The standard for analyzing whistleblower retaliation claims under the Sarbanes-Oxley Act has been clarified by the U.S. Court of Appeals for the Second Circuit.
Deciding the appeal of a whistleblower who claimed he was fired for arguing that a company should make certain disclosures under Sarbanes-Oxley, the court clarified the burden-shifting framework for retaliation claims under the act, 18 U.S.C. §1514A.
In 2001, J. Scott Bechtel was hired as vice president of technology commercialization by Competitive Technologies Inc. (CTI), a company that acts as an agent for patent holders who want to license or sell technologies to companies that will bring them to market.
In 2002, after CTI hired John Nano as president and CEO, Nano and Bechtel began to clash. In October 2002, Bechtel reported to the company's general counsel that Nano, in an effort to quickly generate revenue and keep the company out of bankruptcy, might be violating certain legal requirements.
In December 2002 and March 2003, Bechtel was asked, and agreed, to join a committee to review the company's financial transactions and make recommendations on its disclosure obligations under Sarbanes-Oxley.
At both meetings, Bechtel and other committee members disagreed over what disclosures were required. Fearing personal liability under the act, Bechtel refused to sign the relevant disclosure forms.
In May 2003, the CTI board approved a cost-cutting proposal by Nano that included terminating Bechtel. Nano fired him the next month.
Three months later, Bechtel filed a whistleblower complaint under the act with the Department of Labor's Occupational Safety and Health Administration (OSHA).
In 2005, OSHA found there was reasonable cause to believe CTI violated the act, and it ordered Bechtel be reinstated, given back wages and awarded compensatory damages.
CTI filed objections to the findings and sought a formal hearing before an administrative law judge (ALJ).