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Paper: Blowing the Corporate Whistle: The Sarbanes-Oxley Act - Not Your Garden-Variety Discrimination Claim
Author: Kathleen M. Bonczyk, M.B.A., E
Date: 2005-06-09 08:07:29
Summary: While publicly-held organizations have instituted changes in their accounting models to comply with the Sarbanes-Oxley Act, it is important that they also implement best practices in the human resource function in light of 18 U.S.C. S 1514A. This statute, known as the whistleblower provision of Sarbanes-Oxley, provides a civil remedy for employees of publicly-traded companies and their wholly-owned subsidiaries where an employee has suffered retaliation for blowing the whistle on fraud on behalf of shareholders. Recent case law construing Section 1514A, however, suggests that a much broader range of actities are being considered by the courts as conduct which comes under the Act's zone of protection than one might expect. A whistleblower need not make allegations of cooked accounting books or of cashed seven figure bonus checks made payable to corporate executives. Instead, alleging that management is using a particular vendor based on personal relationships or that a business plan paints too-rosy of a picture for the investing community may be enough to articulate a cause of action under Section 1514A. Additionally, the burden of proof to the defendant/employer who seeks to avoid liability is much higher than the applicable standard relative to other employment laws. Under Section 1514A, the defendant must make a showing, at the clear and convincing evidentiary standard, that it would still have demoted, terminated, or suspended the employee in the absence of the protected activity. Moreover, the Securities and Exchange Commission will be notified when an administrative complaint allegeing a Section 1514A violation is filed by the whistleblower. For these and other reasons, it is essential that covered employers become familiar with the statute so as to position themselves to defend against these claims, if and when an allegation of wrongdoing under Section 1514A is made.