Employers Scoring in Whistleblower Actions

This post comes to us from Jonathan Hayter of the National Law Journal.

The National Law Journal recently published Employers Scoring in Whistleblower Actions, which documents the consistent victories firms have enjoyed against former employees who claim the company retaliated against them for reporting corporate fraud. The Sarbanes-Oxley Act prohibits retaliation against such “whistleblowers,” but since the Act became law five years ago, only 17 retaliation complaints among more than 1,000 filed have been found to have merit.

As the piece explains, Sarbanes-Oxley’s retaliation provision only protects employees reporting a violation of the securities laws, a fraud on shareholders, or a violation of SEC regulations. One reason for employees’ low success rate, then, might be that plaintiffs have attempted to use the Act’s whistleblower protections when reporting corporate conduct not covered by the Act. Another explanation, the piece notes, might be that employers have taken greater care since the passage of the Act to avoid retaliation–and the litigation likely to follow.

The plaintiff’s bar, of course , sees matters differently, urging that a narrow interpretation of whistleblower protections has discouraged employees from coming forward in cases of corporate fraud. As the article points out, the Act requires only that a whistleblower show that he “reasonably believed” that reportable corporate conduct had taken place to be entitled to protection. Plaintiffs’ argue in the piece ¬†that the Administrative Law Judges reviewing whistleblower cases have required employees to meet a higher standard, demanding proof that corporate fraud actually took place before affording the employee protection from retaliation.

The full article is available here.

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