Sarbanes-Oxley Act of 2002

Congress, in the wake of the Enron and Worldcom scandals, passed the Sarbanes-Oxley Act. The Act creates for public companies myriad reporting and disclosure requirements. In terms of its impact on employment law, Sarbanes-Oxley makes it illegal for an employer to terminate an employee for disclosing any act the employee believes to be a law relating to fraud against shareholders.

Sarbanes-Oxley, in relevant part, states:

No [publicly traded company] . . . may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee . . . to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of [18 U.S.C. § §] 1341 [mail fraud], 1343 [wire fraud], 1344 [bank fraud], or 1348 [securities fraud], any rule or regulation of the [SEC], or any provision of Federal law relating to fraud against shareholders, when the information or assistance is provided to . . . a person with supervisory authority over the employee…

In terms of its impact on employment law, Sarbanes-Oxley makes it illegal for an employer to terminate an employee for disclosing any act the employee believes to be a law relating to fraud against shareholders. This is the so-called “whistleblower” or “retaliation” provision of the Act. Sarbanes-Oxley, of course, applies to only publicly-traded corporations.

The anti-retaliation provision of the Sarbanes-Oxley Act has very specific filing requirements. There are also some extremely short deadlines. An employee who believes his/her termination was in violation of the Act may pursue legal action and money damages.

We have represented multiple clients with Sarbanes-Oxley whistleblower issues.