Retaliation Under Sarbanes-Oxley Can be Anything, Really

At one time, Sarbanes Oxley whistleblower claims were  projected to be the next "big thing" in employment litigation. Because of the fast track the claims were supposed to be on and the prospect for near immediate relief, it was envisioned that public companies everywhere would be inundated with serious claims about real or imagined SEC violations (or a host of other potential claims) that would open the gate to thousands of retaliation lawsuits. It hasn't worked out that way. But that doesn't mean that Sarbanes-Oxley cases don't still pose real difficulty for employers.

 

As with this case.   An employee raised concerns about Haliburton revenue recognition practices to the company's chief accounting officer. The CAO dismissed the concerns, as did the company and the company's outside auditors. Not satisfied, the employee then filed a confidential complaint with the SEC and Haliburton audit committee. In the process of notifying its management to retain documents pursuant to the investigation, the employee's name was revealed to other employee. In addition, the employee's complaint to the audit committee, which contained his identifying information, went to the company's general counsel, CFO and several others.

 

Not surprisingly, following the disclosure of the fact that the employee was reporting alleged wrongdoing by his fellow executives, many of his coworkers and the outside auditors refused to communicate with him. Ultimately, he resigned, although the SEC and the audit committee found that, again, there was no merit to his complaints.

 

The employee then filed a whistleblower complaint with the Department of Labor. The administrative law judge who heard the case determined that there was no adverse action taken against the employee because of his whistleblower status. The employee was not disciplined, demoted, or suffered any other kind of tangible company action. But on appeal to the DOL Administrative Review Board, the ALJ's decision was reversed.

 

And here is where it gets interesting - the ARB found that Sarbanes-Oxley prohibits "nontangible" retaliation activity, which is a much broader definition of retaliatory conduct than Title VII. Under this position, prohibited adverse action by an employer is not limited to economic or employment related activities--a significant expansion of whistleblower protection, and employer liability. The ARB determined that by revealing his name, the company breached the employee's confidentiality entitlement.  There is even a substantial argument to be made that unintentional and purely accidental actions by the company that have an unforseen but negative impact on an employee could be considered retaliation even if they have no tangible affect whatsoever. The ultimate effect of the ARB's ruling might be to totally insulate an employee from any type of action once he files a whistleblower complaint, something that is outside of normal employee retaliation law experience.  If so, then public companies will face a significant limitation on their ability to manage their workforces.