Daniel Felber Blog

Under federal law, employees of publicly-traded companies are often protected against retaliatory actions when they report certain types of fraud and other illegal activities. Congress enacted the Sarbanes-Oxley Act of 2002 (commonly referred to as “SOX”) in order to prevent securities fraud and alleviate investment concerns. This law applies to employers required to register with the Security Exchange Commission (SEC) under the Security Exchange Act, or required to file reports under the act. It also applies to private companies acting as contractors, subcontractors, or agents of publicly traded companies.

Under SOX, a publicly traded company may not discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee: (1) for assisting in an investigation or providing information to a federal agency, a member of Congress, or a supervisor at work regarding the violation of an SEC rule or federal securities fraud; and (2) for filing, testifying, or participating in a proceeding filed or about to be filed. Examples of protected reported information are shareholder fraud, mail fraud, wire fraud, accounting fraud, employer’s non-disclosure of accurate financial statements to investors, employer’s improper entries on financial statements, and alteration of delinquency reports.

An employee who prevails in proving their retaliation may be awarded back pay with interest, compensatory damages, litigation costs, expert witness fees, and attorney fees.

As an expansion to SOX, the Dodd-Frank Wall Street Reform and Consumer Protection Act (commonly referred to as “Dodd-Frank”) was enacted in 2010. Dodd-Frank provides employees with protections not covered by SOX. It provides that no employee may be terminated, or in any other way discriminated or retaliated against, for initiating or acting within his/her duties to: (1) provide or about to provide, information to the employer, the Bureau of Consumer Financial Protection (commonly referred to as “the Bureau”), or any other state, local, or federal government authority or law enforcement agency relating to any violation of the Act or any other provision of law that is subject to the jurisdiction of the Bureau, or prescribed by the Bureau; (2) testify or will testify in any proceeding resulting from the administration or enforcement of any provision of the Act or any other provision of law that is subject to the jurisdiction of the Bureau, (3) file or institute any proceeding under any federal consumer financial law; or (4) object to, or refused to participate in, any activity, policy, practice, or assigned task that the employee reasonably believed to be in violation of any law, rule, order, standard, or prohibition, subject to the jurisdiction or enforceable by the Bureau.

If you have raised concerns about corporate fraud and are worried about retaliation, you can contact our firm at 212-425-4250 for a confidential discussion with an attorney confidentially.