In a major victory for employees reporting fraud under the
Sarbanes Oxley Act (SOX), the Third Circuit Court of Appeals
recently revived whistleblower
claims brought against Tyco Electronics Corp. by an accountant
who reported improper expenditures and was allegedly terminated as
a result. The highly-anticipated decision in Wiest et al. v.
Lynch et al. potentially expands the scope of SOX's retaliation
provision, rejecting a stricter interpretation approved by the
Fourth Circuit and instead bringing the standard in line with the
U.S. Department of Labor's more worker-friendly interpretation.
The appeals court's 2-1 opinion said a lower court had
erred by holding that Tyco accounting department veteran Jeffrey
Wiest had to allege that his disclosures to supervisors
"definitively and specifically" related to an existing violation of
a particular anti-fraud law.
Decision Defers to Department of Labor Ruling
The decision brings the law in line with the U.S.
Department of Labor Administrative Review Board's (ARB) May 2011
ruling in Sylvester v. Parexel, which
rejected the "definitive and specific" standard that had been
announced in Platone v. FLYi and later
affirmed by the Fourth Circuit. The Third Circuit court
concluded that the ARB's rejection of this standard was entitled to
court deference. The ARB's interpretation of the "reasonable
belief" standard was similarly entitled to deference, according to
According to the majority, whistleblowers
only have to have a "reasonable belief" that their employer has
violated or will violate the law or U.S. Securities and Exchange
Commission rules. As a result, the majority's decision
partially reversed the dismissal of Wiest's federal whistleblower
claims and vacated the dismissal of his state law claim.
Under the standard articulated in the Third Circuit's
opinion, "an employee must establish not only a subjective,
good-faith belief that his or her employer violated a provision
listed in SOX, but also that his or her belief was objectively
reasonable." The whistleblower's belief is objectively reasonable
when a person with the same training and experience would think the
conduct at issue could run afoul of one of the provisions in SOX's
Section 806, it said.
The ARB had held that SOX whistleblower protections could
apply if a worker reasonably believed a violation was going to
occur. Following that decision, the Third Circuit held that
communications don't have to relate to an existing violation of the
law to be protected. Thus, the Court held that the lower court had
erred by requiring that an employee's communication had to assert
elements of securities fraud to be protected.
Example of Significant Victory for Whistleblowers
For whistleblowers and their attorneys, the decision is a major
victory. The new standard makes it easier for employees to
report misconduct or fraud and to be protected if their employer
attempts to retaliate against the employee for blowing the
whistle. As a result of the ruling, employees without a legal
background can report violations to their supervisors without
having to spell out specific legal rules or statutes that have
already been violated. The result is an expansion of the
protections for employees that will hopefully lead to earlier and
more frequent reporting of misconduct and fraud.
Contact Us To Learn More
If you have discovered evidence of government fraud,
contact an experienced False Claims Act attorney before blowing the
whistle. You may be entitled to a substantial reward and the legal
protections afforded to whistleblowers under state and federal
laws. The attorneys of Berger & Montague are nationally
recognized experts in Whistleblower/Qui Tam actions with over a
decade of experience pursuing these complex fraud cases. For more
information or to schedule your confidential consultation, use the
form on this page or call us at 1-800-424-6690.
For further reading:
Whistleblower Litigation Trends
and Protection for Whistleblowers
False Claims Cases to take Action On
Whistleblowers, Qui Tam & False Claims Act Legal Blog by Berger
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