Image of What acts of retaliation are prohibited by the Sarbanes-Oxley whistleblower protection law?

What acts of retaliation are prohibited by the Sarbanes-Oxley whistleblower protection law?

The Sarbanes-Oxley whistleblower protection law prohibits a broad range of retaliatory acts, including termination, demotion, suspension, harassment and blacklisting.  A decision of the Fifth Circuit holds that “outing” a whistleblower is a prohibited adverse action under SOX.  See Halliburton, Inc. v. Admin. Review Bd., 771 F.3d 254 (5th Cir. 2014).

Anthony Menendez raised concerns internally about questionable accounting practices while working as a director in Halliburton’s Finance and Accounting department. In particular, Menendez disclosed to his supervisor his belief that Halliburton’s practices involving revenue recognition did not conform with generally accepted accounting principles. The supervisor initially responded by telling Menendez that he was not a “team player” and should try harder to work with colleagues to resolve accounting issues.

After Halliburton failed to address his concerns, Menendez filed a confidential disclosure with the SEC about Halliburton’s accounting practices. In addition, Menendez sent a memo to Halliburton’s Board of Directors raising the same issues he disclosed to the SEC, and that memo was forwarded to Halliburton’s general counsel (“GC”). When Halliburton received a notice of investigation from the SEC requiring Halliburton to retain documents, Halliburton’s GC inferred from Menendez’s internal disclosures that he was the source of the SEC inquiry. The GC sent an email to Menendez’s colleagues instructing them to retain certain documents because “the SEC has opened an inquiry into the allegations of Mr. Menendez.”

After the GC outed Menendez as a whistleblower, Menendez’s colleagues began treating him differently, refusing to work and associate with him. Within a year, Menendez resigned. Menendez described the day that he saw the GC’s email outing him as a whistleblower as one of the worst in his life.

The main issue on appeal was whether Menendez suffered an “adverse action” when Halliburton disclosed his identity as a whistleblower. See id. at 259. In affirming the decision below, the Fifth Circuit applied the Supreme Court’s Burlington Northern material adversity standard, i.e., whether a company’s actions well might have dissuaded a reasonable worker from engaging in protected conduct. See id. at 259–62 (citing Burlington Northern & Santa Fe Ry. Co. v. White, 548 U.S. 53 (2006)).

The court reasoned that Halliburton’s outing Menendez to his colleagues and informing them that the whistleblower caused them to be the subject of an SEC investigation “creat[ed] an environment of ostracism,” which “well might dissuade a reasonable employee from whistleblowing.” Id. at 262. The court continued:

It is inevitable that such a disclosure would result in ostracism, and, unsurprisingly, that is exactly what happened to Menendez following the disclosure. Furthermore, when it is the boss that identifies one of his employees as the whistleblower who has brought an official investigation upon the department, as happened here, the boss could be read as sending a warning, granting his implied imprimatur on differential treatment of the employee, or otherwise expressing a sort of discontent from on high. . . . In an environment where insufficient collaboration constitutes deficient performance, the employer’s disclosure of the whistleblower’s identity and thus targeted creation of an environment in which the whistleblower is ostracized is not merely a matter of social concern, but is, in effect, a potential deprivation of opportunities for future advancement.

Halliburton, Inc. v. Admin. Review Bd., 771 F.3d at 262.

To learn more about Sarbanes-Oxley whistleblower protections, click here, and call us at 202-262-8959 to schedule a preliminary consultation.

Sarbanes Oxley whistleblower protection law

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Jason Zuckerman, Principal of Zuckerman Law, litigates whistleblower retaliation, qui tam, wrongful discharge, and other employment-related claims. He is rated 10 out of 10 by Avvo, was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” in 2015 and selected by his peers to be included in The Best Lawyers in America® and in SuperLawyers.