Home » Sarbanes-Oxley » Revealing a Whistleblower’s Identify May Trigger Liability for Retaliation

Revealing a Whistleblower’s Identify May Trigger Liability for Retaliation

Yesterday, the Fifth Circuit issued a decision that should give employers pause. In a whistleblower retaliation suit brought under Section 806 of the Sarbanes-Oxley Act, the Court ruled that the employer’s disclosure of the whistleblower’s identity is sufficient to trigger potential liability under the statute.

After the employee complained to both the SEC and to the company (supervisors, Board’s Audit Committee) about what he believed were questionable accounting practices dealing with revenue recognition, the company internally disclosed his identity in the context of a document retention email to his colleagues. In that email, the company’s general counsel instructed the whistleblower’s supervisor and others to retain certain documents because “the SEC has opened an inquiry into the allegations of Mr. [whistleblower].” From there, the supervisor forwarded the email to 15 members of the whistleblower’s work group, thereby disclosing the SEC investigation and that the whistleblower complained to the SEC about their accounting practices. After this disclosure, the whistleblower’s colleagues apparently treated him differently, refusing to work or associate with him.

Ultimately, the employee resigned and filed a complaint under SOX section 806, alleging the company illegally retaliated against him by disclosing his identity, which lead to his ostracism. Initially, the Department of Labor Administrative Law Judge who held a hearing and evaluated the evidence, dismissed the complaint, finding that the disclosure was not an “adverse action” because none of the alleged harm rose to the level of being “materially adverse.” On appeal, the Administrative Review Board reversed, saying the disclosure rose to the level of “material adversity.”

The company appealed the Administrative Review Board’s determination to the Fifth Circuit. Reviewing the standard for adverse action, the Fifth Circuit observed that the ultimate adverse action question is “whether the factual circumstances are such that [the employer]’s actions well might dissuade an objectively reasonable employee in [the whistleblower]’s shoes from engaging in protected conduct.” Judged in that light, the Court could not say the Administrative Review Board’s decision was reversible error because disclosure could serve as a deterrent to whistleblowing, dissuading a reasonable employee in the future from reporting concerns.

Disclosing a whistleblower’s identity, leading to ostracism, isolation, and differential treatment by co-workers, may constitute an actionable adverse action. “It is inevitable that such a disclosure would result in ostracism. . . . Furthermore, when it is the boss that identifies one of his employees as the whistleblower who has brought an official investigation upon the department, as happened here, the boss could be read as sending a warning, granting his implied imprimatur on differential treatment of the employee, or otherwise expressing a sort of discontent from on high.”

Halliburton, Inc. v. Administrative Review Board, Fifth Circuit Case No. 13-60323 (Nov. 12, 2014).


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