First Circuit Opinion Illustrates Need for Ethics and Compliance Training

The First Circuit Court of Appeals recently clarified that the protections afforded to "whistleblowers" by the Sarbanes-Oxley Act don't apply to whistleblowers working for contractors of public companies.

Section 806 of SOX prohibits companies that are subject to certain provisions of the Securities Exchange Act of 1934 from discriminating or retaliating against an employee who is a protected whistleblower. Fact-finders agree that these prohibitions on retaliation do not prohibit private companies from retaliating against their own employees, but they must not retaliate against employees of public employers. By contrast, SOX guidance from the Labor Department explicitly prohibits contractors and subcontractors of public companies from discriminating against their own employees.

In Lawson v. FMR LLC, the plaintiffs alleged that their employer, a privately held company, was covered by SOX because the employer was a contractor providing services to a public company. A trial court judge in Massachusetts ruled that SOX protected the plaintiffs, but the First Circuit reversed the trial court's opinion.

According to the First Circuit, the statute clearly provides protection only for employees of publicly held companies, not for employees of privately held contractors and subcontractors. The court looked to legislative intent in passing SOX and cited the "Enron debacle" in its opinion. The opinion noted that congressional reports regarding the Enron scandal mentioned only employees of public companies.

The Lawson case illustrates the complexity of federal statutes and the challenges companies face complying with them. Ethics and Compliance training helps employees and managers understand how federal law applies to them. Online programs integrate compliance training into an employee's workday and make it easy for employers to track which employees have taken the required training courses. 

Posted by WeComply on February 10, 2012 WeComply is a leading provider of customizable online ethics and compliance training solutions, offering more than 70 courses on such topics as anti-corruption, antitrust, Code of Conduct, preventing discrimination and harassment, data privacy and security, insider trading and whistleblowing.