Your Rights Under the Sarbanes-Oxley Whistleblower Protection Law

Corporate whistle-blower protections exist to prevent employees from keeping quiet even when they notice their employer doing something illegal. The Sarbanes-Oxley Act (SOX) went into effect after some high-profile scandals exposed the prevalence of fraud in large corporations. The aim of the protections is to safeguard employees who speak out and to facilitate corporate transparency. However, many employees may be unaware of Sarbanes-Oxley Act employee rights and protections. Learning more about the law and how it helps whistleblowers is a great way to feel empowered as an employee.

What is the Sarbanes-Oxley Act?

Several fraud cases caught the headlines in the early 2000s, but the most famous was the one involving Enron. In 2001, a whistleblower released information about Enron’s auditing and disclosure fraud, which included efforts to conceal significant losses and debts. The fallout was a dramatic drop in the value of the company’s stock from $40 a share to just $1, and a few months later, the company filed for bankruptcy. Accounting firm Arthur Anderson, LLP also dissolved as a result because it was serving as Enron’s financial consultant and auditor.

A bipartisan bill introduced by Republican Representative Michael G. Oxley and Democratic Senator Paul Sarbanes passed with strong support from both sides of the aisle. The 2002 bill, the Sarbanes-Oxley Act, was named after the two sponsors.

The law mainly applies to publicly traded companies, their contractors, subcontractors, and subsidiaries. Strict rules apply to companies subject to SOX, including auditing rules and whistleblower protections. Legislators also added harsher penalties for white-collar crimes like fraud. Enforcement of the law falls on the Department of Labor through the Occupational Safety and Health Administration (OSHA).

Who is protected by SOX whistleblower provisions?

Whistleblower protections apply to specified groups, including the employees of publicly traded companies and of private companies acting as contractors, subcontractors, or agents of publicly traded companies subject to SOX. Employees who receive protections may be:

• Accountants
• Auditors
• Compliance officers
• Finance professionals
• IT personnel

Others also qualify, so it’s important to speak to an attorney if you are an employee in need of this type of legal protection.

What types of conduct does SOX protect?

SOX protects employees when they report or disclose conduct they reasonably believe involves:

• Securities fraud
• Shareholder fraud
• Bank fraud
• Mail/wire fraud
• Violations of any SEC rules or related federal laws

Note that SOX protects those who “reasonably believe” their employer engaged in illegal conduct. The law does not require that the employee is correct. A mistaken belief leads to protection as long as it’s deemed objectively reasonable. Additionally, whistleblowers are protected even if the violation didn’t occur yet.

Protected whistleblowing activity shields employees from retaliation for both internal reporting to someone like a supervisor or compliance officer, as well as outside reporting to the SEC or law enforcement.

What counts as retaliation under SOX?

Retaliation includes the imposition of negative employment consequences on a whistleblower. For instance, if an employer retaliates by doing any of the following to the employee, it may violate SOX:

• Terminating
• Demoting
• Suspending
• Making material negative changes in job duties or work environment

It’s important to discuss the actions with a whistleblower protection lawyer.

What must a whistleblower prove?

There are several elements required to establish a SOX retaliation claim, including the following:

• The employee engaged in a protected activity
• The employer knew of the protected activity
• The employee suffered an adverse employment action
• The employee’s engagement in the protected activity contributed to the adverse action decision

Timing is important. If the retaliation occurs shortly after the report of wrongful actions, this will support the causation element.

How employers may defend themselves under SOX

Employers may try to defend against allegations of retaliation by claiming that they would have taken the same actions even without the protected activity. For instance, they might claim they were already planning to let go of the employee before the whistleblowing activity. However, they would need to prove this by clear and convincing evidence – which is a fairly high bar.

Remedies for whistleblowers under SOX

Compensation for whistleblower retaliation can include monetary awards and other forms of damages. For instance, the court may award the whistleblower:

• Compensation for any lost pay and benefits
• Reinstatement to their role if it was lost
• Front pay if reinstatement is not feasible

Other damages may include compensation for losses that are more difficult to quantify, like emotional distress, reputational harm, and personal humiliation. There is no statutory cap on special damages under SOX (a statutory cap on damages is the maximum amount that someone can recover).

Related laws and protections

SOX isn’t the only law that provides whistleblower protections. There are other laws that may apply, depending on the circumstances, including the following:

• Dodd-Frank Wall Street Reform Act
• False Claims Act
• State whistleblower laws that protect government employees like the Georgia Whistleblower Protection Act

Working with a lawyer can help you determine which laws are most relevant to your claim.

Reach out to Buckley Bala Wilson Mew

It’s important that employees of publicly-traded companies know that they can speak out in the face of fraud and securities violations on the part of their employers. However, it’s often frightening to take those steps – and with good reason. You may fear the possibility of losing your livelihood. You can help to protect yourself by speaking to an attorney who handles cases involving whistleblower retaliation. If you believe that you are the victim of retaliation at work, contact Buckley Bala Wilson Mew today to schedule a consultation with an experienced whistleblower protection attorney.