The ARB recently clarified the competing burdens of proof on issues of causation for whistleblower retaliation cases arising under SOX Section 806 and other whistleblower protection statutes.  In particular, in Fordham v. Fannie Mae, ARB No. 12-061 (Oct. 9, 2014), a 2-1 decision, the ARB reversed an ALJ’s decision that had considered the Respondent’s affirmative defense in deciding that an employee had not demonstrated that her whistleblowing was a “contributing factor” in the termination of her employment.

Background

Complainant Edna Fordham (Complainant) was employed by Fannie Mae (Respondent) as an IT Risk Specialist in its SOX Technology Department.  In December 2008, she allegedly raised concerns regarding what she considered weaknesses in Respondent’s SOX Technology Program.  She also allegedly informed her supervisor that she believed there were problems with the documentation supporting the remediation status of SOX-related internal control deficiencies.  Complainant received her 2008 year-end performance review in March 2009, which was critical of her performance.  She was warned that she could face disciplinary action, including termination, if her performance did not improve.  In the weeks that followed, Complainant missed or was late to critical meetings, was often absent from work, and repeatedly failed to meet deadlines for an IT training project.  In April 2009, her supervisors decided to initiate proceedings terminating her employment, which were not communicated to Complainant at that time.

Complainant filed complaints with the SEC, OSHA, and the Federal Housing Finance Agency (FHFA) the same week that Respondent contemplated her termination.  She subsequently informed her supervisors that she had made complaints to the SEC and FHFA.  Soon after, Complainant was told that Respondent was considering terminating her employment but that she would be put on paid administrative leave while it gathered and reviewed documentation to ensure the decision was fair.  Her employment was ultimately terminated in July 2009 for performance and attendance issues.

Complainant filed a complaint alleging that Respondent violated Section 806 of SOX.  An ALJ found that her protected activity was not a “contributing factor” in the decision to terminate her employment.  However, in making this determination, the ALJ considered both the evidence proffered by Complainant and that offered by Respondent in support of its affirmative defense that it would have taken the adverse action in the absence of protected activity.

The ARB’s Ruling

According to the ARB, the question of whether the employer would have taken the same adverse action regardless of the alleged protected activity is considered only after it is concluded that the employee’s protected activity contributed to an adverse action.  The ARB ruled that, by taking into account evidence proffered by the Respondent with respect to its affirmative defense in considering whether Complainant showed that her alleged protected activity contributed to her discharge, the ALJ effectively considered the Respondent’s evidence under the preponderance standard rather than the higher clear and convincing standard.  The ARB vacated and reversed the ALJ’s Decision and Order and remanded the case to the ALJ for reconsideration.

Implications

This decision clarifies previously conflicting DOL decisions, and employers should expect that SOX whistleblower plaintiffs will seek to capitalize on it in trying to establish the causation prong of their prima facie case.  It is important to appreciate that this decision does not deprive employers of the affirmative defense that they would have taken the same adverse action in the absence of protected activity.  Still, it’s apparent that the ARB wants that analysis to be considered outside of a determination of whether a prima facie case has been established.

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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 Forbes.com. 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 Rachel Fischer Rachel Fischer

Rachel S. Fischer is a senior counsel in the Labor & Employment Law Department.

Rachel represents employers in all types of employment-related disputes, including defending clients against claims of discrimination, harassment, retaliation, wrongful discharge, whistleblowing, breach of contract, and in wage and hour…

Rachel S. Fischer is a senior counsel in the Labor & Employment Law Department.

Rachel represents employers in all types of employment-related disputes, including defending clients against claims of discrimination, harassment, retaliation, wrongful discharge, whistleblowing, breach of contract, and in wage and hour matters. She represents employers in federal and state courts, arbitration tribunals, and before administrative agencies, and has litigated both single plaintiff and class action lawsuits. As an experienced trial lawyer, Rachel has successfully litigated numerous cases from complaint through jury verdict or arbitral award.

Rachel represents employers across a wide variety of industries, including banking and finance, law firms, media and entertainment, sports, and higher education.

Rachel also counsels clients on a broad range of employment law matters, including investigations, employee terminations and discipline, and employment policies and procedures.