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The Scope of Protected Activity under the Sarbanes-Oxley Act: Recent Cases Mandate that Disclosures Be Reasonably Related To Fraud Against Shareholders


Sponsored By Katz, Marshall & Banks, LLP



Topics:
Compliance & Governance > DOJ , Sarbanes-Oxley
Professional Services > Legal Services


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Abstract:
Until recently, the question of whether SOX protects employees who raise concerns about an employer=s failure to adhere to generally accepted standards of performance in the accounting and finance industry has remained unanswered. In May 2007, the Administrative Review Board (ARB) of the U.S. Department of Labor decided the issue in the case of Welch v. Cardinal Bankshares Corporation. The ARB determined that an employee who reported his employer's deviation from generally accepted accounting practices (GAAP) and other industry standards was not necessarily engaging in protected activity under SOX because such deviations are not inherently violations of securities laws.


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Retaliation


An employer may not fire, demote, harass or otherwise "retaliate" against an individual for filing a charge of discrimination, participating in a discrimination proceeding, or otherwise opposing discrimination. The same laws that prohibit discrimination based on race, color, sex, religion, national origin, age, and disability, as well as wage differences between men and women performing substantially equal work, also prohibit retaliation against individuals who oppose unlawful discrimination or participate in an employment discrimination proceeding.


In addition to the protections against retaliation that are included in all of the laws enforced by EEOC, the Americans with Disabilities Act (ADA) also protects individuals from coercion, intimidation, threat, harassment, or interference in their exercise of their own rights or their encouragement of someone else's exercise of rights granted by the ADA.


There are three main terms that are used to describe retaliation. Retaliation occurs when an employer, employment agency, or labor organization takes an adverse action against a covered individual because he or she engaged in a protected activity. These three terms are described below.



Adverse Action

An adverse action is an action taken to try to keep someone from opposing a discriminatory practice, or from participating in an employment discrimination proceeding. Examples of adverse actions include:



  • employment actions such as termination, refusal to hire, and denial of promotion,
  • other actions affecting employment such as threats, unjustified negative evaluations, unjustified negative references, or increased surveillance, and
  • any other action such as an assault or unfounded civil or criminal charges that are likely to deter reasonable people from pursuing their rights.

Adverse actions do not include petty slights and annoyances, such as stray negative comments in an otherwise positive or neutral evaluation, "snubbing" a colleague, or negative comments that are justified by an employee's poor work performance or history.


Even if the prior protected activity alleged wrongdoing by a different employer, retaliatory adverse actions are unlawful. For example, it is unlawful for a worker's current employer to retaliate against him for pursuing an EEO charge against a former employer.


Of course, employees are not excused from continuing to perform their jobs or follow their company's legitimate workplace rules just because they have filed a complaint with the EEOC or opposed discrimination.


For more information about adverse actions, see EEOC's Compliance Manual Section 8, Chapter II, Part D.


Covered Individuals

Covered individuals are people who have opposed unlawful practices, participated in proceedings, or requested accommodations related to employment discrimination based on race, color, sex, religion, national origin, age, or disability. Individuals who have a close association with someone who has engaged in such protected activity also are covered individuals. For example, it is illegal to terminate an employee because his spouse participated in employment discrimination litigation.


Individuals who have brought attention to violations of law other than employment discrimination are NOT covered individuals for purposes of anti-discrimination retaliation laws. For example,"whistleblowers" who raise ethical, financial, or other concerns unrelated to employment discrimination are not protected by the EEOC enforced laws.


Protected Activity

Protected activity includes:



Opposition to a practice believed to be unlawful discrimination

Opposition is informing an employer that you believe that he/she is engaging in prohibited discrimination. Opposition is protected from retaliation as long as it is based on a reasonable, good-faith belief that the complained of practice violates anti-discrimination law; and the manner of the opposition is reasonable.


Examples of protected opposition include:



  • Complaining to anyone about alleged discrimination against oneself or others;
  • Threatening to file a charge of discrimination;
  • Picketing in opposition to discrimination; or
  • Refusing to obey an order reasonably believed to be discriminatory.

Examples of activities that are NOT protected opposition include:



  • Actions that interfere with job performance so as to render the employee ineffective; or
  • Unlawful activities such as acts or threats of violence.

Participation in an employment discrimination proceeding.

Participation means taking part in an employment discrimination proceeding. Participation is protected activity even if the proceeding involved claims that ultimately were found to be invalid. Examples of participation include:



  • Filing a charge of employment discrimination;
  • Cooperating with an internal investigation of alleged discriminatory practices; or
  • Serving as a witness in an EEO investigation or litigation.

A protected activity can also include requesting a reasonable accommodation based on religion or disability.


For more information about Protected Activities, see EEOC's Compliance Manual, Section 8, Chapter II, Part B - Opposition and Part C - Participation.


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