Does the Sarbanes-Oxley Act protect whistleblowing in the course of performing one’s job duties?
A corporate whistleblower is protected under the Sarbanes-Oxley Act when they blow the whistle in the course of performing their ordinary job responsibilities. In evaluating whether a duty speech defense should apply to SOX whistleblower retaliation claims, it is important to consider why Congress enacted the SOX whistleblower law. Congress enacted SOX in the wake of Enron and Congressional hearings about the cause of Enron’s collapse revealed auditors and attorneys who tried to stop Enron’s fraudulent practices suffered retaliation. The hearings also revealed that many of the accountants, auditors and lawyers who knew about the fraud chose to ignore it and keep quiet. The point of Sarbanes-Oxley is to ensure that corporate employees are able to blow the whistle without fear of reprisal.
A consensus is emerging that the duty speech doctrine does not apply to SOX whistleblower claims. The duty speech defense asserts that disclosures made while performing routine job duties are outside the ambit of protected conduct. The defense became increasingly popular in the wake of the Supreme Court’s 2006 decision in Garcetti v. Ceballos, which held that government employees cannot bring First Amendment whistleblower retaliation claims based on work-related speech if the speech is part of their job duties. See Garcetti v. Ceballos, 547 U.S. 410, 422 (2006).
Most DOL ALJs addressing this issue have declined to apply Garcetti to SOX claims. For example, Judge Lee Romero Jr. concluded that “one’s job duties may broadly encompass reporting of illegal conduct, for which retaliation results. Therefore, restricting protected activity to place one’s job duties beyond the reach of the Act would be contrary to congressional intent.” Deremer v. Gulfmark Offshore, Inc., ALJ Case No. 2006-SOX-2, 2007 WL 6888110, at *42 (June 29, 2007). The ARB has also declined to apply the duty speech defense to SOX claims. See Robinson v. Morgan Stanley, ARB Case No. 07-070, 2010 WL 348303, at *8 (Jan. 10, 2010) (“[Section 1514A] does not indicate that an employee’s report or complaint about a potential violation must involve actions outside the complainant’s assigned duties.”).
Recently, a New York district court held that the duty speech defense is inapplicable to SOX claims. See Yang v. Navigators Grp., Inc., 18 F. Supp. 3d 519, 530 (S.D.N.Y. May 8, 2014). Jennifer Yang worked as the chief risk officer for Navigators Group (“Navigators”), an insurance company. Yang alleged that Navigators terminated her employment for disclosing to her supervisor deficient risk management and control practices. Navigators moved to dismiss Yang’s SOX claim in part on the basis that Yang’s disclosures about risk issues were “part and parcel of her job.” Id. The court rejected this duty speech argument, relying on a 2012 district court decision holding that “whether plaintiff’s activity was required by job description is irrelevant.” See id. at 531 (citing Barker v. UBS AG, 888 F. Supp. 2d 291, 297 (D. Conn. 2012)).
In an ERA whistleblower case, the ARB held that whistleblower activity arising out of one’s assigned duties does not disqualify that activity as being protected. Vinnett v. Mitsubishi Power Sys., ARB No. 08-104, ALJ No. 2006-ERA-29, slip op. at 10-11 (ARB July 27, 2010).
Another recent decision, which arose under New Jersey’s robust whistleblower protection statute, provides a detailed analysis of why the duty speech doctrine is contrary to the purpose of whistleblower protection laws. See generally Lippman v. Ethicon, Inc., 119 A.3d 215 (N.J. 2015).
Joel Lippman worked at Ethicon, a manufacturer of medical devices used for surgical procedures, from July 2000 until his termination in May 2006. Ethicon is a subsidiary of Johnson & Johnson (“J&J”). During the ten years before he was transferred to Ethicon, Lippman worked at Ortho-McNeil Pharmaceutical (“OMP”), another J&J subsidiary, as director of medical services and then vice president of clinical trials.
At Ethicon, Lippman began as vice president of medical affairs, until Ethicon promoted him to worldwide vice president of medical affairs and chief medical officer in 2002. As vice president of medical affairs, Lippman was “responsible for safety, ensuring that safe medical practices occurred in clinical trials of [Ethicon’s] products; . . . medical reviews, information from a medical standpoint; [and] medical writing.” Id. at 218 (alterations in original) (citation omitted). Consistent with those responsibilities, Lippman served on multiple internal review boards for Ethicon. Generally, those boards addressed strategic product activities and evaluated the health and safety risks of products. As a member of those boards, Lippman was to provide medical and clinical expertise and opinions. In short, Lippman contributed to Ethicon’s high-level policy decision-making.
The court noted that Lippman served on a quality board that assessed the health risks posed by Ethicon’s products and provided “medical input” regarding whether corrective measures were required for any products already in the field. The quality board could take various corrective actions. At times, a product recall became necessary because of regulatory requirements, Ethicon policy, patient health and safety concerns, or a combination thereof. Ethicon gave the quality board the final say in what, if any, corrective actions to take—even when there was no government directive. Members of the quality board were “expected to express their view points from their” area of knowledge or expertise.
During his employment, and arguably within the course of his ordinary job duties, Lippman objected to several of OMP’s and Ethicon’s pharmaceutical products on safety and compliance grounds. When Lippman was terminated, he brought suit under New Jersey’s Conscientious Employee Protection Act (“CEPA”), alleging that he was fired for his objections.
The trial court granted summary judgment for Ethicon, holding that the law’s protection does not extend to disclosures made pursuant to an employee’s ordinary job duties. The appellate division reversed, based largely on an interpretation of the statutory text.
The New Jersey Supreme Court affirmed, concluding that, based on the statute’s purpose and text, an employee is entitled to protection regardless of his or her duties or title, including compliance or “watchdog” employees. See id. at 228. After stating that its primary goal was to implement legislative intent, the court emphasized CEPA’s settled “public policy purpose to protect whistleblowers from retaliation by employers having been long recognized by the courts of this State.” Id. at 224 (citations omitted). The court reiterated that “[a]fter nearly two decades of implementation, it is beyond dispute that the legislative purpose animating CEPA is . . . to ‘protect and encourage employees to report illegal or unethical workplace activities and to discourage public and private sector employers from engaging in such conduct.’” Id. at 225 (quoting Abbamont v. Piscataway Twp. Bd. of Educ., 650 A.2d 958, 971 (N.J. 1994)).
Within that context, the statute’s plain meaning extends protection to all disclosures that otherwise meet the requirements for protection, regardless of the whistleblower’s job duties. See id. at 228. Holding to the contrary would improperly “engraft language that the Legislature has not chosen to include” and deny the remedial legislation a liberal construction. See id. at 226. The court approvingly cited the appellate panel’s observation that “watchdog employees are the most vulnerable to retaliation because they are ‘uniquely positioned to know where the problem areas are and to speak out when corporate profits are put ahead of consumer safety.’” Id. at 220 (citation omitted). But the New Jersey Supreme Court went even further than the appellate division and rejected any additional requirement on “watchdog” employees under CEPA. See id. at 231.
SOX Whistleblower Protection for Corporate Whistleblowers
The whistleblower protection provision of the Sarbanes-Oxley Act provides robust protection to corporate whistleblowers, and indeed some SOX whistleblowers have achieved substantial recoveries. On the fifteenth anniversary of SOX, leading whistleblower law firm Zuckerman Law released a free guide to the SOX whistleblower protection law: “Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers.” The guide summarizes SOX whistleblower protections and offers concrete tips for corporate whistleblowers based on lessons learned during years of litigating SOX whistleblower cases.
The goal of the guide is to arm corporate whistleblowers with the knowledge to effectively combat whistleblower retaliation, avoid the pitfalls that can weaken a SOX whistleblower case, and formulate an effective strategy to obtain the maximum recovery.