SOX Regulations & Exposure
SOX Whistleblower Regulations, Scope of Protection, and Exposure
Scope of Protections - Section 806 of SOX *protects any employee of a publicly traded company, or any employee of a contractor of a publicly traded company, from retaliation for providing information or participating in an investigation of activities that he or she believes constitutes a violation of federal securities or SEC rules.
Section 806 provides that an employer subject to the Act may not “discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment. The Fifth Circuit Court of Appeals **has recently stated in the Sox Whistleblower context that: a “tangible job consequence” is one that “constitutes a significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing significant change in benefits.”
Civil Exposure and Remedy - The Act provides that a successful SOX whistleblower may obtain “all relief necessary to make the employee whole”. Examples are reinstatement with full related rights and benefits, back pay with interest, and any special damages you can prove you incurred as a result of the employers adverse employment actions. Reputational damages have been awarded to Sarbanes Oxley Whistleblowers. The SOX whistleblower is also entitled to recover his or her reasonable attorney fees, expert fees, witness fees and other litigation fees.
The Act also provides that a prevailing company in a SOX whistleblowing case may be awarded attorneys fees not to exceed $1,000, but only if it is determined that the employee’s case was frivolous or brought bad faith.
Criminal Penalties for Retaliation Against Informants - Section 1107 of the Act imposes severe criminal penalties on “whoever knowingly, with the intent to retaliate, takes any action harmful to any person including interference with the lawful employment or livelihood of any person, for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense. The section of SOX is not limited to publicly traded employers. It appears to apply broadly to both individuals and corporations. The Section prohibits retaliation against persons who provide to a law enforcement officer “any truthful information” relating to the commission or possible commission of “any Federal offense.”