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August 16, 2004

Sarbanes-Oxley: whistleblowers' delight?

The Sarbanes-Oxley bill made it unlawful for companies to take negative employment action against staffers who blow the whistle on various improper financial practices, but one consequence may be to put a premium, among employees with potential disputes with their employers, on characterizing themselves as having raised such objections. Such claims are mounting rapidly in number and may become a significant sector within employment law in the future. (Tamara Loomis, "Whistle while you work", Corporate Counsel, Jun. 9; Alexei Oreskovic, "Fighting Fraud or Whistling Dixie?", The Recorder, Apr. 26; Charles H. Kaplan, Thelen Reid & Priest, Winter 2002-03.)

Here's an excerpt from Robert P. Riordan and Lisa Durham Taylor, "Sarbanes-Oxley Whistleblower Claims: Fast Start or Fizzle?", Alston & Bird LawMemo, undated: "So far, seven of the first 169 cases have reached federal court. Once in court, there is a significant risk that the plaintiff will try to burden the company with high-cost discovery aimed at putting the companyís accounting practices on trial. The employee will argue that he needs to discover such information in order to satisfy his obligation to show a good-faith basis for his belief that wrongdoing occurred. The true issue, however, remains whether the employee spoke out and was retaliated against as a result, not whether accounting improprieties occurred. Thus, companies may make a strategic decision not to contest the good-faith element, and thereby try to limit discovery to avoid expense and keep the dispute focused on alleged retaliation."

Posted by Walter Olson at 12:06 AM | TrackBack (1)

Employment Law



Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.