In the recent case of Onyango v. Berkeley Solicitors, the UK Employment Appeal Tribunal ruled that an employee was allowed to bring a ‘whistleblowing’ claim relating to a protected disclosure that was made after the termination of his employment.
Under UK law, workers are protected from receiving detrimental treatment as a result of raising a concern about certain types of wrongdoing occurring in the workplace. In Onyango, the Claimant (Mr. Onyango) brought a claim in the Employment Tribunal alleging that as a result of making a protected disclosure, he was accused of forgery and dishonesty which ultimately led to him being investigated by the regulatory body for solicitors in the UK, the Solicitors Regulatory Authority. The Employment Tribunal held that it did not have jurisdiction to hear Mr. Onyango’s claim because he had made the protected disclosure after the termination of his employment and that it could only hear the case where such disclosure was made during the course of his employment. Mr Onyango appealed to the Employment Appeal Tribunal. Read More
On November 15, 2012, the Securities and Exchange Commission released its Fiscal Year 2012 Annual Report on the Dodd-Frank Whistleblower Program (the “Report”), the first full-year report issued since the enactment of Dodd-Frank. The Report analyzes the 3,001 tips received over the last twelve months by the Commission’s Office of the Whistleblower (“OWB”) , which is responsible for the implementation and execution of the Commission’s whistleblower program. The Report also provides additional information on the whistleblower award evaluation process that resulted in its first (and only) award issuance in August 2012.
Activities of the Commission’s OWB
The OWB was created pursuant to Section 924(d) of the Dodd-Frank Act. OWB reviews and processes whistleblower tips through the Commission’s Tips, Complaints, and Referrals (“TCR”) System, leveraging resources of the Commission’s Office of Market Intelligence to evaluate tips and assign them to the appropriate division. OWB works closely with the Enforcement Division throughout the investigative process, serving as a liaison between the whistleblowers or their counsel and Enforcement staff. OWB arranges meetings between whistleblowers and investigators or subject matter experts within Enforcement to advance investigations. OWB also communicates with other agencies’ whistleblower offices, including the IRS, Department of Justice, Commodity Futures Trading Commission, and the Department of Labor’s OSHA. Read More
Two federal district courts recently issued decisions adopting a broad interpretation of the anti-retaliation provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) and allowed Dodd-Frank whistleblower claims to proceed past motions to dismiss. Significantly, these cases stand for the proposition that to be protected as a whistleblower under the retaliation provision of Dodd-Frank, an individual does not have to meet the definition of a whistleblower for purposes of obtaining a bounty under Dodd-Frank and in particular, does not necessarily have to make a disclosure to the Securities and Exchange Commission (the “SEC”) in the manner required in connection with the bounty provision of the statute. While the issue is far from settled as Dodd-Frank retaliation cases are just beginning to work their way through the federal courts, these decisions could contribute to further increases in the number of Dodd-Frank whistleblower retaliation claims filed against employers. Read More
On August 21, 2012, the Securities and Exchange Commission (SEC) announced that it has awarded its first whistleblower bounty, just over one year after the SEC’s Dodd-Frank whistleblower rules became effective. The SEC’s Claims Review Staff issued a short order, Release No. 34-67698, granting the whistleblower’s award, which notes that the SEC declined to award a claim to a second whistleblower involved in the action. Read More
On June 28, 2012, a Texas District Court held that the Dodd-Frank’s anti-retaliation provision per se does not apply extraterritorially. In Asadi v. G.E. Energy (USA), LLC, Case No. 4:12-cv-00345 (S.D. Tex. June 28, 2012), the district court determined that Dodd-Frank’s anti-retaliation provision did not extend to or protect the plaintiff’s extraterritorial whistleblowing activity. Note that this decision does not apply to Dodd-Frank’s whistleblower bounty provisions, pursuant to which whistleblowers outside of the U.S. may be eligible for bounties for making reports of violations to the SEC.
The complaint alleged that Asadi was a U.S.-based employee who was working from an office in Jordan to secure and manage energy contracts with the Iraqi government. Asadi alleged that he notified his supervisors and a company ombudsperson of a potential violation of the Foreign Corrupt Practices Act (“FCPA”), whereupon GE Energy pressured him to step down, attempted to negotiate a severance, and eventually terminated his employment.
Applying the Supreme Court’s 2010 decision in Morrison v. National Australia Bank, Ltd., 130 S. Ct. 2869 (2010), the district court held that the absence of language regarding the extraterritoriality of Dodd-Frank’s anti-retaliation provision led to a presumption that it did not apply extraterritorially. The district court noted that Section 929P(b) of Dodd-Frank gave extraterritorial jurisdiction over specific enforcement actions brought by the SEC or the DOJ, but not to private actions such as the plaintiff’s. The district court also found persuasive a Department of Labor Administrative Review Board en banc holding that, because Dodd Frank’s amendments to SOX were silent as to extraterritoriality, the amendments could not be construed to extend the reach of SOX extraterritorially. See Villanueva v. Core Labs, NV, 2001 WL 6981989, ARB Case No. 09-108, ALJ Case No. 2009-SOX-6 (ARB Dec. 22, 2011). Thus, the district court concluded that Dodd-Frank’s anti-retaliation provision did not protect Asadi from alleged retaliation and granted GE Energy’s motion to dismiss.
On July 9, 2012, a Southern District of New York court held that the Dodd-Frank Act applies retroactively to protect whistleblowers employed by subsidiaries of publicly-traded companies.
In Leshinsky v. Telvent GIT, S.A., Case No. 1:10-cv-04511-JPO (S.D.N.Y. July 9, 2012), the plaintiff, an employee of a non-publicly-traded subsidiary of a public company, brought a retaliation claim under Sarbanes-Oxley (“SOX”) Section 806. The plaintiff’s claims arose prior to Dodd-Frank’s amendments to Section 806 providing that no public company, including any subsidiary or affiliate whose financial information is included in the consolidated financial statements of such company, may retaliate against a whistleblowing employee.
In analyzing whether the Dodd-Frank amendment to SOX applied to the plaintiff’s claims, the court explained that generally speaking, a statute does not apply retroactively to conduct that occurred prior to a statute’s enactment; there is a presumption against retroactive legislation. When an amendment merely clarifies existing law, rather than substantively changing existing law, however, retroactivity may be appropriate. The court applied three factors to determine whether Dodd-Frank clarified Section 806: (1) whether Congress expressed legislative intent that Dodd-Frank Section 929A was a clarification that should be applied retroactively; (2) whether there was a conflict or ambiguity in the pre-amendment statutory text; and (3) whether the amendment was consistent with a reasonable interpretation of the original statute. The court determined that the Dodd-Frank amendment clarified the legislative intent of Dodd-Frank’s predecessor retaliation provision under SOX.
The court noted that the First Circuit’s April decision in Lawson v. FMR LLC, 690 F.3d 61 (1st Cir. 2012), did not preclude its holding and arguably supported its conclusion that the Dodd-Frank amendments were a necessary clarification to prevent an improper reading of the statute’s protections. See previous blog entry.
There is a new OSHA Whistleblower Protection Program Web site. The site includes SOX complaint and outcome statistics at OSHA, as well as statistics for all of the other whistleblower statutes administered by OSHA. Here is a link to the statistics OSHA is tracking.
Current data on the site runs through 3/31/12 (Q2 of FY2012). So far this year there has been a slight uptick in SOX complaints compared to last year, but not by much, and not yet approaching complaint levels from prior years (2005-2010). According to the statistics, there have been zero merits findings for SOX complainants in OSHA investigations so far in FY2012, and there were only 2 such findings in FY 2011.
In Spinner v. David Landau and Associates, LLC, the Department of Labor’s Administrative Review Board (“ARB”) held that an accountant for a private firm was a covered employee under SOX where the firm performed services for publicly traded clients. In so holding, the ARB rejected the First Circuit’s contrary interpretation of SOX inLawson v. FMR LLC. The Spinner decision provides new ammunition for employees of non-public companies seeking to bring SOX whistleblower claims against their firms and raises significant liability concerns for firms that have operated under the assumption that their employees were not covered by SOX’s whistleblower provisions. Read More
A new opinion from the Department of Labor (“DOL”) makes clear that the department will treat the burden of proof in whistleblower retaliation claims under the Sarbanes-Oxley Act (“SOX”) differently from typical retaliation claims under Title VII. In an opinion issued in late March – Zinn v. American Commercial Lines Inc. – the DOL’s Administrative Review Board (“ARB”) reversed an administrative law judge’s decision that applied Title VII’s “burden shifting” framework to dismiss Zinn’s whistleblower retaliation claim. Specifically, the ARB removed the third prong of the traditional “burden shifting” analysis as discussed further below.
Under Title VII, once an employee makes a prima facie case of retaliation, the burden shifts to the employer to provide a legitimate non-retaliatory reason for taking the adverse employment action at issue in the case. If an employer provides such a reason, the burden then shifts back to the employee to show that the employer’s reasons were actually a pretext for retaliation. In Zinn, the ARB found it was incorrect to apply this framework and “conflat[e] the SOX burden of proof standard with the Title VII burden of proof.” Under SOX, the employee needs to show that she engaged in protected activity that contributed to an adverse employment action. The burden then shifts to the employer to demonstrate, by clear and convincing evidence, that it would have taken the same adverse action absent the protected activity. However, the ARB clarified that it was unnecessary for the employee to then show that the employer’s actions were pretextual. Instead, once an employer produces evidence to support that its actions were non-retaliatory, an administrative law judge should “weigh the circumstantial evidence as a whole” to “gauge the context of the adverse action in question” and determine whether the case should proceed. With this distinct standard and its rejection of the familiar Title VII framework, the DOL has made it evident that SOX whistleblower cases will continue to be a unique and developing area of employment law.
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