Sarbanes-Oxley Inapplicable to Employee Complaints

Know More: Sarbanes-Oxley 2.0, Sarbanes-Oxley

The following is for information, and not meant to be legal advice.

Sarbanes-Oxley Act of 2002 Section 806 (SOX) protects employees who complain of financial or other specific wrongdoing related to shareholder fraud, or mail, wire, or bank fraud.

Some have argued that complaints about certain employment law violations are protected activities under SOX. In February 2006, the Department of Labor (DOL) suggested in the Smith v. Hewlett-Packard case that an internal complaint of class-wide race discrimination could be protected activity under SOX. Employment law violations could create significant monetary exposure and/or negative publicity, and thus affect shareholder value.

However, the DOL’s Administrative Review Board (ARB) September 2006 decision in Platone v. FLYi, Inc., ARB Case No. 04-154 (Sept. 29, 2006), reversed an administrative law judge who awarded a former employee approximately $175,000 under SOX based on an alleged payment scheme that could have defrauded shareholders, would have constituted mail and wire fraud, and violated securities laws.
The ARB held that SOX did not provide whistleblower protection for all employee complaints about how a company spends its money and pays its bills. When allegations of mail or wire fraud arose under SOX, the alleged fraudulent conduct must at least be of a type that would be adverse to investors’ interests. The ARB’s decision in Platone supported dismissing SOX claims based on employment law issues, such as discrimination or wage and hour, that were not directly related to securities fraud.

The ARB emphasized that at the time Platone complained to her employer, Platone did not claim that her complaints were based on securities fraud. Rather, this theory had been added later, after Platone brought the matter to DOL. It is an employee’s report to the employer at the time he/she complains which form the basis for assessing whether the employee engaged in SOX-protected activity. The decision reminded employers to document an employee’s specific complaint at the time made.

Devoted to Corporate Attorneys, Corporate Lawyers, and Corporate Counsel

related entries

0 Comments/Trackbacks

submit a trackback

post a comment

Comment Preview

Advertise

Related Resources

recent comments

sponsored ads

topics

subscribe

Current News

resources

Support This Blog

archives

blogroll

Know More Media - Legal

know more media network

we support unitus

PRWeb

Influencer

ProductivityGoal

CallCenterScript

AdHurl

TheBizofKnowledge

HealthCareVox

BrainBasedBusiness