Employer Affirmative Defense in SOX Whistleblower Cases
Once a SOX whistleblower has proven that SOX protected conduct was a contributing factor in the decision to take an adverse action, an employer can avoid liability only if it proves clearly and convincingly that it would have taken the same adverse employment action even if the employee had not engaged in protected activity.[i] This is known as the same-decision or same-action defense.
The operative phrase here is “would have.” An employer fails to meet its burden if it establishes merely that it could have taken the same adverse action. “Clear and convincing” evidence can be quantified as establishing the probability of a fact at issue “in the order of above 70%.”[ii]
The employer bears this onerous burden only if an employee establishes that their protected activity contributed to the employer’s decision to take the adverse action against them.
An employer may rely on evidence that:
- the whistleblower recently performed poorly or otherwise gave the employer reason to take action;
- the employer’s reason for taking the adverse action materialized before the company allegedly engaged in misconduct or the employee blew the whistle; or
- the whistleblower’s personnel file supports the employer’s explanation and details the employer’s intent to take the adverse action.
A sham investigation of a whistleblower instigated in response to the whistleblowers’ protected conduct (also known as a retaliatory investigation) will not enable the employer to establish a same-decision defense. See, e.g., Genberg v. Porter, 882 F.3d 1249 (10th Cir. 2018).
“[W]here the protected activity is virtually inseparable from the basis for the imposition of discipline, the fact finder must be careful to assure that the employer has met the high clear and convincing affirmative defense standard.” Brousil v. BNSF Railway Co., ARB No. 16-025, -031, ALJ No. 2014-FRS-163 (ARB July 9, 2018) (citing Abdur-Rahman v. DeKalb Cnty, ARB Nos. 08-003, 10-074; ALJ Nos. 2006-WPC-002, -003 (ARB Feb. 16, 2011)(alleged insubordination included protected safety concerns); Smith v. Duke Energy Carolinas, LLC, ARB No. 11-003, ALJ No. 2009-ERA-007 (ARB June 20, 2012)(protected disclosures exclusively led to disciplinary investigation); Henderson Wheeling & Lake Erie Ry., ARB No. 11-013, ALJ No. 2010-FRS-012 (ARB Oct. 26, 2012)(termination letter referenced protected activity); see also Smith v. Duke, ARB No. 14-027, ALJ No. 2009-ERA-007 (ARB Feb. 25, 2015)(Royce, J. dissenting); Speegle v. Stone & Webster, ARB No. 11-029-A, ALJ No. 2005-ERA-006, slip op. at 15, n.97 (ARB Jan. 31, 2013).
“[B]ecause a respondent’s affirmative defense burden is high, and because ‘it is a fact intensive determination, involving questions of intent and motivation’ for taking adverse action, resolving this issue on summary decision is challenging.” Kao v. Areva Inc., ARB No. 16-090, ALJ No. 2014-ERA-00004 (ARB Apr. 30, 2018).
 Colorado v. New Mexico, 467 U.S. 310 (1984).
[ii] Palmer v. Canadian National Railway, ARB No. 16-035 at 57.
SOX Whistleblower Protection Lawyers
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- Matt Stock is a Certified Public Accountant, Certified Fraud Examiner and former KPMG external auditor. As an auditor, Mr. Stock developed an expertise in financial statement analysis, internal controls testing and fraud recognition, and he uses his auditing experience to help whistleblowers investigate and disclose complex financial frauds to the government and obtain damages for retaliation. He is lead author of SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award.
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- The firm has published extensively on whistleblower rights and protections, and regularly speaks nationwide at seminars and continuing legal education conferences. We blog about new developments in whistleblower law at the Whistleblower Protection Blog.
Client Reviews from Executives and Senior Professionals in SOX Whistleblower Retaliation Matters
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Clear and Convincing Evidence
Clear and convincing evidence is “evidence indicating that the thing to be proved is highly probable or reasonably certain.” Williams v. Domino’s Pizza, ARB No. 09–092 at 6 (quoting Brune, ARB No. 04–037 at 14). Evidence is clear when the employer has presented an unambiguous explanation for the adverse action. It is convincing when based on the evidence the proffered conclusion is highly probable. DeFrancesco v. Union R.R. Co., ARB No. 13–057, ALJ No. 2009–FRS–009, slip op. at 7–8 (ARB Sept. 30, 2015) (“DeFrancesco II”) (citing Speegle v. Stone & Webster Constr., Inc., ARB No. 13–074, ALJ No. 2005–ERA–006, slip op. at 6 (ARB Apr. 25, 2014)); see also Acosta, ARB No. 2018–0020, slip op. at 13. This is a difficult standard for employers, signaling Congressional concern with past industry practice and the importance of the interests at stake. See
Araujo v. New Jersey Transit Rail Operations, Inc., 708 F.3d 152, 159 (3d Cir. 2013); (citing Stone & Webster Eng’g Corp. v. Herman, 115 F.3d at 1568, 1572 (11th Cir. 1997); see also DeFrancesco II, ARB No.13–057, at 8. The ARB has offered a series of questions to consider, including whether the employer routinely monitors or investigates compliance with the rules absent protected activity; whether the employer consistently imposes equivalent discipline to employees who violate the rule but engage in no protected activity; whether the rules charged are routinely applied; whether the rule is vague and subject to manipulation; and whether the evidence shows that the investigation was designed to further the purpose of the rule rather than as a way to punish the employee. DeFrancesco II, slip op. at 11–12. To prevail, an employer must show more than that a rule was violated, that it had a legitimate motive for the adverse action, and that it imposes discipline generally whenever it determines a rule
has been broken. Instead, it is necessary to establish that the rule is applied consistently such that employees who engage in substantially similar conduct absent the protected activity are also investigated and punished in the same manner. Id. at 13–14.” Klinger v. BNSF Railroad Co., ALJ No. 2016-FRS-00062, at 19 (ALJ Sept. 29, 2022).