May 22, 2014

Further Guidance On The Scope Of Whistleblower Retaliation Protections Under Sarbanes-Oxley

By C|C Whistleblower Lawyer Team

The recent Fourth Circuit decision in Feldman v. Law Enforcement Associates provides further guidance on the scope of the whistleblower retaliation protections provided under the Sarbanes-Oxley Act of 2002.  This is the statute enacted in the wake of the Enron scandal to prevent and root out fraud in publicly traded companies.  It protects from retaliation employees of publicly traded companies (and now, their contractors) for reporting suspected fraud to their supervisors or the government.  The question before the Fourth Circuit was how far whistleblowers must go in showing their reporting activity was a “contributing factor” to their retaliation.

According to the court, whistleblowers do not have to go very far in satisfying this “contributing factor” test.  The court stressed it is a “rather light burden” which is intended to be “quite broad and forgiving.”  There is no need to show the whistleblower reporting activity was a “primary or even significant cause” of the whistleblower retaliation.  All that is necessary is to show the reporting activity was “at least some way” connected to the retaliation.  Despite this exceedingly relaxed standard, the court ruled against the whistleblower in Feldman for three key reasons.

First, the court found a “complete absence of temporal proximity” because the whistleblower’s reporting of possible illegal activity occurred almost two years before he was fired.  Such a “lengthy gap in time” weighs against any causal connection between his reporting activity and his retaliation.  Second, the court found a significant “intervening event” from the whistleblower’s insubordinate conduct towards the company’s board of directors which occurred only a month before he was fired.  Third, the court noted that a second whistleblower reported the same alleged misconduct but was not also fired.  In fact, the company urged him to continue in his job.

From all this, the court concluded it was not even a close call in finding the contributing factor test had not been met.  To hold otherwise, the court reasoned, would render the standard “toothless.”  The court made clear that in reaching its decision it would not “sit as a kind of super-personnel department weighing the prudence of employment decisions.”  Nor would it decide whether the decisions were “wise, fair, or correct.”  Instead, the court said it would merely rule on whether the complained of retaliation was in any way influenced or affected by the whistleblower activity.  The court found it was not.  Lesson to be learned for those seeking whistleblower retaliation protections under SOX — make sure your causal connection is sound.

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