Thank you for sharing!

Your article was successfully shared with the contacts you provided.
In the three years since its passage, the Sarbanes-Oxley Act of 2002 has profoundly impacted publicly traded companies. Although the act’s whistleblower provision has been less heralded than provisions focusing on institutional controls and accountability, employers would be remiss to ignore the whistleblower component. Section 806 prohibits publicly traded companies from retaliating against employees who report corporate fraud. Importantly, for employers facing the prospect of defending these whistleblower claims, the statute and accompanying regulations erect rigid, detailed administrative procedures with which in-house lawyers must become familiar. First, employees must file �806 complaints with the Occupational Safety and Health Administration within 90 days of the alleged retaliation. As noted by the U.S. District Court for the Northern District of Texas in Murray v. TXU Corp. (2003), failure to do so precludes the Department of Labor (DOL) from awarding any relief and deprives federal district courts of “jurisdiction over a suit brought under Section 806 of the Sarbanes-Oxley Act.” Moreover, the DOL strictly enforces the 90-day deadline, as two rulings by DOL administrative law judges (ALJs) show. In 2003′s Walker v. Aramark Corp., ALJ C. Richard Avery of Metairie, La., affirmed OSHA’s dismissal of a complaint “[b]ecause Complainant’s first contact with OSHA was 105 days after his termination.” In 2004′s Flood v. Cedant Corp., Cherry Hill, N.J., ALJ Paul H. Teitler affirmed OSHA’s dismissal of a complaint that was filed 84 days after termination, because it was at least 95 days after Cedant told Flood he would be fired on a date certain. As Teitler explained, “the limitations period commences once the employee is aware or reasonably should be aware of the employer’s decision.” Walker and Flood illustrate the DOL’s strict enforcement and narrow construction of the 90-day deadline. Missing it by a single day may completely bar relief. Upon receipt of a claim, OSHA notifies the employer of the allegations, the supporting evidence and the basic administrative procedures. During this same time period, while reviewing the complaint, OSHA investigators determine whether the employee stated a prima facie case. If the employee has not, OSHA will not investigate. Even if OSHA believes the complaint states a prima facie case, the employer may still avoid an investigation by demonstrating within 20 days of receiving the complaint that it would have taken the same action in the absence of any whistleblowing. Under the right circumstances, therefore, a publicly traded company may avoid an investigation and the associated publicity, as well as �806 liability, early in the administrative process. Unless OSHA dismisses the case — because the claim doesn’t state a prima facie case or because the employer shows that it would have taken the same action regardless of the whistleblowing — OSHA must issue a written finding stating whether reasonable cause exists to believe the complaint has merit within 60 days of receiving the complaint. Before doing so, OSHA must give the employer an opportunity to respond to the complaint and present witness statements. If OSHA finds reasonable cause to believe a violation has occurred, a preliminary order providing relief will accompany the written finding. At that point, the parties have 30 days to file objections and request a hearing, which stays the relief set forth in the preliminary order except any ordered reinstatement. If no party timely objects and requests a hearing, the preliminary order becomes final and is not subject to judicial review. CONTRIBUTING FACTORS If a party timely requests a hearing, the DOL’s Office of Administrative Law Judges conducts the adversarial hearing at which the parties present their positions and evidence. At the hearing, the Rules of Evidence do not strictly apply, and the employee must show by a preponderance of the evidence that the whistleblowing was a contributing factor — a factor having the tendency to influence the challenged decision — leading to the unfavorable employment action. Even if the employee satisfies that burden, the employer may still avoid liability by demonstrating, with clear and convincing evidence, that it would have taken the same action in the absence of the alleged whistleblowing. If the employer makes this showing, the DOL cannot award the employee any relief. The culmination of the administrative process is the final order, which must issue within 120 days after the hearing concludes. If the employee prevails, the final order may include injunctive relief, reinstatement, back pay, compensatory damages, special damages such as attorney fees and expert witness costs, and costs and expenses (but not punitive damages). A party aggrieved by the final order has 60 days to file its appeal in an appropriate U.S. circuit court of appeals. Unless a party timely appeals, the final order is not subject to subsequent judicial review in any proceeding. If the DOL does not issue a final decision within 180 days of the employee’s complaint, the employee may bypass any remaining administrative requirements and file suit in federal district court. Importantly, though, as noted in Murray: A federal district court lacks jurisdiction over a suit brought under Section 806 of the Sarbanes-Oxley Act if (1) the plaintiff failed to file a complaint with the Secretary of Labor within ninety days of the alleged violation; (2) the Secretary issued a final decision within 180 days of the filing of a Section 806 complaint; (3) the plaintiff filed suit in a federal district court less than 180 days after filing such a complaint; or (4) there is a showing that the Secretary failed to issue a final decision within 180 days due to the plaintiff’s bad faith. Nonetheless, as the parties navigate the administrative process, employers should recognize the prospect of federal district court litigation. Employees pursuing �806 whistleblower claims confront a rigorous, complex administrative framework. Because failure to properly and precisely navigate that framework may be fatal, publicly traded companies that are aware of those requirements and are vigilant will be in a better position to more quickly and effectively defend and dispose of �806 whistleblower claims. Floyd R. Hartley Jr. is a senior litigation associate with Hughes & Luce in Dallas. His practice includes defending commercial, telecommunications, white-collar, employment and civil-rights suits. He also has represented clients in administrative proceedings before the Equal Employment Opportunity Commission, the Texas Commission on Human Rights, the Fort Worth Civil Rights Commission and the Texas Public Utilities Commission.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.