HEAL Advisory: Sarbanes-Oxley Whistleblower Coverage Expanded by Department of Labor to Private Firms Serving Publicly Traded Companies - Accountants, Lawyers, Consultants, and Advisors, Beware!


The U.S. Department of Labor ("DOL") Administrative Review Board ("ARB") has sounded an alarm that needs to be heard by accounting firms, law firms, and other consultants, advisors, and providers of services to publicly traded companies. With its recent decision in Spinner v. David Landau & Associates, LLC, ARB Case Nos. 10-111, 10-115 (May 31, 2012), the ARB continued its expansion of whistleblower protection, holding that Sarbanes-Oxley ("SOX") whistleblower protections extend to employees of privately held businesses that merely contract with publicly traded companies. The ARB's decision significantly expands the number and type of organizations whose employees it says are covered by SOX whistleblower protections. But the result was accomplished by direct rejection of the opposite conclusion reached by the U.S. Court of Appeals for the First Circuit in its well-reasoned recent decision in Lawson v. FMR LLC, 670 F.3d 61 (1st Cir. 2012). While this is not the first instance of contrasting administrative and judicial interpretations of the definition and reach of SOX protections, it clearly indicates the current climate in which a wide swath of employers need to reassess their compliance programs, provisions for receipt of whistleblower reports, and procedures for addressing claims and avoiding retaliation.

This case is only the latest, albeit typical, example of the tension existing between ARB decisions issued since 2010 and the prior mainstream interpretation of SOX by administrative law judges ("ALJs"), a differently constituted ARB, and the courts. It highlights two issues unique to the statutory scheme of SOX and certain other whistleblower laws. First, there is dual jurisdiction of the DOL and federal courts to adjudicate cases. A case must commence in the DOL administrative forum (initiated by a complaint filed with the Occupational Safety and Health Administration ("OSHA")), but it may be placed in federal court after 180 days – if the complainant wishes. That means federal district courts share co-equal primary jurisdiction with an administrative agency for any cases that are taken out of administrative litigation into a federal court. Also, federal appellate courts have review authority over final administrative determinations by the ARB. Second, the ARB has upset and reinterpreted core elements on which SOX claims are predicated. It has shifted – and in many instances reversed – its own course and precedent-following decisions of DOL ALJs, as new ARB members, serving at the will of the Secretary of Labor, have been installed to displace others.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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