The fraud scandals that rocked the U.S. economy at the beginning of this decade have led governments to re-examine legislation to protect whistleblowers. In the last issue of this newsletter, Karl Gustafson discussed Canada's amendments to the Criminal Code. In this issue, we look at a recent New York District Court decision that arguably extends whistleblower protection to employees working
outside the U.S.
In 2002, the U.S. enacted the Sarbanes-Oxley Act, commonly referred to as SOX. Among other things, the intent was:
To protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes.
To further this goal, the Act provides a private right
of action to any employee of a publicly traded company who suffers retaliation for reporting fraud. If successful, the employee may be entitled to relief that includes back pay, reinstatement and compensatory damages.
To succeed in a whistleblower claim under SOX,
the following must be shown:
* the employee engaged in "protected activity," (reporting to the U.S. government or a supervisor at their place of employment information that the employee reasonably believes relates to fraud);
* the employer knew of the protected activity;
* the employee suffered an "unfavourable personnel action," including termination, demotion or any other negative treatment that would reasonably be likely to deter other whistleblowers; and
* it can be seen that the protected activity was a contributing factor to the unfavourable action.