Whistleblower Law Blog

U.S. Bank in Seattle Ordered to Reinstate Sarbanes-Oxley Whistleblower

June 14, 2010

On June 1, 2010, OHSA ordered U.S. Bank in Seattle to reinstate a former manager fired in retaliation for filing an internal complaint alleging securities and bank fraud by company employees.  The Sarbanes-Oxley Act (SOX) protects employees who engage in protected activity by providing information that the employee reasonably believes constitutes a violation of federal mail, wire, bank or securities fraud; federal law relating to fraud against shareholders; or any rule or regulation of the Securities and Exchange Commission (SEC). 

OSHA Finds for Railway Worker Whistleblower, Awards Punitive Damages

June 09, 2010

On May 20, 2010, OSHA ordered CSX Transportation, Inc. to rescind disciplinary actions and pay a whistleblower $5,000 in punitive damages.  According to OSHA, CSX violated the Federal Rail Safety Act when it disciplined the employee for repeatedly reporting safety concerns to management.

The employment attorneys at The Employment Law Group® law firm have experience litigating several types of whistleblower claims before the Department of Labor.  To read more about their Railroad Employee Whistleblower Practice, click here.

OSHA Orders Worldwide Jet Charter to Reinstate Pilot Fired for Whistleblowing

June 08, 2010

On May 5, 2010, OSHA ordered Worldwide Jet Charter LLC to reinstate a pilot discharged for reporting alleged violations of FAA regulations. The order requires the employer reimburse the pilot for lost wages and pay compensatory damages of more than $21,000 and attorney’s fees of $24,610.  Under the Wendell H. Ford aviation Investment and Reform Act for the 21st Century (AIR21), an employer is prohibited from retaliating against an employee who reports suspected violations of FAA regulations. 

The employment lawyers at The Employment Law Group® law firm have experience litigating numerous types of whistleblower claims including nuclear, railroad, and airline whistleblower claims.  To learn more about TELG’s Airline Whistleblower Practice, click here.

The Employment Law Group® Law Firm Publishes Article on the Whistleblower Provisions in the Finance Reform Bill

June 02, 2010

TELG Principals Scott Oswald and Jason Zuckerman published an article in the May 27, 2010 edition of Law360 titled “Whistleblower Protection In The Finance Reform Bill.”  The article discusses the Restoring American Financial Stability Act of 2010 (S. 3217), which the Senate passed on May 20 by a vote of 59-39.   The bill, which we blogged about here, contains several whistleblower provisions including a financial reward for whistleblowers, a new private right action similar to the Consumer Product Safety Improvement Act, and an expansion to the Sarbanes-Oxley Act. 

For more information about the Employment Law Group® law firm’s Whistleblower Retaliation Practice, click here.

Senate Passes Financial Services Reform Bill Containing New Whistleblower Laws

May 21, 2010

On May 20, 2010, the Senate passed the Restoring American Financial Stability Act of 2010 (S. 3217) by a vote of 59-39.  The bill, which is the largest overhaul of financial services regulation since the New Deal, contains several new whistleblower protection provisions and strengthens the whistleblower protection provision of the Sarbanes-Oxley Act (SOX).   This blog post summarizes these whistleblower provisions.

Reward for Whistleblowing to the Securities and Exchanges Commission (SEC).

Under Section 922, the SEC will be required to pay a reward to individuals who provide original information to the SEC which results in monetary sanctions exceeding $1 million.  The award will range from 10 to 30 percent of the amount that is recouped and the amount of the award shall be in the discretion of the SEC.   Factors governing the determination of the reward include the significance of the information provided by the whistleblower, the degree of assistance provided by the whistleblower, the programmatic interest of the SEC in deterring violations of the securities laws by making awards to whistleblowers, and other factors that the SEC may establish by rule or regulation.  A whistleblower may appeal the SEC’s determination of the amount of an award by filing an appeal in the appropriate federal court of appeals within 30 days after the determination is issued.

Section 922 prohibits the SEC from providing an award to a whistleblower who is convicted of a criminal violation related to the judicial or administrative action for which the whistleblower provided information; who gains the information by auditing financial statements as required under the securities laws; who fails to submit information to the SEC as required by an SEC rule; or who is an employee of DOJ or an appropriate regulatory agency, an SRO, the PCAOB or a law enforcement organization.

Prohibition Against Retaliation

Section 922 creates a new private right of action for employees who have suffered retaliation “because of any lawful act done by the whistleblower– ‘(i) in providing information to the Commission in accordance with [the whistleblower reward subsection]; or (ii) in assisting in any investigation or judicial or administrative action of the Commission based upon or related to such information.”  The action may be brought in federal court and remedies include reinstatement, double back pay with interest, as well as litigation costs, expert witness fees, and reasonable attorneys’ fees.

New Whistleblower Protection for Financial Services Employees

Section 1057 creates a robust private right of action for employees in the financial services industry who suffer retaliation for disclosing information about fraudulent or unlawful conduct related to the offering or provision of a consumer financial product or service.  The scope of coverage is quite broad in that Section 1057 would apply to organizations that extend credit or service or broker loans; provide real estate settlement services or perform property appraisals; provide financial advisory services to consumers relating to proprietary financial products, including credit counseling; or collect, analyze, maintain, or provide consumer report information or other account information in connection with any decision regarding the offering or provision of a consumer financial product or service.

Section 1057 prohibits retaliation against an employee who has engaged in any of the following protected acts:

• Provided, caused to be provided, or is about to provide or cause to be provided, to an employer, the newly created Bureau of Consumer Financial Protection (Bureau), or any other government authority or law enforcement agency, information that the employee reasonably believes relates to any violation of any provision of Title X of the bill, which establishes new consumer financial protections, or any rule, order, standard or prohibition prescribed or enforced by the Bureau;
• Testified or will testify in a proceeding resulting from the administration or enforcement of any provision of Title X;
• Filed, instituted, or caused to be filed or instituted any proceeding under any federal consumer financial law; or
• Objected to, or refused to participate in any activity, practice, or assigned task that the employee reasonably believes to be a violation of any law, rule, standard, or prohibition subject to the jurisdiction of, or enforceable, by the Bureau.

Remedies include reinstatement, backpay, compensatory damages, and attorney’s fees and litigation costs, including expert witness fees.  Where reinstatement is unavailable or impractical, front pay may be awarded.

Section 1057 employs a burden-shifting framework that is favorable to employees.  A complainant can prevail merely by showing by a preponderance of the evidence that her protected activity was a contributing factor in the unfavorable action. A contributing factor is any factor which, alone or in connection with other factors, tends to affect in any way the outcome of the decision.  Once a complainant meets her burden by a preponderance of the evidence, the employer can avoid liability only if it proves by clear and convincing evidence that it would have taken the same action in the absence of the employee’s protected conduct.

The procedures governing Section 1057 claims are substantially similar to those governing retaliation claims brought under the Consumer Product Safety Improvement Act of 2008, 15 U.S.C. § 2087.   The statute of limitations is 180 days and the claim must be filed initially with OSHA, which will investigate the complaint and can order preliminary reinstatement.  Once OSHA issues its findings, either party can request a hearing before a Department of Labor (DOL) administrative law judge.  If DOL has not issued a final order within 210 days of the filing of the complaint, the complainant has the option to remove the claim to federal court and either party can request a trial by jury.  Section 1057 claims are exempt from mandatory arbitration agreements.

Expansion of Sarbanes-Oxley Whistleblower Protection Provision

Section 929A clarifies that the whistleblower protection provision of the Sarbanes-Oxley Act (SOX), 18 U.S.C. § 1514A, applies to employees of any subsidiaries of publicly-traded companies “whose financial information is included in the consolidated financial statements of [a publicly] traded company.”  This amendment eliminates a significant loophole that some courts have read into SOX that has substantially narrowed the scope of SOX coverage.  Elevating form over substance, some judges have permitted publicly-traded companies to avoid liability under SOX merely because the parent company that files reports with the SEC has few, if any, direct employees, and instead employs most of its workforce through non-publicly traded subsidiaries.   As Judge Levin pointed in Morefield v. Exelon Servs., Inc., ALJ No. 2004-SOX-002 (ALJ Jan. 28, 2004), this loophole is contrary to the purpose of SOX in that “[a] publicly traded corporation is, for Sarbanes-Oxley purposes, the sum of its constituent units; and Congress insisted upon accuracy and integrity in financial reporting at all levels of the corporate structure, including the non-publicly traded subsidiaries . . . Congress imposed reforms upon the publicly traded company, and through it, to its entire corporate organization.”  Section 806 of SOX was also amended by the Grassley-Cardin Amendment, which applies SOX whistleblower protection to employees of NRSROs, including A.M. Best Company, Inc., Moody’s Investors Service, Inc., and Standard & Poor’s Ratings Service.

 

TELG Principal Jason Zuckerman to Speak at the 2010 National Whistleblower Assembly

May 20, 2010

On May 24, 2010, Jason Zuckerman, a Principal at The Employment Law Group® law firm, will speak about the whistleblower protection provisions of the American Recovery and Reinvestment act of 2009 and the Patient Protection and Affordable Care Act.  The event is co-sponsored by the National Treasury Employees Union, Project of Government Oversight, the American Federation of Government Employees, Federal Law Enforcement Officers Association, and the Semmelweis Society International.  More information about the event is available from the Government Accountability Project here.

For more information about upcoming speaking engagements featuring the attorneys of The Employment Law Group® law firm, click here.

TELG Principal Jason Zuckerman to Speak at CLE on the Sarbanes-Oxley Act

May 20, 2010

On May 21, 2010, Jason Zuckerman, a Principal at The Employment Law Group® law firm, will speak on whistleblower provision of the Sarbanes-Oxley Act at a CLE hosted through www.lawseminars.com.  The program will discuss recent developments concerning SOX, including new and pending corporate whistleblower protection legislation.

For more information about upcoming speaking engagements featuring the attorneys of The Employment Law Group® law firm, click here.

The Employment Law Group® Law Firm is Quoted in BNA Article on New Health Care Reform Law

May 20, 2010

Principal Jason Zuckerman of The Employment Law Group® law firm is quoted in an article in BNA’s Daily Labor Report titled “Health Care Law Has Whistleblower, Other Employee-Friendly Amendments,” about the whistleblower provisions of The Patient Protection and Affordable Care Act of 2009.  The article was published on April 13, 2010.  The Patient Protection and Affordable Care Act which we blogged about here, contains several new protections for employees.  Two of the most notable are section 1558 which creates a new private right of action for whistleblowers and section 10104(j)(2) which amends the False Claims Act.

Section 1558 creates a new right of action based on the procedures of the Consumer Product Safety Improvement Act, 15 U.S.C. § 2087(b).   It protects anyone who discloses information that they reasonably believe evidences a violation of Title I of the Act.  Title I contains numerous provisions regulating health insurance and prohibits an employer from discriminating against an employee for receiving health insurance subsidies.  Distinguishing this new law from the Sarbanes-Oxley Act, Zuckerman noted that the new whistleblower provision “is even more robust than that of the Sarbanes-Oxley Act because [unlike SOX] it contains an explicit right to a jury trial.”  Zuckerman also pointed out that section 1558 appears to apply to employers regardless of their size. 

Section 10104(j)(2) expands the definition of an “original source” under the False Claims Act, limiting the application of the FCA’s public disclosure bar and increasing the likelihood that a relator will be able to meet the original source exception.  According to Zuckerman “[t]his will make it much easier for qui tam relators to show that they are an original source and allow many more to survive motions to dismiss.”

For more information about The Employment Law Group® law firm’s Whistleblower Retaliation Practice, click here.

The Employment Law Group® Law Firm Principal Jason Zuckerman Quoted in Article on Whistleblower Provisions of Health Reform Law

May 20, 2010

In an article discussing the new whistleblower law contained in section 1558 of The Patient Protection and Affordable Care Act, Jason Zuckerman is quoted comparing the new provision to the Sarbanes-Oxley Act (SOX).  The article, titled “Whistle-Blower Protections Tucked into Health Reform Law,” was published by the Society for Human Resource Management on April 26, 2010. 

Section 1558 of the Act which we blogged about here, creates a new right of action for employees who blow the whistle on violations of Title I of the Act.  Title I contains a wide range of rules governing health insurance, including a prohibition against denying coverage based upon preexisting conditions, policy and financial reporting requirements, and prohibitions against discrimination based on an individual’s receipt of health insurance subsidies.  Zuckerman notes that compared to SOX, the new whistleblower protections contained in section 1558 are “more robust” because whistleblowers are provided the “explicit right” to a jury trial. 

For more information about The Employment Law Group® law firm’s Whistleblower Retaliation Practice, click here.

District Court Rules That Amending OSHA SOX Complaint Does Not Restart 180-Day Clock For Removal To Federal Court

May 12, 2010

On March 30, 2010, the U.S. District Court for the District of Connecticut held that when a Sarbanes-Oxley whistleblower amends his complaint, he need not wait an additional 180 days at OSHA before removing his claim to federal court.  In 2006, Richard Trusz, the managing director of valuations at UBS Realty, butted heads with management after he complained about understaffing and warned of potentially overvalued property.  In 2007, two properties were discovered to be overvalued by $3 million and $1.7 million.  Trusz insisted that UBS make disclosures to clients and return excess management funds.  In retaliation, UBS diminished Trusz’s responsibilities, restricted him from having contact with clients, and prevented him from attending an annual client meeting.  After continued conflict, Trusz filed a complaint with OSHA in April 2008 alleging that UBS violated the Sarbanes-Oxley Act. 

In June 2008, independent appraisers found the need to write down over $55 million in assets due to overvaluation.  Angry at Trusz for his comments during a meeting about the findings, UBS placed Trusz on unpaid leave.  While on leave in July, Trusz sent a critical email to management after learning that the company would not be following through with the write-downs.  Two weeks later, Trusz was terminated.  Trusz filed an amended complaint with OSHA on September 3, alleging new instances of retaliation including termination.  In November 2008, Trusz requested that OSHA dismiss his complaint so he could file in federal court. 

After Trusz filed his complaint in federal court, UBS moved to dismiss, claiming that Trusz failed to exhaust his administrative remedies before OSHA.  Under SOX, a complainant may remove his claim to federal district court only after he has been before the Department of Labor for more than 180 days without a final judgment.  UBS argued that the 180-day clock restarted when Trusz amended his complaint in September.  The court denied the motion, finding that Trusz merely “alleged facts and subsequent developments related to the conduct alleged in his original complaint,” and thus OSHA had opportunity to resolve the case as required. 

A copy of the opinion is available here.  For more information about The Employment Law Group® law firm’s Sarbanes-Oxley Whistleblower Practice, click here.