In Wiest v. Lynch, No. 11-cv-4257, 2013 U.S. App. LEXIS 5345 (3d Cir. March 19, 2013), the Third Circuit gave Chevron deference to U.S. Department of Labor Administrative Review Board’s (ARB) interpretation of “protected activity” under Section 806 of SOX in Sylvester v. Parexel International LLC, No. 07-123 (ARB May 25, 2011), concluding that a whistleblower need only show that his or her communication reflects a reasonable belief that the employer has violated or will violate the law or rules of the SEC.  We now see a circuit split on multiple issues, including whether the alleged misconduct must “definitively and specifically” relate to one of the categories in Section 806, and whether the employee can engage in protected activity by complaining of potential future violations. 


The plaintiff worked for approximately thirty-one years in Tyco Electronics’ (Employer) accounting department before his discharge in 2009.  In 2007, he engaged in a pattern of rejecting and questioning expenses that he believed failed to satisfy accounting standards or securities and tax laws.  He alleged that he routinely reported what he believed were improper expenditures to his supervisors, primarily asserting that improper reporting would either violate the Employer’s policies or federal tax laws.  Notably, none of his communications indicated his belief that the Employer had engaged in fraud upon shareholders or had otherwise violated the statutes or rules listed in Section 806.

The District Court’s Decision

Plaintiff filed suit against the Employer and several officers and directors in the U.S. District Court for the Eastern District of Pennsylvania, alleging he was discharged for reporting improper expenditures.  Defendants moved to dismiss, asserting that Plaintiff failed to establish a prima facie case under Section 806 by failing to engage in protected activity.  Specifically, they argued that Plaintiff did not allege that his communications about improper expenditures “definitively and specifically” related to a violation of a statute or rule set forth in Section 806.

The district court determined that the plaintiff had to allege that his communications:  “definitively and specifically” related to a statute or rule listed in Section 806; expressed “‘an objectively reasonable belief that the company intentionally misrepresented or omitted certain facts to investors, which were material and which risked loss;’” and “reflect[ed] a reasonable belief of an existing violation.”  Wiest v. Lynch, No. 10-cv-3288, 2011 U.S. Dist. LEXIS 79283, 2011 WL 2923860 (E.D. Pa. July 21, 2011).  Based on the facts alleged, the district court granted Defendants’ motion. 

The Third Circuit’s Decision

In a 2-1 decision, the Third Circuit held that the district court erred in applying the “definitive and specific” standard, concluding that the ARB had abandoned this standard in Sylvester.  In Sylvester, the ARB determined that a complainant can engage in protected activity even if he or she fails to allege or prove materiality, scienter, reliance, economic loss, or loss causation.  The majority found the ARB’s interpretation in Sylvester to be reasonable.  Additionally, the majority held that an employee’s communications about a potential violation will constitute protected activity as long as the employee reasonably believes the violation is likely to happen.

The dissent, however, stressed that the standard enunciated in “Sylvester provides no guidance as to what, if anything, a § 806 claimant is required to allege . . . and the ARB has provided little more than a recitation of what is not required for an employee to allege protected conduct.” 


This decision is at odds with decisions out of the First, Fifth, Sixth and Ninth Circuits—namely: Day v. Staples, Inc., 555 F.3d 42, 55 (1st Cir. 2009); Allen v. Admin. Review Bd., 514 F.3d 468, 476-77 (5th Cir. 2008); Van Asdale v. Int’l Game Tech., 577 F.3d 989, 996-97 (9th Cir. 2009); Riddle v. First Tenn. Bank, N.A., No. 11-cv-6277, 2012 U.S. App. LEXIS 18684 (6th Cir. Aug. 31, 2012) (unpublished))—as to the viability of a “definitive and specific” standard, and employers are rightfully concerned that, at least within the Third Circuit, it may open the floodgates to claims that bear a highly attenuated relationship to the categories fraud and rules exhaustively listed in Section 806.  Likewise, this decision is at odds with the Fourth Circuit’s decision in Livingston v. Wyeth, 520 F.3d 344, 352 (4th Cir. 2008), with respect to whether an employee can engage in protected activity under SOX by complaining of future misconduct.  

The Tenth Circuit may address the standard applicabile to SOX claims in Lockheed Martin Corp. v. Dep’t of Labor, et al., No. 11-9524 (decision pending).  Proskauer filed an amicus brief supporting the employer’s position in that matter.

Though there are solid bases for applying the standards from which the Third Circuit (and the ARB) departed, employers challenging protected activity in the Third Circuit should continue to focus closely on whether an employee had a subjectively and objectively reasonable belief, as that standard certainly remains in tact.

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Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.

Photo of Lloyd B. Chinn Lloyd B. Chinn

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative…

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative agencies in New York and across the country. Lloyd’s practice ranges from litigating compensation disputes to defending whistleblower, discrimination and sexual harassment claims. Although he represents employers in a wide range of industries, including law, insurance, health care, consulting, media, education and technology, he focuses a substantial portion of his practice on the financial services sector. He has tried to final verdict or arbitration award substantial disputes in this area.

Due to Lloyd’s litigation experience, clients regularly turn to him for advice regarding the full range of employment matters, including terminations, whistleblower policy and procedure, reductions in force, employment agreements, and employment policies. For example, in the wake of the financial crisis, he has counseled a number of firms through reductions in force and related bonus and deferred compensation disputes. Lloyd has also been retained to conduct internal investigations of allegations of workplace misconduct, including claims leveled against senior executives.

Lloyd has represented global businesses in matters involving Sarbanes-Oxley and Dodd-Frank whistleblower claims. He has taken an active role in the American Bar Association on these issues, currently serving as Co-Chair of the Whistleblower subcommittee of the ABA Employee Rights and Responsibilities Committee. Lloyd has spoken on whistleblowing topics before a numerous organizations, including the American Bar Association, ALI-ABA, Association of the Bar of the City of New York, and New York University School of Law. He has testified twice before Congressional subcommittees regarding whistleblower legislation and has also published blog postings, articles and client alerts on a variety of topics in this area, including the Dodd-Frank Act’s whistleblower provisions. Lloyd is a co-editor of Proskauer’s Whistleblower Defense Blog, and he has been widely quoted by on whistleblower topics by a number of publications, including the New York Times, the Wall Street Journal, the National Law Journal and Law 360.

Lloyd has also become active in the International Bar Association, presenting on a variety of subjects, including: the #MeToo movement, the COVID-19 pandemic and employment law, and cross-border harmonization of employment provisions in transactions. Lloyd also hosts a quarterly roundtable discussion among financial services industry in-house employment lawyers. He has also published articles and given speeches on a variety of other employment-law topics, including non-solicitation provisions, FINRA arbitration rules, cross-border discovery, e-discovery, and the use of experts.