One less tune for whistle-blowers to play: Sarbanes-Oxley Act trumps Colorado common law

Good news: Employees who allege they were fired for blowing the whistle on their employers for activities that violated the federal Sarbanes-Oxley Act can’t also sue under Colorado’s common-law public-policy exception to at-will employment.

Instead, they can pursue only their Sarbanes-Oxley Act remedies and don’t get a second bite at the apple.

Recent case: Paul Morrison was the director of internal audits for his employer. He discovered what he believed was an improper accounting practice and reported it to the company and its accounting firm. As a result, the company corrected its accounting procedures.

Then Morrison discovered what he thought was suspicious and possibly illegal insider trading. He reported this, too. But this time the company told Morrison he should resign because it believed his allegations were false. He refused and filed a complaint with the U.S. Department of Labor, alleging a violation of the Sarbanes-Oxley Act: retaliation against him for his previous whistle-blowing. He sued under Sarbanes-Oxley, plus Colorado’s common-law prohibition of wrongful termination.

The court dismissed the common-law claim, saying it applied only if there were no other statute that the employee could use. Morrison’s sole remedy was under the Sarbanes-Oxley Act. (Morrison v. MacDermid, No. 07-CV-01535, DC CO, 2008)

Final note: Colorado common law allows lawsuits for wrongful discharge when the employee refuses to participate in illegal activities, gives up a job-related legal right or privilege, or exposes illegal activity. However, if there’s a specific law that the employee can use to sue his employer, he must use that remedy instead.