The Department of Labor’s Administrative Review Board (ARB) recently held that a former employee of Exelis Systems Corporation who was employed in Afghanistan could bring a SOX claim even though he worked exclusively outside of the United States. Blanchard v. Exelis Systems Corp./Vectrus Systems Corp., ARB Case No. 15-031 (August 29, 2017). In so ruling, the ARB opened the door to the potential extraterritorial application of SOX, reversing course from its prior decision addressing this same issue.
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.
On September 29, 2015, the U.S. Commodity Futures Trading Commission (CFTC) announced that it will make its second award as part of its whistleblower program, which was created by Dodd-Frank. The tipster will receive a bounty of approximately $290,000. Notably absent from the CFTC’s press release regarding the award were any details about the whistleblower or the information that led the enforcement action.
In Wallace v. Tesoro Corp., the Fifth Circuit revived a SOX whistleblower complaint that was dismissed by the U.S. District Court for the Western District of Texas, finding that the plaintiff’s alleged belief that the company violated SEC rules was not objectively unreasonable (as plead in the complaint). (Case No. 13-cv-51010, July 31, 2015). The Fifth Circuit also affirmed the dismissal of claims not included in the OSHA complaint on the grounds that they were not administratively exhausted.
On June 17, 2015, members of the Senate Judiciary Committee introduced the Criminal Antitrust Anti-Retaliation Act of 2015 (Act), a bill that proposes whistleblower protection for employees who provide information to the Department of Justice related to criminal violations of antitrust laws.
On May 25, 2015, the Wall Street Journal published an article (subscription required) reporting that tipsters have found it difficult to collect financial awards from the SEC after filing whistleblower claims.
A Wall Street Journal article (subscription required) dated May 4, 2015 reports that a backlog of tips received by the SEC Office of the Whistleblower as part of its bounty program has resulted in a delay in paying awards to tipsters. According to the article, of the 297 tipsters who have applied for awards since 2011, 83% have not received a decision as to whether they will receive a monetary award.
The ARB recently addressed the standard for proving that protected activity was a “contributing factor” in adverse employment actions. It concluded that evidence showing that an employer would have made the same adverse action decision in the absence of protected activity does not bear on whether the protected activity “contributed” to the adverse action. Powers v. Union Pacific Railroad Co., ARB Case No. 13-034 (Mar. 20, 2015) (3-2 decision).
We have seen a number of substantial whistleblower awards make headlines this year, but a recent article on nytimes.com discusses the potential downsides of government-sponsored bounty programs: rewarding whistleblowers by paying them millions of dollars for information may lead to perverse incentives by allowing wrongdoers to win significant sums of money with little government accountability for the awards.
On November 12, 2014, in Halliburton, Inc. v. Admin. Review Bd., 5th Cir. No. 13-cv-60323, the Fifth Circuit affirmed an ARB’s decision that disclosing the identity of a whistleblower may constitute an “adverse action” under Section 806 of SOX. This decision presents a number of risks for employers—even when they are acting conscientiously and in good faith—and is mandatory reading for in-house employment counsel and compliance professionals.
According to an academic study published on October 6, 2014 by Andrew C. Hall, Gerald S. Martin, Nathan Y. Sharp, and Jaron H. Wilde, the presence of whistleblowers may have a meaningful impact on the outcomes of enforcement actions brought by the SEC and DOJ. The study involved an analysis of the effect of whistleblowers on enforcement actions for alleged financial misrepresentation, as measured by regulatory penalties (and criminal prison sentences). The study’s authors reviewed the outcomes of SEC and DOJ enforcement actions between 1978 and 2012 associated with alleged financial misrepresentation. According to the study, the involvement of whistleblowers in enforcement actions is associated with an average penalty of $90.16 to $92.88 million higher than when no whistleblower is involved. The study also found that whistleblower involvement is associated with executives and employees at firms being fined $50.22 to $56.50 million more than in actions without whistleblowers.