A final rule published by the Occupational Safety and Health Administration has smoothed the path for employees to file whistleblower retaliation claims under the Sarbanes-Oxley and Dodd-Frank acts and put companies in a more difficult spot to defend themselves.
OSHA completed the rule this month (more than three years after the publication of its interim rule) to implement a provision of the Dodd-Frank Act that expanded whistleblower protections under Section 806 of the Dodd-Frank Act. The final rule is substantially similar to the interim rule: It broadens the definition of who qualifies as a whistleblower, expands the protections provided to whistleblowers, and extends the statute of limitations for filing a whistleblower retaliation complaint from 90 to 180 days.
“The final rule reinforces that these types of anti-retaliation provisions are here to stay,” says Daniel Turinsky, a partner with law firm DLA Piper. “It’s very important for companies to be cognizant of the anti-retaliation provisions and to make sure they have appropriate written policies in place.”
One controversial provision of the final rule establishes that, where OSHA has reasonable cause to believe a SOX whistleblower violation occurred, it will issue a preliminary order awarding relief to the employee, including actual or “economic” reinstatement (where an employee is put back on the payroll, but whose job is not reinstated). Any relief included in the preliminary order will take effect immediately, even if the company files an objection and requests a hearing with an administrative law judge.
One irritation: Even if the company then prevails, it still cannot recover wages paid to the employee during the reinstatement period. During the rule’s comment period, critics argued that economic reinstatement without a mechanism for reimbursement violates the company’s rights under the due process clause. In the final rule, however, OSHA disagreed with these criticisms, stating that Congress intended to provide for preliminary reinstatement.
Furthermore, reinstating a former employee’s job raises concerns internally. Companies usually fire someone for a valid reason, says Steven Pearlman, co-head of the whistleblowing and retaliation group of law firm Proskauer, so the reinstatement provision is “extremely concerning” for companies. Imagine, for example, firing a senior executive for misconduct and the ensuing confusion if that person is later reinstated. “You can see the type of problems that would ensue in putting them back in the workplace,” he says.
“The final rule reinforces that these types of anti-retaliation provisions are here to stay.”
Daniel Turinsky, Partner, DLA Piper
Another controversial provision allows whistleblowers to file complaints either orally or in writing. Furthermore, the employee only needs to show that his whistleblowing contributed to the retaliation at work to trigger an OSHA investigation. That effectively means the burden of proof shifts to the employer.
“OSHA will proceed with an investigation, unless the employer can demonstrate by clear and convincing evidence that it would have taken adverse action regardless of the protected activity,” says Lisa Cassilly, a partner with law firm Alston & Bird. If the employer cannot make this showing, then OSHA’s investigation will continue.
Because the bar is set so low for employees to file a complaint, that provision has been “a sore spot for employers,” says Edward Ellis, co-chair of the whistleblowing practice at law firm Littler. Companies have a right to understand what misconduct is being alleged, and that information can be missed in an oral complaint, he says. OSHA has indicated through that part of the rule that a “bare bones type of allegation will suffice,” Pearlman says.
Weighing the Merits
From a practical standpoint, more whistleblower investigations are likely. “It wouldn’t surprise me to see in the wake of these rules an uptick in the number of whistleblower complaints that are filed with OSHA,” Pearlman says.
OSHA’S FINAL RULE
The following is an excerpt from the Occupational Safety and Health Administration’s final rule, “Procedures for the Handling of Retaliation Complaints Under Section 806 of the Sarbanes-Oxley Act.”
[The Society of Corporate Secretaries & Governance Professionals (SCSGP)] commented that it is ‘very concerned that the proposed ‘oral complaint’ provision will have unintended negative consequences, and [it] urge[s] OSHA not to enact it.’ SCSGP further commented that the new rule is “unnecessary because SOX complaints most often are filed by sophisticated professionals,” and that the rule shifts the OSHA investigator’s role from one of a neutral fact-finder to an advocate for the complainant. SCSGP also commented that the rule lacks any standard for the investigator’s creation of the complaint. SCSGP also raised the concern that the new rule ‘presents the risk that the complainant will later treat the investigator as an adverse witness in the litigation.’ SCSGP explained that in cases where a complainant who proceeds to further stages of the administrative proceeding, or a complainant who transfers their case to federal district court, may seek to modify or expand their original complaint by arguing that the OSHA investigator did not accurately record the complainant’s allegations at the time of the initial complaint. SCSGP explained this could place the investigator in the role of an adverse witness and subject him or her to scrutiny for failing to capture the oral complaint in totality.
Similarly, [the Equal Employment Advisory Council (EEAC)] commented that it questioned the ‘rationale of eliminating the requirement that a written complaint contain the full details concerning the alleged violation.’ EEAC commented that written complaints emphasize the gravity of invoking protection under Sarbanes-Oxley and discourage frivolous complaints. The EEAC also commented on the provision that complaints may be made in any language, stating that ‘[t]he agency offers no guidance on by whom, if at all, the complaint will be translated into English’ nor how a respondent may submit its own proposed translation. EEAC respectfully recommended that this final rule make clear how these issues would be resolved.
OSHA has considered these comments and adopts the changes made in the IFR. The statutory text of SOX does not require written complaints to OSHA.
Cassilly, however, notes that more complaints wouldn’t be a “sea change” from the increasing number of whistleblower complaints observed over the last few years. The Labor Department—which manages SOX and Dodd-Frank whistleblower complaints—had 3,060 complaints in 2014, and that number has risen steadily since 2005. “That’s a substantial uptick and a trend that’s continuing,” Cassily says.
When analyzing whistleblower complaints by type, however, it appears that SOX-related whistleblower claims have not only declined year-over-year—they are at their lowest since 2005. The Labor Department received 145 SOX-related whistleblower claims that were filed in 2014, down from the 177 received in 2013.
Furthermore, of 174 total SOX-related complaint determinations (resolved whistleblower claims) made by the Labor Department in 2014, only two were found to have merit. Seventy-seven were dismissed for lack of merit. Another 33 were withdrawn by the whistleblower, and 30 more kicked to federal court. The bottom line: More complaints don’t necessarily translate into meritorious complaints. That’s not much comfort to compliance departments responsible for investigating all complaints, but every bit helps.
The final rule also says that OSHA will provide to the whistleblower a copy of all the information a company submits in response to the complaint. “So employers need to be very careful about safeguarding their confidential information in this process,” Pearlman says.
What to Do Next
“This rule really just reaffirms what employment lawyers having been telling clients for a long time: that you need to make sure that you have proper documentation,” Turinsky says. To the extent you have an employee who may have had significant performance problems or other issues of insubordination, keep proper documentation of those issues, “so if, and when, any employment action is challenge, you have an appropriate policy you can look to,” he says.
Cassilly also reminds companies to have clear policies and procedures that bar retaliation or reprisal against employees who may be engaging in protected activity, and to ensure that supervisors and managers are aware of, and properly trained on, these policies.
These measures have always been important, but they’re “all the more important now, because we know we’re not going to get much relief by way of the final rule,” she says.
Another reminder: Treat anonymous reports as such. “Be judicious and thoughtful about who should be brought into the circle of confidence,” Cassily says. Share only with those who have a legitimate need to know about the complaint, she says.
A company reduces the risk of an anti-retaliation claim “if you are vigilant and identify, investigate, and correct problems,” Ellis says. “The real message is to make it unnecessary for whistleblowers to go to the government by preventing impropriety, and when it comes up, to respond to it quickly.”