The Employment Law Group® attorney R. Scott Oswald discusses the landmark Menendez decision with LawyersUSA in an article titled SOX whistleblower decision creates employer problems. The Department of Labor Administrative Review Board (ARB) ruled that a failure of management to maintain the confidentiality of a whistleblower is a violation of the anti-retaliation provision of the Sarbanes-Oxley Act (SOX). Mr. Oswald outlines the positive consequences of the decision for whistleblowers:
According to R. Scott Oswald, the managing partner of Washington, D.C.-based law firm The Employment [Law]Group, “this is a very significant ruling [because] for the first time, the act itself of revealing a whistleblower’s identity can be an adverse action under the statute.”
Whistleblowers may now feel safer coming forward to report information, he said, knowing their identity will be kept confidential.
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Oswald said the decision adds “teeth” to existing confidentiality policies.
Most companies have a policy that they will maintain a whistleblower’s confidentiality, he said. “But in reality, many corporations do not maintain adequate internal controls over their disclosure protocols.”
The Menendez decision provides additional incentives to employers to maintain confidentiality going forward, in part because the ARB said that damages may be available.
Menendez could receive “special damages” under Sarbanes-Oxley, said Oswald, which could include recovery for the damage to his reputation as well as emotional distress.
In addition to establishing that the act of breaching confidentiality is actionable, the decision also changes the standard for what constitutes an adverse action.
The ARB “articulated a more favorable iteration of adverse action than defined under other whistleblower statutes,” explained Oswald.
As a practical matter, this more generous standard will allow more cases to survive summary judgment, he said.
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