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Sarbanes-Oxley Act (SOX)

The Sarbanes–Oxley Act of 2002 (SOX) includes several important whistleblower protections designed to encourage employees to report corporate fraud and protect them from retaliation

In response to headline-grabbing accounting scandals–beginning with Enron, WorldCom and Tyco–that eroded investors’ confidence in the markets, Congress signed into law the Sarbanes-Oxley Act of 2002 (SOX).

 

Through its expansive reporting and disclosure requirements, significant reform to securities laws, and harsh penalties for bad actors, SOX ushered in a new era of corporate responsibility and governance. 

SOX provides employment retaliation protections for whistleblowers who report mail fraud, wire fraud, bank fraud, or securities fraud to federal law or regulatory enforcement authorities, to Congress, or to their supervisors, or who assist in investigations of those violations. It also protects whistleblowers who report violations of SEC rules or regulations or fraud against shareholders. These whistleblower protections extend to employees, contractors, subcontractors or agents of publicly traded companies and their subsidiaries. 

SOX prohibits employers from firing, demoting, suspending, threatening, harassing, or otherwise discriminating against an employee for reporting their concerns or assisting in an investigation into mail, wire, bank, or securities fraud, or violations of SEC rules or regulations or fraud against shareholders.

Whistleblowers who face retaliation must file a complaint with the Occupational Safety and Health Administration (OSHA) within 180 days of the retaliatory conduct. They may be entitled to reinstatement, back pay with interest, legal fees and other costs. In addition, there is no ceiling on compensatory damages for SOX whistleblowers. 

SOX also provides important procedural protections for whistleblowers. If the Department of Labor does not issue a final decision on a whistleblower complaint within 180 days, the whistleblower can “kick out” their complaint to federal court. And SOX claims are not subject to arbitration agreements–meaning wronged employees are not forced into private dispute resolution that may unfairly favor employers.

Thanks to both SOX and the Dodd-Frank SEC Whistleblower Program, which allows whistleblowers who report securities fraud to potentially receive financial rewards for reporting securities violations to the SEC, whistleblowers who want to report wrongdoing have both a sword and a shield when doing so.

The Employee Whistleblower

SOX prohibits employers from firing, demoting, suspending, threatening, harassing, or otherwise discriminating against an employee for reporting their concerns or assisting in an investigation into mail, wire, bank, or securities fraud, or violations of SEC rules or regulations or fraud against shareholders.

Whistleblowers who face retaliation must file a complaint with the Occupational Safety and Health Administration (OSHA) within 180 days of the retaliatory conduct. They may be entitled to reinstatement, back pay with interest, legal fees and other costs. In addition, there is no ceiling on compensatory damages for SOX whistleblowers. 

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