Are California Employees Protected By SOX?

Yes. SOX protects employees of publicly traded companies and their subcontractors. The definition of “employee” is broad under the statute, and generally includes present and former workers, supervisors, managers, officers, and even independent contractors.

What Does The Whistleblower Have To Prove?

There are three central elements to a SOX claim:

  1. the employee is engaged in protected activity;
  2. the employer took adverse employment action against the employee; and
  3. the adverse employment action against the employee was caused at least in part by the protected activity.

What Is Protected Activity?

SOX protects an employee who provides information that the employee “reasonably believes constitutes a violation” of the enumerated laws to (1) a federal law enforcement agency or regulatory agency, (2) a committee or member of Congress, (3) a person with supervisory authority over the employee, or (4) a person working for the employer who has the authority to investigate, discover, or terminate misconduct. This definition has been further expounded in both administrative and federal court decisions.

While the employee must reasonably believe the employer is engaged in fraud or a violation of securities laws, however, he or she need not be right in that belief. As long as the employee’s belief is reasonable, the employer cannot retaliate against the employee for speaking out, even if the belief ultimately proves to be wrong.

SOX protects an employee’s communication about a violation that has not yet occurred “as long as the employee reasonably believes that the violation is likely to happen.”
“A whistleblower concerning a violation about to be committed is protected as long as the employee reasonably believes that the violation is likely to happen.  Such a belief must be grounded in facts known to the employee, but the employee need not wait until a law has actually been broken to safely register his or her concern.”

What Remedies Are Available To Successful Whistleblowers?

The Sarbanes-Oxley Act entitles employees who prevail on their whistleblower claims to:

  • Reinstatement
  • Backpay with interest
  • Complete “make-whole” compensation (including restoration of seniority/sick leave, etc)
  • “Special Damages” (for emotional distress and loss of professional reputation)*
  • Attorneys’ fees and costs
  • “Affirmative Relief” (such as requiring a letter of apology and formal posting of the decision)

Am I required to arbitrate my claims if my employer forced me to sign an arbitration agreement when I was hired?

No! Even if you signed an arbitration agreement that would otherwise be enforceable, under federal law arbitration of Sarbanes Oxley claims cannot be compelled. 18 U.S.C. § 1514A(e)(2). Moreover, courts will not compel arbitration of other claims that arise out of the same operative facts as the retaliation SOX claim. Stewart v. Doral Fin. Corp., 997 F. Supp. 2d 129, 139-40 (D.P.R. 2014); Laubenstein v. Conair Corp., No. 5:14-CV-05227, 2014 WL 6609164, at *3 (W.D. Ark. Nov. 19, 2014). Given that arbitrators are typically far more conservative than juries, the prohibition on arbitration of SOX claims is tremendously advantageous for employees. The exposure to large jury awards of damages for emotional distress as well as punitive damages, the ban on arbitration of these claims increases employer’s potential liability exponentially.

The Sarbanes-Oxley Act provides strong protections for employees, and our experienced California lawyers stand ready to support California workers who blow the whistle on unlawful activity. Contact Feldman Browne Olivares, APC located in Los Angeles, California for an evaluation of your case with no further obligation.

1 Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745 (2002).

2 Morefield v. Exelon Services, Inc. (Jan. 28, 2004) 2004-SOX-2; 2004 WL 5030303, *2.

3 Van Asdale v. Int’l Game Tech., 577 F.3d 989, 1000 (9th Cir. 2009).

4 18 U.S.C. §§ 1514A(a)(1)-(2) (Supp. 2006).

5 18 U.S.C. § 1514A(a).

6 Id.

7 18 U.S.C. §§ 1514A(b), 1513(e).

8 18 U.S.C. § 1514A(a)(1) (Supp. 2006).

9 Chevron U.S.A, Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837. Wiest v. Lynch, 710 F.3d 121, 133 (3d Cir. 2013).

10 Sylvester v. Parexel Int’l LLC (ARB May 25, 2011) ARB Case No. 07-123, ALJ Case Nos. 2007-SOX-39, 2007-SOX-42, 2011 WL 2165854, *13.