Sarbanes-Oxley Whistleblower retaliation
The attorneys at The Employment Law
Group® law firm have substantial experience representing
employees in Sarbanes-Oxley whistleblower proceedings before
the Department of Labor (DOL) and have helped establish
precedent on several key aspects of the Sarbanes-Oxley Act
(SOX). For example, in
Kalkunte v. DVI Financial Services, Inc., the DOL’s
Administrative Review Board affirmed, for what appears to be
the first time, an Administrative Law Judge’s opinion in
favor of a SOX plaintiff. This decision is significant
because it clarifies several key issues under the Act’s
whistleblower provisions, including: (1) that a
privately-held company acting as a contractor,
subcontractor, or agent of a publicly traded company can be
liable for violating the whistleblower
provisions
under SOX; (2) that a reasonable but mistaken belief is
protected under SOX; (3) that a SOX plaintiff can prevail by
showing merely that her protected conduct was a contributing
factor in the employer’s decision to take an adverse action;
and (4) that special damages under SOX includes compensatory
damages, i.e. damages for impairment of reputation, personal
humiliation, mental anguish and other non-economic harms
resulting from retaliation.
In
Stone v. Instrumentation Laboratory Co., The
Employment Law Group® law firm established precedent in
a case before the Fourth Circuit which held that: (1) SOX
whistleblowers have a right to de novo review in
federal court at any time after a case has been pending
before the DOL for 180 days and before a final judgment; and
(2) that the Administrative Review Board’s dismissal of a
case due to removal to federal court does not render an ALJ
decision a “final judgment” for purposes of collateral
estoppel. The Judge Davis stated that “[t]he plain language
of § 1514(b)(1)(B) unambiguously establishes a
Sarbanes-Oxley whistleblower complainant’s right to de
novo review in federal district court. . . .”
In
Leznik
v. Nektar Therapeutics, Inc., The Employment Law Group® law firm
established precedent on several significant substantive
and procedural issues under SOX, including the
following: (1) whistleblower relief is available for
employees whose normal duties include reporting illegal
conduct; (2) protected conduct is not limited to
disclosures of shareholder fraud and instead includes
disclosures about reasonably perceived violations of SEC
rules; (3) individual liability does not require a
showing of malice; and (4) formal rules of evidence do
not apply to SOX claims.
What is the
Sarbanes-Oxley Act?
The
Sarbanes-Oxley Act of 2002 encourages the
disclosure of corporate fraud by providing protection to
employees of publicly traded companies who engage in whistleblowing activities. To ensure SOX whistleblowers
are afforded adequate protection against reprisal, the
Act contains both a civil and criminal whistleblower
provision.
Under
Section 806 of the Sarbanes-Oxley Act, employees
who believe that they were subjected to retaliation
because of their whistleblowing activities can file a
civil complaint with the Secretary of Labor within 90
days of the retaliatory action. Unlike other
whistleblower laws governed by the Occupational Safety
Healthy Administration (OSHA), a SOX whistleblower can
bring a de novo action in district court for his or her
whistleblower case if the Secretary does not issue a
final decision within 180 days of the filing of the
complaint.
Section
1107, the criminal whistleblower provision of SOX, makes
it a crime for a person to knowingly retaliate against
another for disclosing truthful information to a law
enforcement officer regarding an alleged federal
offense. This provision of SOX is enforced by the U.S.
Department of Justice.
What
activities are protected under Section 806 of SOX?
An employee
engages in protected activity by providing information
that he reasonably believes constitutes a violation of
federal mail, wire, bank or securities fraud; federal
law relating to fraud against shareholders; or any rule
or regulation of the Securities and Exchange Commission
(SEC). Specific examples include:
-
Reporting an employer's nondisclosure of accurate
financial statements to potential investors;
-
Reporting an employer's improper entries on
financial statements;
-
Exposing senior management's alteration of
delinquency reports;
-
Reporting an employer's use of an unregistered
broker to solicit investors in exchange for a
commission; and
-
Raising concerns about a supervisor's practice of
backdating letters of credit.
What must a
SOX plaintiff prove to prevail?
Under SOX
provisions, an employee must prove the following:
-
That he engaged in protected conduct;
-
That the employer had knowledge of the protected
conduct;
-
That the employer took an adverse personnel action
against him; and
-
That the protected activity was a contributing
factor in the employer's decision to take adverse
action.
What
retaliatory acts are prohibited under SOX?
Section 806
prohibits publicly traded companies from taking adverse
personnel actions against a SOX whistleblower. This
includes demotion, termination, suspension, threats,
intimidation, harassment, failure to hire, failure to
promote and any discriminatory action that would
negatively impact the terms and conditions of the
whistleblower's employment.
What can a
prevailing whistleblower recover?
Under the
Sarbanes-Oxley Act, a prevailing employee will be made
whole, i.e., will be returned to the same position he or
she would have been absent the retaliation. In
particular, SOX authorizes reinstatement, back pay for
lost wages, front pay for future lost wages,
compensatory damages, and litigation costs, including
attorney fees.
The Employment Law Group® law firm
has written extensively about the whistleblower provisions
of the Sarbanes-Oxley Act for a number of publications,
including:
“DOL
ARB Decision Reinvigorates Sarbanes-Oxley Whistleblower
Protection,” 7 Workplace L. Rep. (BNA) No. 475 (April 3,
2009).
"Win
for Whistleblowers," National Law Journal
(September 8, 2008)
"Sarbanes-Oxley
Act Whistleblower Retaliation Provision," Avvo
(September 2008)
"The
Umpires Strike Back", Legal Times (June 2008)
"2008
Annual Update on the Whistleblower Provisions of the
Sarbanes-Oxley Act of 2002," American Bar Association
Section of Labor and Employment Law Subcommittee on the
Sarbanes-Oxley Act of 2002 (February 2008).
"Seven
Questions For Sarbanes-Oxley Whistleblowers To Ask,"
The Practical Lawyer (October 2007)
"SOX's
Whistleblower Provision–Promise Unfulfilled,"
Securities Litigation Reporter Vol. 4, Issue 7
(July/August 2007).
"Six
Steps to Limiting Sarbanes-Oxley Whistleblower Liability,"
IT Business Edge (January 16, 2007).
"2007
Annual Update on the Whistleblower Provisions of the
Sarbanes-Oxley Act of 2002," American Bar Association
Section of Labor and Employment Law Subcommittee on the
Sarbanes-Oxley Act of 2002 (February 2007).
"2006
Annual Update on the Whistleblower Provisions of the
Sarbanes-Oxley Act of 2002," American Bar Association
Section of Labor and Employment Law Subcommittee on the
Sarbanes-Oxley Act of 2002 (February 2006).
"2005
Annual Update on the Whistleblower Provisions of the
Sarbanes-Oxley Act of 2002," American Bar Association
Section of Labor and Employment Law Subcommittee on the
Sarbanes-Oxley Act of 2002 (January 2005).
"Whistleblower
Protections in the Nonprofit Sector," Nonprofit Risk
Management Center (September 2005).
"Complying
with Sarbanes-Oxley's Document Destruction Provisions,"
Association Management (July 2004).
"Whistleblower
Protection Programs for Associations," Association
Management (June 2004).
Disclaimer: This website
is maintained by The Employment Law Group® law firm to provide general
information about itself and the field of employment law. The information you
obtain at this site is not, nor is it intended to be, legal advice upon which
you should rely or act. If you would like to discuss your potential claim call
us at 888-603-0983 or
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