The Sarbanes-Oxley Act of 2002, enacted in the wake of major corporate accounting scandals at companies such as Enron, WorldCom and, yes, Tyco International, established a multiprong approach to protect shareholders of publicly held companies from corporate greed. Congress included in the act a whistleblower protection provision, Section 806, that made it illegal for a publicly traded company to take an adverse personnel action against an employee because that employee engaged in "protected activity," such as reporting fraud against shareholders. Congress correctly recognized that individuals with the most information about company fraud are often current employees who require robust legal protections to be able to report fraud without fear of reprisal.
In the years following the statute’s passage, the whistleblower provision was watered down in decisions such as Platone v. FLYi Inc., a 2006 decision by the Administrative Review Board of the U.S. Department of Labor that implemented stringent requirements in order for whistleblower reports to qualify as "protected activity." Several federal courts adopted the heightened standard in Platone, requiring whistleblowers to "definitively and specifically" report a violation of Sarbanes-Oxley to be deemed to have engaged in legally protected activity. In 2011, the board changed course, explicitly rejecting Platone and liberalizing the standard for "protected activity" in Sylvester v. Parexel Int’l LLC. Because decisions of the Administrative Review Board are not necessarily binding precedent for federal courts, however, it remained to be seen whether federal courts would defer to the board’s new less demanding standard of protected activity articulated in Sylvester.
