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.