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SOX doesn’t protect safety whistle-blowers

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in Firing,Human Resources

Here’s a bit of good news for employers: A federal court in North Carolina has refused to add another legal avenue disgruntled employees can use to sue.

The court said even after recent amendments that expanded the scope of the law, the Sarbanes-Oxley (SOX) Act doesn’t protect whistle-blowers who report what they believe are serious safety violations at work. That’s because the law was intended only to safeguard employees who report fraud that affects investors.

Recent case: Steven worked for the Shaw Group as a quality engineering supervisor at a nuclear plant construction site. During a supplier audit, Steven began to suspect that a vendor was shipping defective steel to two nuclear reactor sites and two fuel fabrication facilities.

He told his supervisors that he was going to place a stop-work order on construction involving the steel. Otherwise, he would report the problem to the Nuclear Regulatory Commission.

Steven claims his supervisors refused to approve the stop-work order and instead changed the audit report to downplay problems. Steven sent the original report anyway—and was then fired.

He sued under SOX, arguing that by submitting a “fraudulent” audit report rather than the one he proposed, his em­­ployer was misleading investors.

The court disagreed, concluding that internally reporting safety concerns and possibly doctored audits isn’t the sort of fraud that Sarbanes-Oxley covers. Steven will have to stick to more traditional remedies like those under OSHA and other specific laws covering the nuclear industry. (Gauthier v. The Shaw Group, No. 3:12-CV-00274, WD NC, 2012)

Final note: Before taking ad­­verse action against any employee who has reported potential safety problems, consult your attorney, who can counsel you on how to minimize your litigation risk.

{ 1 comment… read it below or add one }

Alan Murfee March 12, 2013 at 9:11 am

I find this case to be a bit complicated. Steven was right on his part to report the problem to the Nuclear Regulatory Commission. But he should have found out from a reliable source about which organization covers this kind of fraud.


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