What is Protected Activity Under Sarbanes Oxley?
Sarbanes Oxley whistle blower claims do not get a lot of attention. A lot of them never see the light of day because the Department of Labor has a very high rate of rejection. But for the patient and persevering, these can be very interesting and powerful cases.
The whistle blowing provision, section 1514A, is broader than many realize, myself included. I used to think that these cases had to involve conduct that directly involved shareholder fraud. But it covers far more than that.
The elements of a SOX whistle blower claim under section 1514 mirror the basic elements of a retaliation claim: (1) protected activity by the plaintiff, (2) knowledge by the employer of the protected activity, (3) adverse employment action against the plaintiff, and (4) a causal connection between the protected activity and the adverse action.
The protected activity is not limited to reporting conduct that amounts to shareholder fraud. Section 1514 provides that a publicly traded company may not retaliate against an employee who provides information that concerns (1) mail fraud, (2) wire fraud, (3) bank fraud, (4) securities fraud, (5) any rule or regulation of the SEC, or (6) any provision of federal law regarding fraud against shareholders.
Under this standard, any employee of a public company who reports any kind of fraud is probably covered. The fraud can be simple wire or mail fraud that does not have any direct connection to shareholders.
For example, in O'Mahony v. Accenture (S.D.N.Y 2008), the plaintiff threatened to report the company for defrauding French tax authorities. The company told the plaintiff that it intended to knowingly conceal its failure to pay French social security taxes. When the plaintiff objected, the company demoted her.
She filed with the DOL and they, of course, bounced her case but she held tough and filed a claim for de novo review in the SDNY. In that case, Accenture argued that the case should be dismissed because it did not involve shareholder fraud. The court rejected this argument because the complaint clearly alleged that the plaintiff reported wire or mail fraud and this was enough. This holding makes it clear that the protected activity does not have to concern shareholder fraud.
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