Is a Sarbanes-Oxley Whistleblower Required to Prove Pretext?
Under the Department of Labor’s Administrative Review Board decision in Palmer v. Canadian National Railway, ARB No. 16-035, ALJ No. 2014-FRS-154 (ARB Sept. 30, 2016), a corporate whistleblower proceeding under the anti-retaliation provision of the Sarbanes Oxley Act need only show that their protected conduct was a contributing factor in that adverse employment action. The whistleblower need not show that the employer’s reason for the adverse action is untrue as long as the protected activity played any role in the adverse action.
Though the ARB held that ALJs can consider an employer’s reason for taking an adverse action in determining whether the whistleblower has proven “contributing factor” causation, such evidence will rarely be dispositive where there is any evidence that the complainant’s protected conduct played any role in the adverse action. Since the whistleblower need show only that the protected activity played a role in the adverse action, “the employee necessarily prevails at step one if there was more than one reason and one of those reasons was the protected activity.” Palmer, ARB No. 16-035 at 53.
Palmer also clarifies several critical aspects of the burden-shifting framework under most of the DOL whistleblower-protection laws:
- “Contributing factor” causation is a broad and forgiving standard for whistleblowers, requiring the complainant to show that protected activity played some role—even an insignificant or insubstantial role—in the adverse action.
- Decision-maker knowledge of the protected activity and close temporal proximity will suffice to prove causation in some cases.
- A whistleblower need not disprove the employer’s reasons for taking an adverse action (i.e., prove pretext) to demonstrate causation.
- “Since the ‘contributing factor’ standard requires only that the protected activity play some role in the adverse action, the employer’s nonretaliatory reasons are not ‘weighed against’ the employee’s protected activity to determine which reasons might be weightier. In other words, the ALJ should not engage in any comparison of the relative importance of the protected activity and the employer’s nonretaliatory reasons.” at 55.
- Once the whistleblower demonstrates contributing factor causation (a minimal burden), the employer has an onerous burden to prove by clear and convincing evidence that it would have taken the adverse action absent the employee’s engaging in protected conduct. “It is not enough for the employer to show that it could have taken the same action; it must show that it would have. . . . Quantified, the probabilities might be in the order of above 70%.” at 57.
SOX Whistleblower Law
The whistleblower protection provision of the Sarbanes-Oxley Act provides robust protection to corporate whistleblowers, and indeed some SOX whistleblowers have achieved substantial recoveries. Earlier this year, a former in-house counsel at a biotechnology company recovered $11 million in a SOX whistleblower retaliation case alleging that the company fired him for disclosing violations of the Foreign Corrupt Practices Act.
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.whistleblower_lawyers_012017_infographic