The Sarbanes–Oxley Act of 2002 (SOX) regulates a wide range of activities by publicly traded companies. Section 806 of SOX, 18 U.S.C. § 1514A, protects whistleblowers against retaliation for reporting suspected legal violations. It allows employees to file a complaint with the U.S. Department of Labor (DOL), potentially followed by a lawsuit in federal district court. The DOL’s Administrative Review Board (ARB) has held that a whistleblower need only have a “reasonable belief” that a legal violation has occurred to engage in “protected activity” under § 806 of SOX. Sylvester v. Parexel Int’l, ARB Case No. 07-123 (ARB, May 25, 2011). The Third Circuit Court of Appeals, whose jurisdiction includes New Jersey, recently ruled on the question of “reasonable belief” in an SOX whistleblower claim, which could have an impact on New Jersey whistleblowers. Westawski v. Merck & Co. Inc., No. 16-4075, slip op. (3d Cir., Jun. 27, 2018).
The whistleblower protection provisions of § 806 apply to companies that have securities registered under the Securities Exchange Act of 1934, or that are required to file reports under that statute. Employees who report suspected fraud, wire fraud, bank fraud, or securities fraud, or who cooperate in an investigation of one of these alleged offenses, are entitled to protection. 18 U.S.C. § 1514A(a), citing 18 U.S.C. §§ 1341, 1343, 1344, and 1348. An employee must file a complaint with the DOL. If the DOL has not issued a ruling within 180 days, the employee can usually file a complaint in federal court. Available damages include reinstatement, back pay, court costs, and attorney’s fees.
The statute requires that the whistleblower “reasonably believes” that their employer has violated one or more of the enumerated federal fraud statutes. Id. at § 1514A(a)(1). The ARB has interpreted this requirement as having two parts: (1) the employee has “a subjective belief that the complained-of conduct constitutes a violation of relevant law”; and (2) “the belief is objectively reasonable.” Sylvester at 14. As long as the employee’s belief is both subjectively and objectively reasonable, the ARB held, their actions are protected even if no legal violations actually occurred.