Corporate Inefficiency Allegations Not Protected by SOX

February 12, 2009 ( - A federal judge in Massachusetts has rebuffed efforts by a former Staples, Inc. employee to gain protected whistleblower status over allegations the office supply retailer's return process cost too much.

The 1 st  U.S. Circuit Court of Appeals, in an opinion penned byChief Circuit Judge Sandra L. Lynch, saidKevin M. Day was not a whistleblower under theSarbanes-Oxley Act merely because of his opinion about the Staples product return program. Lynch said the appellate court upheld an earlier trial court ruling that was also in Staples’ favor.

According to the ruling, Staples told Day he was being terminated for poor performance and for being a distraction and disruptive.

The 1st Circuit said the Sarbanes-Oxley statute conferred protected status on those who bring forward information about violations of rules or regulations of the U.S. Securities and Exchange Commission or about instances of mail, wire, securities or bank fraud.

Lynch asserted that mere disagreements about corporate efficiency don’t rise to the level of allegations covered in the Sarbanes-Oxley law.

“A company may legitimately decide for a number of reasons that maximizing short-term profits through certain practices is not its goal, particularly if the practices lead to consumer unhappiness,” Lynch wrote. “Further, a company’s management may legitimately decide that certain practices are more efficient than others. A complaint about corporate efficiency is also not within the intended protection of SOX.”

The opinion in  Day v. Staples Inc ., No. 08-1689 (1st Cir.), is available here .