Labor & Employment Law

Sarbanes-Oxley: An explanation from the 5th Circuit

Allen v. Administrative Review Board (5th Cir 01/22/2008) is a must-read case for anyone involved with Sarbanes-Oxley whistleblower cases.

Allen filed a complaint with the Department of Labor against the employer, asserting a whistleblower claim under the Sarbanes-Oxley Act. An administrative law judge dismissed the complaint. The Administrative Review Board (ARB) affirmed that decision, which became the final order of the Secretary of Labor. The 5th Circuit affirmed.

The Act prohibits a publicly traded company from retaliating against an employee who reports information to a supervisor "regarding any conduct which the employee reasonably believes constitutes a violation" relating to one of six enumerated categories.

The court concluded that "an employee's reasonable belief must be scrutinized under both a subjective and objective standard." The court noted "[t]he 'objective reasonableness' standard applicable to [Sarbanes-Oxley Act] whistleblower claims is similar to the 'objective reasonableness' standard applicable to Title VII retaliation claims." The court also noted, however, "[w]e have previously declined to address whether the 'reasonable belief' element of a Title VII retaliation claim includes both a subjective and objective component."

The court determined ultimately that Allen did not act based on a reasonable belief and hence did not engage in protected activity under the Act.

For two good comments on this case, see:

• 5th Cir. Upholds SOX Decision of No Protected Activity from Michael Fox's Jottings By An Employer's Lawyer
• Fifth Circuit Decision Clarifies the Scope of Protected Conduct Under SOX from The Employment Law Group's Whistleblower Law Blog

Full post as published by Ross' Employment Law Blog on January 25, 2008 (boomark / email).