Sarbanes-Oxley Whistleblower Statute Does Not Protect Employees Who Leak Information To The Media
Published by Eric A. Welter on June 3, 2011
The U.S. Court of Appeals for the Ninth Circuit held that the provisions of the Sarbanes-Oxley Act (“SOX”) only protect employees of publicly-traded companies who disclose certain types of information to the three categories of recipients specifically enumerated in the Act, including federal regulatory and law enforcement agencies, Congress, and the employee’s supervisors. An employee’s […]
The U.S. Court of Appeals for the Ninth Circuit held that the provisions of the Sarbanes-Oxley Act (“SOX”) only protect employees of publicly-traded companies who disclose certain types of information to the three categories of recipients specifically enumerated in the Act, including federal regulatory and law enforcement agencies, Congress, and the employee’s supervisors. An employee’s reporting of information to the media is not protected under SOX. More after the break.
Plaintiffs were employed as internal auditors for defendant The Boeing Company. As internal auditors, plaintiffs were responsible for helping defendant comply with SOX requirements and assessing the effectiveness of its internal controls and procedures for financial reporting. Plaintiffs expressed concerns to defendant’s management and Human Resources about perceived pressure and deficiencies in defendant’s audit practices that they viewed as potential violations of SOX. Defendant maintained a policy that prohibited the release of information to the media without prior approval from defendant’s communications department. Despite this policy, plaintiffs discussed defendant’s SOX compliance with a newspaper reporter and emailed the reporter company documents. Shortly thereafter, an article was published by the Seattle Post-Intelligencer which concluded that defendant’s internal and external audits failed to protect against theft and fraud. Defendant learned of plaintiffs’ communication with the newspaper reporter when an investigation revealed that plaintiffs forwarded the reporter company documents from their work email accounts. After plaintiffs admitted to speaking with the newspaper reporter about defendant’s audit practices and providing her with company documents, defendant terminated plaintiffs’ employment for violating the media policy. Plaintiffs then filed lawsuits against defendant alleging that they were terminated in violation of the whistleblower provisions of SOX. The district court granted summary judgment in favor of defendant.
The Ninth Circuit affirmed the district court’s summary judgment in favor of defendant, holding that the plain language of the SOX whistleblower provision only protects an employee’s disclosure of information to a federal regulatory or other law enforcement agency, Congress, or the employee’s supervisor. As the newspaper reporter was not one of the three recipients expressly enumerated by SOX, plaintiffs’ disclosure to the newspaper reporter was not protected activity. The Ninth Circuit rejected plaintiffs contention that their disclosure of perceived SOX violations to the newspaper reporter was protected because reports to the media may eventually “cause information to be provide” to members of Congress or law enforcement agencies. The Ninth Circuit declined “to adopt such a boundless interpretation of the statute” because if Congress wanted to protect reports to the media under SOX, it could have listed the media as one of the entities to which protected reports could be made.
The Ninth Circuit’s complete opinion can be viewed here.Topics: Retaliation