October 2011

SOX Whistleblowers May Now Claim a “Very Broad Spectrum of Adverse Action”

1 min


The whistleblower provision of the Sarbanes–Oxley Act (“SOX”) protects an employee who provides information regarding fraud and violations of rules or regulations of the SEC. Toward that end, Section 806 states that no company “may discharge, demote, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment” because of the protected activity. In the past few years, whistleblowers claiming they have been subjected to adverse employment actions for reporting violations under SOX have had to overcome a relatively high hurdle. Administrative law judges ("ALJ") borrowed a standard of review that had been applied in Title VII cases, and required SOX whistleblowers to show that they experienced a significant, tangible employment action–such as demotion, discharge, or other unfavorable reassignment–as a result of their reporting. Citing a concern with the “incautious application of Title VII precedent to [SOX] whistleblower cases,” the Department of Labor Administrative Review Board (“ARB”) recently placed SOX whistleblowers firmly in their own category and clarified the standards applicable to adverse actions taken in SOX cases.

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