Corporate Whistleblower Protection and the Sarbanes-Oxley Act
What is a Whistleblower?
A “whistleblower” is someone, usually an employee, who reports an employer who has broken the law to an outside agency. Whistleblowers are protected by federal and state laws. Employers may not retaliate against them for reporting misconduct. Whistleblowers may not be fired or otherwise mistreated, and in some instances the government may reimburse them for costs incurred as a result of reporting.
Which Laws Protect Whistleblowers?Whistleblowers are protected by a variety of state and federal laws. The main federal law that protects whistleblowers is the False Claims Act. The False Claims Act basically allows people to report instances involving fraudulent or false reports made to the government. It also protects informers from retaliation by their employer. The False Claims Act deals mainly with the federal government and federal contractors. Several states also have their own versions of False Claims Acts. Check with your local or state government to see if your state has a False Claims Act.
What is the Sarbanes-Oxley Act and How Does it Protect Whistleblowers?
A newer law provides protection for whistleblowers who are employed in a publicly traded company such as a corporation. This law is called the “Sarbanes-Oxley Act of 2002," commonly referred to as “SOX”.
Companies covered by the Act are those that are registered under the Securities Exchange Act and those that are required to file reports with the Securities Exchange Commission. The Act also covers actions made by contractors or agents of the corporation.
Which Specific Sections of the Sarbanes-Oxley Act Address Whistleblowing?
The Sarbanes-Oxley Act expanded the protection provided previously by the False Claims Act into the area of corporate organizations. SOX provided three major additions to the area of corporate whistleblower law:
- Instituting Reporting Procedures- Section 302of the Act requires publicly held companies to institute a venue for handling reports made by anonymous whistle-blowers. This section requires audit committees to establish and institute procedures for employees who wish to report questionable practices while remaining anonymous
- Investigations- Section 806 of SOX requires that any investigation conducted after a complaint is filed must not involve any threats of discharge, demotion, suspension or harassment against a person who has acted lawfully in reporting evidence of company fraud
- Criminal Offense- Section 1107 of the Act makes it a criminal offense for employers to retaliate against informants. According to this section, retaliating against an informant can result in significant fines and/or a prison sentence of up to 10 years
What Kinds of Actions by the Employer Constitute “Retaliation”?
An employee’s actions are considered to be retaliation if their employee’s lawful reporting was a contributing factor in the decision to take “unfavorable” action. Unfavorable retaliatory action can include:
- Discharging or laying off (firing) the employee
- Placing the employee on a blacklist (“do not hire” list)
- Demotion from a position
- Pay reductions or reductions in hours
- Withholding of wages, overtime pay, or promotions
- Denying benefits
- Not hiring or rehiring the person
- Intimidating, harassing, or otherwise mistreating the employee
- Reassignment to an unsuitable post or position
What Remedies does a Whistleblower have under the Act?
A person who was retaliated against for whistleblowing may be entitled to the following remedies:
- Being hired or rehired
- Restoration of benefits that were previously denied
- Payment of back wages owed, plus interest
- Restoration to position of seniority
- Compensation for lost benefits such as retirement, vacation, or sick leave
- Special damages for losses indirectly caused by the retaliation (such as emotional distress or damage to professional reputation)
- Attorney’s fees and litigations expenses such as expert witness fees
- “Affirmation”- letters of apology to the aggrieved employee
- Other compensation that will help the employee be “made whole” again
How do I File a Claim if I Have been Retaliated against as a Whistleblower?
Aggrieved employees must first file a complaint with the Occupational Safety and Health Administration (OSHA) before they are allowed to file suit in a civil court. Filing a complaint with OSHA requires:
- A written complaint must be submitted to OSHA within 90 days of the violation (when the employee became aware of the retaliation). Complaints must contain:
- Contact information of the aggrieved employee and the persons alleged to have violated the Act
- A sufficient amount of detail to prove that employer engaged in retaliation
- After the complaint is received, OSHA will review the complaint to determine whether an investigation is necessary
- After investigations, OSHA will determine whether the employer is guilty and if a settlement can be reached in order to compensate the employee
- If an agreement cannot be reached after 180 days after filing the complaint, the employee may then sue in a state or federal court
- OSHA decisions are final and the person filing the complaint has 30 days to appeal any decisions. Appeals are heard before an administrative law judge or before OSHA’s review board
Final Points to Consider
To recap, here are some points to consider if you believe that you have been retaliated against as a whistleblower:
- There are several laws covering whistleblower protection. The Sarbanes-Oxley Act only applies to certain business entities. Check to see which laws apply to your case
- Make an accurate and detailed report of the incident and the events leading up to its occurrence. Make records while the event is still fresh in your memory
- Organizations covered by SOX are required to provide reporting procedures for company violations. Familiarize yourself with your corporation’s reporting procedures
- Keep track of any lost wages or benefits
- Consult with a lawyer and file as early as possible
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Last Modified: 07-03-2012 01:58 PM PDT
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