Court knocks SOX off contractors’ retaliation claim

On Behalf of | Apr 12, 2012 | Whistle-blower Claims

A recent case heard in federal court raised some interesting issues about contract workers and the Sarbanes-Oxley Act of 2002. As more and more companies are hiring contractors for short-term and long-term assignments, they are finding themselves facing questions about employment issues such as disability accommodations, leave policies and, as in this case, retaliation.

Congress passed SOX in response to the financial scandals of the early 2000s (Enron was perhaps the most notorious). The purpose of the act was to enhance corporate responsibility and financial disclosures and to combat corporate and accounting fraud. One of the key provisions is protection for whistle-blowers who report suspected financial irregularities or fraud.

SOX, however, only applies to publicly-traded companies — that is, companies that are subject to the Securities and Exchange Act of 1934. Private companies — companies that do not offer stock to the general public — are not governed by SOX. Business analysts argue that these companies may not be legally responsible to follow the law, but they are ethically bound to do so.

In this case, the contract employees worked for a private company that we will call “the agency.” The company the workers were assigned to, however, was publicly-held; we’ll call that “the company.” The company was also a financial services provider.

The assignment was to advise and manage company mutual funds. In 2005, one employee filed a complaint against the company under SOX alleging federal filing inaccuracies. The following year, the other man filed a claim alleging violations of accounting regulations. The agency fired both of them.

They went to court, and the federal judge had some tough decisions to make.

Continued in our next post.


Alan Olson practices employment law throughout the United States from his offices in New Berlin, Wisconsin. Attorney Olson may be contacted at [email protected] with questions about the information posted here or for advice on SOX retaliation claims.

Source: HR and Employment Law News, “Whistleblowing: Which Employees Are Covered by SOX?” April 2, 2012


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