IF THE COURT SIDES WITH THE EMPLOYEES’ POSITION, THE EMPLOYEES OF MILLIONS OF PRIVATE COMPANIES THAT ARE CONTRACTORS TO PUBLIC COMPANIES MAY HAVE NEW CAUSES OF ACTION. THIS DECISION RAISES THE QUESTION OF WHETHER THE SUPREME COURT WILL GIVE DEFERENCE TO THE ARB.
Specifically, on September 30, 2013, OSHA awarded more than $1.9 million to a company’s former CFO based on its finding that the company violated Section 806 of SOX by discharging the CFO in retaliation for his warning the board of directors about financial concerns raised by a proposed merger. OSHA ordered the company to: pay the complainant more than $486,000 in lost wages, bonuses, stock options and severance pay; pay over $1.4 million in compensatory damages for pain and suffering, damage to career and professional reputation, and lost 401(k) employer matches and expenses; post OSHA’s findings in a Form 8-K submission to the SEC; and pay reasonable attorney’s fees. Consider how OSHA’s compensatory damage award nearly dwarfs the lost wages and query whether OSHA is authorized to require a company to include particular items in its SEC filings. Then, on November 13, 2013, in a matter arising under the whistleblower protection provision in a similar whistleblower law, the Surface Transportation Assistance Act, OSHA ordered a company to pay a total of $1,070,123 to four whistleblowers, and to reinstate the whistleblowers. OSHA’s orders are issued before an employer has an opportunity to participate in a full evidentiary hearing and confront its accuser in a meaningful way. Though OSHA determinations technically qualify as “preliminary orders,” their import cannot be discounted, as the DOL regularly makes substantial efforts to enforce them, and they embolden whistleblowers to pursue their claims. In short, it is imperative that employers approach claims before OSHA with a high degree of diligence and caution. B. A Circuit Split Deepened Over The Scope Of Protected Activity The ARB issued a decision back on May 25, 2011, in Sylvester v. Parexel International LLC, expansively interpreting the scope of protected activity under SOX. That decision is at odds with decisions issued by a number of federal circuit courts of appeal. A circuit split has widened in the wake of that decision. Indeed, on March 19, 2013, in Wiest v. Lynch, the Third Circuit Court of Appeals gave Chevron deference to the ARB’s interpretation of “protected activity” under SOX, concluding that a whistleblow-
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er’s complaint need not “definitively and specifically” relate to one of the categories of misconduct set forth in Section 806. That decision is at odds with decisions issued by the First, Fifth, Sixth and Ninth Circuits, and employers are concerned that it may open the floodgates to claims that bear a highly attenuated relationship to the categories of fraud listed in Section 806. Moreover, given this circuit split, it may be just a matter of time before the matter ascends to the Supreme Court. C. A SOX Whistleblower Case Finally Reaches The Supreme Court On November 12, 2013, the Supreme Court heard oral argument in the first whistleblower case to reach this tribunal, Lawson v. FMR LLC. The issue before the Court is whether the whistleblower protection in Section 806 extends to employees of a publicly traded company’s contractors. If the Court sides with the employees’ position, the employees of millions of private companies that are contractors to public companies may have new causes of action. This decision also raises the question of the extent to which the Supreme Court will give deference to the ARB, as it addresses a conflict between a decision from the First Circuit favoring the employer position and a decision from the ARB to the contrary. During oral argument before the Court, several of the Justices questioned the propriety of the application of the statute to small “mom-and-pop”-type private employers, perhaps suggesting the Court disagrees with the expansive approach advocated by the petitioners (employees) and the ARB. Notably, the government conceded during the oral argument that, at a minimum, only employees of contractors engaged in work connected with the public company could bring a claim under Section 806. The petitioners’ counsel, however, refused to agree to a limiting principle. When considering the Court’s approach to retaliation claims, it is worth noting that, on June 24, 2013, the Court issued a highly favorable ruling for employers in a case arising under Title VII of the Civil Rights Act of 1964. Specifically, the Court adopted a “but-for” causation standard for Title VII retaliation claims. The
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