Whistleblower Law Under The Sarbanes-Oxley Act

Dolley Law, LLC represents clients in cases involving whistleblower claims and allegations of fraud. The firm's main office is located in St. Louis, Missouri and our attorneys handle whistleblower cases in the State of Missouri and nationwide.

On June 4, 2013, the United States Court of Appeals for the Tenth Circuit handed down its decision in Lockheed Martin, Corp v. Department of Labor & Andrea Brown, a noteworthy case regarding whistleblowers and the protection they are entitled to under the Sarbanes-Oxley Act of 2002 (SOX). The Tenth Circuit affirmed the decision made by the Department of Labor's (DOL) Administrative Review Board, which found in favor of Andrea Brown. Brown was an employee at Lockheed Martin from 2000 until 2008. In 2006, Brown reported various concerns regarding her supervisor, Wendy Owen, including her suspicion that Owen was misusing company funds to support multiple inappropriate relationships with soldiers returning from Iraq. Shortly after reporting her concerns, Brown experienced continuous negative treatment at work and eventually suffered a mental breakdown and took medical leave. Brown subsequently filed a complaint against her former employer claiming that she had been constructively discharged as a direct result of reporting her suspicions about Owen

The DOL's Administrative Law Judge found that Ms. Brown's complaints fell within the scope of SOX and, therefore, she was entitled to protection from retaliation for her actions. The DOL's Administrative Review Board and the Tenth Circuit affirmed the Administrative Law Judge's findings. The Tenth Circuit, applying Chevron deference, determined that whistleblowers are protected by the provisions of SOX even if the alleged fraud is not against shareholders. This decision broadened the coverage of SOX by expanding the types of protected activities that employees may engage in without fear of retaliation by employers.

Section 806 of the Sarbanes-Oxley Act is considered the "anti-retaliation" provision of the Act. This Section provides that publicly traded companies and their officers cannot "discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment" to retaliate against that employee for providing information to a supervisor "regarding any conduct which the employee reasonably believes constitutes a violation of" law. 18 U.S.C. § 1514A. Section 806 indicates that violations of law include any violations of "any provision of Federal law relating to fraud against shareholders…" Id. A whistleblower is considered to have engaged in protected activity when he or she reports information about conduct that the whistleblower reasonably believes is a violation of law, including fraud.

The question in Brown dealt specifically with the "fraud" component of Section 806 and whether the alleged fraud must be against shareholders in order for the whistleblower to be entitled to protection against retaliation. While the provision in Section 806(a)(2) seems to indicate that any alleged fraud or wrongdoing must be "fraud against shareholders," the Tenth Circuit determined that whistleblowers are entitled to the protections of Section 806, whether or not the alleged fraud they reported was against shareholders. Relying on Congressional intent, the court interpreted the phrase "against shareholders" as modifying only the final type of fraud on the list rather than every type of fraud listed. This broad interpretation will provide much more protection to employees that report alleged misconduct. As a result, employers will need to be more aware of what constitutes protected activity under Section 806 of SOX in order to avoid violating the Act.