Image of To engage in protected conduct, must a whistleblower cite a specific violation of law or regulation?

To engage in protected conduct, must a whistleblower cite a specific violation of law or regulation?

Scope of Sarbanes-Oxley Whistleblower Protection

The Department of Labor’s Administrative Review Board and several federal courts have soundly rejected a “magic words” defense, an argument employers invoke in whistleblower retaliation cases requiring laypersons to cite specific statutory or regulatory violations to be protected.

In Wright v. Railroad Commission of Texas, ARB No. 16-068, ALJ No. 2015-SDW-1 (ARB Jan. 12, 2018), the complainant brought retaliation claims under the SDWA and FWPCA alleging that his employment was terminated because he required oil and gas operators to comply with rules regulating drilling wells to protect sources of underground drinking water.

The ALJ found that Wright did not engage in protected activity because there was no evidence that the he ever “referred specifically to the two statutes in this case, ever notified or accused the Railroad Commission of any violations of these specific statutes, ever refused to engage in any practice made unlawful by the statutes, or filed or testified before Congress or in any other proceedings regarding any provision of the statutes.” Slip op. at 7 (footnote omitted).

The ARB found that the ALJ’s ruling on protected activity was in error:

The ALJ’s restrictive view of protected activity is not legally sustainable. A complainant is not required to explicitly mention the statutes by name or to otherwise allege a violation of the statute to engage in activity the SDWA protects. The language of the SDWA simply prohibits employers from discriminating against employees who have “participated in activities to carry out the purposes” of the act. This is broad language, some of the broadest of any of the statutes the ARB has the responsibility to adjudicate. While the FWPCA’s language is not as broad, neither the SDWA nor the FWPCA’s language requires a complainant to cite the statute specifically or to report a “violation.” And under both statutes, a “proceeding” does not have to be a formal proceeding.

Id. at 8 (footnotes omitted).

Similarly in a STAA whistleblower case, the ARB found that the ALJ erred by requiring the whistleblower, a layperson, to articulate in detail a hours-of-service violation.  The complaint in Newell v. Airgas, Inc., ARB No. 16-007, ALJ No. 2015-STA-6 (ARB Jan. 10, 2018) alleged that he was fired for raising concerns about hours-of-service violations. On appeal, the ARB remanded the case due in part to the ALJ’s narrow construction of STAA protected conduct.

The ARB held:

We find that the ALJ erred in requiring [the Complainant] to articulate a specific hours-of-service violation (1) to [his direct manager] on October 13, 2013, and March 21-22, 2014, and (2) to the [higher level] managers on the conference call on March 28. The Board has held that a complainant alleging protected activity need not expressly describe an actual violation of law. Rather, a complainant need only demonstrate that he or she had a reasonable belief that the conduct complained of violated pertinent law or regulations. This standard requires both a subjective belief and an objective belief. Thus, [the Complainant] must show that he actually believed that making the mandated call-out deliveries violated the hours-of-service regulations and that a reasonable person with his training and experience would know that making those deliveries was a violation.”

Further, [the Complainant] need not show that he “actually conveyed his reasonable belief to management.” While [the Complainant] must show that his belief was reasonable, “it does not follow that he must have necessarily conveyed a notion to have reasonably believed it . . .” to his supervisors. Consequently, the ALJ erred in finding the evidence “insufficient to establish” that [the Complainant] communicated any objection about hours-of-service violations.

The “magic words” defense has also been rejected in SOX whistleblower retaliation cases.  For example, an ALJ held that a CFO’s refusal to submit what he deemed an inaccurate EBITDA projection was sufficient to put the employer on notice of his protected activity.  The ALJ explained, “[t]he employee need not use the terms ‘fraud,’ ‘fraud on shareholders,’ or ‘stock fraud’ as long as he identifies the employer’s conduct of concern.”  As the ARB held in  Sylvester v. Parexel Int’l, LLC, ARB No. 07-123, ALJ Nos. 2007-SOX-039, (ARB May 25, 2011), an employee need only have a “reasonable belief” of a violation of law and need not have communicated that belief to the relevant authority.

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SOX Whistleblower Protection for Reporting Fraud to the SEC

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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.