DoL Adopts New Standard for SOX Whistleblower Cases

September 29, 2011 ( - The U.S. Department of Labor’s Administrative Review Board (ARB) adopted a new standard  governing “adverse employment actions” under Section 806 of the Sarbanes-Oxley Act of 2002 (SOX).

A client alert from law firm Seyfarth Shaw LLP says that now, according to the ARB in Menendez v. Halliburton, Inc., Case No. 09-002, an employee need not experience a “tangible” consequence as a result of his or her protected activity.    

The ARB analyzed Anthony Menendez’s claim that the company’s outing of his identity breached a right to confidentiality under Section 301 of SOX, which requires publicly-traded companies to establish procedures for confidential, anonymous submissions of employee complaints.  The ARB found that Section 301 “effectively establishes a ‘term and condition’ of employment within the meaning of Section 806’s whistleblower protection provision,” and concluded that outing Menendez as a whistleblower thus constituted an adverse action. The ARB remanded the case for a determination of causation issues.  

According to Seyfarth Shaw, in late 2005, Menendez confidentially filed a complaint with the Securities and Exchange Commission (SEC) stating concerns about Halliburton, Inc.’s alleged accounting practices. In early 2006, he e-mailed a complaint to the company’s internal audit committee raising essentially the same issues and he included his name and contact information in that message. The company’s Assistant General Counsel allegedly forwarded the complaint to internal audit committee members, the General Counsel, and Chief Financial Officer.    

The SEC subsequently informed the company that it was opening an investigation into its accounting practices. Shortly thereafter, the General Counsel allegedly informed several managers by e-mail that the SEC “opened an inquiry into the allegations of Mr. Menendez.” The Chief Accounting Officer also allegedly passed on this e-mail to members of Menendez’s department.  Menendez then took a paid administrative leave, and resigned before he was scheduled to return.    

Menendez filed suit under Section 806, alleging that the company retaliated against him because of his complaints to the audit committee and the SEC, stressing that the company violated his expectations of confidentiality by identifying him as a whistleblower. The Administrative Law Judge dismissed Menendez’s complaint, finding that he failed to demonstrate that the company had taken adverse actions against him. The ARB, however, found that the ALJ erred in finding that Menendez did not suffer an adverse action.    

The ARB’s decision initially noted that Section 806 “explicitly proscrib[es] non-tangible activity … bespeaks a clear congressional intent to prohibit a very broad spectrum of adverse action against SOX whistleblowers.”  Further, although the ARB recognized that the Supreme Court’s landmark decision in Burlington Northern & Santa Fe Railway Co. v. White, 548 U.S. 53 (2006) was instructive, it stressed that Burlington Northern involved the standard under Title VII, and concluded that Section 806 affords greater protections than Title VII.    

Thus, the ARB instead relied on Williams v. American Airlines, Inc., No. 09-018 (ARB Dec. 29, 2010), which held (in the context of an AIR 21 retaliation claim), that adverse action “refers to unfavorable employment actions that are more than trivial.”  The ARB went further to conclude that Section 806’s reference to the “terms and conditions of employment” does not limit SOX’s protections to “economic or employment-related actions.”