Retaliation cases continue to grow in number and, in a decision on June 4, 2013 of the Tenth Circuit Court of Appeals, in scope as well. There, the Court in Lockheed Martin Corporation v. Administrative Review Board of the United States Department of Labor gave an expansive reading of what constitutes protected activity and retaliation under the Sarbanes-Oxley Act (http://www.soxlaw.com/) (SOX).
SOX provides whistleblower protection to employees of publicly traded companies. SOX prohibits an employer from discharging, demoting, or taking an adverse action against an employee who provides information about or participates in an investigation involving activity an employee reasonably believes constitutes mail, bank, securities, or wire fraud, a violation of a rule involving the SEC, or any federal law relating to fraud against shareholders. While numerous employees have filed administrative actions or cases involving SOX, the narrow definition of “protected activity” has historically limited the type and scope of cases.
In Lockheed Martin, the employee complained that her superior was engaged in inappropriate sexual activities through a “pen pal” program the company had with members of the military. Specifically, the employee complained the supervisor was using company funds to pay for hotels, gifts, and transportation with people the supervisor met through the program, and then passed these expenses on to its clients, in this case, the Department of Defense. The employee filed a complaint through a company hotline. Thereafter, the employer announced a reorganization of the department in which the employee worked. The employee was subjected to a series of moves she deemed retaliatory, including the way in which her position had been restructured, loss of her office, and being prevented from attending a conference. The employee quit, claiming “forced termination,” and filed a SOX complaint. An administrative law judge awarded the employee $75,000 in compensatory damages, reinstatement, back pay, and medical expenses. The Administrative Review Board affirmed the decision.
Lockheed Martin had argued that the employee’s complaints did not relate to shareholder fraud and therefore were not covered by SOX. The Tenth Circuit disagreed and affirmed the decision of the Administrative Review Board. Of importance to employers, the Court ruled, “an employee complaint need not specifically relate to shareholder fraud to be actionable under the Act [SOX].” This is a broader read than what other courts have previously allowed and, if followed by other courts, expands the type of complaints that may be considered protected activity. The Tenth Circuit additionally ruled that while an employee must show the complaint was a “contributing factor” in an unfavorable personnel action, the standard for determining this is “broad and forgiving” and to be read in favor of the employee. Finally, the Court also affirmed the decision that the employee had been constructively discharged.
So what does this mean for employers? First, the case is one of the broadest readings to date of protected activity under SOX and may encourage employees to file more SOX complaints. Second, the case demonstrates again how careful employers must be in making even seemingly small personnel changes (e.g., change of title, office move, disallowing attendance at a conference) when an employee has otherwise raised complaints about company activity (or in this case, her supervisor’s activity). In other words, small actions can grow into a claim for retaliation. Employers must be able to show definitively and with good reasons why adverse personnel moves are made and be prepared to show the same decision would have been made even absent the employee’s complaint.