Sarbanes-Oxley Whistleblower Protection for Employees of Publicly Traded Companies


The Sarbanes-Oxley Act was passed in the wake of the collapse of Enron. One of the things that Congress recognized when it investigated Enron was the lack of protection for whistleblowers who report corporate fraud. Congress corrected this issue by putting an anti-retaliation provision into Sarbanes-Oxley which can protect employees of publicly traded companies who report fraud.

Sarbanes-Oxley protects employees of publicly traded companies who report most types of fraud, not only securities fraud.  The statute protects reports of mail fraud, wire fraud, bank fraud, and of course securities fraud.  For example, imagine a person who works at a publicly traded company who reports to her VP that her manager is overbilling for her division’s services.  If the bills are sent by mail, that would be mail fraud.  If the bills are sent via the internet that would be wire fraud.  Under Sarbanes-Oxley that person could have protection against retaliation for reporting fraud.

There is a common misconception that an employee doing the right thing and reporting fraud or illegal activity cannot be retaliated against.  Some states may have laws to that effect, but there is no federal law or state law in Texas that provides blanket protection to employees for all reports of illegal conduct. Instead, there are a patchwork of laws that protect employees who report very specific illegal conduct.  Sarbanes-Oxley is one of the broader federal statutes prohibiting retaliation for people who report certain types of fraud.  Because illegal schemes often involve some type of fraud, it is a relatively broad federal whistleblower statute.

Sarbanes-Oxley is also somewhat revolutionary in the sense that it can protect people working for U.S. publicly traded companies abroad who report fraud in violation of United States laws.  A recent decision by the Department of Labor’s Administrative Review Board has determined that the law can apply outside of the United States. A recent blog article on that decision can be found here.

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