WHISTLEBLOWER LAW a Practitioner’S Guide

WHISTLEBLOWER LAW A Practitioner’s Guide

Lisa J. Banks Member of the Colorado and District of Columbia Bars

Jason C. Schwartz Member of the District of Columbia, Maryland and Virginia Bars

2016

Law Journal Press 120 Broadway New York, New York 10271

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Library of Congress Cataloging-in-Publication Data Names: Banks, Lisa J., author. | Schwartz, Jason C., 1972- , author. Title: Whistleblower law: a practitioner’s guide / Lisa J. Banks, Member of the Colorado and District of Columbia Bars; Jason C. Schwartz, Member of the District of Columbia, Maryland and Virginia Bars. Description: New York, New York: Law Journal Press, 2016. Includes index. Identifiers: LCCN 2016001484 (print) LCCN 2016006950 (ebook) ISBN 978-1-58852-398-3 (looseleaf) ISBN 978-1-58852-399-0 () Subjects: LCSH: Whistle blowing—Law and legislation—United States. Classification: LCC KF390.5.W57 B36 2016 (print) LCC KF390.5.W57 (ebook) DDC 342.73/068—dc23 LC record available at http://lccn.loc.gov/2016001484 ABOUT THE AUTHORS

Lisa J. Banks

Lisa J. Banks is a founding partner of Katz, Marshall & Banks, LLP, in Washington, D.C., where she focuses her practice on employment discrimination and whistleblower claims, as well as contractual employment disputes. Ms. Banks has successfully represented employees and whistleblowers at both the trial court and appellate levels for almost 20 years, and has served as an arbitrator for the American Arbitration Association (AAA), where she has adjudicated numerous employment and contractual disputes. Ms. Banks has been consistently ranked as one of Washington’s top lawyers by Washingtonian Magazine, Best Lawyers in America, and D.C. Super Lawyers. Ms. Banks is an active member of the American Bar Association, where she serves as the Employee Co-Chair of the Labor and Employment Section’s EEO Committee. She is also an active member and frequent speaker on employment law and whistleblower topics for local and national bar associations, and has provided commentary on current legal issues to the print and television media. Ms. Banks received a Bachelor of Arts degree from Trinity College in Hartford, Connecticut in 1990, and a J.D degree from the University of Denver College of Law in 1995, where she served as an editor on the Denver University Law Review. She clerked for the Honorable Daniel M. Taubman, Colorado Court of Appeals, from 1995-1996, and for the Honorable Gregory K. Scott, Colorado Supreme Court from 1996-1997. Ms. Banks served as an Appellate Attorney with the Office of General Counsel of the U.S. Equal Employment Opportunity Commission from 1997 to 2000. In 1999, Ms. Banks served as an Attorney Advisor in the Office of White House Counsel.

Jason C. Schwartz

Jason C. Schwartz is a partner in the Washington, D.C. office of Gibson, Dunn & Crutcher and a member of the firm’s Executive Committee. He practices primarily in the areas of labor, employment and trade secret litigation.

v WHISTLEBLOWER LAW vi Mr. Schwartz has extensive experience representing defendants in whistleblower litigation under the Sarbanes-Oxley Act, False Claims Act, and other whistleblower protection statutes and in conducting internal investigations of whistleblower allegations. Mr. Schwartz earned his law degree magna cum laude from The Georgetown University Law Center, where he was elected to the Order of the Coif and received the George Brent Mickum III Prize and the Charles A. Keigwin Award for the best academic record in first year courses. Mr. Schwartz received a B.A. degree in international affairs cum laude from The George Washington University. INTRODUCTION

Whistleblowers—those who make disclosures to reveal abuses, wrongdoing, or dangers that threaten the public interest—are increasingly visible in today’s workplace and society. Names such as Daniel Ellsberg, Karen Silkwood, Sherron Watkins, Bradley Manning, and Edward Snowden are widely known, and engender strong emotions. Indeed, sharp disagreements exist as to whether whistleblowers are heroes or villains, or some combination of the two. But not all whistleblowers end up on the cover of a newspaper, or become the subject of a Hollywood movie. Everyday employees who report concerns have historically been and continue to be an effective means of identifying illegality, corruption and threats to public health, safety and the environment because of their insider knowledge and experience. And yet, it is undeniable that disclosing confidential information can have very serious and negative effects on industry, privacy, and even national security. Thus, controversies abound, particularly in the government sector, about whether a particular whistleblower is a hero or a traitor, a conscientious employee or a disloyal troublemaker. Either way, it seems clear that state and federal legislative efforts of the past decade or two to incentivize and protect whistleblowers reflect a view that whistleblowers are often the best source of information about waste, fraud and abuse in the public sector, and can help promote institutional accountability, compliance and safety in the private sector. While the term “whistleblower” is relatively new—some claim that consumer advocate Ralph Nader coined the term during the 1970s1—the concept goes back over a century in the United States. In 1863, Congress passed the False Claims Act (“FCA”),2 also known as the “Lincoln Law,” during the Civil War to deter fraudulent procurement activities by government contractors.3 The FCA prohibits any person from presenting a “false or fraudulent claim for payment or approval” to the United States,

1 See Whistle Blowing: The Report of the Conference on Professional Responsibility (Ralph Nader et al. eds., 1972). 2 See generally Chapter 1 infra. 3 See Act of March 2, 1863, ch. 67, § 1, 12 Stat. 696-697, codified at 31 U.S.C. §§ 3729-3733.

ix x WHISTLEBLOWER LAW and allows the federal government to obtain reimbursement for false or fraudulent claims for payment.4 As part of the FCA, Congress included a qui tam provision, which allowed individuals to sue companies and individuals who were defrauding the government on the government’s behalf.5 The phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur” translates roughly to “he who brings an action for the king as well as for himself.” As originally drafted in 1863, the FCA provided for double damages and a $2,000 fine for each false claim submitted. Those who filed qui tam actions, called “relators,” were entitled to receive fifty percent of the amount the government recovered as a result of the action.6 Thus, as it was drafted, the FCA provided incentives to those who would expose fraud on the government. The whistleblower incentives of the FCA remained largely unchanged until 1943, when, in response to perceived “parasitic lawsuits” by relators during wartime, and in deference to the Department of Justice’s claim to sole authority to prosecute fraud cases, Congress amended the statute and reduced the relator’s share of the recovery significantly.7 Congress also added a provision that prevented a whistleblower from filing a qui tam action if the information regarding fraud was already in the possession of a government official, even if the government was not taking any action to address the wrongdoing. After these amendments, qui tam actions under the FCA were effectively eliminated for the next several decades.8 The FCA reemerged in the 1980s, as defense spending associated with the Cold War and other conflicts skyrocketed, and with it, reports of fraud, waste and abuse by government contractors.9 In response, Congress amended the FCA in a number of important respects: an increased relator’s share; recovery of treble damages; increased penalties for each false claim; recovery of attorneys’ fees and expenses for the relator; and protection for relators from retaliation for “blowing the whistle.”10 As a result of these amendments, there was a rapid expansion of qui tam suits to enforce the FCA.11

4 31 U.S.C. § 3729(a). 5 31 U.S.C. § 3730(b)(1). 6 See Act of March 2, 1863, ch. 67 §§ 1, 3, 4, 6, 12 Stat. 696-698. 7 Pub. L. No. 213, ch. 377, 57 Stat. 608 (Dec. 23, 1943); 31 U.S.C. § 232(c). 8 United States ex rel. Springfield Terminal Railway Co. v. Quinn, 14 F.3d 645, 650 (1994) (noting that the 1943 amendments “substantially decreased the use of qui tam provisions to enforce the FCA . . . an courts greeted those qui tam suits that did arise with considerable caution”). 9 Doyle, “Qui Tam: The False Claims Act and Related Federal Statutes,” p. 7, Congressional Research Service, R40785, (2009), available at https://www.fas.org/ sgp/crs/misc/R40785.pdf (last visited Nov. 30, 2015). 10 Pub. L. No. 99-562, 100 Stat. 3153 (Oct. 27, 1986). 11 Department of Justice, Fraud Statistics—Overview October 1, 1987 - September 30, 2014 (Nov. 20, 2014), available at http://www.justice.gov/sites/default/files/civil/ legacy/2013/12/26/C-FRAUDS_FCA_Statistics.pdf (last visited Nov. 30, 2015). INTRODUCTION xi In addition to the financial incentives offered by the FCA, the anti-retaliation provisions added to the statute in 1986 reflected a growing awareness of and attention to the role of whistleblowers in identifying illegal conduct, and a desire to afford such individuals protection from reprisal for their actions. The most rapid development of whistleblower protections has generally occurred over the last thirty to forty years. The 1970s and 1980s, for example, saw the passage of a number of statutes that reflected an increasing emphasis on the role of public and private whistleblowers, arising in the context of some of the specific concerns of the time: environmental protection, nuclear power, transportation developments, increased military spending, and banking irregularities. By the time President Richard Nixon signed an executive order creating the Environmental Protection Agency (“EPA”) in 1970, the environmental movement had firmly taken hold. Over the next decade and a half, Congress enacted or revised numerous statutes concerning natural resources and public health and safety—each of which contain an anti-retaliation provision.12 The Clean Air Act, originally passed in 1963, was amended twice during the 1970s to address emerging pollution concerns.13 In 1970, Congress amended the Solid Waste Disposal Act, which regulated municipal waste- disposal technology.14 The Occupational Safety and Health Act of 1970 contained protections for employees who report unsafe or unhealthy working conditions.15 The Federal Water Pollution Control Act was amended significantly in 1972, and along with the Clean Water Act of 1977 and the Water Quality Act of 1987, it created a structure for regulating the discharge of pollution into navigable or surface waters.16 The Energy Reorganization Act of 1974, which established the Nuclear Regulatory Commission, responded to the growing use of nuclear energy for civilian and military purposes.17 The Safe Drinking Water Act of 1974 allowed the federal government to set quality standards for the nation’s public drinking water systems.18 The Toxic Substances Control Act, enacted in 1976, granted the EPA the power to regulate and monitor the production, importation, use, and disposal of chemicals and substances that could adversely

12 See generally, Chapter 5 infra. 13 Pub. L. No. 91-604, 84 Stat. 1676 (Dec. 31, 1970); Pub. L. No. 90-148, 81 Stat. 485 (Nov. 21, 1967); Pub. L. No. 95-95, 91 Stat. 685 (Aug. 7, 1977); Pub. L. No. 101-549, 104 Stat. 2399 (Nov. 15, 1990); 42 U.S.C. § 7401 note. 14 Pub. L. No. 91-512, 84 Stat. 1227 (Oct. 26, 1970). 15 Pub. L. No. 91-596, 84 Stat. 1590 (Dec. 29, 1970). 16 Pub. L. No. 92-500, 86 Stat. 816 (Oct. 18, 1972), 33 U.S.C. §§ 1251 et seq.; Pub. L. No. 95-217, 91 Stat. 1566 (Dec. 22, 1977); Pub. L. No. 100-4, 101 Stat. 7 (Feb. 4, 1987), 33 U.S.C. § 1251 note. 17 Pub. L. No. 93-438, 88 Stat. 1233 (Oct. 11, 1974); 42 U.S.C. §§ 5801 et seq. 18 Pub. L. No. 93-523, 88 Stat. 1660 (Dec. 16, 1974); 42 U.S.C. § 201 note. xii WHISTLEBLOWER LAW impact human health and the environment.19 The Comprehensive Environmental Response, Compensation and Liability Act of 1980, passed in the wake of discoveries in the 1970s of uncontrolled toxic- waste dumps, established regulations for hazardous waste sites.20 The Asbestos Hazard Emergency Response Act of 1986 required local educational agencies to take steps to protect students and staff from harmful asbestos exposure.21 Similarly, Congress passed a number of statutes during this time that applied to whistleblowers in the transportation industry.22 The Federal Railroad Safety Act of 1970 was amended in 1980 to add anti-retaliation protections for employees.23 The International Safe Container Act of 1977 imposed safety regulations on the design of cargo containers moving in international trade.24 The Surface Transportation Assistance Act of 1982 responded to concerns regarding safety in the trucking industry.25 The Seaman’s Protection Act, enacted in 1984, prohibited discharge or demotion of a seaman for reporting violations of maritime regulations to the Coast Guard.26 Other federal whistleblower statutes passed during the 1970s and 1980s reflected the dramatic increase in military and defense spending and the growing concern about fraud by government contractors.27 The Defense Contractor Whistleblower Protection Act, which was passed in 1986, created anti-retaliation protections for Department of Defense contractors who report illegal activity and misconduct by their employers.28 The Major Fraud Act of 1988 (“MFA”) criminalizes fraud on the government and protects individuals from retaliation for lawful acts done in furtherance of criminal prosecution under the statute.29 The Military Whistleblower Protection Act of 1988 (“MWPA”) protects members of the armed forces from retaliation for reporting any of a number of enumerated acts of misconduct.30 The Whistleblower Protection Act of 1989 (“WPA”), which amended the Civil Service Reform Act of 1978, provides public employees with

19 Pub. L. No. 94-469, 90 Stat. 2003 (Oct. 11, 1976); 15 U.S.C. §§ 2601 et seq. 20 Pub. L. No. 96-510, 94 Stat. 2767 (Dec. 11, 1980); 42 U.S.C. § 9601 note. 21 Pub. L. No. 99-519, 100 Stat. 2970 (Oct. 22, 1986); 15 U.S.C. §§ 2651 et seq. 22 See generally, Chapter 6 infra. 23 Pub. L. No. 91-458, Title II, 84 Stat. 971 (Oct. 16, 1970), as amended by Pub. L. No. 96-423, § 10, 94 Stat. 1811, 1815 (Oct. 10, 1980); 49 U.S.C. § 20101. 24 Pub. L. No. 95-208, 91 Stat. 1475 (Dec. 13, 1977). 25 Pub. L. No. 97-424, 96 Stat. 2097 (Jan. 6, 1983); 29 C.F.R. pt. 1978. 26 Coast Guard Authorization Act of 1984, Pub. L. No. 98-557, § 13(a), 98 Stat. 2860, 2863 (Oct. 30, 1984), 46 U.S.C. § 2114, as amended by Pub. L. No. 111-281, Title VI, § 611(a), 124 Stat. 2905, 2969 (Oct. 15, 2010). 27 See generally, Chapter 7 infra. 28 Pub. L. No. 99-500, § 942, 100 Stat. 1783 (Oct. 18, 1986); 10 U.S.C. § 2409. 29 Pub. L. No. 100-700, 102 Stat. 4631 (Nov. 19, 1988); 18 U.S.C. § 1031(h). 30 10 U.S.C. § 1034. INTRODUCTION xiii protection from retaliation for blowing the whistle on fraud, waste and abuse.31 As a corollary to these federal statutes, many states in the U.S. have passed their own laws to protect whistleblowers.32 These statutes augment federal protections, or create state analogues of their federal counterparts. In addition, most states recognize a common law cause of action for employees terminated in violation of the public policy of that jurisdiction. These tort claims serve as a narrow exception to the general doctrine of at-will employment, however, and are often unavailable where a statutory remedy already exists. Nevertheless, by the 1980s and into the 1990s, employees in public and private spheres, across industries, could often find protection against retaliation for raising concerns about issues of illegality, corruption or fraud, and threats to public health, safety and the environment. Because these protections are applicable only to certain industries, however, or to certain locations, coverage was uncertain, and often absent in the case of a general corporate whistleblower. The patchwork nature of protection for whistleblowers provided in federal and state law became apparent in the wake of the Enron scandal in 2001. Congressional testimony revealed that when an internal Enron accountant complained of financial improprieties to the energy company’s CEO, the company sought and received advice from its counsel that no law prevented the discharge of the accountant.33 The company’s counsel was correct that no federal or state law protected the employee from retaliation for raising concerns—a fact seized upon by a bipartisan Congress to enact expansive whistleblower protections in the Sarbanes Oxley Act of 2002 (“SOX”) and provide a cause of action to employees of publicly traded companies who suffered retaliation because they reported fraud.34 Not only did SOX implement reforms over the financial and banking industries after the Enron and WorldCom scandals, it also provided the broadest protections then available for private-sector whistleblowers. The Act was generally seen as a watershed moment for whistleblowers. SOX also served as a model for subsequent whistleblower legislation, and what followed was an array of new federal statutes that contained similar whistleblower-friendly provisions related to burden of proof, remedies, reporting mechanism, and district court review. These statutes include the FDA Food Safety Modernization Act (“FSMA”),35

31 Pub. L. No. 101-12, 103 Stat. 16 (April 10, 1989); Pub. L. No. 103-424, 108 Stat. 4361 (Oct. 29, 1984); Pub. L. No. 112-199, 126 Stat. 1465 (Nov. 27, 2012) (codified, as amended, in various sections of Title 5 U.S.C.). 32 See generally, Chapter 8 infra. 33 S. Rep. No. 107-146, 107th Cong, 2nd Sess. 5, 107 S. Rpt. 146 (LEXIS) (May 6, 2002). 34 18 U.S.C. § 1514A (2006). 35 Pub. L. No. 111-353, 124 Stat. 3885 (Jan. 4, 2011); 21 U.S.C. § 2201 note. xiv WHISTLEBLOWER LAW the Patient Protection and Affordable Care Act (“ACA”),36 the American Recovery and Reinvestment Act of 2009 (“ARRA”),37 the Consumer Product Safety Improvement Act of 2008 (“CPSIA”),38 the National Transit System Security Act of 2007 (“NTSSA”),39 and the Pipeline Safety Improvement Act of 2002 (“PSIA”).40 During the past decade alone, Congress has also amended several statutes to broaden their reach, including the Coast Guard Authorization Act of 2010,41 the Energy Policy Act of 2005,42 the Fraud Enforcement and Recovery Act of 2009,43 and the Rail Safety Improvements Act of 2008.44 SOX also appeared to spur a number of states to create or strengthen whistleblower protections for private and public employees.45 In addition, SOX required publicly-traded corporations to adopt a code of ethics, and was effective in influencing corporations to institute other measures to better ensure compliance and encourage employees to report issues that arise. The trend toward greater protection for whistleblowers has continued in recent years. Among other things, administrative judges appointed to the U.S. Department of Labor Administrative Review Board (“ARB”) by President Barack Obama have issued decisions reflecting a more expansive interpretation of SOX, and Congress enacted additional whistleblower protections in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd Frank”).46 Dodd-Frank was passed in response to the subprime mortgage debacle and financial crisis of 2008/2009, and was yet another effort by Congress to improve accountability and transparency in the financial system, protect consumers from abusive practices, and empower whistleblowers, among other purposes. Dodd Frank contains its own anti-retaliation provision and amends SOX to provide for, among other things, a longer statute of limitations, the right to a jury trial, expanded coverage, and a “kick out” provision to allow for filing in federal court.47 In an attempt to further encourage whistleblowers, Congress also imported the incentive model of the FCA and the Internal Revenue Service (“IRS”) whistleblower program to Dodd Frank, and created whistleblower programs related to the Securities

36 Pub. L. No. 111-148, 124 Stat. 119 (March 23, 2010); 42 U.S.C. § 18001 note. 37 Pub. L. No. 111-5, § 1553, 123 Stat. 115 (Feb. 17, 2009). 38 Pub. L. No. 110-314, 122 Stat. 3016 (Aug. 14, 2008); 15 U.S.C. § 2051 note. 39 Pub. L. No. 110-53, Title XIV, 121 Stat. 400 (Aug. 3, 2007); 29 C.F.R. pt. 1982. 40 Pub. L. No. 107-355, 116 Stat. 2985 (Dec. 17, 2002); 29 C.F.R. pt. 1981. 41 Pub. L. No. 111-281, Title VI, § 611(a), 124 Stat. 2905 (Oct. 15, 2010). 42 Pub. L. No. 109-58, 119 Stat. 594 (Aug. 8, 2005); 42 U.S.C. § 15801 note. 43 Pub. L. No. 111-21, § 4(d), 123 Stat. 1617 (May 20, 2009). 44 Pub. L. No. 110-432, 122 Stat. 4848, 4892 (Oct. 16, 2008). 45 See generally, Chapter 8 infra. 46 Pub. L. No. 111-203, 124 Stat. 1376 (July 21, 2010); 12 U.S.C. § 5301 note. 47 See generally, Chapter 3 infra. INTRODUCTION xv and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”), both of which provide a financial reward to employees whose information resulted in a successful enforcement action by the government.48 These programs have not been without controversy, however, as the business community has expressed concerns that such programs encourage individuals not to report internally (which would provide a company the opportunity to address a problem), but rather encourage employees to collect information and then report perceived wrongdoing externally, in order to seek a financial reward.49 While the general trend in the law has been toward increased incentives and protections for would-be whistleblowers, debate over the effectiveness of whistleblowers and the consequences of the proliferation of whistleblower laws continues. There is no doubt that insiders are the best source of information about waste, fraud and abuse in the public sector, and are critical to promoting institutional accountability, compliance and safety in the private sector. It is also true that individuals may cause serious harm by raising unfounded allegations or by recklessly disseminating information, and that over- regulation of employment decisions makes it difficult to efficiently manage a business. It is undeniable that some employees experience retaliation for complaining about fraud or safety violations, while others are appropriately disciplined for unrelated failings. And perhaps clearest of all is the fact that no statutory or common law whistleblower scheme will consistently strike the right balance of prohibitions, protections, and incentives. This treatise does not take a stance on the virtues of whistleblowing in general, or on whether any particular whistleblower law or program is good or bad. Rather, the book presents the various whistleblower laws that have developed over time and in various industries, in an attempt to provide a balanced overview of the current landscape of the law and a helpful guide for practitioners. The book begins by covering the most impactful whistleblower statutes, including the False Claims Act in Chapter 1, SOX in Chapter 2, and Dodd-Frank in Chapter 3. The next three chapters address the many statutes (other than SOX) enforced by OSHA, which are grouped into three categories: Consumer and Investor (Chapter 4); Nuclear and Environmental (Chapter 5); and Transportation (Chapter 6). Chapter 7

48 See generally, Chapters 9-11 infra. 49 See, e.g.: Letter from U.S. Chamber of Commerce to U.S. Securities and Exchange Commission (Dec. 17, 2010), available at http://www.sec.gov/comments/ s7-33-10/s73310-194.pdf (last visited Nov. 30, 2015); Letter from The Financial Services Roundtable and the American Bankers Association to the U.S. Securities and Exchange Commission (Dec. 17, 2010), available at http://www.sec.gov/comments/ s7-33-10/s73310-191.pdf (last visited Nov. 30, 2015). xvi WHISTLEBLOWER LAW covers many of the various other federal whistleblower statutes that have evolved in the last thirty or forty years, and are not enforced by OSHA. Chapter 8 provides a survey of the state statutory and common law claims available to whistleblowers in all fifty states and the District of Columbia. The three primary whistleblower incentive programs are covered in Chapters 9 (SEC), 10 (IRS), and 11 (CFTC). Chapter 12 addresses the issues related to corporate documents that frequently arise in whistleblower cases, and Chapter 13 addresses the unique issues related to attorneys and compliance officers who blow the whistle. Finally, Chapter 14 addresses the challenges faced by corporations and employers in addressing whistleblower reports and defending against whistleblower actions. TABLE OF CONTENTS

CHAPTER 1

False Claims Act: Qui Tam and Retaliation Claims

§ 1.01 Introduction...... 1-2 [1] Overview of the False Claims Act. . . . 1-2 [2] History and Amendments...... 1-3 § 1.02 False Claims Act Liability and Qui Tam Suits. . 1-5 [1] Elements and Examples of False Claims Act Claims ...... 1-5 [a] Statutory Liability Provisions. . . . 1-5 [b] “Person” Defined...... 1-5 [c] Knowing Submission...... 1-6 [d] Materiality ...... 1-7 [e] False and Fraudulent Claims. . . . 1-8 [i] Fraudulent Billing in Healthcare...... 1-10 [ii] Off-Label Drug Marketing in the Pharmaceutical Industry...... 1-12 [iii] Fraudulent Billing in National Defense and Homeland Security Contracts...... 1-13 [iv] Mortgage-Related Fraud. . . . 1-14 [v] Troubled Asset Relief Program Fraud...... 1-14 [2] Statutory Bars to Qui Tam Actions . . . . 1-15 [a] Public Disclosure Bar ...... 1-16 [b] Original Source Exception to Public Disclosure Bar...... 1-19

xvii xviii WHISTLEBLOWER LAW [c] First-to-File Bar...... 1-20 [3] Filing a Qui Tam Claim—The Litigation Process ...... 1-21 [a] Jurisdiction and Limitations Period. . 1-21 [b] Filing the Complaint and Disclosure Statement ...... 1-22 [c] Government Investigation During the Seal Period...... 1-22 [d] Intervention Decision...... 1-23 [e] Pleading Standard...... 1-24 [4] Damages and Penalties ...... 1-25 [a] Treble Damages...... 1-25 [b] Calculation of Actual Damages. . . 1-26 [c] Penalties ...... 1-28 [5] Relator’s Share in a Successful Qui Tam. . 1-29 [a] Factors That May Increase a Relator’s Share...... 1-30 [b] Factors That May Decrease a Relator’s Share...... 1-31 [6] Settlement/Release of Qui Tam Claims . . 1-31 § 1.03 FCA Retaliation Claims...... 1-34 [1] Prohibited Retaliation and Amendments . . 1-34 [2] Prima Facie Case ...... 1-36 [a] Protected Activity...... 1-37 [b] Employer Knowledge...... 1-38 [c] Causation ...... 1-39 [d] Burden of Proof...... 1-41 [3] Limitations Period for FCA Retaliation Claims and Procedural Issues Related to Filing ...... 1-41 [4] Pleading Standard ...... 1-43 [5] Remedies ...... 1-43 [6] Settlement/Release of Section 3730(h) Claims...... 1-44

CHAPTER 2

Sarbanes-Oxley Act of 2002

§ 2.01 Overview...... 2-2 [1] Whistleblower Provision: Section 806 . . . 2-3 [2] Dodd-Frank Amendments to SOX. . . . 2-4 § 2.02 Covered Employer...... 2-6 TABLE OF CONTENTS xix [1] Publicly Traded Companies...... 2-6 [2] Consolidated Subsidiaries...... 2-7 [3] Contractors, Subcontractors, and Agents. . 2-8 [a] Retaliation Against Contractors’ Employees...... 2-8 [b] Retaliation Against Employees of Publicly Traded Companies. . . . 2-10 [4] Individual Liability ...... 2-11 § 2.03 Covered Employee ...... 2-12 [1] Classification as Employee or Independent Contractor...... 2-12 [2] Extraterritorial Application of Employee Protections ...... 2-13 [3] Enforceability of Pre-Dispute Arbitration Agreements with Respect to Covered Employees...... 2-16 § 2.04 Prima Facie Case...... 2-19 [1] Protected Activity ...... 2-19 [a] Reasonable Belief...... 2-20 [b] Existing Violation versus Imminent Violation...... 2-24 [c] Fraud on Shareholders versus Violation of an Enumerated Category...... 2-24 [d] Materiality ...... 2-26 [e] To Whom (and About Whom) an Employee Must Report...... 2-27 [2] Adverse Action...... 2-27 [3] Causation ...... 2-29 § 2.05 Litigation Process...... 2-32 [1] Filing and Investigation of Complaint . . . 2-32 [a] Commencement of Limitations Period ...... 2-32 [b] Tolling of Limitations Period . . . . 2-33 [c] Form of Complaint...... 2-34 [d] Pleading Standard...... 2-35 [e] Burdens of Proof...... 2-35 [2] Determination and Review...... 2-36 [3] Kick-Out Provision ...... 2-37 [4] Review of DOL Final Order by Federal Courts of Appeal...... 2-38 [5] Jury Trial...... 2-39 § 2.06 Available Remedies...... 2-40 [1] Reinstatement...... 2-41 [2] Front Pay in Lieu of Reinstatement . . . . 2-42 xx WHISTLEBLOWER LAW [3] Back Pay...... 2-43 [4] Attorneys’ Fees ...... 2-44 [5] Non-Economic and Compensatory Damages...... 2-45 [6] Punitive Damages ...... 2-46

CHAPTER 3

The Dodd-Frank Wall Street Reform and Consumer Protection Act

§ 3.01 Overview...... 3-2 § 3.02 Amendments to the Sarbanes-Oxley Act of 2002...... 3-4 § 3.03 Securities and Exchange Commission Whistleblower Program...... 3-6 § 3.04 Securities and Exchange Commission Anti-Retaliation Provision...... 3-7 [1] Scope of Protection...... 3-7 [a] Whistleblower Status...... 3-7 [i] Reasonable-Belief Standard. . 3-8 [ii] Possible Securities Law Violation Standard. . . . . 3-9 [iii] Manner of Reporting. . . . . 3-9 [b] Extraterritorial Application. . . . . 3-12 [2] Prima Facie Case...... 3-13 [a] Protected Activity...... 3-14 [b] Adverse Action...... 3-14 [c] Causation ...... 3-15 [3] Procedural Requirements...... 3-15 [a] Enforcement: Private Right of Action and SEC Enforcement. . . 3-15 [b] Jury Trials...... 3-16 [c] Statute of Limitations ...... 3-17 [d] Arbitration ...... 3-17 [4] Available Remedies...... 3-18 § 3.05 Commodity Futures Trading Commission Whistleblower Program...... 3-19 § 3.06 Commodity Futures Trading Commission Anti-Retaliation Provision...... 3-20 TABLE OF CONTENTS xxi § 3.07 Consumer Financial Protection Act Anti-Retaliation Provision...... 3-21 § 3.08 Amendments to the False Claims Act...... 3-22

CHAPTER 4

Consumer and Investor Whistleblower Statutes

§ 4.01 Overview...... 4-2 § 4.02 Consumer Product Safety Act and Consumer Product Safety Improvement Act of 2008. . . . . 4 4- [1] CPSIA Anti-Retaliation Provision. . . . . 4 4- [a] Covered Employers and Employees. . 4-5 [b] Protected Activity...... 4-5 [i] Consumer Product Safety Act. . 4-7 [ii] Children’s Gasoline Burn Prevention Act...... 4-7 [iii] Federal Hazardous Substances Act ...... 4-8 [iv] Flammable Fabrics Act . . . . 4-8 [v] Poison Prevention Packaging Act of 1970...... 4-9 [vi] Refrigerator Safety Act . . . . 4-9 [vii] Virginia Graeme Baker Pool and Spa Safety Act. . . . . 4-9 [2] CPSIA Anti-Retaliation Provision Procedures...... 4-10 [a] Statute of Limitations ...... 4-10 [b] Burdens of Proof...... 4-10 [c] Reasonable Cause Finding and Preliminary Orders...... 4-11 [d] Review and Removal...... 4-12 § 4.03 Patient Protection and Affordable Care Act. . . 4-13 [1] ACA Anti-Retaliation Provision. . . . . 4-13 [a] Covered Employers and Employees. . 4-13 [b] Protected Activity...... 4-14 [i] Receipt of Credits or Subsidies ...... 4-15 [ii] Title I Protected Disclosures. . 4-16 [2] ACA Anti-Retaliation Provision Procedures...... 4-17 [a] Statute of Limitations ...... 4-17 xxii WHISTLEBLOWER LAW [b] Burdens of Proof...... 4-18 [c] Reasonable Cause Finding and Preliminary Orders...... 4-19 [d] Review and Removal...... 4-19 § 4.04 Consumer Financial Protection Act of 2010. . . 4-20 [1] CFPA Anti-Retaliation Provision . . . . . 4-20 [a] Covered Employers and Employees. . 4-21 [b] Protected Activity...... 4-22 [2] CFPA Anti-Retaliation Provision Procedures...... 4-24 [a] Statute of Limitations ...... 4-24 [b] Burdens of Proof...... 4-25 [c] Reasonable Cause Finding and Preliminary Orders...... 4-25 [d] Review and Removal...... 4-26 § 4.05 FDA Food Safety Modernization Act...... 4-27 [1] FSMA Anti-Retaliation Provision. . . . . 4-27 [a] Covered Employers and Employees. . 4-28 [b] Protected Activity...... 4-28 [2] FSMA Anti-Retaliation Provision Procedures...... 4-29 [a] Statute of Limitations ...... 4-29 [b] Burdens of Proof...... 4-30 [c] Reasonable Cause Finding and Preliminary Orders...... 4-30 [d] Review and Removal...... 4-31

CHAPTER 5

Nuclear and Environmental Whistleblower Statutes

§ 5.01 OSHA-Administered Nuclear Whistleblower Protections...... 5-2 [1] Overview ...... 5-2 [a] The Nuclear Power Industry. . . . 5-2 [b] Atomic Energy Act of 1954 . . . . 5-4 [c] Energy Reorganization Act of 1974...... 5-4 [2] Covered Employers and Employees . . . . 5-6 [3] Burden of Proof...... 5-7 [a] Protected Activity...... 5-8 [b] Adverse Actions...... 5-9 [c] Contributing-Factor Standard...... 5-9 [4] Respondent’s Affirmative Defense. . . . 5-10 TABLE OF CONTENTS xxiii [5] ERA Procedures...... 5-13 [a] Filing a Complaint...... 5-13 [b] Investigation...... 5-13 [c] Findings and Orders...... 5-14 [d] Review and Removal...... 5-14 [6] NRC Investigation of Whistleblower Complaints ...... 5-15 [7] OSHA-Issued Statistics on ERA Complaint Determinations...... 5-16 § 5.02 OSHA-Administered Environmental Whistleblower Statutes...... 5-18 [1] Overview ...... 5-18 [2] Burden of Proof...... 5-19 [a] Protected Activity...... 5-19 [b] Adverse Actions...... 5-19 [c] Motivating-Factor Standard. . . . . 5-19 [d] Respondent’s Affirmative Defense. . 5-20 [3] Procedures ...... 5-20 [a] Filing a Complaint...... 5-20 [b] Investigation...... 5-20 [c] Findings and Orders...... 5-21 [d] Review and Removal...... 5-21 [4] Clean Air Act...... 5-22 [5] Comprehensive Environmental Response, Compensation and Liability Act of 1980...... 5-25 [6] Federal Water Pollution Control Act/Clean Water Act ...... 5-26 [7] Safe Drinking Water Act of 1974. . . . . 5-28 [8] Solid Waste Disposal Act...... 5-29 [9] Toxic Substances Control Act...... 5-31 [10] Asbestos Hazard Emergency Response Act of 1986...... 5-32 [11] Section 11(c) of the Occupational Safety and Health Act of 1970...... 5-33

CHAPTER 6

Transportation Industry Whistleblower Protection

§ 6.01 Overview...... 6-3 § 6.02 Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (“AIR21”). . 6-5 [1] Overview ...... 6-5 xxiv WHISTLEBLOWER LAW [2] Covered Employers and Employees . . . . 6-5 [3] Protected Activity ...... 6-7 [4] Adverse Actions...... 6-9 [5] AIR21 Procedures...... 6-10 [a] Filing a Complaint...... 6-10 [b] Deadline for Filing an AIR21 Complaint...... 6-10 [c] Burdens of Proof...... 6-10 [d] Reasonable Cause Finding and Preliminary Orders...... 6-11 [e] Review and Removal...... 6-12 § 6.03 The Federal Railroad Safety Act of 1970 (“FRSA”)...... 6-13 [1] Overview ...... 6-13 [2] Covered Employers and Employees . . . . 6-13 [3] Protected Activity ...... 6-14 [4] Adverse Actions...... 6-14 [5] Relation to Other Laws and Remedies. . . 6-15 [6] FRSA Procedures...... 6-16 [a] Filing a Complaint...... 6-16 [b] Deadline for Filing an FRSA Complaint...... 6-16 [c] Burdens of Proof...... 6-16 [d] Reasonable Cause Finding and Preliminary Orders...... 6-18 [e] Review and Removal...... 6-18 § 6.04 The Surface Transportation Assistance Act of 1982 (“STAA”)...... 6-20 [1] Overview ...... 6-20 [2] Covered Employers and Employees . . . . 6-20 [3] Protected Activity ...... 6-21 [4] Adverse Actions...... 6-22 [5] Relation to Other Laws and Remedies. . . 6-23 [6] STAA Procedures ...... 6-23 [a] Filing a Complaint...... 6-23 [b] Deadline for Filing an STAA Complaint...... 6-23 [c] Burdens of Proof...... 6-24 [d] Reasonable Cause Finding and Preliminary Orders...... 6-25 [e] Review and Removal...... 6-25 § 6.05 The National Transit Systems Security Act of 2007 (“NTSSA”)...... 6-27 [1] Overview ...... 6-27 [2] Covered Employers and Employees . . . . 6-27 TABLE OF CONTENTS xxv [3] Protected Activity ...... 6-27 [4] Adverse Actions...... 6-28 [5] Relation to Other Laws and Remedies. . . 6-29 [6] NTSSA Procedures ...... 6-29 [a] Filing a Complaint...... 6-29 [b] Deadline for Filing an NTSSA Complaint...... 6-30 [c] Burdens of Proof...... 6-30 [d] Reasonable Cause Finding and Preliminary Orders...... 6-31 [e] Review and Removal...... 6-31 § 6.06 The Pipeline Safety Improvement Act of 2002 (“PSIA”) ...... 6-33 [1] Overview ...... 6-33 [2] Covered Employers and Employees . . . . 6-33 [3] Protected Activity ...... 6-34 [4] Adverse Actions...... 6-35 [5] The PSIA Procedures ...... 6-36 [a] Filing a Complaint...... 6-36 [b] Deadline for Filing PSIA Complaint. 6-36 [c] Burdens of Proof...... 6-36 [d] Reasonable Cause Finding and Preliminary Orders...... 6-37 [e] Review and Removal...... 6-37 § 6.07 The Seaman’s Protection Act (“SPA”)...... 6-38 [1] Overview ...... 6-38 [2] Covered Employers and Employees . . . . 6-39 [3] Protected Activity ...... 6-39 [4] Adverse Actions...... 6-40 [5] The SPA Procedures ...... 6-40 [a] Filing a Complaint...... 6-40 [b] Deadline for Filing an SPA Complaint...... 6-40 [c] Burdens of Proof...... 6-40 [d] Reasonable Cause Finding and Preliminary Orders...... 6-41 [e] Review and Removal...... 6-41 § 6.08 The International Safe Container Act (“ISCA”). . 6-43 [1] Overview ...... 6-43 [2] Covered Employers and Employees . . . . 6-43 [3] Protected Activity ...... 6-43 [4] Adverse Actions...... 6-43 [5] The ISCA Procedures ...... 6-43 § 6.09 The Moving Ahead for Progress in the 21st Century Act (“MAP-21”)...... 6-45 xxvi WHISTLEBLOWER LAW [1] Overview ...... 6-45 [2] Covered Employers and Employees . . . . 6-45 [3] Protected Activity ...... 6-45 [4] Adverse Actions...... 6-45 [5] MAP-21 Procedures...... 6-46 [a] Filing a Complaint...... 6-46 [b] Deadline for Filing a MAP-21 Complaint...... 6-46 [c] Burdens of Proof...... 6-46 [d] Reasonable Cause Finding and Preliminary Orders...... 6-46 [e] Review and Removal...... 6-47

CHAPTER 7

Other Federal Whistleblower Protection Statutes

§ 7.01 Overview...... 7-3 § 7.02 Whistleblower Protection Act of 1989...... 7-5 [1] Overview ...... 7-5 [2] Covered Employers and Employees . . . . 7-6 [3] Protected Disclosures...... 7-8 [4] Covered Personnel Action...... 7-11 [5] WPA Procedures ...... 7-12 [a] Direct Appeal to the MSPB . . . . 7-13 [b] Office of Special Counsel. . . . . 7-13 [c] Individual Right of Action. . . . . 7-15 [d] Burdens of Proof...... 7-15 [e] Corrective Action...... 7-17 [f] Review and Removal...... 7-17 § 7.03 Defense Contractor Whistleblower Protection Act...... 7-19 [1] Overview ...... 7-19 [2] Covered Employers and Employees . . . . 7-19 [3] Protected Activity ...... 7-20 [4] Adverse Actions...... 7-21 [5] Relation to Other Laws and Remedies. . . 7-21 [6] Procedures ...... 7-21 [a] Filing a Complaint...... 7-21 [b] Deadline for Filing a Complaint. . . 7-22 [c] Investigation and Remedies. . . . . 7-22 [d] Burdens of Proof...... 7-23 [e] Review and Removal...... 7-23 TABLE OF CONTENTS xxvii § 7.04 Government Contractor and Subcontractor Pilot Program...... 7-25 [1] Overview ...... 7-25 [2] Covered Employers and Employees . . . . 7-25 [3] Protected Activity ...... 7-25 [4] Adverse Actions...... 7-26 [5] Relation to Other Laws and Remedies. . . 7-26 [6] Pilot Program Procedures...... 7-27 [a] Filing a Complaint...... 7-27 [b] Deadline for Filing a Complaint. . . 7-27 [c] Investigation and Remedies. . . . . 7-27 [d] Burdens of Proof...... 7-28 [e] Review and Removal...... 7-29 § 7.05 American Recovery and Reinvestment Act of 2009...... 7-30 [1] Overview ...... 7-30 [2] Covered Employers and Employees . . . . 7-30 [3] Protected Activity ...... 7-30 [4] Adverse Actions...... 7-31 [5] Relation to Other Laws and Remedies. . . 7-31 [6] ARRA Procedures...... 7-32 [a] Filing a Complaint...... 7-32 [b] Deadline for Filing a Complaint. . . 7-32 [c] Investigation and Remedies. . . . . 7-32 [d] Burdens of Proof...... 7-33 [e] Review and Removal...... 7-34 § 7.06 Additional Whistleblower Protections for Federal Government Employees and Contractors...... 7-36 [1] Overview ...... 7-36 [2] FBI Whistleblower Protections...... 7-36 [3] Department of Energy Whistleblower Protections ...... 7-38 [4] Intelligence Community Whistleblower Protection Act of 1998...... 7-39 [5] Major Fraud Act of 1988...... 7-41 [6] Other Statutes...... 7-42 § 7.07 Whistleblower Protections for Military Service Members and Employees...... 7-44 [1] Military Whistleblower Protection Act of 1988...... 7-44 [2] Nonappropriated Fund Instrumentality Employees of the Armed Forces. . . . 7-46 § 7.08 Whistleblower Protections in the Financial Sector ...... 7-48 xxviii WHISTLEBLOWER LAW [1] Federal Credit Union Act ...... 7-48 [2] Financial Institutions Reform, Recovery, and Enforcement Act of 1989. . . . . 7-49 [3] Annunzio-Wylie Anti-Money Laundering Act...... 7-51 § 7.09 Industry-Specific Whistleblower Protections. . . 7-52 [1] Overview ...... 7-52 [2] Migrant and Seasonal Agricultural Worker Protection Act...... 7-52 [3] Federal Mine Safety and Health Act of 1977...... 7-53 [4] Surface Mining Control and Reclamation Act of 1977...... 7-55 [5] Emergency Medical Treatment and Active Labor Act...... 7-55 [6] Other Statutes...... 7-56

CHAPTER 8

Survey of State Whistleblower Statutes

§ 8.01 Overview...... 8-2 § 8.02 Alabama...... 8-4 [1] Statutory Whistleblower Protections. . . . 8-4 [2] Wrongful Termination...... 8-4 § 8.03 Alaska...... 8-5 [1] Statutory Whistleblower Protections. . . . 8-5 [2] Wrongful Termination...... 8-5 § 8.04 Arizona...... 8-6 [1] Statutory Whistleblower Protections. . . . 8-6 [2] Wrongful Termination...... 8-7 § 8.05 Arkansas...... 8-8 [1] Statutory Whistleblower Protections. . . . 8-8 [2] Wrongful Termination...... 8-8 § 8.06 California...... 8-10 [1] Statutory Whistleblower Protections. . . . 8-10 [2] Wrongful Termination...... 8-11 § 8.07 Colorado ...... 8-12 [1] Statutory Whistleblower Protections. . . . 8-12 [2] Wrongful Termination...... 8-12 § 8.08 Connecticut...... 8-14 [1] Statutory Whistleblower Protections. . . . 8-14 [2] Wrongful Termination...... 8-14 TABLE OF CONTENTS xxix § 8.09 Delaware...... 8-16 [1] Statutory Whistleblower Protections. . . . 8-16 [2] Wrongful Termination...... 8-16 § 8.10 District of Columbia...... 8-18 [1] Statutory Whistleblower Protections. . . . 8-18 [2] Wrongful Termination...... 8-19 § 8.11 Florida...... 8-20 [1] Statutory Whistleblower Protections. . . . 8-20 [2] Wrongful Termination...... 8-20 § 8.12 Georgia ...... 8-21 [1] Statutory Whistleblower Protections. . . . 8-21 [2] Wrongful Termination...... 8-21 § 8.13 Hawaii...... 8-22 [1] Statutory Whistleblower Protections. . . . 8-22 [2] Wrongful Termination...... 8-22 § 8.14 Idaho...... 8-24 [1] Statutory Whistleblower Protections. . . . 8-24 [2] Wrongful Termination...... 8-24 § 8.15 Illinois...... 8-26 [1] Statutory Whistleblower Protections. . . . 8-26 [2] Wrongful Termination...... 8-26 § 8.16 Indiana...... 8-28 [1] Statutory Whistleblower Protections. . . . 8-28 [2] Wrongful Termination...... 8-28 § 8.17 Iowa...... 8-30 [1] Statutory Whistleblower Protections. . . . 8-30 [2] Wrongful Termination...... 8-30 § 8.18 Kansas...... 8-32 [1] Statutory Whistleblower Protections. . . . 8-32 [2] Wrongful Termination...... 8-32 § 8.19 Kentucky...... 8-33 [1] Statutory Whistleblower Protections. . . . 8-33 [2] Wrongful Termination...... 8-33 § 8.20 Louisiana...... 8-34 [1] Statutory Whistleblower Protections. . . . 8-34 [2] Wrongful Termination...... 8-34 § 8.21 Maine...... 8-35 [1] Statutory Whistleblower Protections. . . . 8-35 [2] Wrongful Termination...... 8-35 § 8.22 Maryland...... 8-36 [1] Statutory Whistleblower Protections. . . . 8-36 [2] Wrongful Termination...... 8-36 § 8.23 Massachusetts...... 8-38 [1] Statutory Whistleblower Protections. . . . 8-38 [2] Wrongful Termination...... 8-38 xxx WHISTLEBLOWER LAW § 8.24 Michigan...... 8-40 [1] Statutory Whistleblower Protections. . . . 8-40 [2] Wrongful Termination...... 8-40 § 8.25 Minnesota...... 8-42 [1] Statutory Whistleblower Protections. . . . 8-42 [2] Wrongful Termination...... 8-42 § 8.26 Mississippi...... 8-44 [1] Statutory Whistleblower Protections. . . . 8-44 [2] Wrongful Termination...... 8-44 § 8.27 Missouri...... 8-45 [1] Statutory Whistleblower Protections. . . . 8-45 [2] Wrongful Termination...... 8-46 § 8.28 Montana...... 8-47 [1] Statutory Whistleblower Protections. . . . 8-47 [2] Wrongful Termination...... 8-48 § 8.29 Nebraska...... 8-49 [1] Statutory Whistleblower Protections. . . . 8-49 [2] Wrongful Termination...... 8-49 § 8.30 Nevada...... 8-51 [1] Statutory Whistleblower Protections. . . . 8-51 [2] Wrongful Termination...... 8-52 § 8.31 New Hampshire ...... 8-53 [1] Statutory Whistleblower Protections. . . . 8-53 [2] Wrongful Termination...... 8-53 § 8.32 New Jersey ...... 8-55 [1] Statutory Whistleblower Protections. . . . 8-55 [2] Wrongful Termination...... 8-56 § 8.33 New Mexico...... 8-57 [1] Statutory Whistleblower Protections. . . . 8-57 [2] Wrongful Termination...... 8-57 § 8.34 New York ...... 8-59 [1] Statutory Whistleblower Protections. . . . 8-59 [2] Wrongful Termination...... 8-60 § 8.35 North Carolina ...... 8-61 [1] Statutory Whistleblower Protections. . . . 8-61 [2] Wrongful Termination...... 8-61 § 8.36 North Dakota...... 8-63 [1] Statutory Whistleblower Protections. . . . 8-63 [2] Wrongful Termination...... 8-63 § 8.37 Ohio...... 8-64 [1] Statutory Whistleblower Protections. . . . 8-64 [2] Wrongful Termination...... 8-65 § 8.38 Oklahoma ...... 8-66 [1] Statutory Whistleblower Protections. . . . 8-66 [2] Wrongful Termination...... 8-66 TABLE OF CONTENTS xxxi § 8.39 Oregon...... 8-68 [1] Statutory Whistleblower Protections. . . . 8-68 [2] Wrongful Termination...... 8-68 § 8.40 Pennsylvania...... 8-70 [1] Statutory Whistleblower Protections. . . . 8-70 [2] Wrongful Termination...... 8-71 § 8.41 Rhode Island...... 8-72 [1] Statutory Whistleblower Protections. . . . 8-72 [2] Wrongful Termination...... 8-73 § 8.42 South Carolina ...... 8-74 [1] Statutory Whistleblower Protections. . . . 8-74 [2] Wrongful Termination...... 8-74 § 8.43 South Dakota...... 8-75 [1] Statutory Whistleblower Protections. . . . 8-75 [2] Wrongful Termination...... 8-75 § 8.44 Tennessee...... 8-77 [1] Statutory Whistleblower Protections. . . . 8-77 [2] Wrongful Termination...... 8-78 § 8.45 Texas...... 8-79 [1] Statutory Whistleblower Protections. . . . 8-79 [2] Wrongful Termination...... 8-79 § 8.46 Utah...... 8-81 [1] Statutory Whistleblower Protections. . . . 8-81 [2] Wrongful Termination...... 8-81 § 8.47 Vermont...... 8-83 [1] Statutory Whistleblower Protections. . . . 8-83 [2] Wrongful Termination...... 8-83 § 8.48 Virginia...... 8-85 [1] Statutory Whistleblower Protections. . . . 8-85 [2] Wrongful Termination...... 8-85 § 8.49 Washington...... 8-87 [1] Statutory Whistleblower Protections. . . . 8-87 [2] Wrongful Termination...... 8-88 § 8.50 West Virginia ...... 8-89 [1] Statutory Whistleblower Protections. . . . 8-89 [2] Wrongful Termination...... 8-89 § 8.51 Wisconsin ...... 8-91 [1] Statutory Whistleblower Protections. . . . 8-91 [2] Wrongful Termination...... 8-92 § 8.52 Wyoming...... 8-93 [1] Statutory Whistleblower Protections. . . . 8-93 [2] Wrongful Termination...... 8-93 xxxii WHISTLEBLOWER LAW CHAPTER 9

SEC Whistleblower Incentive Program

§ 9.01 Overview...... 9-2 § 9.02 Whistleblower Status ...... 9-5 [1] Eligible Individual...... 9-5 [a] Definition of Whistleblower. . . . . 9-5 [b] Excluded Individuals...... 9-5 [i] Absolute Exclusions. . . . . 9-6 [ii] Qualified Exclusions. . . . . 9-7 [iii] Exceptions to Qualified Exclusions...... 9-8 [2] Voluntariness Requirement...... 9-9 [3] Original Information...... 9-11 [4] Independent Knowledge and Analysis. . . 9-12 [a] Definition...... 9-12 [b] Excluded Information...... 9-13 [i] In General...... 9-13 [ii] Attorney-Client Privilege. . . 9-14 [iii] Illegally Obtained Information...... 9-14 [5] Procedure for Submitting Information. . . 9-15 [6] Confidentiality and Anonymity...... 9-15 § 9.03 Covered Actions...... 9-18 [1] Successful Enforcement Action...... 9-18 [2] Calculation of Proceeds...... 9-19 § 9.04 Award ...... 9-21 [1] Amount of Award ...... 9-21 [a] Factors that May Increase an Award...... 9-21 [b] Factors that May Decrease an Award...... 9-22 [2] Procedure for Claiming Award...... 9-24 [a] Initiating a Claim...... 9-24 [b] Review of Claim for Award . . . . 9-24 [3] Preliminary Determination...... 9-25 [4] Reconsideration of Determination. . . . . 9-25 [5] Final Order...... 9-26 § 9.05 Rules to Support Internal Compliance Programs. . 9-27 § 9.06 Developments ...... 9-31 [1] Agency Interpretations and Actions. . . . 9-31 [a] Enforcing Anti-Retaliation Provisions...... 9-31 TABLE OF CONTENTS xxxiii [b] Deterring Actions that Impede Whistleblowers...... 9-32 [2] Claims and Award Statistics...... 9-33

CHAPTER 10

IRS Whistleblower Incentive Program

§ 10.01 Overview...... 10-2 § 10.02 Whistleblower Status ...... 10-5 [1] Eligible Individual...... 10-5 [a] Definition of Whistleblower. . . . . 10-5 [b] Excluded Individuals...... 10-5 [2] Voluntariness Requirement...... 10-6 [3] Submitting Specific and Credible Information...... 10-6 [4] Confidentiality and Anonymity...... 10-7 § 10.03 Covered Administrative or Judicial Action. . . . 10-9 [1] Successful Enforcement Action...... 10-9 [2] Calculation of Proceeds...... 10-10 [a] Collected Proceeds...... 10-10 [b] Amount in Dispute...... 10-11 § 10.04 Award ...... 10-12 [1] Amount of Award ...... 10-12 [a] Awards for Substantial Contribution (Between 15% and 30%). . . . . 10-12 [i] Factors that May Increase an Award...... 10-12 [ii] Factors that May Decrease an Award...... 10-13 [b] Awards for Less Substantial Contribution (Capped at 10%). . . 10-14 [c] Reduction of Award...... 10-15 [d] Denial of Award...... 10-16 [e] Multiple Whistleblowers ...... 10-16 [f] Joint Whistleblowers ...... 10-17 [2] Procedure for Claiming an Award. . . . 10-18 [a] Initiating a Claim...... 10-18 [b] Whistleblower Administrative Proceedings...... 10-19 xxxiv WHISTLEBLOWER LAW [i] Rejections and Denials. . . . 10-19 [ii] Preliminary Award Recommendation...... 10-20 [A] Preliminary Computation. . . . . 10-20 [B] Detailed Award Report. . 10-21 [C] Contents of Administrative Claim File...... 10-22 [3] Determination Letter...... 10-23 [4] Appeal...... 10-23 [5] Administrative Timeframes...... 10-24 [6] Timing of Payment of Award...... 10-25 § 10.05 Developments ...... 10-26

CHAPTER 11

CFTC Whistleblower Incentive Program

§ 11.01 Overview...... 11-2 § 11.02 Whistleblower Status ...... 11-5 [1] Eligible Individual...... 11-5 [a] Definition of Whistleblower. . . . . 11-5 [b] Excluded Individuals...... 11-6 [2] Voluntarily Provided...... 11-7 [3] Original Information...... 11-8 [4] Original Source...... 11-8 [5] Independent Knowledge and Analysis. . . 11-9 [a] Definition...... 11-9 [b] Excluded Information...... 11-10 [6] Procedure for Submitting Information. . . 11-11 [7] Confidentiality and Anonymity...... 11-12 § 11.03 Covered Administrative or Judicial Action. . . . 11-14 § 11.04 Award ...... 11-16 [1] Amount of Award ...... 11-16 [a] Factors that May Increase an Award. 11-17 [i] Significance of the Information...... 11-17 [ii] Assistance Provided. . . . . 11-17 [iii] Law Enforcement Interest. . . 11-18 [iv] Participation in Internal Compliance Systems. . . . 11-18 [b] Factors that May Decrease an Award ...... 11-19 [i] Culpability ...... 11-19 [ii] Unreasonable Reporting Delay. 11-20 TABLE OF CONTENTS xxxv [iii] Interference with Internal Compliance and Reporting Systems...... 11-20 [c] Multiple Whistleblowers ...... 11-21 [2] Procedure for Claiming an Award. . . . 11-21 [3] Timing of Payment ...... 11-23 § 11.05 Developments ...... 11-25

CHAPTER 12

Purloined Documents

§ 12.01 Overview...... 12-1 § 12.02 Document Acquisition and Dissemination as Protected Activity...... 12-3 § 12.03 Balancing Test in Title VII and Discrimination Claims...... 12-4 § 12.04 Evidence Gathering as Protected Activity by Whistleblowers...... 12-6 [1] False Claims Act...... 12-6 [2] Sarbanes-Oxley Act Retaliation . . . . . 12-8 [3] Dodd-Frank Whistleblower Protections . . 12-9 § 12.05 Employer Responses to Document Acquisition and Dissemination by Employees...... 12-11 [1] After-Acquired Evidence...... 12-11 [2] Breach of Contract...... 12-12 [3] Breach of Fiduciary Duty...... 12-15 § 12.06 Retaliatory Counterclaims ...... 12-16 § 12.07 Potential Criminal Liability...... 12-17 § 12.08 Ethical Issues for Attorneys...... 12-20

CHAPTER 13

Attorneys and Compliance Personnel as Whistleblowers

§ 13.01 Overview...... 13-1 § 13.02 Ethical Obligations of Attorney/Whistleblowers. . 13-3 § 13.03 Sarbanes-Oxley Act and the Dodd-Frank Act . . 13-5 [1] Attorney Disclosures...... 13-5 [2] Retaliation...... 13-8 [a] Attorneys ...... 13-10 [b] Compliance Personnel...... 13-11 xxxvi WHISTLEBLOWER LAW § 13.04 False Claims Act...... 13-12 § 13.05 Eligibility for Whistleblower Awards ...... 13-14 [1] Attorneys ...... 13-14 [2] Compliance Personnel...... 13-18 § 13.06 Attorneys as Qui Tam Relators...... 13-20 § 13.07 Responding to a Claim: Employer Defenses. . . 13-22 [1] Pretrial and Extrajudicial Measures. . . . 13-22 [2] Substantive Defenses...... 13-23

CHAPTER 14

Employer Considerations

§ 14.01 Overview...... 14-2 [1] Importance of the Issue...... 14-3 [2] The “Two-Track” Approach...... 14-5 § 14.02 Compliance Strategies and Preventative Measures...... 14-7 [1] Encouraging Internal Whistleblowing . . . 14-7 [a] Management Buy-in...... 14-7 [b] Employee Assurance ...... 14-8 [c] Robust Investigations...... 14-9 [2] Effective Complaint Policies and Legal Requirements...... 14-10 [3] Education and Training...... 14-11 § 14.03 Internal Investigation of the Complaint. . . . . 14-14 [1] The Duty to Investigate...... 14-14 [2] Initiating the Investigation...... 14-15 [3] Issuing a Document Hold Notice. . . . . 14-17 [4] Defining the Scope of the Investigation. . 14-19 [5] Collecting Relevant Documents . . . . . 14-20 [6] Interviewing Witnesses...... 14-21 [7] Oversight of the Investigation...... 14-24 [8] Reporting the Results of the Investigation. . 14-26 § 14.04 Protecting Privilege...... 14-28 [1] The Extent of Privilege...... 14-28 [2] Challenges to Privilege...... 14-31 [a] Whistleblower Was a Party to Privileged Communications. . . . 14-32 [b] Attorneys as Whistleblowers. . . . 14-35 [3] Confidentiality Agreements...... 14-35 [4] Limiting Disclosures to Employees During Internal Investigations. . . . . 14-37 TABLE OF CONTENTS xxxvii § 14.05 Compelled and Voluntary Disclosure ...... 14-38 [1] Mandatory Disclosure Provisions. . . . . 14-38 [2] Agency Leniency Programs ...... 14-40 § 14.06 Interactions with the Whistleblower ...... 14-41 [1] Avoiding the Appearance of Retaliation. . 14-41 [2] Disciplining a Whistleblower for Other Misconduct...... 14-41 § 14.07 Public Relations Considerations...... 14-43 [1] Pre-Planning...... 14-43 [2] Managing the Response...... 14-43 § 14.08 Settlements ...... 14-45 [1] Assessing the Risk...... 14-45 [a] Internal Investigation Results . . . . 14-45 [b] Whistleblower Involvement in the Alleged Misconduct...... 14-45 [c] The Truth or Falsity of the Allegation...... 14-46 [d] Potential Type of Claim...... 14-46 [e] Forum and Relief Available. . . . . 14-46 [f] Likelihood of an Adverse Ruling. . 14-47 [g] Range of Potential Damages and Other Adverse Effects ...... 14-47 [2] Confidentiality of Settlement Agreements. . 14-48 [3] Labor Department Review of Settlement Agreements...... 14-50

INDEX ...... I-1 CHAPTER 2

Sarbanes-Oxley Act of 2002

Chapter Contents

§ 2.01 Overview [1] Whistleblower Provision: Section 806 [2] Dodd-Frank Amendments to SOX § 2.02 Covered Employer [1] Publicly Traded Companies [2] Consolidated Subsidiaries [3] Contractors, Subcontractors, and Agents [a] Retaliation Against Contractors’ Employees [b] Retaliation Against Employees of Publicly Traded Companies [4] Individual Liability § 2.03 Covered Employee [1] Classification as Employee or Independent Contractor [2] Extraterritorial Application of Employee Protections [3] Enforceability of Pre-Dispute Arbitration Agreements with Respect to Covered Employees § 2.04 Prima Facie Case [1] Protected Activity [a] Reasonable Belief [b] Existing Violation versus Imminent Violation [c] Fraud on Shareholders versus Violation of an Enumerated Category [d] Materiality [e] To Whom (and About Whom) an Employee Must Report

2-1 § 2.01 WHISTLEBLOWER LAW 2-2 [2] Adverse Action [3] Causation § 2.05 Litigation Process [1] Filing and Investigation of Complaint [a] Commencement of Limitations Period [b] Tolling of Limitations Period [c] Form of Complaint [d] Pleading Standard [e] Burdens of Proof [2] Determination and Review [3] Kick-Out Provision [4] Review of DOL Final Order by Federal Courts of Appeal [5] Jury Trial § 2.06 Available Remedies [1] Reinstatement [2] Front Pay in Lieu of Reinstatement [3] Back Pay [4] Attorneys’ Fees [5] Non-Economic and Compensatory Damages [6] Punitive Damages

§ 2.01 Overview In the wake of the high-profile corporate accounting scandals involving Enron and WorldCom in 2001 and 2002, the U.S. Congress passed the Sarbanes-Oxley Act of 2002 (“SOX”).1 The purpose of SOX was to restore investor confidence in the integrity of the nation’s financial markets by improving corporate governance and the accuracy and reliability of corporate disclosures. The law requires certain officers of publicly traded companies to make certifications related to the accuracy of the company’s financial statements, and authorizes penalties for material misstatements or omissions. SOX also includes anti-retaliation protections for whistleblowers.2 This Chapter addresses the key topics and trends in the case law regarding SOX’s anti-retaliation provision, Section 806 (“Section 806”).3

1 Pub. L. No. 107-204, 116 Stat. 745 (July 30, 2002); 15 U.S.C. § 7201 note. 2 Pub. L. No. 107-204, § 806, 116 Stat. 745, 802-804; 18 U.S.C. § 1514A. 3 While this chapter addresses the key topics and trends in Section 806 juris- prudence, it is not exhaustive with respect to more technical or esoteric issues that arise infrequently. The Department of Labor (“DOL”) Office of Administrative 2-3 SARBANES-OXLEY ACT § 2.01[1] [1]—Whistleblower Provision: Section 806 Under Section 806, a covered employer may not terminate or otherwise discriminate against an employee for providing information that the employee reasonably believes constitutes a violation of federal laws relating to one of six enumerated categories: (1) mail fraud, (2) wire fraud, (3) bank fraud, (4) securities/commodities fraud, (5) “any rule or regulation of the U.S. Securities and Exchange Commission” (“SEC”), or (6) “any provision of federal law relating to fraud against shareholders.”4 Under Section 806, complaints must be filed with the Secretary of Labor within 180 days after an adverse action.5 The Department of Labor (“DOL”) Occupational Safety and Health Administration (“OSHA”) investigates and adjudicates matters in accordance with the rules and procedures set forth in the whistleblower protection provision of the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (“AIR21”), upon which Congress modeled Section 806.6 Despite the relatively expansive scope of SOX’s anti-retaliation provision, few plaintiff/complainants have prevailed in SOX whistleblower actions since the law was passed. From fiscal years 2005 through 2015, employees filed 2,059 SOX complaints with the DOL. The DOL dismissed the majority of these complaints, issuing just twenty-two favorable determinations to employees, while a significant number have been settled or voluntarily withdrawn. Additionally, since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”),7 some whistleblowers have elected to avail themselves of the “kick-out” provision, which allows a SOX complainant to withdraw a charge from the DOL and bring an action for de novo review in federal district court.8 The complaint, however, must have been pending in the DOL for more than 180 days without a final determination, and the complainant must not have acted in bad faith to contribute to the delay.9

Law Judges (“OALJ”) maintains a digest detailing, inter alia, such issues. The OALJ’s SOX Whistleblower Digest is available at http://www.oalj.dol.gov/PUBLIC/ WHISTLEBLOWER/REFERENCES/REFERENCE_WORKS/SOX_DIGEST.HTM (last visited Nov. 18, 2015). 4 18 U.S.C. § 1514A(a)(1) (citing 18 U.S.C. §§ 1341 (mail fraud), 1343 (wire fraud), 1344 (bank fraud) and 1348 (securities/commodities fraud)). 5 18 U.S.C. § 1514A(b)(2)(D). 6 Pub. L. No. 106-181, 114 Stat. 61 (April 5, 2000); 49 U.S.C. § 40101 note. AIR21 governs retaliation complaints by employees in the airline industry. 49 U.S.C. § 42121. See Chapter 6 infra § 6.02. 7 Pub. L. No. 111-203, 124 Stat. 1376 (July 21, 2010); 12 U.S.C. § 5301 note. See Chapter 3 infra. 8 18 U.S.C. § 1514A(b)(1)(B). 9 Id. See § 2.05[3] infra for more detail related to the kick-out provision. § 2.01[2] WHISTLEBLOWER LAW 2-4 The following chart summarizes the distribution of SOX complaints and determinations over the past decade.10

Table 1: SOX Complaints and Determinations by the DOL

Fiscal Filed Merit Settled Dismissed Kick-Out Withdrawn Year 2005 291 8 29 193 N/A 38 2006 234 0 45 186 N/A 30 2007 231 0 43 172 N/A 31 2008 235 0 42 130 N/A 24 2009 228 3 41 127 N/A 35 2010 201 3 38 141 N/A 27 2011 148 2 37 93 9 15 2012 169 2 39 90 10 18 2013 177 2 38 141 24 44 2014 145 2 32 77 30 33 TOTALS 2059 22 384 1350 73 295

[2]—Dodd-Frank Amendments to SOX Section 922 of Dodd-Frank amended SOX Section 806 in a number of important ways. First, it doubled the limitations period for filing a SOX whistleblower claim, extending the deadline to 180 days from ninety days.11 Second, Dodd-Frank altered the calculation of the filing deadline. Rather than beginning the limitations period on “the date the violation occurs,” the amended Section 806 calculates the period from “the date on which the employee became aware of the violation.”12 Third, Section 806, as amended, now explicitly applies to private subsidiaries and affiliates of public companies, which resolves a longstanding split within the DOL and federal courts regarding the scope of coverage of the law.13 Fourth, Dodd-Frank extended Section 806 coverage to employees of “nationally recognized ratings organization[s],” e.g., Moody’s Investor Service and Standard & Poor’s, which reflected Congress’s belief that such organizations should be held to the same standard as publicly traded companies.14 Fifth,

10 The data in this chart is drawn from OSHA’s Whistleblower Investigation Data for FY2005 through FY2014, available at http://www.whistleblowers.gov/ whistleblower/wb_data_FY05-14.pdf (last visited Nov. 18, 2015). 11 18 U.S.C. § 1514A(b)(1)(B). 12 18 U.S.C. § 1514A(b)(2)(D). 13 18 U.S.C. § 1514A(a). 14 Id. 2-5 SARBANES-OXLEY ACT § 2.01[2] Dodd-Frank banned the use of pre-dispute arbitration agreements for SOX retaliation claims.15 Sixth, Section 922(c) of Dodd-Frank amended SOX to expressly provide that employees bringing retaliation claims under SOX have a right to jury trial.16 Previously, some courts had ruled that a SOX plaintiff was not entitled to a jury trial because the statute did not expressly provide for such a right.17

15 18 U.S.C. § 1514A(e)(2). As detailed infra, this pre-dispute-arbitration ban has generally been held not to apply retroactively. 16 18 U.S.C. § 1514A(b)(2)(E). 17 See, e.g.: Fifth Circuit: Murray v. TXU Corp., 2005 U.S. Dist. LEXIS 10945, *14-15 (N.D. Tex. June 7, 2005). Ninth Circuit: Schmidt v. Levi Strauss & Co., 621 F. Supp.2d 796, 801 (N.D. Cal. 2008). § 2.02[1] WHISTLEBLOWER LAW 2-6 § 2.02 Covered Employer In general, the Sarbanes-Oxley Act of 2002 (“SOX”) whistleblower protections apply to publicly traded companies and their subsidiaries that are subject to the registration or reporting requirements of the Securities Exchange Act of 1934 (“Exchange Act”),1 as well as to nationally recognized statistical ratings organizations.2 Sarbanes-Oxley Section 806 also applies to private companies that serve as agents or contractors of publicly traded companies, as well as consolidated subsidiaries of publicly traded companies.3 Indi- vidual officers and supervisors who direct retaliation against an employee who engaged in protected activity are also subject to liability under the law.4

[1]—Publicly Traded Companies SOX Section 806 (“Section 806”) protects employees of publicly traded companies. As defined by SOX, publicly traded companies are companies with securities registered under Section 12 of the Exchange Act, or which are required to file reports under Section 15(d) of the Exchange Act.5 The “publicly traded” status attaches to companies from which the Securities and Exchange Commission (“SEC”) has received an application for registration of its securities as well as certifications from exchange authorities, such as National Association of Securities Dealers Automated Quotations system (“Nasdaq”) or the New York Stock Exchange (“NYSE”), that the securities have been approved for listing and registration.6 Additionally, thirty days must have elapsed from that certification before an employer is eligible to be sued under Section 806. Section 806 does not apply to employers with withdrawn or incomplete registration statements.7 Furthermore, Section 806 does not provide protection for adverse employment actions occurring before the effective date of the company’s registration.8

1 18 U.S.C. § 1514A(a); 15 U.S.C. §§ 78a et seq. 2 18 U.S.C. § 1514A(a). 3 Id. 4 Id. 5 18 U.S.C. § 1514A(a). See: 15 U.S.C. §§ 78l, 78o(d). 6 15 U.S.C. §§ 78l(d), 78o(d). Roulett v. American Capital Access Service Corp., 2007 U.S. Dist. LEXIS 1979, *5-7 (S.D.N.Y. March 2, 2007). 7 Roulett v. American Capital Access Service Corp., 2007 U.S. Dist. LEXIS 19791, *5-7 (S.D.N.Y. March 2, 2007). 8 Gallagher v. Granada Entertainment USA, ALJ No. 2004-SOX-00074, 2005 DOLSOX LEXIS 13, *7 (April 1, 2005). 2-7 SARBANES-OXLEY ACT § 2.02[2] [2]—Consolidated Subsidiaries For many years, the Department of Labor (“DOL”) and federal courts reached inconsistent conclusions as to whether the anti-retaliation provisions of Section 806 applied to privately held subsidiaries of publicly traded companies. Some decisions interpreting Section 806 concluded that the plain language and intent of Section 806 made clear that the law protected employees of these subsidiaries.9 Other decisions applied an agency analysis, focusing on whether the publicly traded parent controlled employment decisions at the subsidiary or played some role in the adverse action against the employee.10 The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”)11 resolved this issue by expressly providing that employees of consolidated subsidiaries are covered by Section 806. Dodd-Frank defined consolidated subsidiaries as “any subsidiary or affiliate whose financial information is included in the consolidated financial statements of a [publicly traded company].”12 The majority of decisions interpreting this revised provision have held that it was not a substantive change in the law, but rather a clarification.13 Thus, some courts have found that Section 806 protects employees of consolidated subsidiaries whose claims arose before the enactment of Dodd-Frank.14

9 See, e.g.: Mara v. Sempra Energy Trading, ARB No. 10-051, ALJ No. 2009- SOX-18, 2011 DOLSOX LEXIS 57, *14-17 (June 28, 2011) (applying Johnson consolidated-entity test); Merten v. Berkshire Hathaway, ARB No. 09-025, ALJ No. 2008-SOX-40, 2011 DOLSOX LEXIS 56, *7-8 (June 16, 2011) (same); Johnson v. Siemens Building Technologies, Inc., ARB No. 08-032, ALJ No. 2005-SOX-15, 2011 DOLSOX LEXIS 16, *38 (March 31, 2011) (en banc) (holding that SOX 806 “cover[s] a subsidiary whose financial information is included in the consolidated financial statements [of a covered parent company]”). 10 See, e.g., Klopfenstein v. PCC Flow Technology Holdings, Inc., ARB No. 04-149, ALJ No. 2004-SOX-11, 2006 DOLSOX LEXIS 59, *25-33 (May 31, 2006). 11 Pub. L. No. 111-203, § 929A, 124 Stat. 1376, 1852 (July 21, 2010); 18 U.S.C. § 1514A(a). 12 Id. 13 See, e.g.: Second Circuit: Leshinsky v. Telvent GIT, S.A., 873 F. Supp.2d 582, 591 (S.D.N.Y. 2012); Ashmore v. CGI Group, Inc., 2012 U.S. Dist. LEXIS 82598, *8-11 (S.D.N.Y. June 12, 2012); Andaya v. Atlas Air, Inc., 2012 U.S. Dist. LEXIS 78654, *8 (S.D.N.Y. April 30, 2012). Department of Labor: Mara v. Sempra Energy Trading, LLC, 2011 DOLSOX LEXIS 57, *14-15 (June 28, 2011) (citing Johnson); Johnson v. Siemens Building Technologies, Inc., 2011 DOLSOX LEXIS 16, *14-15 (March 31, 2011) (en banc). But see: Seventh Circuit: Mart v. Gozdecki, Del Giudice, Americus & Farkas LLP, 910 F. Supp.2d 1085, 1095 (N.D. Ill. 2012) (holding that Dodd-Frank altered the scope of SOX 806, and thus the substantive rights and liabilities of subsidiaries and their employees, and refusing to apply the law retroactively). 14 See, e.g., Leshinsky v. Telvent GIT, S.A., 873 F. Supp.2d 582, 584 (S.D.N.Y. 2012). § 2.02[3] WHISTLEBLOWER LAW 2-8 [3]—Contractors, Subcontractors, and Agents By its terms, Section 806 applies to contractors, subcontractors, and agents of publicly traded companies.15 For some time, however, coverage depended on whether the individual alleging retaliation was an employee of the contractor, subcontractor or agent, in which case he or she likely would not be protected from retaliation, or whether the contractor, subcontractor or agent retaliated against an employee of the publicly traded company, in which case coverage was more clear. The Supreme Court addressed this issue and reconciled the divergent interpretations of the law.16

[a]—Retaliation Against Contractors’ Employees While Dodd-Frank resolved a longstanding disagreement over the applicability of Section 806 to subsidiaries of publicly traded companies, it did not resolve a split in the courts and DOL regarding whether contractors, subcontractors and/or agents of publicly traded companies are covered employers liable for retaliation against their own employees. Some decisions by the DOL and federal courts interpreted the “contractor, subcontractor or agent” language of Section 806 as identifying additional entities that are prohibited from retaliating against employees of publicly traded companies, without extending Section 806’s coverage to such entities’ own employees.17 The SEC and DOL advocated for a broader interpretation of the law. For example, the SEC argued that such an interpretation would exclude the employees of many types of professional contractors from coverage, including private accounting and auditing firms, mutual fund advisers, and outside counsel.18 The SEC argued that such an outcome was inconsistent with the purposes of SOX, which was passed partly in response to an accounting scandal that involved not only a public company, Enron, but also its private, outside accounting firm, Arthur Andersen.19

15 18 U.S.C. § 1514A(a). 16 Lawson v. FMR LLC, 134 S.Ct. 1158, 1176, 188 L.Ed.2d 158 (2014). It is important to note that Lawson concerned a claim that arose prior to the enactment of Dodd-Frank. 17 See, e.g.: First Circuit: Lawson v. FMR LLC, 670 F.3d 61, 65-77 (1st Cir. 2012). Seventh Circuit: Fleszar v. United States Department of Labor, 598 F.3d 912, 915 (7th Cir. 2010). 18 See Brief of the Securities and Exchange Commission as Amicus Curiae in Support of the Petitioner and Department of Labor, Urging Affirmance on Issue Addressed, p. 9-14 (July 6), Klopfenstein v. Administrative Review Board, 402 Fed. Appx. 936 (5th Cir. 2010), available at http://www.sec.gov/litigation/briefs/2010/ klopfenstein0710.pdf (last visited Nov. 18, 2015). 19 See id., pp. 10-11. 2-9 SARBANES-OXLEY ACT § 2.02[3] The Supreme Court adopted the broader interpretation of the scope of Section 806 coverage in Lawson v. FMR LLC,20 concluding that, under the plain language of Section 806, “[a] contractor may not retaliate against its own employee for engaging in protected whistleblowing activity.”21 Therefore, the Court held, Section 806 protects the employees of private contractors of covered employers—including publicly traded companies, their subsidiaries, and nationally recognized ratings organizations—from retaliation.22 In reaching this conclusion, the Court observed that various provisions of Section 806 presume an employer-employee relationship between the whistleblower and the alleged retaliator, suggesting that the prohibitions on retaliatory conduct bind the employer with respect to its own employees, not those of the company with which it contracts. For example, Section 806 specifically covers individuals who provide information to “a person with supervisory authority over the employee (or such other person working for the employer who has the authority to investigate, discover, or terminate misconduct).”23 Addi- tionally, the remedies available to a successful complainant, such as reinstatement, are not actions that a contractor could typically take with respect to the employees of a publicly traded company or subsidiary with which it contracts.24 The majority also pointed to the context in which SOX was drafted and its legislative history, observing that Congress intended Section 806 to prevent the sort of discouragement of whistleblowing in which Enron and its outside accounting firm, Arthur Andersen, allegedly engaged with respect to their own employees.25 In Lawson, the employer, FMR LLC, contracted to manage and advise mutual fund companies that had no employees of their own.26 As the Court noted, because the mutual fund companies had no employees, the only possible whistleblowers would be employees of the fund’s co-contractors, such as FMR LLC.27

20 Lawson v. FMR LLC, 134 S.Ct. 1158, 1166, 188 L.Ed.2d 158 (2014). 21 Id. 22 Id., 134 S.Ct. 1158, 1161. 23 Id., 134 S.Ct. at 1165-1167 (quoting 18 U.S.C. § 1514A(a)(1)). (Emphasis in original.) 24 Id. at 1167 (citing 18 U.S.C. § 1514A(c)(2)). 25 Id. at 1162 (noting that “[o]f particular concern to Congress was abundant evidence that Enron had succeeded in perpetuating its massive shareholder fraud in large part due to a ‘corporate code of silence’; that code, Congress found, ‘dis- courage[d] employees from reporting fraudulent behavior not only to the proper authorities, such as the FBI and the SEC, but even internally’”). 26 Id. at 1161. 27 Id. § 2.02[3] WHISTLEBLOWER LAW 2-10 The Supreme Court did not specify the outer boundaries of its holding in Lawson, prompting speculation that the decision might open the door to suits by a vast array of contractors, such as nannies to the executives of publicly traded companies. The dissent in Law- son expressed concern about the “stunning reach” of the majority’s holding.28 In one of the earliest decisions applying Lawson a district court focused on a central theme in the Lawson analysis—namely, that SOX was intended to prevent fraud by public companies that could reasonably impact shareholders.29 The court dismissed the claim of an employee who complained that his former company overbilled a publicly traded company for which it provided marketing services, reasoning that the alleged overbilling would have minimal, if any, impact on shareholders.30 Therefore, while the parameters of Law- son remain unclear, lower courts may prove unwilling to consider retaliation claims by employees of contractors whose complaints are ancillary to the business of the publicly traded company or subsidiary with which it contracts.31

[b]—Retaliation Against Employees of Publicly Traded Companies A less controversial question is whether Section 806 applies to contractors, subcontractors, or agents who allegedly retaliated directly against employees of a publicly traded company. A contractor will

28 Id., 134 S.Ct. 1158, 1178. The dissent also raised the prospect of nannies suing their employers under SOX: As construed by the majority, the Sarbanes-Oxley Act regulates employment relationships between individuals and their nannies, housekeepers, and caretakers, subjecting individual employers to litigation if their employees claim to have been harassed for providing information regarding any of a host of offenses. If, for example, a nanny is discharged after expressing a concern to his employer that the employer’s teenage son may be participating in some Internet fraud, the nanny can bring a § 1514A suit. Id. at 1183-1184. 29 Gibney v. Evolution Marketing Research, LLC, 25 F. Supp.3d 741, 745 (E.D. Pa. 2014). 30 Id., 25 F. Supp.3d 741, 747 (E.D. Pa. 2014). 31 See, e.g.: Wiest v. Lynch, 15 F. Supp.3d 543, 572 (E.D. Pa. 2014) (holding that ‘‘agency based on engagement ‘in securities related activities’’’ would result in SOX coverage, and coverage ‘‘might also be based on types of services with regard to which fraud contemplated under section 806 might be perpetrated.”); Safarian v. American DG Energy Inc., 2014 U.S. Dist. LEXIS 59684, *12-13 (D.N.J. April 29, 2014), aff’d in part, vacated in part on other grounds, and remanded 2015 U.S. App. LEXIS 12548 (3d Cir. July 21, 2015) (holding that plaintiff, an independent contractor and engineer who had no involvement with the company’s accounting or taxation practices, was not entitled to Dodd-Frank protections when his alleged whistleblowing did not deal with covered corporate disclosures). 2-11 SARBANES-OXLEY ACT § 2.02[4] be liable for retaliating against a public company’s employee to the extent that the contractor is acting as the agent of the public company because even under a narrow reading of the “contractor, subcontractor or agent language,” if such an entity retaliates against an employee of a covered employer, that entity faces liability under Section 806. An entity with the power to affect an employee’s terms and conditions of employment functions as the employer’s agent, standing in the shoes of the employer. This situation may arise where a publicly traded company retains a contractor to oversee it for some limited purpose. For example, a publicly traded company retained a “turnaround specialist” to manage the company through bankruptcy and dissolution.32 The DOL Administrative Review Board (“ARB”) noted that the main principal of the turnaround specialist functioned as the Chief Executive Officer (“CEO”) of the public company during the bankruptcy and dissolution and had the power to affect the terms of an employee’s employment, up to and including termination.33 The panel therefore concluded that the turnaround specialist was a covered “contractor, subcontractor or agent” for purposes of Section 806.34

[4]—Individual Liability Section 806 includes officers and employees as those subject to liability under the act.35 Pursuant to this provision, an employee may have a cause of action not only against a corporate entity, but also against an individual actor.36 While Section 806 does not define which officers and employees are subject to liability, the provision has been interpreted to apply only to those individuals with the authority to control the complainant’s employment.37

32 Kalkunte v. DVI Financial Services, Inc., ARB Nos. 05-139, -140, ALJ No. 2004-SOX-56, 2009 DOLSOX LEXIS 1, *20-21, 35-36 (Feb. 27, 2009). 33 Id. 34 Id. 35 18 U.S.C. § 1514A(a). 36 See OSHA, “Procedures for the Handling of Discrimination Complaints Under Section 806 of the Corporate and Criminal Fraud Accountability Act of 2002, Title VIII of the Sarbanes-Oxley Act of 2002,” 69 Fed. Reg. 52,104, 52,105 (Aug. 24, 2004). 37 Klopfenstein v. PCC Flow Tech nologies Holdings, Inc., AR B 04 -149, 2004 -SOX-11, 2009 DOLSOX LEXIS 13, *14-16 (Aug. 31, 2009) (Vice-president of employer company deemed not individually liable in case of whistleblowing employee’s termination when vice-president did not have control over termination of employee). See also: Kalkunte v. DVI Financial Services, Inc., ARB Nos. 05-139, -140, ALJ No. 2004-SOX-56, 2009 DOLSOX LEXIS 1, *20-22 (Feb. 27, 2009); Jordan v. Sprint Nextel Corp., 2006-SOX-41, 2006 DOLSOX LEXIS 141, *15-17 (March 14, 2006); Gallagher v. Granada Entertainment USA, 2004-SOX-74, 2004 DOLSOX LEXIS 95, *4-5 (Oct. 19, 2004). § 2.03[1] WHISTLEBLOWER LAW 2-12 § 2.03 Covered Employee In general, the Sarbanes-Oxley Act of 2002 (“SOX”) protects employees of covered employers, which generally include publicly traded companies and their subsidiaries, officers, contractors, subcontractors and agents.1 In certain circumstances, however, individuals working for covered employers may not be protected, e.g., when they are deemed to be independent contractors. Also, other individuals may be barred from bringing a SOX Section 806 (“Section 806”) claim because the law does not apply extraterritorially. Certain employees who are otherwise covered, such as in-house legal counsel and compliance officers, may face special challenges due to the sensitive nature of the information to which they have access and their unique roles within their organizations. In addition, covered employees may be barred from pursuing actions in the Department of Labor (“DOL”) and courts where there is an enforceable, pre-dispute mandatory arbitration agreement, i.e., one entered into prior to the enactment of Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).2

[1]—Classification as Employee or Independent Contractor Independent contractors generally may not bring a SOX retaliation suit.3 Importantly, an individual’s own view of their status as an independent contractor or an employee is not determinative. Courts and the DOL instead look to a variety of factors to determine whether an individual is, in fact, an employee for purposes of Section 806. The key question in determining whether an individual is an employee or an independent contractor is the existence of a right of control over the individual’s work. This is usually a fact-intensive question. The common-law agency test, originally set forth in Nation- wide Mutual Insurance Company v. Darden,4 provides the framework for determining right of control.5 The Darden test focuses on the “hiring party’s right to control the manner and means by which the [work] is accomplished.”6

1 See § 2.02 supra. 2 Pub. L. No. 111-203, 124 Stat. 1376, 1852 (July 21, 2010); 12 U.S.C. § 5301 note. See § 2.03[3] infra. 3 Note that this issue is distinct from whether an employee of a contractor to a publicly traded company may bring a cause of action under Section 806. Here, the question is whether the complainant’s status, rather than the respondent’s status, permits a would-be whistleblower to bring a cause of action. 4 Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992). 5 Id., 503 U.S. 318, 323-324, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992). 6 Id. (Internal quotation marks omitted.) 2-13 SARBANES-OXLEY ACT § 2.03[2] An illustration of the application of the Darden test in the SOX context is Bothwell v. American Income Life.7 In Bothwell, the DOL administrative law judge (“ALJ”) denied summary judgment to the respondent, which argued that the complainant was an independent contractor and not an employee. In reaching that decision, the ALJ emphasized that the complainant (1) was required to report to his superiors every day at a specific time, (2) was required to complete all of his work at the respondent’s office, (3) was unable to decide how to accomplish any tasks without first receiving input, (4) received a specific list of daily contacts and appointments, and (5) had no control over his work hours or appointments, and was not able to alter his sales presentation or schedule.8 Regulations enacted pursuant to SOX, however, seemingly define “employee” more broadly than the common-law test. An individual deemed an independent contractor under the common-law Darden test may nevertheless be an employee for purposes of SOX if they are “an individual whose employment could be affected by a [company or company representative].”9 Several ALJ decisions have concluded that a complainant who was an independent contractor under the Darden common-law agency analysis, was nonetheless a covered employee for SOX purposes.10 Even if an individual self-identifies as an independent contractor, the existence of factors suggesting that a covered employer can affect the terms and conditions of a complainant’s employment may be sufficient to grant standing under Section 806.11

[2]—Extraterritorial Application of Employee Protections There is a presumption against the extraterritorial application of labor and employment statutes (i.e., the operation of these laws outside the physical boundary of the U.S.).12 Prior to 2010, courts were

7 Bothwell v. American Income Life, 2005-SOX-57, 2005 DOLSOX LEXIS 55 (Sept. 19, 2005). 8 Id., 2005 DOLSOX LEXIS 55, *8-9, 12-13 (Sept. 19, 2005). 9 29 C.F.R. § 1980.101(g). 10 See, e.g.: Mara v. Sempra Energy Trading, LLC, ARB No. 10-051, ALJ No. 2009-SOX-18, 2011 DOLSOX LEXIS 57, *12-15 (June 28, 2011); Deremer v. Gulfmark Offshore, Inc., 2006-SOX-00002, slip op. at 45, 2007 DOLSOX LEXIS 46, *83-84 (June 29, 2007). 11 See Mara v. Sempra Energy Trading, LLC, 2009 DOLSOX LEXIS 25, *25-26 (Oct. 5, 2009) (denying summary judgment and holding that a self-identified accounting consultant—who maintained a separate business identity, frequently set her own schedule, invoiced the company for payments, received a 1099-MISC, was ineligible for employee benefits, and was not hired directly by the respondent—might be a covered employee under Section 806 because she physically worked at the company’s offices, received instruction on how to perform certain tasks, and was assigned an additional project after her original contracted project was completed). 12 See: Supreme Court: McCulloch v. Sociedad Nacional de Marineros de Honduras, 372 U.S. 10, 20-22, 83 S.Ct. 671, 9 L.Ed.2d 547 (1963) (National Labor Relations Act). § 2.03[2] WHISTLEBLOWER LAW 2-14 sometimes willing to apply U.S. securities laws extraterritorially to conduct that substantially occurred in the United States, or where the effects of the U.S. securities law violation was substantially felt in the United States.13 The Supreme Court made it clear in Morrison v. National Australia Bank that the Securities and Exchange Act of 1934 (“Exchange Act”) did not provide a cause of action for foreign investors against foreign or U.S. issuers for losses on transactions on foreign exchanges, or for domestic investors against foreign issuers for losses on transactions on foreign exchanges.14 Section 806 protects employees who report, inter alia, violations of U.S. securities laws, and the DOL and courts have had occasion to address whether, and under what circumstances, SOX anti-retaliation protections extend to an employee of a foreign company, or to an employee of a domestic company who works abroad, and who reports violations of U.S. securities laws. Courts have uniformly held that Section 806 does not apply extraterritorially because there was no clear expression of Congressional intent to do so.15 However, decisions as to whether Section 806 applies turn on a fact-specific, case-by-case analysis.16 In deciding whether

Third Circuit: Asplundh Tree Expert Co. v. NLRB, 365 F.3d 168, 175-176 (3d. Cir. 2004) (same). Fourth Circuit: Reyes-Gaona v. North Carolina Growers Associates, Inc., 250 F.3d 861, 866 (4th Cir.), cert. denied 534 U.S. 995, 122 S.Ct. 463, 151 L.Ed.2d 38 (2001) (ADEA). Seventh Circuit: Pfeiffer v. W.M. Wrigley Jr. Co., 755 F.2d 554, 557 (7th Cir. 1985) (pre-1984 ADEA amendments case). District of Columbia Circuit: Air Line Dispatchers Ass’n. v. National Mediation Board, 189 F.2d 685, 691 (D.C. Cir.), cert. denied 342 U.S. 849, 71 S.Ct. 77, 96 L.Ed. 641 (1951) (Railway Labor Act). 13 See e.g., Psimenos v. E.F. Hutton & Co., 722 F.2d 1041, 1046 (2d Cir. 1983). Compare: Des Brisay v. Goldfield Corp., 549 F.2d 133, 135-136 (9th Cir. 1997), with Bersch v. Drexel Firestone, 519 F.2d 974, 986-987 (2d Cir.), cert. denied 423 U.S. 1018, 96 S.Ct. 453, 46 L.Ed.2d 389 (1975). 14 561 U.S. 247, 273, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010). Id., 561 U.S. at 285 (Stevens, Ginsburg, JJ., concurring in the judgment). 15 See, e.g.: First Circuit: Carnero v. Boston Scientific Corp., 433 F.3d 1, 7 (1st Cir. 2005), cert. denied 548 U.S. 906, 126 S.Ct. 2973, 165 L.Ed.2d 954 (2006) (“Where, as here, a statute is silent as to its territorial reach, and no contrary congressional intent clearly appears, there is generally a presumption against its extraterritorial application.” (citing E.E.O.C. v. Arabian Oil Co., 499 U.S. 244, 248 (1991)). Second Circuit: Liu Meng-Lin v. Siemens AG, 763 F.3d 175, 180-183 (2d Cir. 2014) (holding that a Taiwanese employee of a Chinese subsidiary of a German parent company had no cause of action under anti-retaliation provisions of Dodd-Frank for reporting possible violations of the Foreign Corrupt Practices Act for actions that occurred in China and North Korea because the anti-retaliation provision of Dodd-Frank does not apply extraterritorially). 16 433 F.3d 1, 18 n.17 (1st Cir. 2005), cert. denied 548 U.S. 906, 126 S.Ct. 2973, 165 L.Ed.2d 954 (2006). 2-15 SARBANES-OXLEY ACT § 2.03[2] an employee has standing, courts will determine whether a given situation actually requires an extraterritorial application of Section 806, or whether the connections to the United States are such that extraterritoriality is not implicated.17 Courts and the DOL have found Section 806 applicable in a variety of situations that involve foreign employees, employers and/or conduct.18 Courts generally apply a two-part test: “(1) whether the wrongful conduct occurred in the United States, and (2) whether the wrongful conduct had a substantial adverse effect in the United States or upon United States citizens.”19 Thus, where the alleged retaliatory conduct and underlying securities law violation occurred in the U.S., a foreign national working abroad for a U.S. subsidiary may be covered by Section 806.20 In certain circumstances, foreign nationals working abroad for a foreign subsidiary of a foreign company that is publicly traded in the U.S. may be able to maintain a cause of action where the alleged fraud actually occurred in the United States and the effects of the alleged fraud reach, and potentially mislead, U.S. investors.21

17 Id., 433 F.3d 1, 8 (1st Cir. 2005) (“Frauds against foreign subsidiaries uncovered by foreign whistleblowers may, undoubtedly, threaten U.S. investors in the parent just as do domestic frauds.”). 18 See, e.g.: Second Circuit: O’Mahony v. Accenture Ltd., 537 F. Supp.2d 506, 508, 510-515 (S.D.N.Y. 2008) (employee working in France was an employee of a U.S. subsidiary and alleged fraud and retaliatory conduct occurred in U.S.). Department of Labor: Walters v. Deutsche Bank AG, No. 2008 SOX 70, 2009 DOLSOX LEXIS 61, *79-80, 112 (March 23, 2009) (holding that extraterritorial application of SOX 806 was not required for citizen working in Switzerland because “all elements essential to establishing a prima facie violation of Section 806 allegedly occurred in the United States”). 19 Second Circuit: O’Mahony v. Accenture Ltd., 537 F. Supp.2d 506, 512 (S.D.N.Y. 2008). See also, e.g.: Fifth Circuit: Asadi v. G.E. Energy (USA) LLC, 2012 U.S. Dist. LEXIS 89746, *18-19 n.40 (S.D. Tex. June 28, 2012). Department of Labor: Villanueva v. Core Laboratories, NV, ARB No. 09-108, ALJ No. 2009-SOX-006, 2011 DOLSOX LEXIS 82, *24 n.23, 31 (Dec. 22, 2011), aff’d on other grounds sub nom. Villanueva v. United States Department of Labor, 743 F.3d 103, 108 (5th Cir. 2014) (seeing no clear context or legislative history extending the protected categories to include exterritorial laws without demonstrating a connection to domestic laws or financial documents filed with the SEC); Walters v. Deutsche Bank AG, 2009 DOLSOX LEXIS 61, *79-80 (March 23, 2009). 20 See 537 F. Supp.2d 506, 513-515. 21 See Walters v. Deutsche Bank AG, 2008-SOX-70, 2009 DOLSOX LEXIS 61, *79-80, 112 (March 23, 2009) (finding SOX coverage of a Swiss national working in Switzerland for a German parent where the employer “[was] publicly traded in the U.S., and all elements essential to establishing a prima facie violation of Sec- tion 806 allegedly occurred in the United States,” and noting that deception of U.S. investors by a publicly traded company—wherever located—was “precisely the type of situation Sarbanes-Oxley was intended to address and Section 806 was intended to forestall”). § 2.03[3] WHISTLEBLOWER LAW 2-16 Where the connection between the United States and the relevant conduct and effects is too attenuated, courts have rejected Section 806 claims. Thus, a foreign national working for a foreign subsidiary of a covered employer may not be entitled to Section 806 protections where the alleged underlying fraud occurred—and its effects were primarily felt—outside the U.S.22 Similarly, where an employee worked solely for foreign companies abroad and never in the U.S., and where the alleged retaliatory employment actions occurred abroad, the employee may not have standing to bring an action under Section 806.23

[3]—Enforceability of Pre-Dispute Arbitration Agreements with Respect to Covered Employees Prior to the enactment of Dodd-Frank, courts had held that SOX retaliation claims could permissibly be subject to pre-dispute mandatory arbitration agreements.24 Section 922 of Dodd-Frank (“Sec- tion 922”) amended SOX and states that “no predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under [Section 806].”25 Section 922(c) of Dodd-Frank specifically states that any “agreement, policy form, or condition of employment, including . . . a predispute arbitration agreement” that has the effect of waiving rights and remedies available to SOX whistleblowers is invalid.26 Because many covered employees who might bring Section 806 claims signed mandatory pre-dispute arbitration agreements prior to the enactment of Dodd-Frank, a critical question is whether Section 922 applies retroactively. Congress was not explicit as to whether the ban was to apply retroactively. To date, courts have not reached a

22 Carnero v. Boston Scientific Corp., 433 F.3d 1, 2-3, 5-18 (1st Cir. 2005), cert. denied 548 U.S. 906, 126 S.Ct. 2973, 165 L.Ed.2d 954 (2006) (holding that individual employed by Argentinean and Brazilian subsidiaries of a publicly traded U.S. corporation was not entitled to protection under SOX 806 where his complaints primarily related to alleged misconduct in Latin America). 23 See Ede v. The Swatch Group Ltd, ARB 05-053, ALJ No. 2004-SOX-68, 2007 DOLSOX LEXIS 51, *7 (June 27, 2007). 24 See e.g.: Second Circuit: Guyden v. Aetna, Inc., 544 F.3d 376, 384 (2nd Cir. 2008). District of Columbia Circuit: Taylor v. Fannie Mae, 839 F. Supp.2d 259, 261 (D.D.C. 2012). Department of Labor: Ulibarri v. Affiliated Computer Services, 2005-SOX-46, -47, 2006 DOLSOX LEXIS 8, *36 (Jan. 13, 2006), aff’d ARB No. 07-003, 2008 DOLSOX LEXIS 48 (July 31, 2008). 25 Pub. L. No. 111-203, § 922, 124 Stat. 1376, 1852 (July 21, 2010); 18 U.S.C. § 1514A(e)(2). 26 18 U.S.C. § 1514A(e)(1). 2-17 SARBANES-OXLEY ACT § 2.03[3] consensus on the issue, but most courts interpreting the ban on mandatory pre-dispute arbitration of Section 806 claims have held that the provision does not apply retroactively.27 The Supreme Court established standards for analyzing the retroactive application of statutes in Fernandez-Vargas v. Gonzales,28 and Landsgraf v. USI Film Products.29 In the absence of an express statement of congressional intent regarding retroactive application, a court should apply the standard rules of statutory construction to discern Congressional intent.30 Where the statute is ambiguous and legislative intent is unclear, a court must determine whether a retroactive application of the statute would have the “consequence in the disfavored sense of affecting substantive rights, liabilities, or duties on the basis of conduct arising before its enactment.”31 If so, a court applies the presumption against retroactivity. If retroactive application would affect procedural rather than substantive rights, it is acceptable under Landsgraf. Courts that have held that Section 922 of Dodd- Frank does not apply retroactively have reasoned that parties have a substantive, contractual right to agree to arbitrate claims, and that applying the ban retroactively “would fundamentally interfere with the parties’ contractual rights and would impair the predictability and stability or their earlier agreement.”32 Although this is now the majority view, the first decisions to address this issue concluded that retroactive application was appropriate.33 Although acknowledging that there is a “national policy favoring

27 Fourth Circuit: Blackwell v. Bank of America Corp., 2012 U.S. Dist. LEXIS 51991, *11 (D.S.C. March 22), report and recommendation adopted 2012 U.S. Dist. LEXIS 51447 (D.S.C. April 12, 2012). Fifth Circuit: Holmes v. Air Liquide USA LLC, 2012 U.S. Dist. LEXIS 10678, *18 (S.D. Tex.), aff’d 498 Fed. Appx. 405 (5th Cir. 2012). Ninth Circuit: Henderson v. Masco Framing Corp., 2011 U.S. Dist. LEXIS 80494, *9-12 (D. Nev. July 22, 2011). District of Columbia Circuit: Taylor v. Fannie Mae, 839 F. Supp.2d 259, 262-263 (D.D.C. 2012). 28 Fernandez-Vargas v. Gonzales, 548 U.S. 30, 37-38, 126 S.Ct. 2422, 165 L.Ed.2d 323 (2006) (Immigration Reform Act added a new section, which applies with no impermissibly retroactive effect to those who reentered the U.S. illegally before Act’s effective date). 29 Landsgraf v. USI Film Products, 511 U.S. 244, 269-271, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994). 30 Id., 511 U.S. 244, 261 (1994). 31 Fernandez-Vargas v. Gonzales, 548 U.S. 30, 37, 126 S.Ct. 2422, 165 L.Ed.2d 323 (2006). (Internal quotation marks and brackets omitted.) 32 Henderson v. Masco Framing Corp., 2011 U.S. Dist. LEXIS 80494, *13 (D. Nev. July 22, 2011). (Internal quotation marks omitted.) 33 First Circuit: Pezza v. Investors Capital Corp., 767 F. Supp.2d 225, 234 (D. Mass. 2011). Second Circuit: Wong v. CKX, Inc., 890 F. Supp.2d 411, 423 (S.D.N.Y. 2012). § 2.03[3] WHISTLEBLOWER LAW 2-18 arbitration of claims that parties contract to settle in that manner,”34 these courts concluded that Section 922’s ban on mandatory pre- dispute arbitration agreements is procedural rather than substantive, and thus can apply retroactively. For example, one court noted that the parties’ rights are not abrogated simply by changing the forum in which the case is heard, i.e., by requiring that a case be heard, if at all, in the DOL and the courts rather than before an arbitrator.35

34 767 F. Supp.2d 225, 232 (quoting Preston v. Ferrer, 552 U.S. 346, 353, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008)). 35 Id., 767 F. Supp.2d at 233. 2-19 SARBANES-OXLEY ACT § 2.04[1] § 2.04 Prima Facie Case To prevail under the Sarbanes-Oxley Act of 2002 (“SOX”) anti- retaliation provision,1 an employee must demonstrate that he engaged in a protected activity about which the employer knew or should have known, that the employee suffered an adverse action, and that the circumstances were sufficient to raise the inference that the protected activity was a contributing factor in the adverse action.2 Once an employee demonstrates a prima facie case, the burden of production shifts to the employer to show by “clear and convincing evidence” that it would have taken the same adverse employment actions in the absence of the protected activity.3

[1]—Protected Activity Section 806 provides protection for employees who complain— internally or to regulators, though possibly not to the media—about conduct that the employee “reasonably believes” constitutes a violation of one of the six categories of federal law enumerated in SOX Section 806 (Section 806”): (1) mail fraud, (2) wire fraud, (3) bank fraud, (4) securities/commodities fraud, (5) “any rule or regulation of the Securities and Exchange Commission” (“SEC”), or (6) “any provision of federal law relating to fraud against shareholders.”4 The Department of Labor (“DOL”) and the courts initially construed protected activity narrowly and dismissed many SOX claims on the basis that the complainant failed to show that he had engaged in the conduct necessary to trigger the protections of Section 806. The DOL and federal courts, however, have interpreted the anti-retaliation provisions more broadly, rejecting many of the standards developed in earlier case law.

1 Pub. L. No. 107-204, § 806, 116 Stat. 745, 802-804 (July 30, 2002); 18 U.S.C. § 1514A. 2 Halliburton, Inc. v. Administrative Review Board, 771 F.3d 254, 259 (5th Cir. 2014). Actions under 18 U.S.C. § 1514A are governed by the legal burdens of proof that are set forth in 49 U.S.C. § 42121. See 18 U.S.C. §§ 1514A(b)(2)(A)-(C). A complainant, in order to prevail, must prove by a preponderance of evidence that he engaged in protected activity or conduct, that respondent knew that he engaged in such protected activity, that he suffered an unfavorable personnel action, and that protected activity was a contributing factor in such unfavorable action. See Allen v. Administrative Review Board, 514 F.3d 468, 475-476 (5th Cir. 2008). 3 49 U.S.C. § 42121(b)(2)(B)(iv). 4 18 U.S.C. § 1514A(a)(1) (“Section 1514(a)(1)”), further codified at 18 U.S.C. §§ 1341 (mail fraud), 1343 (wire fraud), 1344 (bank fraud) and 1348 (securities/ commodities fraud). SOX also provides protection to employees who “file, cause to be filed, testify, participate in, or otherwise assist in a proceeding filed or about to filed (with any knowledge of the employer) relating to an alleged violation” of the laws noted above. 18 U.S.C. § 1514A(a)(2). § 2.04[1] WHISTLEBLOWER LAW 2-20 [a]—Reasonable Belief Section 806 only protects an employee who “reasonably believes” the information he reports constitutes a violation of one of the enumerated provisions.5 Although SOX does not define “reasonable belief,” in the decade after the passage of SOX, a steady string of cases required a complainant to establish that the conduct complained of “definitively and specifically” related to one or more of the laws enumerated in SOX. This test evolved from the decision of the Administrative Review Board (“ARB”) in Platone v. FLYi, Inc.,6 which borrowed the standard from the anti-retaliation provision of the Energy Reorgani- zation Act,7 another whistleblower statute administered by the DOL. Subsequent SOX decisions by the DOL and federal courts adopted and strictly applied this test, often finding that a complainant’s protected activity was not sufficiently and clearly related to one of the violations enumerated in Section 806.8 In Sylvester v. Parexel International LLC9 the DOL Administrative Review Board (“ARB”) revisited the issue and jettisoned the “definitively and specifically” test in favor of a “reasonable belief” analysis. The decision turned on the plain language of Section 806, which by its terms protects an employee who provides information that the employee “reasonably believes constitutes a violation of” one of the

5 18 U.S.C. § 1514A(a)(1). 6 Platone v. FLYi, Inc., ARB No. 04-154, ALJ No. 2003-SOX-27, 2006 DOLSOX LEXIS 105, *33 (Sept. 29, 2006). 7 Id., 2006 DOLSOX LEXIS 105, *33 n.115 (Sept. 29, 2006); Pub. L. No. 93-438, 88 Stat. 1233 (Oct. 11, 1974); 42 U.S.C. §§ 5801 et seq. See Chapter 5 infra. 8 See, e.g.: Second Circuit: Vodopia v. Koninklijke Phillips Electronics, N.V., 398 Fed. Appx. 659, 662-663 (2d Cir. 2010). Fifth Circuit: Allen v. Administrative Review Board, 514 F.3d 468, 476-477 (5th Cir. 2008). Ninth Circuit: Van Asdale v. International Game Technology, 577 F.3d 989, 996-997 (9th Cir. 2009). Compare: Second Circuit: Sharkey v. J.P. Morgan Chase & Co., 2010 U.S. Dist. LEXIS 139761, *14-19 (S.D.N.Y. Jan. 14, 2011) (dismissing plaintiff’s SOX claim for lack of specificity because she did not identify “the allegedly illegal conduct,” even where the defendant knew that the illegal activities involved mail fraud, bank fraud, and other securities violations); Portes v. Wyeth Pharmaceuticals, Inc., 2007 U.S. Dist. LEXIS 60824, *9-17 (S.D.N.Y. Aug. 20, 2007). Fourth Circuit: Welch v. Chao, 536 F.3d 269, 278-279 (4th Cir. 2008) (employee who reported his employer’s deviation from generally accepted accounting practices (“GAAP”) and other industry standards was not necessarily engaging in protected activity under SOX because such deviations are not inherently violations of securities laws). 9 Sylvester v. Parexel International LLC, ARB No. 07-123, ALJ Nos. 2007-SOX- 039, -042, 2011 DOLSOX LEXIS 39 (May 25, 2011). 2-21 SARBANES-OXLEY ACT § 2.04[1] six categories of laws identified in Section 1514A(a)(1).10 According to the ARB, prior decisions applying the “definitively and specifically” standard had done so “with neither reflection nor further analysis of the . . . origin or correct application” of this statutory language.11 The Sylvester holding ushered in a wave of decisions that have applied the “reasonable belief” analysis and eschewed the “definitively and specifically” test, whether based on deference to the ARB’s interpretation or on an independent analysis of the plain language of Section 806.12 To determine whether an employee had the requisite reasonable belief to trigger the protections of Section 806, courts and the DOL conduct an objective and a subjective analysis.13 An employee’s

10 Id., 2011 DOLSOX LEXIS 39, *18, 30-31, 44-45 (May 25, 2011); 18 U.S.C. § 1514(A)(a)(1), further codified at 18 U.S.C. §§ 1341 (mail fraud), 1343 (wire fraud), 1344 (bank fraud) and 1348 (securities/commodities fraud). 11 2011 DOLSOX LEXIS 39, at *42-43. 12 The ARB is not the definitive source of law on this topic, and its decisions are not binding on federal courts. Courts have and may continue to disagree with its interpretations of the law. The extent to which the ARB’s interpretation of the law is due deference is subject to debate. Nevertheless, courts in several circuits have adopted the “reasonable belief” analysis. See, e.g.: First Circuit: Stewart v. Doral Financial Corp., 997 F. Supp.2d 129, 136-137 (D.P.R. 2014). Second Circuit: Nielsen v. AECOM Technology Corp., 762 F.3d 214, 221 (2d Cir. 2014); Leshinsky v. Telvent GIT, S.A., 942 F. Supp.2d 432, 443 (S.D.N.Y. 2013). Third Circuit: Wiest v. Lynch, 710 F.3d 121, 131-134 (3d Cir. 2013). Fifth Circuit: Villanueva v. United States Department of Labor, 743 F.3d 103, 109 (5th Cir. 2014). Sixth Circuit: Rhinehimer v. U.S. Bancorp Investment, Inc., 787 F.3d 797, 806 (6th Cir. 2015). District of Columbia Circuit: Taylor v. Fannie Mae, 65 F. Supp.3d 121, 125 (D.D.C. 2014). Department of Labor: Prioleau v. Sikorsky Aircraft Corp., ARB No. 10-060, ALJ No. 2010-SOX-003, 2011 DOLSOX LEXIS 85, *15-16 (Nov. 9, 2011). Courts that have declined to follow the Sylvester decision include: Fourth Circuit: Feldman v. Law Enforcement Associates Corp., 955 F. Supp.2d 528, 550 (E.D.N.C. 2013), aff’d 752 F.3d 339 (4th Cir. 2014) (holding that plaintiffs must show that their complaint “definitively and specifically” related to one of the enumerated categories of misconduct). Eighth Circuit: Miller v. Stifel, Nicolaus & Co., 812 F. Supp.2d 975, 987 (D. Minn. 2011) (holding that “[o]nly activity ‘definitively and specifically relate[d] to one of the six enumerated categories of misconduct . . . is protected by SOX.’”). 13 See, e.g.: First Circuit: Day v. Staples, Inc., 555 F.3d 42, 54 (1st Cir. 2009). Second Circuit: Nielsen v. AECOM Technology Corp., 762 F.3d 214, 221 (2d Cir. 2014); Fraser v. Fiduciary Trust Co. International, 396 Fed. Appx. 734, 735 (2d Cir. 2010); Perez v. Progenic’s Pharmaceuticals, Inc., 965 F. Supp.2d 353, 363 (S.D.N.Y. 2013). Fourth Circuit: Feldman v. Law Enforcement Associates Corp., 779 F. Supp.2d 472, 490-491 (E.D.N.C. 2011). Seventh Circuit: Harp v. Charter Communications, Inc., 558 F.3d 722, 723 (7th Cir. 2009). § 2.04[1] WHISTLEBLOWER LAW 2-22 objective belief “is evaluated based on the knowledge available to a reasonable person in the same factual circumstances with the same training and experience as the aggrieved employee.”14 This is a mixed question of law and fact, and where no genuine dispute of material fact exists, a court may determine as a matter of law that an individual lacked an objectively reasonable belief that a violation had occurred.15 The subjective component of the reasonable-belief test requires that the complainant actually believe that a violation of one of the laws identified in Section 806 has occurred.16 In determining whether a complainant had a genuine subjective belief that such a violation occurred, courts and the DOL will look to various factors to determine whether the employee made her complaint in good faith.17 For the objective component of the reasonable belief test, relevant factors can include a plaintiff’s “particular educational background and

Eighth Circuit: Pearl v. DST Systems, Inc., 359 Fed. Appx. 680, 681 (8th Cir. 2010). Ninth Circuit: Nance v. Time Warner Cable, Inc., 433 Fed. Appx. 502, 503 (9th Cir. 2011); Van Asdale v. International Game Technology, 577 F.3d 989, 1000 (9th Cir. 2009); Guitron v. Wells Fargo Bank, N.A., 2012 U.S. Dist. LEXIS 93883, *45 (N.D. Cal. July 6, 2012). Tenth Circuit: Lockheed Martin Corp. v. Administrative Review Board, 717 F.3d 1121, 1132 (10th Cir. 2013). Eleventh Circuit: Gale v. United States Department of Labor, 384 Fed. Appx. 926, 929 (11th Cir. 2010). 14 Harp v. Charter Communications, Inc., 558 F.3d 722, 723 (7th Cir. 2009). (Internal quotation marks omitted.) Compare: Perez v. Progenic’s Pharmaceuticals, Inc., 965 F. Supp.2d 353, 365-366 & n.12 (S.D.N.Y. 2013) (denying dismissal of complaint where plaintiff lacked education and training in securities law necessary to determine that apparent misinformation in corporate press release might be per- missible “puffery” or “corporate optimism”) with Harkness v. C-Bass Diamond, LLC, 2010 U.S. Dist. LEXIS 24380, *21-22 (D. Md. March 16, 2010) (holding that in light of plaintiff’s “professional experience and the legal resources available to her,” her belief that a violation of an SEC rule had occurred was unreasonable). 15 See, e.g.: First Circuit: Day v. Staples, Inc., 555 F.3d 42, 58 (1st Cir. 2009). Fourth Circuit: Welch v. Chao, 536 F.3d 269, 278 (4th Cir. 2008); Livingston v. Wyeth, Inc., 520 F.3d 344, 353-356 (4th Cir. 2008); Jordan v. Alternative Resources Corp., 458 F.3d 332, 339 (4th Cir. 2006); Feldman v. Law Enforcement Associates Corp., 955 F. Supp.2d 528, 544-546 (E.D.N.C. 2013). Fifth Circuit: Allen v. Administrative Review Board, 514 F.3d 468, 478 (5th Cir. 2008). Seventh Circuit: Harp v. Charter Communications, Inc., 558 F.3d 722, 726 (7th Cir. 2009). 16 See, e.g.: First Circuit: Day v. Staples, Inc., 555 F.3d 42, 54 n.10 (1st Cir. 2009). Eighth Circuit: Miller v. Stifel, Nicolaus & Co., 812 F. Supp.2d 975, 988 (D. Minn. 2011). Eleventh Circuit: Gale v. United States Department of Labor, 384 Fed. Appx. 926, 930 (11th Cir. 2010). 17 See, e.g., Dampeer v. Jacobs Technology—Engineering & Science Group, ARB No. 12-006, ALJ No. 2011-SOX-33, 2013 DOLSOX LEXIS 20, *4 (May 31, 2013). 2-23 SARBANES-OXLEY ACT § 2.04[1] sophistication.”18 A court will not simply accept a plaintiff’s assertion that she believed that a violation of Section 806 had occurred. For example, where an employee repeatedly refused to follow a particular instruction that she believed violated company policy, and which her supervisor explained was, in fact, not against company policy, the ARB determined that the employee did not demonstrate that she genuinely believed that a violation of one of the categories of laws set forth in Section 806 had occurred.19 While an employee’s belief that a violation has occurred must be objectively and subjectively reasonable, the employee need not com- municate the reasonableness of the belief to management or authorities in order to trigger the protections of Section 806.20 It is sufficient that the employee report conduct that he reasonably believes violates one of the categories of laws set forth in Section 806. The employee need not explain the basis of the belief, cite to a particular statute, or otherwise use any particular words or phrases.21 The employee also need not be correct about his or her belief that certain conduct violates one of the categories of laws set forth in Section 806, as such a requirement would be inconsistent with the principle that an employee need only have a “reasonable belief.”22 An employee cannot invoke the protections of Section 806 where the conduct complained of clearly did not implicate any of the laws identified in the statute. There is a general consensus that where an employee’s complaint implicates general mismanagement or a violation of internal company policies that are not related to fraud or a regulatory violation, an employee cannot meet the reasonable-belief standard.23 Despite the ARB’s rejection of the “definitively and specifically” standard, some courts have continued to apply it—or have not explicitly rejected it—frequently relying on federal and DOL decisions pre- dating Sylvester and its progeny. Some of these cases have applied the reasonable belief and “definitively and specifically” tests in tandem.

18 Day v. Staples, 555 F.3d 42, 54 n.10 (1st Cir. 2009). 19 Id., 555 F.3d 52, 57 (1st Cir. 2009). See also: Department of Labor: Johnson v. Mechanics and Farmers Bank, ALJ No. 2006- SOX-0019, 2006 DOLSOX LEXIS 69, *11-13 (June 9, 2006) (holding that the complainant did not have a reasonable belief that the respondent bank was involved in fraudulent activity because after he reported his suspicion that certain loan applications might be fraudulent, the Bank subsequently investigated the applications and did not fund them, which the complainant did not dispute). 20 Sylvester v. Parexel International LLC, ARB No. 07-123, ALJ Nos. 2007-SOX- 039, -042, 2011 DOLSOX LEXIS 39, *34, 124 (May 25, 2011). 21 See Welch v. Chao, 536 F.3d 269, 276 (4th Cir. 2008). 22 See Allen v. Administrative Review Board, 514 F.3d 468, 476-477 (5th Cir. 2008). 23 See, e.g., Andaya v. Atlas Air, Inc., 2012 U.S. Dist. LEXIS 78654, *12-16 (S.D.N.Y. April 30, 2012). § 2.04[1] WHISTLEBLOWER LAW 2-24 These courts have required that an employee have a subjectively and objectively reasonable belief that illegal conduct has occurred, and that the employee’s complaint definitively and specifically relate to one of the violations enumerated in Section 806.24

[b]—Existing Violation versus Imminent Violation Another disputed question addressed by the ARB in Sylvester was whether an employee must show that a violation of one of the laws enumerated in Section 806 had actually occurred at the time he engaged in protected activity. Prior to the ARB’s decision in Sylvester, some courts had held that a plaintiff had to demonstrate that he had complained about an “existing violation.”25 The ARB held, however, that the employee need not describe an actual violation of law, but show only that a violation was imminent.26 Other courts have adopted this approach as well, holding “[i]t would frustrate [the purpose of Sarbanes-Oxley] to require an employee, who knows that a violation is imminent, to wait for the actual violation to occur when an earlier report possible could have prevented it.”27

[c]—Fraud on Shareholders versus Violation of an Enumerated Category Courts have split on the question of whether an employee’s complaint must relate to fraud on shareholders, or whether it is sufficient that the complaint relates to one of the six categories of fraud identified in Section 806. Because Congress passed SOX in part to restore investor confidence following high-profile scandals at large, publicly traded companies, some courts have reasoned that the complained-of

24 See, e.g.: Second Circuit: Andaya v. Atlas Air, Inc., 2012 U.S. Dist. LEXIS 78654, *10-14 (S.D.N.Y. April 30, 2012). Sixth Circuit: Riddle v. First Tennessee Bank, 497 Fed. Appx. 588, 595-596 (6th Cir. 2012). Ninth Circuit: Nordstrom v. U.S. Bank, N.A., Inc., 2012 U.S. Dist. LEXIS 102267, *9-10 (S.D. Cal. July 23, 2012) (citing Van Asdale v. International Game Technology, 577 F.3d 989 (9th Cir. 2009)); Guitron v. Wells Fargo Bank, 2012 U.S. Dist. LEXIS 93883, at *43-47, 53 (N.D. Cal. July 6, 2012) (citing Van Asdale). 25 See, e.g., Livingston v. Wyeth, Inc., 520 F.3d 344, 352 (4th Cir. 2008). 26 Sylvester v. Parexel International LLC, ARB No. 07-123, ALJ Nos. 2007-SOX- 039, -042, 2011 DOLSOX LEXIS 39, *36-38 (May 25, 2011). (Citation omitted.) 27 See, e.g.: Second Circuit: Leshinsky v. Telvent GIT, S.A., 942 F. Supp.2d 432, 446 (S.D.N.Y. 2013). But see, Andaya v. Atlas Air, Inc., 2012 U.S. Dist. LEXIS 78654, *5 (S.D.N.Y. April 30, 2012) (favorably discussing Wyeth’s discussion of the need for the plaintiff to have a reasonable belief about a current violation of the law). Third Circuit: Wiest v. Lynch, 710 F.3d 121, 133 (3d. Cir. 2013). 2-25 SARBANES-OXLEY ACT § 2.04[1] conduct must relate to fraud on shareholders to trigger Section 806’s protections.28 Other courts have taken the view that an employee’s complaint need only relate to one of the categories of violations in Section 806, including a violation of an SEC rule or regulation, which does not necessarily implicate fraud at all, let alone fraud on shareholders.29 Prior to the ARB’s Sylvester decision, many courts had adopted the former view.30 But in Sylvester, the ARB rejected the requirement that a complaint relate to fraud on shareholders,31 and many federal courts and the DOL have followed suit.32 A minority of courts, however,

28 See, e.g., Bishop v. PCS Administration, (USA), Inc., 2006 U.S. Dist. LEXIS 37230, *30-31 (N.D. Ill. May 23, 2006) (finding that the phrase “relating to fraud against shareholders” must be read as modifying all violations enumerated under Section 806). 29 See, e.g.: Second Circuit: Nielsen v. AECOM Technology Corp., 762 F.3d 214, 221-223 (2d Cir. 2014) (“The statute does not specify what, in particular, a purported whistleblower must establish to demonstrate that criminal fraud or securities-related malfeasance is afoot.”). Third Circuit: Wiest v. Lynch, 710 F.3d 121, 139 (3d Cir. 2013); Safarian v. Ameri- can DG Energy, Inc., 2014 U.S. Dist. LEXIS 59684, *9-10 n.3 (D.N.J. April 29, 2014). Fifth Circuit: Allen v. Administrative Review Board, 514 F.3d 468, 476-478 (5th Cir. 2008). Eleventh Circuit: Reyna v. Conagra Foods, Inc., 506 F. Supp.2d 1363, 1381-1383 (M.D. Ga. 2007); Collins v. Beazer Homes USA, Investment, 334 F. Supp.2d 1365, 1376 (N.D. Ga. 2004). Department of Labor: Walton v. Nova Information Systems and Bancorp, 2005- SOX-107, -18, 2006 DOLSOX LEXIS 145 (March 29, 2006). 30 See, e.g.: Second Circuit: Fraser v. Fiduciary Trust Co. International, 417 F. Supp.2d 310, 322 (S.D.N.Y. 2006). Fourth Circuit: Livingston v. Wyeth, Inc., 520 F.3d 344, 353-354 (4th Cir. 2008) (holding that employee disclosures must be related to illegal activity and involve shareholder fraud). Seventh Circuit: Bishop v. PCS Administration (USA), Inc., 2006 U.S. Dist. LEXIS 37230, *30-31 (N.D. Ill. May 23, 2006). Eighth Circuit: Skidmore v. ACI Worldwide, Inc., 2008 U.S. Dist. LEXIS 64313, *13 (D. Neb. June 18, 2008). 31 Sylvester v. Parexel International LLC, 2011 DOLSOX LEXIS 39, *58-60 (May 25, 2011). 32 See: Second Circuit: Gladitsch v. Neo@Oglivy, 2012 U.S. Dist. LEXIS 41904, *20 (S.D.N.Y. March 21, 2012); Sharkey v. J.P. Morgan Chase & Co., 805 F. Supp.2d 45, 55-56 (S.D.N.Y. 2011); O’Mahony v. Accenture Ltd., 537 F. Supp.2d 506, 517-518 (S.D.N.Y. 2008). Tenth Circuit: Lockheed Martin Corp. v. Administrative Review Board, 717 F.3d 1121, 1130-1132 (10th Cir. 2013). Department of Labor: Zinn v. American Commercial Lines Inc., ARB No. 10-029, ALJ No. 2009-SOX-025, 2012 DOLSOX LEXIS 18, *13-14 (March 28, 2012); Funke v. Federal Express Corp., ARB No. 09-004, ALJ No. 2007-SOX-043, 2011 DOLSOX LEXIS 55, *22-23 (July 8, 2011) (citing Sylvester). § 2.04[1] WHISTLEBLOWER LAW 2-26 acknowledging a split in authority on the question, have continued to require that a complaint relate to fraud against shareholders.33 Still others have required that a complainant must also cite to conduct that evidences an actual intent to defraud or deceive when supported by the catch-all category of conduct related to fraud against shareholders.34

[d]—Materiality The question of whether a violation of the law has a material effect on shareholders frequently arises in securities law. Interpreting provisions of the Securities and Exchange Act of 1934 (“Exchange Act”),35 the SEC has taken the position that a deliberate or knowing misrep- resentation may be a violation of the law even if it does not have a material financial impact on the company or its shareholders.36 By its terms, SOX does not expressly require a showing that the complained of conduct has an independent material effect on shareholders, and most courts have agreed that a showing of materiality is not required to trigger the anti-retaliation protections of Section 806.37 The DOL has held that a complainant need not even “approximate

33 See, e.g.: Second Circuit: Nielsen v. AECOM Technology Corp., 762 F.3d 214, 223 (2d Cir. Aug. 8, 2014). Third Circuit: Wiest v. Lynch, 710 F.3d 121, 139, 144 (3d Cir. 2013); Safarian v. American DG Energy, Inc., 2014 U.S. Dist. LEXIS 59684, *4-5 (D.N.J. April 29, 2014). Fourth Circuit: Gauthier v. Shaw Group, Inc., 2012 U.S. Dist. LEXIS 172551, *13 (W.D.N.C. Dec. 4, 2012). Ninth Circuit: Nance v. Time Warner Cable, Inc., 433 Fed. Appx. 502, 503 (9th Cir. 2011). 34 See Allen v. Administrative Review Board, 514 F.3d 468, 479-480 (5th Cir. 2008) (holding that plain language of statute indicates that some form of scienter related to fraud against shareholders is required). 35 15 U.S.C. §§ 78a et seq. 36 See SEC, Staff Accounting Bulletin No. 99 (noting that § 13(b) of the Exchange Act, which requires that a publicly traded company keep accurate books, records and accounts of transactions, may apply to the “failure to record accurately immaterial terms,” if done intentionally), available at http://www.sec.gov/interps/account/sab99. htm (last visited Nov. 18, 2015). 37 See, e.g.: Fourth Circuit: Welch v. Chao, 536 F.3d 269, 276 (4th Cir. 2008); Livingston v. Wyeth, Inc., 520 F.3d 344, 355 (4th Cir. 2008) (“[Although] a statement or omission must concern a material fact to violate § 10(b) of the Securities Exchange Act and SEC Rule 10b-5 . . . nothing in § 1514A . . . indicates that § 1514A contains an independent materiality requirement.”). (Internal citation omitted.) Department of Labor: Menendez v. Halliburton, Inc., ARB Nos. 09-002, -003, 2011 DOLSOX LEXIS 65, *24 (Sept. 13, 2011) (“[C]omplainant need not allege the substantive elements of fraud, including materiality, to warrant Section 806 protection; the complainant need only have a reasonable belief that the activity alleged constitutes fraud.”); Sylvester v. Parexel International LLC, ARB No. 07-123, ALJ Nos. 2007-SOX-039, -042, 2011 DOLSOX LEXIS 39, *118-119 (May 25, 2011). 2-27 SARBANES-OXLEY ACT § 2.04[2] specific elements of fraud” in order to engage in protected activity under Section 806.38 However, one federal court of appeals has questioned whether the complainant can establish a reasonable belief that a violation occurred without approximating the elements of the provisions enumerated in Section 806.39

[e]—To Whom (and About Whom) an Employee Must Report Courts and the DOL continue to consider questions concerning to whom and about whose conduct an employee must complain in order to invoke the protections of Section 806. Reports to agencies other than the DOL and the SEC have been deemed protected activity, as have complaints to non-supervisors who have the authority to prevent and correct potential violations.40 It is less clear whether an employee who reports a purported violation to the media—as opposed to a supervisor or regulator—is protected under Section 806. Some courts have held that a complaint to the media only does not constitute protected activity under Section 806, although few courts have had an opportunity to address the question.41

[2]—Adverse Action Sarbanes-Oxley prohibits an employer from taking an “adverse employment action” against an employee for engaging in protected activity. With the Supreme Court’s decision in Burlington Northern & Santa Fe Railway Co. v. White,42 an employer’s actions are deemed “materially adverse” if they would dissuade a reasonable worker in the

38 Sylvester v. Parexel International LLC, ARB No. 07-123, ALJ Nos. 2007-SOX- 039, -042, 2011 DOLSOX LEXIS 39, *53 (May 25, 2011). 39 Nielsen v. AECOM Technology Corp., 762 F.3d 214, 221 n.6 (2d Cir. 2014). See also: First Circuit: Day v. Staples, Inc., 555 F.3d 42, 55-57 (1st Cir. 2009). Fourth Circuit: Livingston v. Wyeth, Inc., 520 F.3d 344, 355 (4th Cir. 2008). Fifth Circuit: Allen v. Administrative Review Board, 514 F.3d 468, 480 n.9 (5th Cir. 2008). Ninth Circuit: Van Asdale v. International Game Technology, 577 F.3d 989, 1001 (9th Cir. 2009); Nazif v. Computer Sciences Corp., 2015 U.S. Dist. LEXIS 78673, *19 (N.D. Cal. June 17, 2015). 40 See, e.g.: Vannoy v. Celanese Corp., ARB No. 09-118, ALJ No. 2008-SOX-064, 2011 DOLSOX LEXIS 68, *27-28 (Sept. 28, 2011) (disclosures to the IRS protected); Funke v. Federal Express Corp., ARB No. 09-004, ALJ No. 2007-SOX-043, 2011 DOLSOX LEXIS 55, *31-32 (July 8, 2011) (reports to persons other than supervisors who have the “authority to investigate, discover, or terminate misconduct” and reports to local law enforcement both protected). 41 See, e.g., Tides v. Boeing, 644 F.3d 809, 815 (9th Cir.), cert. denied 132 S.Ct. 518, 181 L.Ed.2d 350 (2011). 42 Burlington Northern & Santa Fe Railway Co. v. White, 548 U.S. 53, 26 S.Ct. 2405, 165 L.Ed.2d 345 (2006). § 2.04[2] WHISTLEBLOWER LAW 2-28 complainant’s position, considering the totality of the circumstances, from engaging in protected activity.43 Although Burlington Northern involved a claim arising under Title VII of the Civil Rights Act of 1964,44 courts and the DOL have also applied this standard to retaliation claims under Section 806.45 The scope of adverse employment actions under Section 806 is broad, encompassing conduct ranging from increased scrutiny to termination.46 In fact, the ARB has held that SOX’s anti-retaliation provision prohibits a range of conduct broader than that described in Burlington Northern. The ARB in Menendez v. Halliburton, Inc.,47 which was decided a few months after Sylvester, noted that the plain language of SOX “explicitly proscribes non-tangible activity,” which suggests “a congressional intent to prohibit a very broad [expanse] of adverse action[s] against SOX whistleblowers.”48 The ARB also looked to an earlier opinion issued in the context of the Wendell H. Ford

43 Id., 548 U.S. 53, 57, 26 S.Ct. 2405, 165 L.Ed.2d 345 (2006). 44 Pub. L. No. 88-352, Title VII, 78 Stat. 241 (July 2, 1964); 42 U.S.C. § 2000a note. 45 See, e.g.: Fifth Circuit: Allen v. Administrative Review Board, 514 F.3d 468, 476 n.2 (5th Cir. 2008); Hardy v. City of Tupelo, 2009 U.S. Dist. LEXIS 103762 (N.D. Miss. Nov. 2, 2009). Eighth Circuit: Miles v. Wal-Mart Stores, Inc., 2008 U.S. Dist. LEXIS 5781, *31 (W.D. Ark. Jan. 25, 2008). 46 See, e.g.: Second Circuit: Fraser v. Fiduciary Trust Co. International, 2009 U.S. Dist. LEXIS 75565, *17 (S.D.N.Y. Aug. 25, 2009) (termination). Department of Labor: Levi v. Anheuser Busch Cos., Inc., ARB No. 08-086, 2008-SOX-28, 2009 DOLSOX LEXIS 66, *8-9 (Sept. 25, 2009) (failure to hire may be an adverse employment action but the complainant in this case did not prove he was not hired because of his protected activity); Gattegno v. Prospect Energy Corp., ARB No. 06-118, 2006-SOX-8, 2008 DOLSOX LEXIS 41, *39-42 (May 29, 2008) (constructive discharge); Grove v. EMC Corp., 2006-SOX-99, 2007 DOLSOX LEXIS 49, *43-54 (July 2, 2007) (hostile work environment may be an adverse employment action but it was not sufficiently alleged here); Reines v. Venture Bank and Venture Financial Group, 2005-SOX-112, 2007 DOLSOX LEXIS 18, *136, 152-153 (March 13, 2007) (demotion/reduced responsibilities); McClendon v. Hewlett Packard, Inc., 2006-SOX-29, 2006 DOLSOX LEXIS 138, *217-223 (Oct. 5, 2006) (transfer); Allen v. Stewart Enterprises, Inc., ARB No. 06-081, 2004-SOX-60 to 62, 2006 DOLSOX LEXIS 87 (July 27, 2006) (logging increased error rates and relocation were not adverse employment actions in this case); Hughart v. Raymond James & Associates, Inc., 2004-SOX-9, 2004 DOLSOX LEXIS 92, *132-133 (Dec. 17, 2004) (failure to promote); Hendrix v. American Airlines, Inc., 2004-AIR-10, 2004-SOX-23, 2004 DOLSOX LEXIS 87, *37 (Dec. 9, 2004) (placement on a layoff list); McIntyre v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 2003-SOX-23, 2004 DOLSOX LEXIS 100, *22 (Jan. 16, 2004) (blacklisting). 47 Menendez v. Halliburton, Inc., ARB Nos. 09-002, -003, ALJ No. 2007-SOX- 005, 2011 USDOL LEXIS 65 (Sept. 13, 2011). 48 Id., 2011 USDOL LEXIS 65, *33 (Sept. 13, 2011). 2-29 SARBANES-OXLEY ACT § 2.04[3] Aviation Investment and Reform Act for the 21st Century (“AIR21”).49 Quoting its prior AIR21 decision,50 the ARB held that adverse actions are “unfavorable employment actions that are more than trivial, either as a single event or in combination with other deliberate employer actions alleged.”51 Increasingly, courts are holding that employer conduct falling short of a tangible employment action may constitute an adverse action for purposes of Section 806. In upholding the ARB’s decision in Menen- dez, the Court of Appeals for the Fifth Circuit noted that a company’s disclosure of an employee’s identity as a whistleblower was an adverse action, since it could adversely affect his ability to collaborate with his colleagues and do his job.52 Courts have also held that other types of actions—such as exclusion from meetings and poor performance reviews—are adverse actions that might well dissuade an employee from making a complaint about a violation within the scope of Sec- tion 806.53

[3]—Causation In order to establish a claim of retaliation under SOX, an employee must show that the protected activity was a “contributing factor” in the employer’s decision to take an adverse employment action against the employee.54 The whistleblower’s protected activity does not have to be the employer’s sole reason or even a significant reason for the adverse action. Rather, the protected activity only has to play some role in the employer’s decision. One court has described the “contributing factor” standard as “broad and forgiving.”55 A whistleblower

49 Pub. L. No. 106-181, 114 Stat. 61 (April 5, 2000); 49 U.S.C. § 42121. AIR21, the aviation industry whistleblower retaliation law on which Section 806 was modeled, is explicitly referenced in SOX. 50 2011 USDOL LEXIS 65, *34 (citing Williams v. American Airlines, Inc., ARB No. 09-018, slip op. at 12-15 (Dec. 29, 2010)). 51 Id. See also: Ninth Circuit: Guitron v. Wells Fargo Bank, N.A., 2012 U.S. Dist. LEXIS 93883, *51-52 (N.D. Cal. July 6, 2012). 52 Halliburton, Inc. v. Administrative Review Board, 771 F.3d 254, 262 (5th Cir. 2014). 53 See, e.g.: Second Circuit: Kolchinsky v. Moody’s Corp., 2012 U.S. Dist. LEXIS 25650, *17-18 (S.D.N.Y. Feb. 28, 2012) (holding that exclusion from meetings, demotion, reduced salary and bonuses, transfer to a support role without possibility of promo- tion, suspension, and termination were each adverse actions). Ninth Circuit: Guitron v. Wells Fargo Bank, N.A., 2012 U.S. Dist. LEXIS 93883, *53 (N.D. Cal. July 6, 2012) (holding that suspension and poor performance review were adverse actions). 54 See: 29 C.F.R. § 1980.104(e)(2)(iv); 49 U.S.C. § 42121(b)(2)(B)(i). 55 See Lockheed Martin Corp. v. Administrative Review Board, 717 F.3d 1121, 1136 (10th Cir. 2013). § 2.04[3] WHISTLEBLOWER LAW 2-30 may establish that the protected activity was a contributing factor to the adverse action through circumstantial as well as direct evidence.56 Courts and the DOL have considered several types of evidence, alone or in combination, to determine whether a complainant’s protected activity is a contributing factor to the adverse action. Temporal proximity between the protected activity and the alleged adverse action is “a significant factor in considering a circumstantial showing of causation.”57 Close temporal proximity between the protected activity and the beginning of the alleged retaliatory conduct allows the court to draw an inference that the protected activity was a contributing factor, although temporal proximity is not always dispositive.58 Conversely, while there is no bright line rule regarding temporal proximity, some courts have “routinely dismissed” retaliation claims when as few as three months elapse between the protected activity and alleged retaliation absent other evidence of causation.59 The decision-maker’s knowledge of the protected activity may support a finding of causation, while evidence that the decision maker was unaware of the protected activity may prevent such a finding.60 If the ultimate decision maker is unaware of the protected activity, a whistleblower may still demonstrate causation under the “cat’s paw” theory by establishing that someone with knowledge of the activity “set in motion” the adverse employment action by influencing the employment decision.61 Additional evidence regarding causation includes the occurrence of intervening events that sever the causal connection

56 See, e.g., Van Asdale v. International Game Technology, 577 F.3d 989, 1003 (9th Cir. 2009). See also, Balko v. Ukrainian National Federal Credit Union, 2014 U.S. Dist. LEXIS 42427, *25 (S.D.N.Y. March 28, 2014) (“Because the employer rarely leaves direct evidence of its retaliatory intent, the Court must carefully comb the available evidence in search of circumstantial proof.”). 57 Feldman v. Law Enforcement Associates Corp., 752 F.3d 339, 348 (4th Cir. 2014) (quoting Tice v. Bristol-Meyers Squibb Co., 2006-SOX-20, 2006 DOLSOX LEXIS 44, 2006 WL 3246825, at *20 (Dep’t of Labor April 26, 2006)). 58 Wiest v. Lynch, 15 F. Supp.3d 543, 562 (E.D. Pa. 2014). 59 Leshinsky v. Telvent GIT, S.A., 942 F. Supp.2d 432, 450 (S.D.N.Y. 2013). Compare, Zinn v. American Commercial Lines, Inc., ARB No. 10-029, ALJ No. 2009-SOX-025, 2012 DOL Ad. Rev. Bd. LEXIS 31, *25 (March 28, 2012) (“[A] temporal proximity of seven to eight months between protected activity and adverse action may be sufficient circumstantial evidence to prove that the protected activity contributed to the adverse action.”). 60 See, e.g.: Second Circuit: Ghiradelli v. McAvey Sales & Service, Inc., 287 F. Supp.2d 379, 388-391 (S.D.N.Y. 2003), aff’d 98 Fed. Appx. 909 (2d Cir. 2004). Third Circuit: Wiest v. Lynch, 15 F. Supp.3d 543, 565 (E.D. Pa. 2014). Ninth Circuit: Boyd v. Accuray, Inc., 873 F. Supp.2d 1156, 1170-1171 (N.D. Cal. 2012). 61 873 F. Supp.2d 1156, 1170 n.8 (N.D. Cal. 2012). 2-31 SARBANES-OXLEY ACT § 2.04[3] between the protected activity and the adverse action and pre- existing performance problems or plans to terminate.62 If the employee establishes a prima facie case of retaliation, an employer may still defeat a finding of liability by providing “clear and convincing” evidence that the employer would have taken the same action absent the protected activity.63

62 See, e.g.: Second Circuit: Sharkey v. J.P. Morgan Chase & Co., 2015 U.S. Dist. LEXIS 138357, *39-40 (S.D.N.Y. Oct. 9, 2015) (intervening events). Fourth Circuit: Feldman v. Law Enforcement Associates Corp., 752 F.3d 339, 349 (4th Cir. 2014) (intervening events). Sixth Circuit: Sussberg v. K-Mart Holding Corp., 463 F. Supp.2d 704, 715 (E.D. Mich. 2006) (intervening events). Eighth Circuit: Brondyke v. Bridgepoint Education, Inc., 2014 U.S. Dist. LEXIS 58161, *28-29 (D. Iowa April 25, 2014) (past performance issues); Miller v. Stifel, Nicolaus & Co., Inc., 812 F. Supp.2d 975, 989 (D. Minn. 2011) (ongoing performance issues and intervening events). Department of Labor: Zinn v. American Commercial Lines, Inc., ARB Case No. 13-021, ALJ CASE NO. 2009-SOX-025, 2013 DOL Ad. Rev. Bd. LEXIS 113 (Dec. 17, 2013) (past performance problems). 63 See: 18 U.S.C. § 1514A(b); 49 U.S.C. § 42121(b)(2)(B)(ii). See also: First Circuit: Day v. Staples, Inc., 555 F.3d 42, 53 (1st Cir. 2009). Fourth Circuit: Feldman v. Law Enforcement Associates Corp., 752 F.3d 339, 345 (4th Cir. 2014); Welch v. Chao, 536 F.3d 269, 275 (4th Cir. 2008). Fifth Circuit: Allen v. Administrative Review Board, 514 F.3d 468, 476 (5th Cir. 2008). Seventh Circuit: Harp v. Charter Communications Inc., 558 F.3d 722, 726-727 (7th Cir. 2009). Eighth Circuit: Miller v. Stifel, Nicolaus & Co., Inc., 812 F. Supp.2d 975, 982 (8th Cir. 2011). Eleventh Circuit: Johnson v. Stein Mart, Inc., 440 Fed. Appx. 795, 801 (11th Cir. 2011). § 2.05[1] WHISTLEBLOWER LAW 2-32 § 2.05 Litigation Process An employee wishing to assert a complaint under the Sarbanes- Oxley Act of 2002 (“SOX”) Section 806 must file the complaint with the Department of Labor (“DOL”) Occupational Safety and Health Administration (“OSHA”) within 180 days of the adverse action.1 OSHA is charged with investigating complaints that meet the basic elements of a SOX Section 806 (“Section 806”) claim. Within thirty days after OSHA issues a determination, either party may request a hearing before an Administrative Law Judge (“ALJ”).2 Either party may then appeal the ALJ’s decision to the Administrative Review Board (“ARB”). Once the ARB renders a decision and the Secretary of Labor issues a final order, either party may appeal to the appropriate federal court of appeals. Alternatively, under Section 806’s “kick-out” provision,3 a party may seek de novo review in federal district court if the Secretary of Labor has not issued a final order within 180 days of the filing of the complaint.4

[1]—Filing and Investigation of Complaint In order to pursue a SOX whistleblower claim, an employee must file a complaint with any office of OSHA within 180 days of the alleged retaliatory action. OSHA will conduct an investigation if it determines that the complaint contains the necessary elements of a claim, and will issue a preliminary determination. If OSHA issues a determination in favor of the complainant, it may award the remedies prescribed in the statute.5

[a]—Commencement of Limitations Period The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”)6 doubled the limitations period for filing a claim under Section 806 from ninety to 180 days and clarified that the limitations period begins to run on “the date on which the employee became aware of the violation,”7 even if that is later than the date on which the retaliatory conduct actually occurred. Cases interpreting both the old and new language of Section 806 make clear that the key question is one of knowledge, i.e., when the employee has unequivocal notice of his employer’s decision to take an adverse action, as opposed to

1 18 U.S.C. § 1514A(b)(2)(D). 2 18 U.S.C. § 1514A(b)(2)(A), noting that in general actions are governed by the rules and procedures under 49 U.S.C. § 42121(b)(2). 3 See § 2.05[3] infra. 4 18 U.S.C. § 1514A(b)(1)(B). 5 See 18 U.S.C. § 1514A(c). 6 Pub. L. No. 111-203, 124 Stat. 1376 (July 21, 2010); 12 U.S.C. § 5301 note. 7 18 U.S.C. § 1514A(b)(2)(D). 2-33 SARBANES-OXLEY ACT § 2.05[1] when he actually experiences the consequences of the adverse action, such as termination or demotion.8

[b]—Tolling of Limitations Period Although generally disfavored, several decisions have applied equitable tolling principles to complaints raising Section 806 claims that were otherwise untimely. In order to apply such principles, the limitations deadline must not be jurisdictional, i.e., failing to timely file must not strip the court of its ability to hear the claim. The Supreme Court has held that claim-processing deadlines are generally not jurisdictional in the absence of clear legislative intent to the contrary and therefore may be tolled.9 In Turin v. AmTrust Financial Services, Inc.,10 the ARB concluded that the limitations period for Section 806, as for other OSHA- administered whistleblower statutes, is a claim-processing deadline, and thus subject to equitable modification.11 According to the ARB, there are four situations in which it may be appropriate to apply equitable tolling principles to modify the statute of limitations for a Section 806 claim:

“(1) when the defendant has actively misled the plaintiff regarding the cause of action; (2) when the plaintiff has in some extraordinary way been prevented from filing his action; (3) when the plaintiff has raised the precise statutory claim in issue but has done so in the wrong forum; and (4) where the employer’s own acts or omissions have lulled the plaintiff into forgoing prompt attempts to vindicate his or her rights.”12

8 See, e.g.: Corbett v. Energy East Corp., ARB No. 07-044, 2006-SOX-65, 2008 DOLSOX LEXIS 59, *9 (Dec. 31, 2008) (holding that “the date that an employer communicates to the employee its intent to implement the discharge or other discriminatory act marks the occurrence of a violation, rather than the date the employee experiences the consequences”); Salian v. Reedhycalog UK, ARB No. 07-080, 2007-SOX-20, 2008 DOLSOX LEXIS 60, *2, 12 (Dec. 31, 2008) (holding that filing period commenced when complainant received a letter stating that his position was being made redundant in thirty days); Rollins v. American Airlines, ARB No. 04-140, 2004-AIR-9, 2007 DOL Ad. Rev. Bd. LEXIS 33, *6-7 (April 3, 2007) (holding that the limitations period began to run when the employee received an advisory letter which provided “final and unequivocal” notice of termination to the employee and not when the actual termination letter was issued five days later, and finding the complaint untimely because complainant failed to file his complaint within the limitations period as calculated from the receipt of the advisory letter). 9 See: Sebelius v. Auburn Regional Medical Center, 133 S.Ct. 817, 824-825, 184 L.Ed.2d 627 (2013); Henderson v. Shinseki, 562 U.S. 428, 435, 131 S.Ct. 1197, 1202-1203 (2011). 10 Turin v. AmTrust Financial Services, Inc., ARB No. 11-062, ALJ No. 2010- SOX-018, 2013 DOLSOX LEXIS 12 (March 29, 2013). 11 Id., 2013 DOLSOX LEXIS 12, *16 (March 29, 2013). 12 Id. at *16-17. § 2.05[1] WHISTLEBLOWER LAW 2-34 The ARB held that the fourth situation applied where a respondent and complainant entered into a “standstill agreement” three days before the limitations period for filing a Section 806 charge expired, and where the agreement required that neither party initiate legal proceedings without giving ten days’ notice to the other party.13 The ARB therefore concluded that the SOX complaint was timely because the complainant complied with the terms of the standstill agreement which the parties had negotiated.14 In many cases, however, courts or the DOL reject arguments for equitable tolling, finding that the circumstances do not require modifying the statutory limitations deadline, even in the interests of basic fairness and justice.15 In one case that predated the ARB’s decision in Turin, an ALJ refused to enforce a tolling agreement negotiated and entered into between the parties.16 Thus, whether tolling is available, and under what circumstances, remains unclear.

[c]—Form of Complaint Department of Labor regulations require no particular form of complaint.17 According to the regulations, a Section 806 complaint may be written or oral.18 If a complainant provides an oral complaint, OSHA will reduce it to writing, but the complaint will be deemed filed on the date that the oral complaint was made.19

13 Id. at *18-20. 14 Id. at *20-21. 15 See, e.g.: DeFazio v. Sheraton Steamboat Resorts & Villas, ARB No. 11-063, ALJ No. 2011-SOX-35, 2012 DOLSOX LEXIS 61, *6-7 (Oct. 23, 2012) (rejecting equitable tolling due to alleged mishandling by former attorney on the case, finding that there was no active misleading of complainant by respondent or its counsel during settlement negotiations with regard to the filing deadline); Reid v. Boeing Co., ARB No. 10-110, ALJ No. 2009-SOX-27, 2012 DOLSOX LEXIS 23, *9 (March 30, 2012) (rejecting complainant’s tolling argument, finding that delay was due to misunderstanding of the law rather than a medical condition); Coppinger-Martin v. Nordstrom, Inc., ARB No. 07-067, 2007-SOX-19, 2009 DOLSOX LEXIS 64, *7-11 (Sept. 25, 2009) (rejecting complainant’s argument that limitations period did not begin to run until she had reason to know that her termination was due to her protected activity, where respondent allegedly misrepresented the basis for her termination); Hickernell v. Penske Truck Leasing, Inc., 2008-SOX-00025, 2008 DOLSOX LEXIS 114, *20-21 (April 17, 2008) (strictly construing the limitations deadline where complainant argued that she had delayed filing due to threats she received from an agent of the employer). 16 See Szymonik v. TyMetrix Inc., 2006-SOX-50, 2006 DOLSOX LEXIS 21, *10-12 (March 8, 2006). 17 29 C.F.R. § 1980.103(b). 18 Id. 19 Id. 2-35 SARBANES-OXLEY ACT § 2.05[1] [d]—Pleading Standard The pleading standard for Section 806 complaints at the OSHA level is significantly lower than for a complaint filed in federal court. The Supreme Court has held that the Federal Rules of Civil Proce- dure require that complaints filed in federal court allege sufficient facts to state a claim for relief that is facially—and not merely con- ceivably—plausible.20 The ARB has declined to apply this federal pleading standard in the Section-806 context,21 and, as noted, DOL regulations require “[n]o particular form of complaint.”22 However, this lower pleading standard is not applicable to complaints filed in federal court following proceedings at the OSHA level.23

[e]—Burdens of Proof The burdens of proof under Section 806 are identical to the burdens in cases arising under AIR21’s whistleblower provisions.24 To prevail under either statute, a complainant “must prove by a preponderance of the evidence that (1) he engaged in protected activity; (2) the employer knew that he engaged in the protected activity; (3) he suffered an unfavorable personnel action; and (4) the protected activity was a contributing factor in the unfavorable action.”25 “If the employee establishes these four elements, the employer may avoid liability only if it can prove ‘by clear and convincing evidence’ that it ‘would have taken the same unfavorable personnel action in the absence of that [protected] behavior.’”26 As the ARB has noted, this “‘independent burden-shifting framework’ is distinct from the McDonnell Douglas burden-shifting framework applicable to Title VII claims,” in that a significantly higher burden of production shifts to a Section 806 respondent after a complainant proves a prima facie case.27 The ARB has clarified that in determining whether a complainant has met his initial burden of

20 See: Ashcroft v. Iqbal, 556 U.S. 662, 678-680, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). 21 Sylvester v. Parexel, ARB No. 07-123, ALJ Nos. 2007-SOX-039, -042, 2011 DOLSOX LEXIS 39, *25-28 (May 25, 2011). 22 Id., 2011 DOLSOX LEXIS 39, *26 (May 25, 2011) (quoting 29 C.F.R. § 1980.103(b)). 23 See, e.g., Sharkey v. J.P. Morgan Chase & Co., 805 F. Supp.2d 45, 51 (S.D.N.Y. 2011) (applying federal pleading standards to complaint filed in federal court after dismissal by OSHA). 24 See 18 U.S.C. § 1514A(b)(2)(C) (stating that an action “shall be governed by the legal burdens of proof set forth in [49 U.S.C. § 42121(b)]”). See Chapter 6 infra. 25 See Allen v. Administrative Review Board, 514 F.3d 468, 475-476 (5th Cir. 2008). (Internal footnotes omitted.) 26 Id., 514 F.3d 468, 476 (5th Cir. 2008) (quoting 49 U.S.C. § 42121(b)(2)(B)(iv)). 27 Id., 514 F.3d at 475-476. See also: § 2.05[2] WHISTLEBLOWER LAW 2-36 proving that his protected activity contributed to the adverse employment action, the fact-finder must consider only the evidence offered by the complainant, and should not weigh the complainant’s evidence against any evidence offered by the respondent in support of its defense.28 Only after determining whether the complainant has met his prima facie burden should the fact-finder consider whether the respondent has produced evidence sufficient to show by clear and convincing evidence that it would have taken the same personnel action in the absence of protected the activity.29 In reaching this holding, the ARB described its prior decisions regarding how to analyze a respondent’s evidence in support of its affirmative defense as “inconclusive and, if anything, have only served to confuse what otherwise appears straightforward,” and treated the issue as a matter of first impression.30 Some federal courts continue to weigh evidence offered by employers when determining whether an employee has established a prima facie case even after the ARB clarified its position.31

[2]—Determination and Review After OSHA issues its determination, either party may, within thirty days, request a hearing before the ALJ.32 The ALJ will conduct an administrative hearing preceded by discovery, and the process will resemble a bench trial in federal court.33 The ALJ’s decision may be appealed to the ARB, with further appeal to the appropriate federal court of appeals.34

Second Circuit: Leshinksy v. Telvent GIT, S.A., 942 F. Supp.2d 432, 441 (S.D.N.Y. 2013) (holding that “the defendant’s burden under Section 806 is notably more than under other federal employee protection statutes, thereby making summary judgment against plaintiffs in Sarbanes-Oxley retaliation cases a more difficult proposition”). Ninth Circuit: McEuen v. Riverview Bancorp, Inc., 2013 U.S. Dist. LEXIS 180423, *6-8 (W.D. Wash. Dec. 19, 2013). 28 Fordham v. Fannie Mae, ARB Case No. 12-061, 2014 DOLSOX LEXIS 51, *3-5 (Oct. 9, 2014). 29 Id., 2014 DOLSOX LEXIS 51, *64-65 (Oct. 9, 2014). 30 Id. at *46, 54-56. 31 See, e.g.: Second Circuit: Sharkey v. J.P. Morgan Chase & Co., 2015 U.S. Dist. LEXIS 138357, *38 (S.D.N.Y. Oct. 9, 2015). Third Circuit: Wiest v. Tyco Electronics Corp., 2015 U.S. Dist. LEXIS 47935, *26-27 (E.D. Pa. April 10, 2015). 32 18 U.S.C. § 1514A(b)(2)(A), noting that in general actions are governed by the rules and procedures under 49 U.S.C. § 42121(b); 49 U.S.C. § 42121(b)(2)(A) (“Not later than 30 days after the date of notification of findings under this para- graph, either the person alleged to have committed the violation or the complainant may file objections to the findings or preliminary order, or both, and request a hearing on the record.”). 33 See DOL, “Information for Whistleblowers,” available at http://www.dol.gov/ appeals/whistleblowers.htm (last visited Nov. 18, 2015). 34 See id. 2-37 SARBANES-OXLEY ACT § 2.05[3] [3]—Kick-Out Provision An employee may not file a Section-806 complaint directly in federal court and generally must exhaust administrative remedies before the DOL prior to seeking review by the federal courts. Dodd-Frank, however, created an alternative procedural avenue to the courts by adding a “kick-out” provision to Section 806.35 This provision allows an employee to withdraw a claim from the DOL and file a complaint in federal district court for de novo review if the DOL has not issued a final order within 180 days after filing, provided that the delay is not a result of the bad faith of the complainant.36 The same burdens of proof apply in federal court that applied before the ALJ.37 Few decisions have addressed what constitutes a bad-faith delay by a complainant which would render the kick-out provision of Section 806 unavailable. In one case, after a complainant filed a notice with the ARB of his intent to file suit in federal court, respondents argued that the complainant had acted in bad faith by taking procedural steps that prevented the DOL from issuing a final order within 180 days of filing.38 Respondents noted that the complainant had amended his complaints, changed respondents, and took procedural steps that delayed OSHA’s investigation and subsequent DOL proceedings.39 The ARB held that complainant’s actions in availing himself of common procedural steps did not by itself indicate bad faith.40 The ARB noted further that the complainant had waited six months after the expiration of the requisite 180-day period to avail himself of the kick- out provision, such that any delay the complainant might have caused was not the reason that the DOL did not issue a final order within

35 See: 18 U.S.C. § 1514A(b)(1)(B); 29 C.F.R. § 1980.114(a). 36 18 U.S.C. § 1514A(b)(1)(B). The 180-day clock may often not be met under current-case-processing times, as 180 days for an OSHA investigation and determination, ALJ proceeding, and ARB review and decision is perhaps not a realistic time- frame. As of April 29, 2014, OSHA had a backlog of 1,726 whistleblower retaliation cases that were still ongoing more than ninety days after the complaint filing date. See Testimony of David Michaels, PhD, MPH, Assistant Secretary, Occupational Health and Safety Administration, before the S. Subcomm. on Employment and Workplace Safety, S. Comm. on Health Education, Labor and Pensions, 113th Cong. 2d. Sess., available at https://www.osha.gov/pls/oshaweb/owadisp.show_document? p_table=TESTIMONIES&p_id=1602#footnotes (last visited Nov. 18, 2015). The OSHA case backlog can reach up to two years in many cases. See Stiff, “The State Of DOL’s Whistleblower Protection Program,” Law360, available at http://www. law360.com/articles/712640/the-state-of-dol-s-whistleblower-protection-program (last visited Nov. 18, 2015). 37 See 18 U.S.C. § 1514A(b)(2)(C). 38 Vroom v. General Electric Co., ARB No. 10-121, ALJ No. 2010-SOX-19, 2010 DOLSOX LEXIS 80, *3 (Nov. 8, 2010). 39 Id. 40 Id. § 2.05[4] WHISTLEBLOWER LAW 2-38 180 days.41 Thus, the ARB determined that the complainant had not acted in bad faith, and held that the complainant could withdraw his complaint from the DOL and file suit in federal court.42 One important component of the kick-out provision is that it gives a statutory right to de novo review in federal court, at any point prior to a final order from DOL.43 Therefore, even if an ALJ has decided in favor of a respondent, and review is pending before the ARB, in some cases a complainant may obtain de novo review in federal district court, and some courts have held that neither the ALJ decision itself nor any issues necessarily decided in reaching the decision are binding on the district court.44 The DOL has suggested, however, that collat- eral estoppel is appropriate where “a complainant brings a new action in federal court following extensive litigation before the Department that has resulted in a decision by an administrative law judge or the Secretary.”45 Some courts have adopted this approach.46 Although the contrary interpretation of the statute may effectively give employees two opportunities to fully litigate Section 806 claims, once in the DOL and once in federal court, some courts have found that the plain and unambiguous language of Section 806 grants complainants the statutory right to de novo review in federal district court, absent a final order from DOL.47

[4]—Review of DOL Final Order by Federal Courts of Appeal Prior to the enactment Dodd-Frank, Section-806 claims only reached federal court when a party appealed a final agency decision to the appropriate federal court of appeals. This remains the final avenue of appeal of a final agency decision that is issued either (1) within 180 days after filing the Section-806 charge, or (2) before a complainant invokes the kick-out provision. On appeal of a final decision by the DOL, a court of appeals reviews the determination and applies the “highly deferential arbitrary and capricious standard, which focuses

41 Id. at *4. 42 Id. at *5. 43 18 U.S.C. § 1514A(b)(1)(B). 44 Stone v. Instrumentation Laboratory Co., 591 F.3d 239, 249-250 (4th Cir. 2009). 45 OSHA, “Procedures for the Handling of Discrimination Complaints Under Sec- tion 806 of the Corporate and Criminal Fraud Accountability Act of 2002, Title VIII of the Sarbanes-Oxley Act of 2002,” 68 Fed. Reg. 31,860, 31,863 (May 28, 2003). 46 See: Third Circuit: Tice v. Bristol-Myers Squibb Co., 325 Fed. Appx. 114, 123 (3d Cir. 2009). Seventh Circuit: Robinson v. Morgan Stanley, 474 Fed. Appx. 456, 458 (7th Cir. 2012). 47 591 F.3d 239, 243, 249 (4th Cir. 2009), supra. 2-39 SARBANES-OXLEY ACT § 2.05[5] on whether an agency articulated a rational connection between the facts and the decision made.”48 The court will utilize the substantial evidence rule and will not overturn the DOL’s decision unless the evidence could not reasonably support the agency’s conclusion.49 An appellant therefore must meet a very high bar to obtain reversal of a final DOL decision.

[5]—Jury Trial As amended by Dodd-Frank,50 Section 806 expressly provides the right to a jury trial for SOX claims in federal court.51 Prior to the Dodd-Frank amendments, it was unclear whether such a right existed under SOX and some courts had ruled that a SOX plaintiff was not entitled to a jury trial because the statute did not expressly provide for such a right.52 In federal court, the Federal Rules of Civil Procedure set forth the procedure for demanding a jury trial in a Section-806 claim. Typically, the demand for a jury trial must be made within fourteen days after service of the last pleading related to the issue of Section-806 liability.53

48 Klopfenstein v. Administrative Review Board, 402 Fed. Appx. 936, 938 (5th Cir. 2010) ( per curiam) (case below ARB Nos. 07-021, -022, ALJ NO. 2004-SOX-11). 49 Id., 402 Fed. Appx. 936, 939 (5th Cir. 2010) (per curiam). See also, Gale v. United States Department of Labor, 384 Fed. Appx. 926, 928, 930 (11th Cir. 2010). 50 Pub. L. No. 111-203, § 922, 124 Stat. 1376 (July 21, 2010). 51 18 U.S.C. § 1514A(b)(2)(E). 52 See, e.g.: Fifth Circuit: Murray v. TXU Corp., 2005 U.S. Dist. LEXIS 10945, *14-15 (N.D. Tex. June 7, 2005). Ninth Circuit: Schmidt v. Levi Strauss & Co., 621 F. Supp.2d 796, 801 (N.D. Cal. 2008). 53 See Fed. R. Civ. P. 38(b)(1). § 2.06 WHISTLEBLOWER LAW 2-40 § 2.06 Available Remedies The Sarbanes-Oxley Act of 2002 (“SOX”)1 provides for “all relief necessary to make the employee whole,”2 i.e., to put the employee in the position in which he would have been but for the retaliatory conduct of his employer. Accordingly, complainants in successful SOX cases may be entitled to (1) “reinstatement with the same seniority as the employee would have had, but for the discrimination;” (2) back pay, with interest accruing from the date of the retaliatory conduct; and (3) special damages, which, under statute, include “litigation costs, expert witness fees, and reasonable attorney fees.”3 Front pay may be available where reinstatement is inappropriate or impossible.4 Compensatory damages for reputational harm and emotional pain and suffering may also be available, although not specifically identified in the statute.5 The statute does not provide for punitive damages and some courts have concluded that punitive damages are not available for a prevailing Section-806 complainant.6

1 Pub. L. No. 107-204, § 806, 116 Stat. 745 (July 30, 2002); 18 U.S.C. § 1514A. 2 OSHA, “Procedures for the Handling of Retaliation Complaints Under Section 806 of the Sarbanes-Oxley Act of 2002, as Amended,” 80 Fed. Reg. 11,865, 11,872 (March 5, 2015). 3 18 U.S.C. §§ 1514A(c)(2)(A)-(C). 4 See § 2.06[2] infra. 5 Second Circuit: Mahony v. KeySpan Corp., 2007 U.S. Dist. LEXIS 22042, *20-22 (E.D.N.Y. March 12, 2007) (damages to reputation). Sixth Circuit: Rutherford v. Jones Lang LaSalle America, 2013 U.S. Dist. LEXIS 116872, *10-12 (E.D. Mich. Jan. 29, 2013) (citing persuasive cases that allowed for recovery of damages for emotional distress, humiliation, and injury to reputation). Ninth Circuit: Jones v. Home Federal Bank, 2010 U.S. Dist. LEXIS 3579, *15-16 (D. Idaho Jan. 14, 2010) (reputational injury damages). Tenth Circuit: Lockheed Martin Corp. v. Administrative Review Board, 717 F.3d 1121, 1138-1139 (10th Cir. 2013) (upholding award of non-economic compensatory damages). Eleventh Circuit: Hanna v. WCI Communities, Inc., 348 F. Supp.2d 1332, 1334 (S.D. Fla. 2004) (damages to reputation). Department of Labor: Menendez v. Halliburton, Inc., ARB No. 12-026, ALJ No. 2007-SOX-005, 2013 DOLSOX LEXIS 11. *44-52 (March 20, 2013) (compensatory damages for emotional distress and professional harm); Kalkunte v. DVI Financial Services, Inc., ARB Nos. 05-139, -140, ALJ No. 2004-SOX-056, 2009 DOLSOX LEXIS 1, *35 (Feb. 27, 2009) (awarding complainant for pain, suffering, mental anguish, humiliation, and the negative impact on her credit). 6 See: 18 U.S.C. § 1514A(c)(2)(C) (compensatory damages shall include . . . “compensation for any special damages sustained as a result of the discrimination, including litigation costs, expert witness fees, and reasonable attorney fees”); OSHA, “Procedures for the Handling of Retaliation Complaints Under Section 806 of the Sarbanes-Oxley Act of 2002, as Amended,” 76 Fed. Reg. 68,084, 68,097 (Nov. 3, 2011). See also: Fifth Circuit: Murray v. TXU Corp., 2005 U.S. Dist. LEXIS 10945, *12 (N.D. Tex. June 7, 2005) (noting that the omission of punitive damages from the statute is clear and unequivocal). 2-41 SARBANES-OXLEY ACT § 2.06[1] [1]—Reinstatement A common form of make-whole relief sought by a terminated complainant in proceedings at the Occupational Safety and Health Administration (“OSHA”) of the U.S. Department of Labor (“DOL”) is reinstatement. The updated OSHA Whistleblower Investigation Manual (“OSHA Manual”), which applies to Section 806 investigations, provides, “Reinstatement of the complainant to his or her former position is the presumptive remedy in merit whistleblower cases involving a discharge or demotion and is a critical component of making the complainant whole.”7 Among other things, the reinstatement remedy includes restoration of benefits and seniority lost by virtue of the termination, and it may include non-monetary measures such as requiring an employer to expunge negative information from a complainant’s employment record.8 A key procedural question is whether a preliminary order of reinstatement, i.e., one issued prior to the DOL’s final order, is enforceable. Few courts have addressed the issue. One of the first courts to do so refused to enforce a preliminary order of reinstatement, but the panel did not reach agreement on the underlying ground for that decision.9 One judge in the majority held that the court lacked jurisdiction to enforce the order, while the other judge concluded that the order of reinstatement was invalid because the defendant had not received due process before OSHA.10 The dissenting judge argued that the court did have jurisdiction and should enforce the order.11 Faced with a similar question, another court of appeals granted the defendant’s motion for a stay of the preliminary order of reinstatement, applying a traditional balancing test for injunctive relief, but failed to resolve the question of the court’s jurisdiction to enforce the order.12 A district court decision concluded that federal courts cannot enforce preliminary orders of reinstatement.13 Looking to the

Eleventh Circuit: Hanna v. WCI Communities, Inc., 348 F. Supp.2d 1332, 1333 (S.D. Fla. 2004) (same). 7 OSHA, “Whistleblower Investigations Manual,” Chapter 6, II, A, p. 6-1 (April 21, 2015), available at https://www.osha.gov/OshDoc/Directive_pdf/CPL_02-03-005.pdf (last visited Nov. 18, 2015). 8 See, e.g., OSHA, “US Department of Labor Orders Dana Holding Corp. to Pay Whistleblower Nearly $275,000 in Back Wages, Damages,” Press Release (Sept. 10, 2012), available at https://www.osha.gov/pls/oshaweb/owadisp.show_document?p_ table=NEWS_RELEASES&p_id=22971 (last visited Nov. 18, 2015). 9 Bechtel v. Competitive Technologies, Inc., 448 F.3d 469, 475-476 (2nd Cir. 2006). 10 Id. 11 Id., 448 F.3d 469, 490. 12 Solis v. Tennessee Commerce Bancorp, Inc., 2010 U.S. App. LEXIS 15302, *3 (6th Cir. May 25, 2010). 13 Solis v. Union Pacific Railroad Co., 2013 U.S. Dist. LEXIS 4887, *6 (D. Idaho Jan. 11, 2013). § 2.06[2] WHISTLEBLOWER LAW 2-42 Wendell H. Ford Aviation Investment and Reform Act for the 21st Centur y (“AIR21”), 14 which prescribes the procedure and burdens of proof for Section-806 claims, the court held that the law treats final and preliminary orders differently and “does not empower federal district courts to enforce preliminary reinstatement orders.”15 The Administrative Review Board (“ARB”), meanwhile, has declined to review or stay an Administrative Law Judge’s (“ALJ”) preliminary order of reinstatement, concluding that it could not hear an interloc- utory appeal of the order.16

[2]—Front Pay in Lieu of Reinstatement In some cases, the DOL may award a complainant the equitable remedy of front pay in lieu of reinstatement.17 Front pay is a disfavored remedy due to the uncertainty inherent in quantifying an appropriate amount of front pay, and it is granted only where reinstatement is not possible or would be unreasonably harmful to the employee.18 The DOL and courts closely scrutinize an award of front pay to ensure that it is not unduly speculative.19 Even where front pay is otherwise appropriate, a judge may deny or limit the award where a terminated complainant has made subsequent career choices that will clearly limit his earnings.20

14 Pub. L. No. 106-181, 114 Stat. 61 (April 5, 2000); 49 U.S.C. § 40101 note. The AIR21 Act governs retaliation complaints by employees in the airline industry. 49 U.S.C. § 42121. 15 2013 U.S. Dist. LEXIS 4887, *6. 16 See: Prioleau v. Sikorsky Aircraft Corp., ARB No. 12-089, ALJ No. 2010- SOX-3, 2012 DOLSOX LEXIS 47, *2-3 (Aug. 30, 2012); Windhauser v. Trane, ARB No. 05-127, ALJ No. 2005-SOX-17, 2007 DOLSOX LEXIS 82, *3-4, 9-10 (Oct. 31, 2007). 17 See OSHA, “Whistleblower Investigations Manual,” Chapter 6, III, B, p. 6-2 (noting that front pay is an available remedy where reinstatement is inappropriate and stating that it “should be awarded for a set amount of time and should be reasonable, based on factors like the length of the time complainant expects to be out of work and the complainant’s compensation prior to retaliation”), available at https://www. osha.gov/OshDoc/Directive_pdf/CPL_02-03-005.pdf (last visited Nov. 18, 2015). 18 See, e.g., Jones v. Southpeak Interactive Corp. of Delaware, 986 F. Supp.2d 680, 687-688 (E.D. Va. 2013) (acknowledging the availability of front pay in lieu of reinstatement, but denying an award of front pay after concluding that it was too speculative). 19 Id., 986 F. Supp.2d 680, 686 (E.D. Va. 2013). Department of Labor: Luder v. Continental Airlines, Inc., ARB No. 10-026, ALJ No. 2008-AIR-9, 2012 DOL Ad. Rev. Bd. LEXIS 11, *45 (Jan. 31, 2012) (admon- ishing ALJ for failing to set reasonable parameters and time limits on a monthly front pay award, and remanding case to ALJ after determining that, while it was not possible for the plaintiff to return to his position as a pilot, there might be other suitable jobs at Continental). 20 See, e.g., Barrett v. E-Smart Technologies, Inc., 2010-SOX-00031, 2011 DOL- SOX LEXIS 64, *118-119 (Sept. 9, 2011). 2-43 SARBANES-OXLEY ACT § 2.06[3] [3]—Back Pay As with reinstatement, back pay with interest is a commonly sought make-whole remedy that is specifically provided for under Section 806.21 The ARB has made clear that back pay dates to the time when an adverse action reduced the employee’s compensation, which may have predated a termination.22 Less clear is what types of compensation fall within the scope of back pay. The ARB has held that a “back pay award should reflect not just lost base earnings; it should reflect attendant losses such as ‘interest, overtime, shift differentials, and fringe benefits such as vacation and sick pay.’”23 Accordingly, awards of back pay and related damages have included compensation for various lost benefits, including health and pension benefits, lost bonus, board-meeting fees, stock options, medical expenses, car allowance, and insurance expenses.24 As with front pay, however, compensation for lost non-wage benefits must be specific and non-speculative.25 Complainants in federal whistleblower actions also have a duty to mitigate damages by making reasonable efforts to find employment.26

21 18 U.S.C. § 1514A(c)(2)(B). 22 See Gunther v. Deltek, Inc., ARB Case Nos. 13-068, -069, 2014 DOLSOX LEXIS 63, *7-8 (Nov. 26, 2014) (modifying award to calculate back pay from the time complainant was placed on administrative leave, as opposed to the time she was terminated, “to make her whole”). 23 See: Tipton v. Indiana Michigan Power Co., ARB No. 04-147, ALJ No. 02-ERA-30, 2006 DOL Ad. Rev. Bd. LEXIS 97, *20-22 (Sept. 29, 2006) (quoting Hobby v. Georgia Power Co., ARB Nos. 98-166, -169, ALJ No. 90-ERA-30, at 12 (Feb. 9, 2011), aff’d sub nom. Georgia Power Co. v. United States Department of Labor, 52 Fed. Appx. 490 (11th Cir. 2002) (unpublished table decision)). 24 See, e.g.: Fort v. Tennessee Commerce Bancorp. Inc., 2010 DOLSOX LEXIS 23, *19-21 (March 17, 2010) (awarding complainant a lost bonus, board meeting fees, stock options, medical expenses, car allowance, insurance, and job search expenses); Brown v. Lockheed Martin Corp., 2008-SOX-49, 2010 DOLSOX LEXIS 2, *166-168 (Jan. 15, 2010) (awarding compensation for lost pension and health benefits and related expenses, including out-of-pocket insurance premiums and medical expenses). 25 See: Barrett v. E-Smart Technologies, Inc. 2010-SOX-00031, 2011 DOLSOX LEXIS 64, *113-116 (Sept. 9, 2011) (denying award of value of stock which complainant had option to buy, but allowing complainant to exercise options vested as of the date of his termination, as the latter were readily calculable); Jayaraj v. Pro-Pharmaceuticals, Inc., 2003-SOX-32, 2005 DOLSOX LEXIS 5, *92-97 (Feb. 11, 2005) (holding complainant may be entitled to recover the value of lost stock options if pled with specificity); Platone v. Atlantic Coast Airlines, 2003-SOX-27, 2004 DOLSOX LEXIS 88, *16-18 (July 13, 2004) (denying complainant’s request for compensation for a 401(k) plan in which she had not yet enrolled and the lost value of free and discounted airline tickets, because the value of these lost benefits was overly speculative). 26 Jayaraj v. Pro-Pharmaceuticals, Inc., ALJ No. 2003-SOX-00032, 2005 DOL- SOX LEXIS 5, *90 (Feb. 11, 2005). § 2.06[4] WHISTLEBLOWER LAW 2-44 [4]—Attorneys’ Fees SOX expressly allows a complainant to recover attorneys’ fees, expert witness fees, and litigation costs as compensable special damages under the law.27 A few questions arise regarding these remedies, however. The first is the appropriate calculation of attorneys’ fees. Several DOL decisions have concluded that the applicable rate for attorney time is that of the geographic market where the proceedings took place, not necessarily where the attorneys and their firm were located.28 Two of these decisions have relied on the Altman Weil Survey of Law Firm Economics rate for the relevant market.29 One decision also considered whether the total fee at the rates that the attorneys requested in their fee petition reasonably reflected factors such as the complexity of the issues presented, the lead attorney’s experience, and the quality of the attorneys’ performance at trial.30 A second question is what specific fees and costs are compensable. Where a complainant retains out-of-town counsel but does not show that comparably skilled local counsel was unavailable, at least one judge has refused to award attorney travel-related expenses.31 Attor- neys’ fees do, however, include time spent in settlement negotiations, even before a complainant files a Section-806 complaint.32 Addition- ally, where counsel’s administrative costs—e.g., for copying, research, and mailing—are passed on to a client by operation of a retainer agreement (rather than being written off as overhead expenses), a judge may award reimbursement of those costs.33 A third question is whether attorneys’ fee awards should be reduced where they are disproportionately greater than the complainant’s monetary recovery. The answer is generally no, and the ARB “has

27 18 U.S.C. § 1514A(c)(2)(C). 28 See: Clemmons v. Ameristar Airways, Inc., ARB No. 11-061, ALJ No. 2004- AIR-11, 2012 DOL Ad. Rev. Bd. LEXIS 44, *7-10 (April 27, 2012); Hagman v. Washington Mutual Bank, Inc., 2005-SOX-73, 2006 DOLSOX LEXIS 130, *119 (Dec. 19, 2006); Platone v. Atlantic Coast Airlines, Inc., 2003-SOX-27, 2004 DOL- SOX LEXIS 88, *25-27 (July 13, 2004), rev’d on other grounds sub nom. Platone v. FLYi, Inc., ARB No. 04-154, 2006 DOLSOX LEXIS 105, *45-46 (Sept. 29, 2006). 29 Hagman v. Washington Mutual Bank, Inc., 2006 DOLSOX LEXIS 130, *118-119 (Dec. 19, 2006); Platone v. Atlantic Coast Airlines, Inc., 2004 DOLSOX LEXIS 88, *26-27 (July 13, 2004), rev’d on other grounds sub nom. Platone v. FLYi, Inc., 2006 DOLSOX LEXIS 105 (Sept. 29, 2006). 30 Platone v. Atlantic Coast Airlines, Inc., 2004 DOLSOX LEXIS 88, *26-27 (July 13, 2004). 31 Hagman v. Washington Mutual Bank, Inc., 2006 DOLSOX LEXIS 130, *137-139 (Dec. 19, 2006). 32 See, e.g., Gunther v. Deltek, Inc., ARB Case Nos. 13-068, -069, 2014 DOL Ad. Rev. Bd. LEXIS 87, *7-8 (Nov. 26, 2014) (adding $15,269.50 to the fee award for pre-filing negotiations). 33 Clemmons v. Ameristar Airways, Inc., ARB No. 11-061, ALJ No. 2004-AIR-11, 2012 DOL Ad. Rev. Bd. LEXIS 44, *17-20 (April 27, 2012). 2-45 SARBANES-OXLEY ACT § 2.06[5] routinely declined to reduce attorneys’ fee awards solely because the amount requested is larger than the damages recovered.”34 According- ly, where the fee award reflects a reasonable rate and time spent in light of the totality of the circumstances—including the success of the complainant on the issues raised and the litigation tactics employed by the respondent—even a fee that significantly exceeds the complainant’s monetary award generally will not be reduced.35

[5]—Non-Economic and Compensatory Damages In its enumeration of compensatory damages, in addition to reinstatement and back pay, Section 806 provides for “compensation for any special damages sustained as a result of the discrimination,” and specifically mentions “litigation costs, expert witness fees, and reasonable attorney fees” in such “special damages”, as noted above.36 While some courts have found that compensatory damages may include damages that fall outside of back pay and litigation costs, such as job search expenses,37 the question of whether non-economic compensatory damages, such as for emotional distress or reputational harm, is more controversial. Some courts have held that SOX’s focus on make-whole relief suggests that the law is only restitutionary, and thus reject claims for damages beyond those necessary to return the plaintiff to the status quo with respect to employment status, wages and benefits, in addition to out-of-pocket costs incurred in pursuing a claim.38 The DOL and many courts have taken the opposite position that non-economic damages, including for emotional distress and reputational harm, are available under Section 806.39 The ARB has held

34 Id., 2012 DOL Ad. Rev. Bd. LEXIS 44, *16 (April 27, 2012). 35 Id. at *3-4 (upholding fee award of $230,085.69 where complainant received $37,995.09 plus interest in monetary damages). 36 18 U.S.C. § 1514A(c)(2)(C). 37 See, e.g., Fort v. Tennessee Commerce Bancorp. Inc., 2010 DOLSOX LEXIS 23, *19-21 (March 17, 2010) (awarding complainant a lost bonus, board meeting fees, stock options, medical expenses, car allowance, insurance, and job search expenses). 38 See, e.g., Schmidt v. Levi Strauss & Co., 621 F. Supp.2d 796, 804-805 (N.D. Cal. 2008). 39 See OSHA “Whistleblower Investigations Manual,” Chapter 6, V., A-B, p. 6-2 supra (“Compensatory damages may be awarded under all OSHA-administered whistleblower statutes . . . [and] include . . . out of pocket medical expenses for treatment of symptoms directly related to the retaliation . . . [and] compensatory damages for demonstrated mental anguish or pain and suffering . . . .”). See also: Fifth Circuit: Menendez v. Halliburton, Inc., ARB No. 12-026, ALJ No. 2007- SOX-5, 2013 DOL Ad. Rev. Bd. LEXIS 22, *39-50 (March 15, 2013), aff’d sub nom. Halliburton Inc. v. Administrative Review Board, 771 F.3d 254, 266 (5th Cir. 2014). Department of Labor: Brown v. Lockheed Martin Corp., ARB No. 10-050, ALJ No. 2008-SOX-00049, 2011 DOLSOX LEXIS 12 (Feb. 28, 2011), aff’d sub nom. Lockheed Martin Corp. v. Administrative Review Board, 717 F.3d 1121, 1138-1139 (10th Cir. 2013) (affirming ALJ’s award of $75,000 in compensatory damages); § 2.06[6] WHISTLEBLOWER LAW 2-46 that to recover for emotional distress and humiliation, a complainant need not put forth testimony from medical or psychiatric experts, provided that there is sufficient evidence in the record of the mental or physical consequences of the adverse employment actions, including the credible testimony of lay witnesses and the complainant.40 In determining the appropriate amount of compensatory damages, which may be uncertain or speculative, the ARB has considered awards made in factually similar cases.41

[6]—Punitive Damages Section 806 does not specifically authorize punitive damages, which are designed to punish the defendant for willful or malicious conduct rather than to compensate the plaintiff. Courts have consistently held that Section 806, which by its terms provides only for relief necessary to make the employee whole, does not allow for punitive damages.42

Kalkunte v. DVI Financial Services, Inc., 2004-SOX-56, 2009 DOLSOX LEXIS 1, *35 (Feb. 27, 2009) (affirming ALJ award for “pain, suffering, mental anguish . . . and the humiliation that she suffered”). 40 Brown v. Lockheed Martin Corp., ARB No. 10-050, ALJ No. 2008-SOX- 00049, 2011 DOLSOX LEXIS 12, *14 (Feb. 28, 2011), aff’d sub nom. Lockheed Martin Corp. v. Administrative Review Board, 717 F.3d 1121, 1138-1139 (10th Cir. 2013) (upholding ALJ’s award of compensatory damages based solely on the testimony of the complainant, her son, and her coworkers regarding the mental anguish and humiliation she suffered). 41 See Menendez v. Halliburton, Inc., ARB No. 12-026, ALJ No. 2007-SOX-5, 2013 DOL Ad. Rev. Bd. LEXIS 22, *49-50 (March 15, 2013), aff’d sub nom. Halli- burton Inc. v. Administrative Review Board, 771 F.3d 254 (5th Cir. 2014). 42 See: Fifth Circuit: Murray v. TXU Corp., 2005 U.S. Dist. LEXIS 10945, *12 (N.D. Tex. June 7, 2005) (noting that the omission of punitive damages from the statute is clear and unequivocal). Eleventh Circuit: Hanna v. WCI Communities, Inc., 348 F. Supp.2d 1332, 1333 (S.D. Fla. 2004) (same).