DOL Confirms SOX Inapplicable To Most Employee Complaints

Sarbanes-Oxley section 806 protects employees who complain of financial or other specific wrongdoing related to shareholder fraud, and/or mail, wire, or bank fraud. Until recently, the plaintiffs’ bar has had some success in arguing that complaints about certain alleged employment law violations are protected activities under SOX. As reported in our February 2006 Management Alert, a Department of Labor (DOL) administrative law judge suggested in Smith v. Hewlett-Packard that an internal complaint of class-wide race discrimination could be protected activity under SOX. This decision built on an earlier ruling that a complaint of significant wage payment violations under the Fair Labor Standards Act could likewise be SOX-protected. The theory in both cases was that such employment law violations could create significant monetary exposure and/or negative publicity, and thus ultimately affect shareholder value. Another theory asserted is that an employer’s failure to properly document employees’ immigration status constitutes “mail or wire fraud” because such records are sent through the mail or by “wire.”