Date: Nov 22, 2011
The U.S. Department of Labor's Occupational Safety and Health Administration ("OSHA") has published interim final rules revising the regulations governing how whistleblower claims brought under the Sarbanes-Oxley Act ("SOX") are handled. These rules, like those implementing the other 20 whistleblower statutes administered by OSHA, are broadly protective of whistleblowers. Comments on the rules must be received by January 3, 2012.
The whistleblower provision of SOX protects employees of publicly traded companies and of certain other employers, from retaliation for reporting mail fraud, wire fraud, bank fraud, securities fraud, violations of SEC rules or regulations, or violations of any provision of federal law relating to fraud against shareholders.
In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("The Dodd-Frank Act"; "the Act") made five substantive changes to the SOX whistleblower provision. First, the scope of the whistleblower protections in SOX was broadened to apply to credit rating agencies. Second, the scope of the whistleblower protections in SOX was also widened to make explicit the fact that those protections apply to employees of subsidiaries of publicly traded companies, a matter that had been contested prior to 2010. Third, the Act lengthened the time an employee has to bring a claim when he believes he has been the subject of an adverse employment action as a result of his protected activity. Whereas previously, the employee had only three months to bring such a claim, he now has 180 days to file a complaint with OSHA. The time period begins to run on the date the violation occurred or on the date the employee became aware of the violation. Fourth, the Act gives either party the right to a jury trial if OSHA fails to issue a final decision within 180 days of the filing of the complaint. Fifth, the Dodd-Frank Act explicitly states that the rights and remedies provided in the SOX whistleblower provisions may not be waived by any agreement, including a pre-dispute arbitration agreement.
The interim rules implement these changes. From the beginning of the administrative process, the burden placed upon the employee is minimal. Under the new rules a whistleblower complaint may be made either orally or in writing and need not be made in English. With the consent of the employee, it may be filed by any person on the employee's behalf. The rules provide that copies of all papers filed by the employer must be provided to the employee, having been properly redacted if appropriate. However, the rules do not grant reciprocal treatment to the employer: there is no provision requiring OSHA to provide copies of documents submitted by employees (with identifying information redacted) to employers.
The rules keep the pro-complainant burden of proof scheme that is becoming commonplace in whistleblower statutes. An employee must demonstrate, by a mere preponderance of the evidence, that his protected activity was "a contributing factor" in the adverse action alleged. This means only that he must show that the protected activity, alone or in combination with other factors, affected in some way the outcome of the employer's decision. An employee can meet this burden, for example, by showing that the adverse action took place shortly after the protected activity, thereby giving rise to the inference that the protected activity was a contributing factor in the adverse action.
Assuming the employee meets this minimal hurdle, it becomes the employer's burden to demonstrate, by clear and convincing evidence, that it would have taken the same adverse action in the absence of the protected activity. Notably, even if the employer succeeds in persuading a trier of fact that there is a legitimate basis for its action, an employee will still prevail if he is able to show that the legitimate reason was only one of the reasons for the adverse action, and that the employee's protected activity was a contributing factor.
A successful SOX whistleblower is entitled to make-whole relief, including reinstatement with the same seniority status the employee would have had but for the retaliation, back pay with interest, and compensation for any special damages sustained, including litigation costs, expert witness fees, and reasonable attorney's fees. The interim rules explicitly state that, should the employer appeal an adverse decision, all remedies can be stayed except preliminary reinstatement; that is, an employee must be reinstated to his former position pending a decision on the appeal. The rules do provide for circumstances in which such reinstatement is not appropriate but strongly emphasize that reinstatement will be considered appropriate in all but the most exceptional circumstances as determined on a case-by-case basis by OSHA.
The OSHA Office of Whistleblower Enforcement Programs has the broadest employee protection mandate within the federal government – enforcing the whistleblower protections contained in 21 federal statutes. With enhanced status, funding, and a mandate to punish employers who retaliate against workers who allege whistle-blowing activity, it is more important than ever that employers implement effective compliance policies and procedures, and train managers to recognize protected activity. Moreover, an employer must be vigilant throughout the employment relationship, maintaining detailed personnel files on its employees, just in case the employer is ever called upon to act in a system where the governing rules ensure that the cards are stacked firmly on the side of the employee.
Keller and Heckman provides assistance in all areas covered in this Alert, including whistleblower litigation. Interested employers should contact David Sarvadi at 202-434-4249 or email@example.com, or Manesh Rath at 202-434-4182 or firstname.lastname@example.org.