ARB Strictly Enforces SOX’s Whistleblower Provisions In A Pair Of Recent Cases

The Administrative Review Board (ARB) continues to be inundated with whistleblower retaliation claims under Section 806 of the Sarbanes-Oxley Act of 2002 (SOX). The decisions the ARB issued last month are daunting for employers and could be a sign of things to come. More specifically, on February 17, 2011, the ARB reversed an Administrative Law Judge’s (ALJ) dismissal of a Section 806 claim in Butler v. Anadarko Petroleum Corp., ARB Case No. 09-047, applying the doctrine of equitable tolling to a claim that was filed with OSHA almost six months after employment ended. Shortly thereafter, on February 28, 2011, the ARB affirmed an ALJ’s reinstatement order in Brown v. Lockheed Martin Corp., ARB Case No. 10-050.

Butler v. Anadarko Petroleum

Butler’s employment was terminated on May 22, 2006. On July 31, 2006, she filed a complaint in the U.S. District Court for the Southern District of Texas (the “District Court”), alleging that Anadarko retaliated against her in violation of Section 806. On December 15, 2006 - nearly six months after her employment ended - Butler filed the same complaint with OSHA that she previously filed with the District Court, as well as a list of her version of the relevant facts. OSHA concluded that the filing deadlines should be tolled because Butler timely filed her claim in the wrong forum, but the ALJ reversed, concluding that the District Court complaint “did not contain valid SOX complaints filed in the wrong forum.”

The ARB analyzed whether the Butler pled sufficient allegations in her District Court complaint to warrant a tolling of the statute of limitations. Under the law that existed at the time of Butler’s complaint, an employee alleging retaliation under Section 806 was required to file a complaint with OSHA within ninety days of alleged violation (Dodd-Frank recently doubled that statute of limitations). Despite the lapse of nearly six months between Butler’s discharge and filing of an OSHA complaint, the ARB concluded that her claims should be tolled because the District Court complaint alleged in general terms that she was discharged for reporting SOX violations. Importantly, although Butler’s District Court complaint may not have alleged a prima facie case under Section 806, the ARB concluded that filing a complaint in the wrong forum will, as in this case, toll a complainant’s claims until she files in the correct forum provided that: (i) the OSHA complaint contains the same claims as the federal court complaint, and (ii) the federal court complaint satisfies the initial filing requirements for OSHA complaints.

Brown v. Lockheed Martin

In May 2006, Brown, a Communications Director, complained to her employer’s Ethics Director that her supervisor engaged in conduct that amounted to mail and wire fraud. Thereafter, she allegedly received lower performance ratings, lost her bonus, was asked to vacate her office and work from home or a visitor’s office, her title and responsibilities were given to another employee, and she was told that she could not attend an annual conference despite the fact that she was to be presented with an award at the conference. On February 4, 2008, Brown gave her employer notice of what she claimed to be her forced termination.

On January 15, 2010, the ALJ ordered the employer to reinstate Brown and awarded her compensatory damages of $75,000. On appeal, the ARB found that substantial evidence supported the ALJ’s findings that Brown was constructively discharged in retaliation for engaging in protected activity, and that the ALJ’s conclusions of law were correct. In particular, the ARB found that the employer “created an abusive and ‘materially adverse’ work environment such that [Brown’s] resignation was a reasonable response to the actions of her employer” and that “[s]ubstantial evidence in the record overwhelmingly supports this finding.”

Importantly, in affirming the ALJ’s ruling, the ARB noted that “Section 806(a)(1) [of SOX] does not require that the mail fraud or wire fraud pertain to a fraud against shareholders,” and concluded that because Brown engaged in protected activity by reporting misconduct relating to mail fraud and wire fraud, it need not address whether Brown’s complaints related to a fraud against shareholders.

Implications

Butler and Brown serve as cautionary signs, and highlight that the ARB is taking an arguably liberal approach to interpreting and enforcing Section 806. Accordingly, employers are well served by taking calculated steps to minimize the risk of SOX whistleblower claims. This includes: stepping-up compliance programs; instituting comprehensive codes of conduct and anti-retaliation policies; training managers to be appropriately responsive to whistleblower complaints; conducting swift and thorough investigations in response to internal complaints; instituting effective remedial measures; and fostering a culture of integrity and accountability.

For more information, please contact the Seyfarth attorney with whom you work or any member of our SOX Whistleblower Team.