People who “blow the whistle” on a company’s illegal conduct often suffer retaliation for their courage and honesty, but when they do, several laws may protect them. One of the most important federal laws is the 2002 Sarbanes Oxley Act (“SOX”), enacted in the wake of the turn of the 21st Century scandals involving publicly traded companies like Enron, Tyco International, and WorldCom. SOX protects whistleblowers who report or assist in the investigation of (1) securities fraud, (2) mail, bank, or wire fraud, (3) a violation of any federal law about fraud against shareholders, or (4) a violation of a Securities Exchange Commission (“SEC”) rule or regulation.
SOX whistleblower protection is not universal. It’s focused mostly on securities fraud and protecting shareholders, but the mail, bank, and wire fraud provisions do often apply to other kinds of cases. While the law does not cover many employers, all publicly traded domestic companies and their subsidiaries (where financial information of parent and subsidiary are reported together) fall within its scope. It also applies to nationally recognized statistical rating organizations (such as Moody’s Investors Service Inc. or Standard & Poor’s Global Ratings Service), and to any officer, employee, contractor, subcontractor, or agent of a covered company or rating organization. A separate SOX provision protects financial analysts who work for brokers if they produce negative reports about an issuer of securities being sold by the broker for the issuer.
When And How To File A SOX Whistleblower Complaint
A SOX whistleblower complaint must be filed within 180 days of the retaliation. It should be filed with the Occupational Safety and Health Administration (“OSHA”) by visiting the local OSHA office (there is none in Minnesota), sending a written complaint to the closest OSHA regional or area office, or simply calling the local office. Calls can be made through an OSHA 800 number, and while no format is required for written complaints, the agency has an online form that can be used. Minnesota has no OSHA office because it has its own agency that administers most other OSHA functions. The area office responsible for Minnesota is in Eau Claire, Wisconsin, and the regional office is in Chicago.
The bottom line on filing an OSHA SOX complaint is that there are no formal requirements, which makes things deceptively easy. To maximize the likelihood of getting past the initial review, a whistleblower should retain counsel to draft a formal complaint document. Schaefer Halleen files SOX complaints very similar to the kind of complaint one would file in court. This approach makes clear all the relevant facts as well as the legal basis for the claim and facilitates a prompt response from the assigned OSHA investigator. No rule requires the service of such a complaint document on the employer, but there also is no rule against it, and doing so may accelerate settlement negotiations.
A complaint should make clear that (1) the employee engaged in protected activity (i.e., reporting or helping to investigate the legal violations covered by the law), (2) the employer knew of the activity, (3) the employer took adverse action against the employee (e.g., demotion, termination, unwanted reassignment, or the like), and (4) the whistleblowing contributed to the decision to take the adverse action against the employee. These elements constitute what is known as a prima facie case.
What Happens After The SOX Complaint Is Filed
After receiving a complaint, OSHA sends it to the respondent employer, which then has twenty days to submit a written statement. The employee receives a copy of the statement. OSHA may meet with the employer and may interview the employee or others. The agency then determines if the employee has stated a prima facie case. If there is no prima facie case, or if OSHA finds clear and convincing evidence the adverse action against the employee was not related to whistleblowing, the case will end.
In any event, within 60 days of the filing of a complaint, OSHA must issue written findings. If in favor of the employee, the findings will come with a preliminary order granting all relief necessary to make the employee whole, including reinstatement, back pay with interest and certain other damages. Unless there is an objection or a request for a hearing, OSHA’s findings and preliminary order become effective 30 days after receipt by the respondent, or on a later date set forth in the order.
Objections and appeals can result in a lengthy multi-step administrative law process that ends with the U.S. Court of Appeals for the federal circuit in which the retaliation allegedly occurred. Further appeal to the U.S. Supreme Court is at least a theoretical possibility. The only other way to get a case into the court system is if OSHA and the Department of Labor don’t issue a final decision within 180 days after a complaint was filed. The complaining employee may then bring an action in the appropriate U.S. District Court.
Damages And Whistleblower Claims Under Other Laws Along With SOX?
SOX damages are not as extensive as the damages available under other laws. They do not include punitive damages. Early on, most courts also held damages for reputational harm, and future earnings are not covered, though more recent cases hold otherwise. Either way, a plaintiff pursuing a SOX whistleblower claim may also want to invoke other whistleblower statutes, such as the False Claims Act, or the Minnesota Whistleblower Act or other such state laws.
SOX provides an essential but not exclusive legal basis for making a whistleblower retaliation claim. Because SOX claims must be initiated with OSHA, and other whistleblower protection statutes require filing in court or with other agencies, an overall litigation strategy for a plaintiff with whistleblower claims can be complicated, and a plaintiff is well-advised to seek counsel as early on as possible.
More information: SOX Fits Better and Better
