Whistleblower Law Blog

TELG Attorney Quoted in Crain’s Detroit Business Article Predicting Rapid Expansion of Whistleblower Claims

October 14, 2011

On October 14, 2011, Crain’s Detroit Business published an article titled “Are there enough private crimes in Michigan to warrant beefing up the state’s false claims act?” in which The Employment Law Group® law firm attorney R. Scott Oswald states:

Having whistleblowers in government and the health care sector will ensure that individuals and corporations engaged in fraudulent acts (will think twice about committing crimes).  It will serve as a deterrent….

Recently, whistleblower and SEC attorney Darcy Flynn revealed that the SEC was shredding documents relating to corporations under investigation, including thousands of inquiries into the $50 billion Bernard Madoff Ponzi scheme, Goldman Sachs, and Lehman Brothers.  Before blowing the whistle at the SEC, Flynn blew the whistle on health care fraud:

Flynn also was the whistleblower in the 1995 Medicare fraud case against Blue Cross Blue Shield of Michigan. The Blues settled with the federal government and paid a $27.6 million fine.

Over the next decade, Oswald believes false claims act complaints will go up by a factor of 100.

“There has been an explosion in government contracting. A huge amount of work is being outsourced,” Oswald said.

“Another reason is the expansion of health care services with the health care reform bill. As more people become covered by insurance and prescribed medications there will be more opportunities for pharmaceutical companies to engage in unlawful activities.”

TELG Principals Publish Article in California Lawyer

October 14, 2011

The Employment Law Group® principal attorneys David Scher and R. Scott Oswald wrote an article entitled “Blowing the Whistle,”  which appeared in the October 2011 edition of California Lawyer.  In the article, Scher and Oswald discuss the California Whistleblower Protection Act (CWPA), referring to it as a “robust law that…has limitations and administrative hurdles.” They explain how the CWPA is widely respected, but cluttered with restrictive policies.  Although the CWPA does provide robust protection for employees and whistleblowers, its technical requirements can make the filing of a claim somewhat complicated. By far, the biggest restriction is the fact that CWPA only covers those employed by the state and not those employed by the local government.

Under the CWPA, a state employee must file an administrative claim with the State Personnel Board (SPB), which would then investigate the claim. For state university employees, they must file their claims either to their supervisor or to an internal staff member before they take the matter to a civil court.

If the claimant is seeking damages, the CWPA stipulates that after the State Personnel Board investigates, the employee must bring the matter to the Victim Compensation and Government Claims Board. The board has 45 days to respond to a claim and if it the board rejects the claim, the claimant (employee) has six months to file a lawsuit.  If the board denies the claim because there was no timely response, the claimant has two years to bring the issue before a court.

Oswald and Scher recommend that employees and whistleblowers file their complaints with both the SPB and the claims board. They also recommend that due to the complexities involved, only attorneys with strong knowledge of the administrative requirements of the CWPA handle these cases.

Oracle Agrees to Pay U.S. $199.5 Million to Resolve False Claims Act Lawsuit

October 14, 2011

According to a Department of Justice Press Release, Oracle Corp. and Oracle America Inc. have agreed to pay $199.5 million plus interest for failing to meet their contractual obligations to the General Services Administration (GSA).

This settlement relates to a contract Oracle entered into in 1998 to sell software licenses and technical support to government entities through GSA’s Multiple Award Schedule (MAS) program.   The MAS program provides the government and other GSA-authorized purchasers with a streamlined process for procurement of commonly used commercial goods and services.  To be awarded a MAS contract, contractors must agree to disclose commercial pricing policies and practices, and to abide by the contract terms.  The settlement resolves allegations that, in contract negotiations and over the course of the contract’s administration, Oracle knowingly failed to meet its contractual obligations to provide GSA with current, accurate and complete information about its commercial sales practices, including discounts offered to other customers, and that Oracle knowingly made false statements to GSA about its sales practices and discounts.

Tony West, Assistant Attorney General for the Civil Division of the Department of Justice sates:

“Companies that engage in unlawful or fraudulent practices to secure government business undermine the integrity of the procurement process and create an unfair advantage against the majority of companies that are playing by the rules.  Resolutions like this one – the largest GSA false claims settlement in history – demonstrates our commitment to ensure taxpayers are not overpaying for the products and services they receive.”

The settlement resolves a lawsuit filed on behalf of the U.S. government by former Oracle employee, Paul Frascella, who will receive $40 million as his share of the recovery in the case.   Under the whistleblower provisions of the False Claims Act, private citizens can bring lawsuits on behalf of the United States and share in any recovery obtained by the government.

TELG Principals Publish Authoritative Article on D.C.’s Amended Whistleblower Protection Act in Bureau of National Affairs

October 14, 2011

The Employment Law Group’s © Managing Principal R. Scott Oswald and former Principal Jason Zuckerman have published a whistleblower article in the Bureau of National Affairs, Inc. Daily Labor Report titled “D.C.’s Amended Whistleblower Protection Act: The Gold Standard for Public Sector Whistleblower Protection.”

The article highlights changes to Washington D.C.’s recently amended Whistleblower Protection Act (D.C. WPA); changes which make it the “strongest public sector whistleblower protection statute in the country” and a model for other states to follow. Messrs. Oswald and Zuckerman point out that in order “to encourage public sector employees to blow the whistle on waste, fraud, and abuse, states must provide robust whistleblower protections to employees.”

These changes were brought about after the D.C. Council investigated Harriette Walters, a former employee at the Office of Tax and Revenue, and discovered she had embezzled over $48 million over the course of 18 years. Her co-workers remained silent the entire time because they feared reprisals for blowing the whistle.

Now, “the D.C. WPA protects any current or former employee, applicant for employment, as well as employees of independent and subordinate agencies….[Furthermore,] authorizing actions against individuals is critical to deterring retaliation against whistleblowers.”

Changes to the D.C. WPA include:

1. Broad Scope of Protected Conduct: The D.C. Whistleblower Protection Act protects an employee who lawfully discloses information which he or she reasonably believes evidences gross mismanagement, waste of public funds, abuse of authority in connection with the administration of a public program or the execution of a public contract, a violation of law, regulation, or contractual term, or a substantial danger to public health and safety. The D.C. WPA also protects and employee’s refusal to comply with an illegal order…. [Defined as] a directive to violate or assist in violating any federal, state, or local law, rule, or regulation.
2. Protecting ‘Duty Speech’: The amended D.C. WPA also eliminated the “duty speech” loophole. Foreseeing the assertion of the “duty speech” defense from Garcetti v.Ceballos, the D.C. Council clarified that employees are protected even if their disclosure is made during the course of performing their job duties.
3. Prohibited Types of Retaliation: The D.C. WPA forbids a wide range of retaliatory adverse actions, including “recommended, threatened, or actual termination, demotion, suspension, or reprimand; involuntary transfer, reassignment or detail; referral for psychiatric of psychological counseling; failure to promote or take other favorable personnel action.
4. Causation Standard and Burden-Shifting Framework: The D.C.  WPA applies a causation standard and burden shifting framework that is mare favorable to employees than Title VII of the 1964 Civil Rights Act’s McDonnell Douglas standard. To prevail under the D.C.WPA, an employee must show by a preponderance of the evidence that her protected conduct was a contributing factor in the adverse employment action.
5. Statute of Limitations and Right to Jury Trial: Under the D.C. WPA, a whistleblower may seek a trial by jury within three years after a violation occurs or within one year after he or she first learns of the violation, whichever comes first.
6. Remedies: Remedies available to a whistleblower include injective relief, reinstatement to the same or equivalent position with all seniority rights and benefits, back pay, interest, compensatory damages, attorneys’ fees, and costs.
7. Financial Incentive for Whistleblowing: The District is encourage employees to become whistleblowers by creating financial incentives while simultaneously prohibiting retaliation and holding those who participate in retaliation personally responsible for their acts. 
8. Protection for Employees of D.C. Contractors: The District extends similar protections to the employees of District contractors and instrumentalities.

Messrs. Oswald and Zuckerman conclude that more states should adopt whistleblower protection statutes similar to the District of Columbia’s because strong whistleblower protection laws like the D.C. WPA will incentivize more people to come forward and blow the whistle.

DC Federal Court Holds Employee Reporting Wrongdoing Can Proceed with Wrongful Termination Lawsuit

October 11, 2011

On September 12, 2011, the United States District Court for the District of Columbia ruled that Jonathon Myers can proceed with his wrongful termination lawsuit against his former employer, Alutiiq International Solutions, LLC, and his former supervisors.  Myers reported to several supervisors an inappropriate romantic relationship between another supervisor, George Bailey, and an employee, Lori Strictland, where Bailey had given Strictland unearned raises and promotions and had hired relatives and friends of the employee to positions for which they were not qualified.  Since Bailey and Strictland were working on a government contract, such conflicts of interest are a violation of federal regulations.

The matter was referred to the Office of Inspector General (OIG), resulting in Bailey’s removal from the contract and Strictland’s termination.  A day later, Alutiiq also terminated Myers.  In his complaint, Myers alleges he was unlawfully punished because his reporting of the conflict of interest may have jeopardized the government contract.

In Adams v. George W. Cochran & Co., 597 A.2d 28, the D.C. Court of Appeals held that an at-will employee stated a cause of action for wrongful discharge where the employee would have been forced to violate the law in order to avoid being terminated.  The D.C. Court of Appeals then expanded this public policy exception in Carl v. Children’s Hospital, 702 A.2d 159 (D.C. 1997). The exception may exist where the employee acted in furtherance of a public policy “solidly based on a statute or regulation that reflects the particular public policy to be applied, or (if appropriate) on a constitutional provision concretely applicable to the defendant’s conduct.”

The court held that the facts alleged by Myers establish a prima facie claim of wrongful termination, thus allowing the lawsuit to proceed.  The court also held that Myers could proceed on his claim that his supervisors were estopped from terminating him after they had promised not to retaliate against him if he cooperated with the OIG’s investigation.  The case is Myers v. Alutiiq Int’l Solutions, LLC.

DOL ARB Rules that Whistleblowers May Disclose Confidential Employer Information Evidencing Wrongdoing

October 10, 2011

In Vannoy v. Celanese Corp., the Department of Labor Administrative Review Board (ARB) reversed the Administrative Law Judge’s decision, affirming that whistleblowers are protected when disclosing to the government confidential employer information evidencing wrongdoing.

Whistleblower Matthew Vannoy filed a complaint with the Department of Labor on January 25, 2008, alleging his employer, Celanese Corporation, violated the whistleblower protection provisions of the violated the Sarbanes-Oxley Act (SOX) when placing him on paid administrative leave and subsequently terminating him.  Celanese is an international publicly traded company that manufactures and distributes industrial chemicals.

Vannoy noticed potential weaknesses in the company’s credit card reimbursement program and reported those weaknesses internally and to the IRS.  Some of the documents Vannoy sent to the IRS included confidential employer information such as employee home addresses and social security numbers.

The ARB held that SOX whistleblowers are not only protected when disclosing information to the SEC or Department of Justice, but they are also protected when making disclosures to the IRS.  Applying the Williams standard, the ARB also held that the use of paid administrative leave could constitute an adverse employment action when forced upon a SOX whistleblower.  Lastly, the ARB found:

There is a clear tension between a company’s legitimate business policies protecting confidential information and the whistleblower bounty programs created by Congress to encourage whistleblowers to disclose confidential company information in furtherance of enforcement of tax and securities laws. Passage of these bounty provisions demonstrate that Congress intended to encourage federal agencies to seek out and investigate independently procured, non-public information from whistleblowers such as Vannoy to eliminate abuses in the tax realm under the IRS Whistleblower program and now in the securities realm with the SEC Whistleblower program recently enacted in 2010. In 2010, the Dodd-Frank Act established the SEC Investor Protection fund, which is to be used to pay whistleblower claims and is funded with monetary sanctions that the SEC collects in a judicial or administrative action, or through certain disgorgements under the Sarbanes-Oxley Act of 2002. Similar to the IRS Whistleblower bounty program that Vannoy pursued, Section 21F(b) of the Dodd-Frank Act provides that the SEC “shall pay” a whistleblower who voluntarily provides original information to the SEC that leads to the successful enforcement of a covered judicial or administrative action and results in certain monetary sanctions.

Under the SEC bounty program, the whistleblower is entitled to an award of between 10 percent and 30 percent of what the SEC collects in monetary sanctions. However, the whistleblower must provide “original information to the SEC relating to a violation of the securities law.” 15 U.S.C. 78u-6 (b)(1) (emphasis added). The Act defines original information as information that: (i) “is derived from the independent knowledge or analysis of the whistleblower;” (ii) “is not known to the SEC from any other source, unless the whistleblower is the original source of the information;” and (iii) the information “is not derived exclusively from an another allegation contained in a judicial or administrative hearing, in a governmental report, hearig, audit or investigation, or from the news media, unless the whistleblower is a source of the information.” 15 U.S.C. 78u-6(a)(3).

Under the terms of the SEC whistleblower bounty program, Congress anticipated that the whistleblower would provide independently garnered, insider information that would be valuable to the SEC in its investigation. Indeed, the recently issued final rule implementing the SEC bounty program contains a provision prohibiting employers from enforcing or threatening to enforce confidentiality agreements to prevent whistleblower employees from cooperating with the SEC. 17 C.F.R. § 240.21F-17(a).

The IRS whistleblower bounty program Vannoy used, like the SEC program recently established, reflects Congressional recognition of the notable contributions to law enforcement provided by whistleblowers with non public, inside information. Vannoy’s allegations must be viewed in light of these significant enforcement interests. Evidence of record supports Vannoy’s allegations that he procured employee data in 2005 and in 2007 as part of his efforts to facilitate his complaint with the IRS as to Celanese’s accounting practices. In doing so he sent confidential information by e-mail and created compact discs containing confidential information concerning Celanese employees without the company’s permission. Indeed the record shows that some of this information was transferred to a personal computer at Vannoy’s home. See supra at 4. Thus the crucial question for the ALJ to resolve with a hearing on remand is whether the information that Vannoy procured from the company is the kind of “original information” that Congress intended be protected under either the IRS or SEC whistleblower programs, and whether the manner of the transfer of information was protected activity within the scope of SOX. These are mixed questions of law and fact for the ALJ to determine in the first instance.

Menendez v. Halliburton Affirms Broad Protection for Sarbanes-Oxley Whistleblowers

September 28, 2011

On September 13, 2011, the Department of Labor Administrative Review Board (ARB) issued an opinion in Menendez v. Halliburton, Inc., another opinion in a long line of opinions this year and last year that affirm broad protections for Sarbanes-Oxley Act (SOX) whistleblowers.   The ARB reversed the decision of the Administrative Law Judge, finding that the reporting of questionable accounting practices in this case was a protected activity even when the whistleblower was mistaken.  The ARB also ruled that the disclosure of the whistleblower’s identity – even though coworkers would eventually find out anyway – was an adverse employment action.  In addition, the whistleblower need only show that the protected activity was a contributing factor in the employer’s decision to take the adverse action – a very low hurdle.

Importantly, the ARB further expanded protections for whistleblowers by removing from consideration Title VII case law that may have produced narrow exceptions to whistleblower protection.  The ARB formally adopted the Williams standard, which states that any nontrivial unfavorable employment action is an adverse action, but curiously the ARB also retained the Title VII Burlington Northern standard as a persuasive interpretive tool. 

Background

Halliburton, Inc. hired Anthony Menendez in March 2005 as Director of Technical Accounting Research & Training to support Halliburton’s Finance & Accounting (F&A) organization.  He initially reported directly to Halliburton’s Chief Accounting Officer (CAO) Mark McCollum.

Within a few months, Menendez approached McCollum with his belief that Halliburton was engaging in questionable accounting practices – namely, that Halliburton could not recognize revenue on certain products prior to their delivery into the physical possession of the customer.  Halliburton and its external auditor, KPMG, disagreed with Menendez’s recognition concern.

Following the disagreement, Menendez made confidential disclosures to the SEC that Halliburton, with the knowledge of its external auditor, was engaging in defective accounting practices with respect to revenue recognition.  He also reported the practices to Halliburton’s Audit Committee, making substantially the same claim and expecting his complaint to remain confidential as required under the Sarbanes-Oxley Act (SOX) and Halliburton’s stated policy.

In violation of SOX and Halliburton’s stated policy, Menendez’s complaint to Halliburton’s Audit Committee was forwarded to KPMG, the CFO, and McCollum.  Even more damning – an email was sent to Menendez and fifteen of his direct coworkers publically outing Menendez as the SEC whistleblower.

When Menendez returned to work the following week after used accumulated leave, he received no phone calls, few emails, and his coworkers generally avoided him.  KPMG’s auditors, with whom Menendez normally worked closely, also refused to interact with him.

The SEC formally notified Halliburton on September 19, 2006, that no enforcement action was being recommended.  Halliburton’s Audit Committee concluded the same.

Menendez was then instructed to report to the director of external reporting for the F&A group instead of reporting directly to McCollum.  On October 17, 2006, Menendez resigned, stating that he believed Halliburton had demoted him by requiring him to report to a lower ranking officer. 

Sarbanes-Oxley Act (SOX)

On May 8, 2006, Menendez filed a complaint with the Department of Labor under Section 806 of the Corporate and Criminal Fraud Accountability Act of 2002, Title VIII of SOX, accusing the company of using improper accounting practices to distort its financial statements and mislead investors.  Menendez further claims Halliburton retaliated against him in violation of the SOX whistleblower provisions after he reported his concerns to the SEC and Halliburton’s Audit Committee.

Section 806 of SOX, 18 U.S.C. Sec. 1514(A), provides that:

No company with a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l), or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d), or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee –

(1) to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of section 1341, 1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders, when the information or assistance is provided to or the investigation is conducted by –

(A) a Federal regulatory or law enforcement agency;

* * * *

(C) a person with supervisory authority over the employee (or such other person working for the employer who has the authority to investigate, discover, or terminate misconduct).

The plain language of the statute prohibits employers from discriminating against whistleblowers who report to the SEC or other regulatory or law enforcement agency what the whistleblower “reasonably believes” constitutes a violation of a securities law or of “any rule or regulation” of the SEC.

To prevail on a SOX whistleblower retaliation claim, whistleblowers must prove by a preponderance of evidence that:

1. he or she engaged in a protected activity;
2. he or she suffered an adverse action; and
3. the protected activity was a contributing factor in the resulting adverse action.

The Department of Labor (DOL) Administrative Law Judge (ALJ) dismissed Menendez’s claim; however, the Administrative Review Board (ARB) reviewed the ALJ’s decision, reversing in part, affirming in part, and remanding back to the ALJ to make further findings.

Protected Activity – Reasonableness Standard

The ARB affirmed the ALJ’s finding that the Menendez engaged in protected activity when he alleged violations of SEC rules concerning potentially questionable accounting practices to his supervisors, the SEC, and Halliburton’s Audit Committee.  To be engaged in a protected activity, the whistleblower must reasonably believe that their employer is committing fraud that violates a securities law or any rule or regulation of the SEC.   The necessary reasonableness is based on the knowledge available to a reasonable person in the same circumstances as the whistleblower and with the same training and experience.

Material violation not a requirement

The ARB held that there is no requirement that the whistleblower allege material violations of the law, noting that the whistleblower is seeking protection under SOX and not actually suing the employer for committing fraud.

…Section 806’s plain language contains no materiality requirement for whistleblower complaints.  As we explained recently in Sylvester v. Parexel, a complainant need not allege the substantive elements of fraud, including materiality, to warrant Section 806 protection; the complainant need only have a reasonable belief that the activity alleged constitutes fraud.

Menendez v. Halliburton, Inc. ARB No. 09-002, 09-003, ALJ No. 2007-SOX-005, slip op. at 13 (ARB Sep. 13, 2011) (citing Sylvester v. Parexel International LLC, ARB No. 07-123, ALJ Nos. 2007-SOX-39 and 42 (ARB May 25, 2011)).

Vindication not a Requirement

The ARB held that the reasonableness of Menendez’s position on the questionable accounting practices is not undermined by the SEC ultimately approving the accounting practices.  An employee’s reasonable but mistaken belief in employer wrongdoing constitutes protected activity under SOX.

Congress purposely selected a broad reasonableness standard unfettered by the limitations of the materiality or vindication requirements in order to encourage whistleblowers to report potential fraud and to report that fraud in its infancy.  Placing the burden on the whistleblower to prove with legal certainty that an employer is indeed committing a vast fraud would deter those whistleblowers who sense wrongdoing but do possess a smoking gun from ever coming forward with the valuable knowledge they do possess.

Adverse Action

Menendez alleged the following adverse actions: (1) breach of whistleblower confidentiality; (2) isolation; (3) removal of job duties; (4) demotion; and (5) constructive discharge.  The ALJ held that none of the above enumerated instances constituted an adverse action.  The ARB disagreed, holding that the breach of whistleblower confidentiality was an adverse action levied against Menendez and stating:

Indeed, the facts of this case exemplify the very reason why Congress mandated that publically-traded firms set up confidential avenues to report wrongdoing.

Menendez, slip op. at 26.

Breach of whistleblower confidentiality

Section 301 of SOX, 15 U.S.C. Sec. 78j-1(m)(4), requires that publicly-traded companies such as Halliburton establish procedures for:

(A) the receipt, retention, and treatment of complaints received by the issuer regarding accounting, internal accounting controls, or auditing matters; and

(B) the confidential, anonymous submission by employees of the issuer of concerns regarding questionable accounting or auditing matters.

Strict confidentiality of whistleblower complaints is essential to protecting whistleblowers from almost certain retaliation by the supervisor that whistleblower likely implicates in a fraud committed against shareholders.

The reason for requiring audit committees to create confidential and/or anonymous disclosure procedures is evident. Employee whistleblowers are one of the most effective sources of information concerning questionable accounting and auditing matters as well as fraud and corporate crime. Since employees are more willing to identify misconduct if they can do so anonymously, it stands to reason that anonymous and/or confidential reporting mechanisms encourage internal reporting of corporate misconduct. Furthermore, the confidentiality that Section 301 provides allows employees to report problems directly to the independent audit committee and thus effectively to their employer, while at the same time permitting the whistleblowing employee to avoid possible retaliation from supervisors or high-ranking company managers who may be defensive about wrongdoing in which they might be implicated.  Congress well recognized the importance of encouraging the reporting of accounting irregularities and potential fraud by means of confidential disclosures.

Menendez, slip op. at 23.

Williams and Burlington Northern tests for adverse actions

While the ARB had previously adopted the Burlington Northern test for adverse actions, the ARB now formally adopts the Williams test:

Citing this Board’s adoption of the Supreme Court’s Burlington standard in AIR 21 cases, the ALJ held Title VII’s definition of adverse action, likewise applies to SOX whistleblower claims. However, in Williams v. American Airlines, this Board recently clarified that Burlington’s adverse action standard, while persuasive, is not controlling in AIR 21 cases.  As we discuss below, we similarly hold that Burlington is a particularly helpful interpretive tool, but the plain language of Section 806’s adverse action provision controls.

Menendez, slip op. at 15; Williams v. American Airlines, Inc. ARB No. 09-018, ALJ No. 2007-AIR-004, slip op. (ARB Dec. 29, 2010); Burlington Northern & Santa Fe Railway Co. v. White, 548 U.S. 53 (2006).

The Burlington Northern test, borrowed from Title VII anti-discrimination Supreme Court case law, defines an adverse action as any action that would dissuade a reasonable employee from engaging in the protected activity.  The Williams test alternatively defines adverse actions as unfavorable employment actions that are more than trivial, either as a single event or in combination with other deliberate employer actions.

The ARB has decided to officially depart from Title VII case law by adopting Williams as the controlling standard and relegating Burlington Northern to persuasive authority or an “interpretive tool.”   This departure is intended to resolve inconsistencies caused by substantial differences in statutory language between the Title VII provisions and the SOX anti-retaliation provisions.  The move is in all likelihood a victory for whistleblowers and whistleblower advocates, because it forecloses arguments by the opposition manipulating Title VII case law in an attempt to unfairly narrow the broad protections Congress originally intended to provide SOX whistleblowers.

Unlike either Title VII provision, Section 806 states that no company “may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee.” As explained above this language explicitly proscribes non-tangible activity, which evinces a congressional intent to prohibit a very broad spectrum of adverse action against SOX whistleblowers. This difference in statutory construction convinces us that adverse action under SOX Section 806 must be more expansively construed than that under Title VII.

Considering these differences in statutory language, in Williams, we held that the intended protection of AIR 21 extends beyond any limitations in Title VII and can extend beyond tangibility and ultimate employment actions.  Because of its similarity to the adverse action language construed in Williams and for reasons explained below, we adopt the Williams standard of actionable adverse action as likewise applicable to Section 806 cases. Under this standard, “the term ‘adverse actions’ refers to unfavorable employment actions that are more than trivial, either as a single event or in combination with other deliberate employer actions alleged.”  Nevertheless, the Supreme Court’s reasoning in Burlington addressing the contours of adverse action under Title VII’s anti-retaliation provision is compelling and serves as a helpful guide for the analysis of adverse acts under SOX.

Menendez, slip op. at 17.

In some ways, the Williams standard provides broader protections than the Burlington Northern one.  In Williams, the ARB wrote that certain actions, such as termination, demotion, and suspension are per se adverse actions.  The ARB also lists examples of trivial actions: petty slights, minor annoyances, personality conflicts, snubbing by supervisors and coworkers, but further remarks that these actions could be nontrivial in the aggregate.

This is likely not the end of the application of Burlington Northern by the ARB to whistleblower cases.  The ARB in Menendez applied the Burlington Northern test, finding that the employer’s breach of whistleblower confidentiality would dissuade a reasonable employee from engaging in protected activity.  Even the Williams court applied both its standard and Burlington Northern test to the facts of that case.

Anything that would dissuade a reasonable employee from engaging in protected activity seems like it would always constitute an unfavorable employment action that is more than trivial.  The Williams test seems to engulf the Burlington Northern test, while broadening whistleblower protections by exalting certain unfavorable employment actions to a per se status, and foreclosing the application of any narrowing language from Title VII case law.  For this reason, Burlington Northern will likely remain extremely persuasive authority, particularly for close cases.

No tangible consequences requirement

The ARB reversed the ALJ’s conclusion that the emails breaching Menendez’s confidentiality were not adverse actions under SOX because they merely identified Menendez to a group of people who would have known it was him in any case.  The ARB held that the tangible consequences of an adverse action merely affects the amount of damages ultimately awarded the whistleblower, not the adverse action determination.  Because Section 301 of SOX requires publically-traded companies to establish procedures for the confidential, anonymous submission of concerns regarding questionable accounting matters, Menendez’s right to confidentiality was a “term and condition” of employment that Halliburton unquestionably denied him.

Causation 

The ARB held that a whistleblower need only show by a preponderance of evidence that the protected activity was a contributing factor in the employer’s decision to take the resulting adverse action.  The protected activity does not have to be the only factor or even a determining factor- it need only be a contributing factor.

Proving a motive is not a necessary element in determining causation.  Requiring the whistleblower to prove that the employer harbored a retaliatory or discriminatory motive would impose a higher evidentiary standard than what Congress has put forth in the statute.

Conclusion

Menendez should be a clarion call to publicly traded corporations that the ARB has aligned whistleblower protections with the original language and broad interpretation Congress originally intended to protect SOX whistleblowers.

Bank of America Ordered to Pay $930,000 to Whistleblower for Violating SOX

September 22, 2011

The U.S. Department of Labor ordered Bank of America (BoA)  to reinstate and pay $930,000 to a former employee who BoA is accused of unlawfully retaliating against. The unidentified employee worked for Countrywide Financial Corp. before it merged with Bank of America in 2008.

After conducting an internal investigation, the former employee found “widespread and pervasive wire, mail and bank fraud involving Countrywide employees.” She reported her findings to Countrywide’s Employee Relations Department but shortly after Bank of America acquired Countrywide she was fired purportedly due to her “management style.”

The Department of Labor’s Occupational Safety and Health Administration and the former employee  maintain that “Bank of America used illegal retaliatory tactics against this employee” because she had the integrity to report potential fraud.  Reporting corporate wrongdoing involving wire, mail, and bank fraud are protected activy under the whistleblower protection provision of the Sarbanes-Oxley Act.

DOL ALJ Orders Whistleblower Truck Driver Reinstated at Beacon Transport

September 12, 2011

U.S. Department of Labor Administrative Law Judge Joseph E. Kane ordered whistleblower Edward Schrieber reinstaed with his former employer Beacon Transport, Inc.  ALJ Kane also awarded Schrieber back pay and attorneys’ fees.

Beacon Transport had fired Schrieber after he had refused to haul cargo in his truck.  Truck drivers travelling on interstate highways are allowed to carry up to 80,000 lbs.  In addition to gross weight, there are also limitations for the amount of weight an individual axle may carry.  Every motor carrier shall issue a receipt or bill of lading for property tendered for transportation in interstate commerce indicating the freight’s weight.  On September 22, 2009, Schrieber was given a bill of lading for the cargo that did not include the freight’s weight.  Several days following Schrieber’s refusal to haul the cargo, Beacon Transport fired him.

The ALJ ruled that Schrieber’s apprehension that the cargo was unsafe to haul was objectively reasonable.  The ALJ further held that Shrieber’s refusal to haul the cargo was a contributing factor in the employer’s decision to fire him. Therefore, Schrieber’s termination was unlawful under the Surface Transportation Assistance Act (STAA).

The ALJ held that unless the employer provided evidence that Schrieber failed to mitigate his damages, Schrieber is entitled to full back pay up until the employer provides an offer of reinstatement.  Under STAA,  the burden is on the employer to establish any failure by a wrongfully discharged employee to properly mitigate damages through the pursuit of alternative employment.

The opinion is Schrieber v. Beacon Transport, Inc., Case No: 2010-STA-70.

Related articles

• Truck Driver Awarded $19,162.44 in Additional Damages under Whistleblower Statute 
• DOL Orders Union Pacific Railroad to Pay Whistleblowers more than $615,000
• U.S. DOL ALJ Reinstates Truck Driver who Refused to Violate DOT Regulations, Awards $46k in Damages
• OSHA Announces Measures to Improve Whistleblower Protection Program

DOL Orders Union Pacific Railroad to Pay Whistleblowers more than $615,000

September 09, 2011

The U.S. Department of Labor used its authority under OSHA Section 11(c) of the Discrimination against Employees under OSHA Act of 1970 to order Union Pacific Railroad to pay a total of $400,000 in punitive damages, $90,315 in compensatory damages, $34,900 in attorney fees, and more than $90,000 in back wages to three whistleblowers.  Union Pacific had violated the Federal Railroad Safety Act by firing and suspending workers for reporting workplace safety concerns and a workplace injury.