Publicly traded companies have a new worry: Employees can use the whistle-blowing provisions of the Sarbanes-Oxley Act (SOX) as another way to get back at employers when they are disciplined or fired.
SOX makes it illegal to discipline an employee who complains that the company may be violating the Securities Exchange Act. That includes anything that might mislead shareholders.
But employers can easily defeat SOX whistle-blowing claims if they can show solid, business-related reasons for disciplinary decisions—such as proof they would have fired the employee whether or not he had complained about possible securities violations.
Recent case: Mark Livingston oversaw training programs for Wyeth’s Sanford facility. The company had a history of U.S. Food and Drug Administration (FDA) violations at other facilities and was under orders to increase its training efforts. Livingston complained that the training program he was planning was delayed, and that meant possible future FDA violations at his facility.
Livingston also had his own troubled history. Subordinates regularly quit or demanded transfers. The last straw was a holiday party Livingston threw for his staff. When the HR director arrived unannounced and uninvited, Livingston told him, “You’re not invited. We have a gift exchange. You have no gift. We have limited food. I need you to leave.” Livingston then threatened to call the police and have the HR manager escorted off the premises.
Wyeth fired Livingston, and he sued under SOX. He alleged that delayed training would mean that the company would miss deadlines and might falsify inspections. That, in turn, Livingston reasoned, would mislead shareholders.
The court tossed out the case. It reasoned that Livingston’s scenario was speculative and not part of legitimate whistle-blowing. Plus, Wyeth proved it would have fired Livingston for insubordination anyway. (Livingston v. Wyeth, No. 06-1939, 4th Cir., 2008)
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