Almost 20 years ago, following the collapse of Enron and other high-profile corporate scandals, Congress passed the Sarbanes-Oxley Act, sweeping legislation aimed at cracking down on fraudulent financial reporting. Among other provisions, the act provided protections for investors who were victimized by fraudulent reports, such as those Enron published.
Sarbanes-Oxley also gave protections to workers who reported fraud by their employers. More recently, Congress has amended the act to strengthen these worker protections.
Whistleblowers and retaliation
Workers take a great risk when they report wrongdoing by their employers. Few employers are happy to learn that one of their employees has spoken to the authorities about something unflattering to the company. Employers may be tempted to retaliate against these whistleblowers by terminating their employment, demoting them, reassigning them or taking other negative employment-related action against them.
Doing so would be a mistake. State and federal laws offer many protections to whistleblowers who legally report everything from sexual harassment to violation of environmental laws to unsafe working conditions. Employers may not legally retaliate against a worker who has exercised their legal right to report misdeeds in the workplace.
For example, imagine Steve, an employee of Kentucky Widget Manufacturing, complains to his manager that the company’s equipment is unsafe, and may badly injure Steve or other employees. His manager brushes off his complaint. Frustrated and fearful that he is going to be injured, Steve reports the problem to the state Occupational Safety and Health agency. Steve’s manager finds out what Steve did and fires him. In this scenario, the manager engaged in illegal retaliation. State and federal laws give Steve the right to file suit against Kentucky Widget Manufacturing.
The example of the manufacturing company above is relatively straightforward. Retaliation cases involving Sarbanes-Oxley can be more complicated.
First, the protections apply only to companies regulated by the Securities Exchange Act. An employee at one of these companies who reports what they reasonably believe to be violations of the Sarbanes-Oxley Act is protected against retaliation by their employer.
The employee first files a complaint with the Secretary of Labor. The Labor Department then investigates the complaint. Depending on the circumstances, the Labor Department may give the worker a notice of the right to sue, or if it has not completed its investigation within a specified period of time, the worker gets the right to go ahead with a federal lawsuit against the employer.
If the worker prevails in the lawsuit, their remedies may include reinstatement in their old job with back pay, as well as any special damages they incurred as a result of the retaliation, including attorney fees.