Elements and Burden of Proof of a Whistleblower Claim under Sarbanes-Oxley

Bechtel v. Administrative Review Bd., U.S. Dep't of Labor, 2013 U.S. App. LEXIS 4539 (2d Cir. Mar. 5, 2013):

Section 806 of the Sarbanes-Oxley Act, 15 U.S.C. § 1514A, seeks to combat what Congress identified as a corporate "culture, supported by law, that discourage[s] employees from reporting fraudulent behavior not only to the proper authorities, such as the FBI and the SEC, but even internally." S. Rep. No. 107-146, at 5 (2002). To accomplish this goal, § 1514A "protects 'employees when they take lawful acts to disclose information or otherwise assist . . . in detecting and stopping actions which they reasonably believe to be fraudulent.'" Guyden v. Aetna, Inc., 544 F.3d 376, 383 (2d Cir. 2008) (quoting S. Rep. No. 107-146, at 19). Specifically, § 1514A makes it unlawful for publicly traded companies to "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" certain laws, rules, and regulations addressing various types of fraud. 18 U.S.C. § 1514A(a)(1).

The relevant burdens of proof for whistleblower retaliation claims under § 1514A are contained in the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century ("AIR 21"), 49 U.S.C. § 42121(b), see 18 U.S.C. § 1514A(b)(2), and the Code of Federal Regulations at 29 C.F.R. §§ 1980.100-1980.115. Although we have not previously described the elements and burdens of proof set forth by these provisions, see 49 U.S.C. § 42121(b)(2)(B)(iii), (iv); 29 C.F.R. § 1980.109(a), (b), our sister Courts of Appeals have. As they have explained:

"To prevail under [§ 1514A], an employee must prove by a preponderance of the evidence that (1) she engaged in protected activity; (2) the employer knew that she engaged in the protected activity; (3) she suffered an unfavorable personnel action; and (4) the protected activity was a contributing factor in the unfavorable action. If the employee establishe[s] these four elements, the employer may avoid liability if it can prove 'by clear and convincing evidence' that it 'would have taken the same unfavorable personnel action in the absence of that protected behavior.'"

Harp v. Charter Commc'ns, Inc., 558 F.3d 722, 723 (7th Cir. 2009) (alterations omitted) (quoting Allen v. Admin. Review Bd., 514 F.3d 468, 475-76 (5th Cir. 2008), in turn quoting 49 U.S.C. § 42121(b)(2)(B)(iv)). We agree that this framework is established by the relevant regulations and is consistent with the statute. See 49 U.S.C. § 42121(b)(2)(B)(iii), (iv); 29 C.F.R. § 1980.109(a), (b).

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