The ARB recently affirmed the dismissal of a whistleblower retaliation claim under Section 806 of SOX, holding an employer is not a “contractor” covered by SOX simply because it was a party to a contract with a publicly traded company.  Griffo v. Book Dog Books, LLC, Robert William Holdings, LLC & Robert William Mgmt., LLC, ARB Case No. 2018-0029 (May 2, 2019).

Background

Respondents are private companies in the business of selling and renting text books.  They entered into contracts to sell and rent books through a publicly traded retailer.  They also entered into contracts to maintain accounts and a line of credit with a publicly traded financial institution.  Complainant was the CFO of Respondent Book Dogs Books.  He allegedly complained about financial and inventory inconsistencies at Book Dog Books and, shortly thereafter, his employment was terminated.  He filed a complaint with OSHA claiming his discharge constituted retaliation in violation of SOX’s whistleblower protection provision.  After OSHA dismissed his complaint, an ALJ granted Respondents’ motion for summary judgment, holding they were not covered employers under SOX because they were not publicly traded and Complainant did not provide any services to a public company.  Complainant appealed to the ARB.

Ruling

The ARB affirmed the ALJ’s decision, finding Respondents’ relationships with the two public companies were insufficient to render them covered “contractors” under SOX.  The ARB explained that, following the U.S. Supreme Court’s decision in Lawson v. FMR (2014) (discussed here)—which extended SOX’s whistleblower protection to employees of a publicly traded company’s contractors and subcontractors—courts considering the meaning of “contractor” under SOX have held that an employer is not a covered “contractor” simply because it has entered into a contract with a publicly traded company.  The ARB ruled that “at a minimum, a ‘contractor’ under [SOX’s whistleblower provision] must actually perform a service for a publicly traded company.”  The ARB concluded that since Respondents were only customers of the public companies, and did not provide any services to them, they were not covered by SOX.

Implications

This decision reflects the ARB’s recognition of basic and necessary limitations on the U.S. Supreme Court’s decision in Lawson.

Posted in Key ARB Decisions, SOX Whistleblower Decisions
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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.

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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.

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Photo of Allison Martin Allison Martin

Allison Martin is a senior counsel in the Labor & Employment Law Department. Allison represents employers in a wide range of employment litigation matters, including employment discrimination and harassment lawsuits arising under Title VII and similar state and local statutes, retaliation claims, and…

Allison Martin is a senior counsel in the Labor & Employment Law Department. Allison represents employers in a wide range of employment litigation matters, including employment discrimination and harassment lawsuits arising under Title VII and similar state and local statutes, retaliation claims, and wage-and-hour claims. She represents employers in federal and state courts, arbitration tribunals, and before the EEOC and the New York City Commission on Human Rights. Allison has extensive experience litigating both single plaintiff and class action lawsuits.

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Allison previously served as a federal law clerk in the U.S. District Court for the Southern District of New York.

At Seton Hall University School of Law, Allison was an Articles Editor for the Seton Hall Law Review. Allison also  interned for Chief Judge Garrett E. Brown (Ret.) of the U.S. District Court for the District of New Jersey while in law school.

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