Decisions of the Administrative Review Board
Abhyankar v. Countrywide Financial Corp.
, ARB No. 11-043, ALJ No. 2007-SOX-83 (ARB Mar. 29, 2013)
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RETROACTIVE APPLICATION OF STATUTE; APPLICATION OF SECTION 922 OF THE DODD-FRANK ACT (WHICH RENDERS UNENFORCEABLE PRE-DISPUTE ARBITRATION AGREEMENTS IN REGARD TO SOX SECTION 806 COMPLAINTS) TO A DECISION OF AN ARBITRATOR DENYING THE SOX CLAIM WHERE THE ARBITRATOR�S DECISION WAS NOT YET FINAL WHEN DODD-FRANK BECAME LAW
In Abhyankar v. Countrywide Financial Corp. , ARB No. 11-043, ALJ No. 2007-SOX-83 (ARB Mar. 29, 2013), the ARB stated that prior to passage of the Dodd-Frank Act, complaints alleging a violation of SOX Section 806 could be subject to mandatory arbitration. However, Section 922 of Dodd-Frank amended SOX Section 806 to render unenforceable pre-dispute arbitration agreements requiring arbitration of whistleblower complaints. See 18 U.S.C.A. § 1514A(e)(2). The Dodd-Frank Act was signed into law on July 21, 2010.
In Abhyankar , the Complainant's 2008 employment contract included an arbitration agreement. The Complainant filed a SOX complaint with OSHA in July 2006. While OSHA's investigation was pending, the Complainant entered into a stipulation with the Respondent to arbitrate his claims before the Judicial Arbitration & Mediation Services (JAMS) pursuant to the arbitration agreement. One of the claims against the Respondent before JAMS was the SOX complaint. OSHA dismissed the complaint, and the Complainant requested an ALJ hearing. The ALJ granted the Respondent's motion to compel arbitration and stay the administrative proceedings. Following a hearing, the JAMS arbitrator entered a February 9, 2010, Interim Award finding that the Complainant did not establish a violation of the SOX whistleblower protection provisions. Later, the arbitrator rendered, but did not formally issue, a Partial Final Award with regard to the SOX whistleblower claim. The ALJ had the parties brief the issue of whether the Complainant was entitled to proceed on his SOX claim before the ALJ. Noting that the arbitrator had not formally issued his Partial Final Award, the ALJ nevertheless dismissed the complaint in light of the arbitrator's decision on the SOX claim because it was rendered prior to enactment of the Dodd-Frank Act. Applying the analysis of Landgraf v. USI Film Prods. , 511 U.S. 244 (1944), the ALJ found that retroactively applying Section 922 would have impermissibly affected the Respondent's substantive rights that it had secured as a result of the arbitration. The ARB disagreed with the ALJ's ultimate finding.
The ARB agreed with the ALJ that there was no clear answer to the question of retroactivity in the text of Section 922 of the Dodd-Frank Act or its legislative history. Thus, the ARN turned to the question of whether Section 922, if applied to the Complainant's SOX claim, would have an impermissible retroactive effect. This involves a determination whether applying the statute to the current dispute would have a retroactive consequence negatively affecting substantive rights. The ARB acknowledged that because the arbitration agreement in this case arose out of an employment contract entered into prior to passage of Dodd-Frank, the Respondent's position had some merit. The ARB, however, found that Dodd-Frank Section 922 falls within the category of jurisdictional statutes which generally may be applied retroactively because the legislation does not take away a substantive right but simply changes the tribunal that is to hear the case. The ARB cited caselaw to the effect that that substantive rights are not diminished by a determination of whether or not a dispute should be heard in an arbitral or a judicial forum. The ARB held: "The ban on the arbitration of SOX whistleblower claims found within Section 922 primarily affects the jurisdiction to hear the substantive claim." USDOL/OALJ Reporter at 7 (footnote omitted).
Noting, as the Supreme Court pointed out in Hughes Aircraft , that statutes that are "jurisdictional" can nonetheless affect "the underlying primary conduct of the parties," the ARB next addressed the ALJ's reasoning that the Respondent in the instant case possessed "settled expectations" and a "reasonable reliance" interest arising out of the transactions that had occurred in the arbitration proceedings prior to Dodd-Frank's enactment. The ALJ noted the litigation practice that had occurred before the arbitrator and the arbitrator's February 2010 determination. The ALJ viewed the arbitrator's subsequent actions as "ministerial rather than substantive." The ARB, however, noted that the arbitrator's final award with respect to the SOX claim was not issued prior to the effective date of the Dodd-Frank Act under the JAMS rules. Until then, neither party had any vested legal rights in the award, including the right to challenge the arbitrator's decision in court. The ARB cited a long line of federal decisions focusing upon whether a final decision had already been issued under the previous statute or rule prior to the new statute or rule's enactment. The ARB therefore concluded that application of Section 922 to this case did not affect the substantive rights of the parties; therefore, its application would not have a disfavored retroactive consequence.
One member of the Board wrote a concurring opinion noting that in her view Section 922 does not create retroactive effects and applies to the case at bar because Congress had sought to clarify SOX Section 806 through enactment of Section 922 of the Dodd-Frank Act.
Turin v. Amtrust Financial Services, Inc.
, ARB No. 11-062, ALJ No. 2010-SOX-18 (ARB Mar. 29, 2013)
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TIMELINESS OF COMPLAINT; EQUITABLE TOLLING; "STANDSTILL" AGREEMENT THAT LULLED COMPLAINANT INTO NOT FIILNG SOX COMPLAINT WITHIN LIMITATIONS PERIOD
In Turin v. Amtrust Financial Services, Inc. , ARB No. 11-062, ALJ No. 2010-SOX-18 (ARB Mar. 29, 2013), the Complainant was verbally informed that he was fired in December 2008. By the time he filed his SOX whistleblower complaint in April 2013, the statutory limitations period had expired. Both OSHA and ALJ found that the complaint should be dismissed as untimely. On appeal, however, the ARB reviewed the parties� "standstill" agreement and held that equitable grounds existed for modifying the limitations period.. The ARB wrote:
Viewing the totality of the undisputed facts surrounding the standstill agreement, we find sufficient grounds exist for equitable modification of the statute of limitations. The standstill agreement clearly demonstrates that both parties affirmatively negotiated a moratorium on litigation for a minimum of ten days and potentially thirty days. It is undisputed that the parties agreed to the standstill agreement on March 12, 2009, which was 87 days after December 15, 2008 (the day that Zyskind said to Turin, "you are fired"). Consequently, even under the Respondents� view of the facts, Turin still had three days to file an OSHA claim. But this agreement committed Turin to forestall filing an OSHA complaint until more than ninety days after December 15, 2008. Then, after Turin complied with the terms of the standstill agreement, the Respondents raised the limitations bar, essentially arguing that Turin should have filed the OSHA complaint within three days after agreeing to the standstill agreement. Arguably, filing an OSHA complaint without a ten-day notice would have violated the standstill agreement. If the statute of limitations began to run on December 31, 2008, as the Respondents alternatively argue, then Turin had to file an OSHA complaint on March 31, 2009. This would have given the parties about nine days to negotiate before Turin had to serve a ten-day notice. As it turned out, Turin served a ten-day notice on March 23, 2009, and filed the OSHA complaint ten days later as permitted by the precise terms of the standstill agreement. Having considered the totality of the circumstances, we find that equity requires that we hold the Respondents to the terms of their agreement with Turin and accept as timely the April 2nd filing of the OSHA complaint.
USDOL/OALJ Reporter at 9-10 (footnotes omitted). In a footnote, the ARB stated:
We note that our focus is not whether standstill agreements or tolling agreements are enforceable against OSHA. See, e.g., Hunter-Boykin v. George Washington Univ. , 132 F.3d 77, 79-82 (D.C. Cir. 1998) (discussing the validity of tolling agreements); Davis-Bell v. Columbia Univ. , 851 F. Supp. 2d 650, 680 (S.D.N.Y. 2012) (district court determined timeliness of Title VII claim "[t]aking the tolling agreement between the parties into consideration."). We only determine that there is sufficient basis for us to equitably modify the statute of limitations in this case based on the record as a whole.
USDOL/OALJ Reporter at 10 n.20.
DISMISSAL OF PARTY; ALJ MUST NOT BASE RULING ON MOTION TO DISMISS SOLELY ON INFORMATION IN OSHA COMPLAINT BUT ALSO ON SUPPLEMENTS TO THE COMPLAINT MADE BEFORE OSHA AND ARGUMENTS IN BRIEFS
In Turin v. Amtrust Financial Services, Inc. , ARB No. 11-062, ALJ No. 2010-SOX-18 (ARB Mar. 29, 2013), the Complainant was hired as general counsel for U.S. operations of AmTrust Financial Services, Inc. (AmTrust). This employment ended in June 2007. He then worked for another company whose major shareholders and founders were the same as AmTrust's. The Complainant later became a member of the board of directors for AmTrust's subsidiaries. When the Complainant filed a SOX complaint, he named several Respondents, one of which was AmTrust. The complaint was not clear as to the basis for the claim against AmTrust, and did not name the AmTrust subsidiaries. Before the ALJ, the Respondents moved to dismiss AmTrust on the grounds that the Complainant's employment with AmTrust ended in June 2007 (i.e., prior to the protected activity in December 2008); that the Complainant did not name the AmTrust subsidiaries in the complaint; and that AmTrust did not control or influence employment decisions at the subsidiaries. The ALJ dismissed AmTrust on the grounds that the Complainant's direct liability theory was vague and because the Complainant failed to plead a vicarious liability claim asserting the subsidiaries� retaliatory removal of the Complainant from his director position. The ARB reversed the dismissal of AmTrust.
As to the claim against AmTrust as a parent company, the ARB found that the ALJ erred by relying solely on the OSHA complaint to determine whether the Complainant sufficiently asserted a claim of retaliatory discharge from the AmTrust subsidiaries. Although the complaint was silent about the Complainant's employment position with the subsidiaries, the Complainant was permitted under the regulations to supplement his complaint, and did so in this case. Moreover, the Complainant's briefs focused on a claim that AmTrust caused his lost directorship and/or employment with the subsidiaries. The ARB held that given this procedural history, the ALJ erred in dismissing the claim against AmTrust as to the allegedly retaliatory loss of employment at the subsidiaries.
As to the direct liability claim, the ARB stated that it "cannot decipher from the ALJ's opinion how [the Complainant's] failure to allege in his OSHA complaint he was an employee of AmTrust was dispositive." The ARB stated while it appreciated that the claims were found by the ALJ to be vague, the ARB "has never ruled that SOX prohibits covered companies only from unlawfully discriminating against their direct employees." USDOL/OALJ Reporter at 12 (footnote omitted). But more importantly, the ARB found that the ALJ repeated the error of failing to consider the Complainant's supplementation of the complaint, where he essentially argued that AmTrust and the subsidiaries were his joint-employer.
Rudolph v. National Railroad Passenger Corp. (AMTRAK)
, ARB No. 11-037, ALJ No. 2009-FRS-15 (ARB Mar. 29, 2013)
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CAUSATION AND CONTRIBUTING FACTOR STANDARD; ATTRIBUTED KNOWLEDGE OF EMPLOYER UNDER "CAT�S PAW" ANALYSIS; INTERVENING EVENTS
In Rudolph v. National Railroad Passenger Corp. (AMTRAK) , ARB No. 11-037, ALJ No. 2009-FRS-15 (ARB Mar. 29, 2013), the ALJ found that the Complainant's reporting that he was forced to violate his hours of service and his accurate reporting of his hours of duty on that date were contributing factors to his supervisor's threat of disciplinary action. The ALJ also found that the Respondent failed to prove by clear and convincing evidence that the supervisor would have made his threat absent the Complainant's protected activity. Thus, the ALJ found that the Respondent violated the FRSA whistleblower provision. The ALJ also found, however, that additional adverse actions taken by the Respondent (a disciplinary charge, unpaid sickness benefits, psychiatric evaluation referral, medical disqualification, and refusal to approve return to work), were not violations of the FRSA based on the finding that the decision-maker for each adverse action was unaware of the Respondent's protected activities or that an intervening event occurred. The ARB found that this was reversible error. The ARB wrote:
The FRSA identifies specific activities that are protected, including reporting a violation of a safety rule, refusing to violate a safety rule, filing a complaint regarding enforcement, notifying an employer of a work-related injury or illness, cooperating with an investigation, furnishing accident information, reporting hours of service accurately, requesting medical or first aid treatment, and following a treating physician's orders or treatment plan. Any activity falling within any of these categories triggers the whistleblower protection of the statute. The question that must be answered to find an employer liable under the FRSA is whether the protected activity contributed in any way to the adverse action the employer takes against an employee who engages in such activity.
Proof of causation or "contributing factor" is not a demanding standard. To establish that his protected activity was a "contributing factor" to the adverse action at issue, the complainant need not prove that his or her protected activity was the only or the most significant reason for the unfavorable personnel action. The complainant need only establish by a preponderance of the evidence that the protected activity, "alone or in combination with other factors," tends to affect in any way the employer's decision or the adverse action taken. Thus, for example, a complainant may prevail by proving that the respondent's reason, "while true, is only one of the reasons for its conduct, and [that] another factor is the complainant's protected activity."
As previously noted, the ALJ's conclusion that Rudolph failed to establish that his protected activity contributed to each adverse action Amtrak took him was based primarily on the ALJ's finding that the Amtrak decision-maker for each adverse action was unaware of Rudolph's protected activities. The ALJ's exclusive focus on the knowledge possessed by the final responsible decision-maker constitutes error as a matter of law. As the ARB explained in Bobreski , proof that an employee's protected activity contributed to the adverse action does not necessarily rest on the decision-maker's knowledge alone. It may be established through a wide range of circumstantial evidence, including the acts or knowledge of a combination of individuals involved in the decision-making process. Proof of a contributing factor may be established by evidence demonstrating "that at least one individual among multiple decision-makers influenced the final decision and acted at least partly because of the employee's protected activity."
As the Board discussed in Bobreski , the "cat's paw" legal concept of liability recognized in Staub v. Proctor Hosp. , demonstrates how knowledge of protected activity and actions by others occurring early in the decision-making chain can influence the final decision-maker and result in a finding of liability. In Staub , the Supreme Court addressed the circumstances under which an employer may be held liable for employment discrimination based on the discriminatory animus of an employee who influenced, but did not make, the ultimate employment decision. The Court rejected the argument that an employer can shield itself from liability by isolating the personnel official responsible for the adverse employment action, who acted without discriminatory animus, from the animus of lower-level supervisors on whose advice and recommendations the company official relied in taking the personnel action. Under the "cat's paw" theory, the Court held that if a supervisor performs an act motivated by discriminatory animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action taken, then the employer will be held liable.
Where motivation is, as in Staub, a prerequisite to establishing liability, the complainant must prove that the company official responsible for the adverse employment decision, although himself harboring no discriminatory intent, acted on the advice or actions of others motivated by animus intended to cause an adverse employment action. Where, however, the complainant need establish that his protected activity was only a contributing factor in the adverse action, proof of motivation is not Moreover, in such cases the complainant need not prove that the decision-maker responsible for the adverse action knew of the protected activity if it can be established that those advising the decision-maker knew, regardless of their motives. Consequently, Rudolph will have met his burden of proof under the FRSA if the circumstantial evidence of record, including the knowledge of those advising the ultimate decision-makers regardless of their motivation, establishes that his protected activity (any or all) was a contributing factor in the adverse personnel actions Amtrak took against him.
USDOL/OALJ Reporter at 15-18 (footnotes omitted). The ARB found that the ALJ's exclusive focus on the responsible officials� knowledge ignored the fact that in each instance one or more company officials who were aware of the Complainant's protected activity advised the decision-maker or were otherwise involved in the decision-making process. The ARB also found that the intervening events cited by the ALJ did not automatically negate a finding that the protected activity was a contributing factor in the adverse action. The ARB then reviewed each adverse action and explained why the ALJ's analysis was wrong. In the interest of brevity, this casenote will provide only a few examples of the ARB's review.
The ALJ found, for example, that the doctor who was primarily responsible for the Respondent's actions that temporarily prevented payment of the sick benefits to the Complainant and the Complainant from returning to work, was not aware of three of the Complainant's protected activities. The ALJ also found, however, that this doctor's decisions and actions were based on the advice of attorneys within the Respondent's legal department who surely were aware of the Complainant's hours-of-service protected activities. The ARB held that under the "cat's paw" theory of liability, the attorneys� knowledge is imputed to the doctor.
The ALJ found that this doctor was aware of other protected activity, but that this was not a contributing factor to the doctor's refusal to provide information to the Rail Retirement Board because of the intervening events of receipt of certain additional medical information. The ALJ found that this information, coupled with the Complainant's prior medical and work history, provided "sufficient evidence to outweigh the circumstantial evidence of contributing factor based on temporal proximity and subject matter." The ARB wrote:
This, however, is not the proper test at the "contributing factor" stage of analysis. As the ARB recently pointed out, "an �intervening event� does not necessarily break a causal connection between protected activity and adverse action simply because the intervening event occurred after the protected activity." The complainant's burden of proving contributory causation will be met upon this minimal showing even if the employer also had a legitimate reason for the unfavorable employment action against the employee. Again, proof of causation or "contributing factor" is not a demanding standard. The complainant need not prove that his or her protected activity was the only or the most significant reason for the unfavorable personnel action. It is enough that a complainant establish that the protected activity in combination with other factors affected in any way the adverse action at issue.
USDOL/OALJ Reporter at 20-12 (footnotes omitted). The ARB noted that the Respondent might establish that the intervening events were the real reason why the Complainant was temporarily denied the sick benefits and not allowed to return to work, and that it would have taken these actions by "clear and convincing evidence" because of the intervening events even if the Complainant had not engaged in the protected activities. The ARB also noted, however, that this question was not before it.
In a different vein, the ALJ rejected any contributory causal relationship between the Complainant's protected activity of attempting to return to work and the doctor's referral of the Complainant for psychiatric evaluation, on the ground that the doctor's psychiatric referral did not fall within the definition of discipline in section 20109(c)(2). The ARB conceded the referral may not constitute discipline within the meaning of section 20109(c)(2), but that the question was not whether the psychiatric evaluation is discipline but whether the Complainant's protected activity was a contributing factor in the doctor's decision to refer the Complainant for the psychiatric evaluation.
The ARB remanded for the ALJ to re-evaluate causation. One member of the Board dissented in part on the ground that the ALJ's fact findings and the record supported his ultimate conclusion that the Complainant's choices and events other than protected activity caused the medically-related employment decisions.
DEFENSE TO THE CHARGE OF UNLAWFUL DISCIPLINE UNDER SECTION 20109(c)(2); REFUSAL TO ALLOW COMPLAINANT TO RETURN TO WORK; APPLICABILITY OF CLEAR AND CONVINCING EVIDENCE STANDARD
In Rudolph v. National Railroad Passenger Corp. (AMTRAK) , ARB No. 11-037, ALJ No. 2009-FRS-15 (ARB Mar. 29, 2013), the ARB stated that "�[w]here an employee seeks to return to work based on his or her treating physician's recommendation, a covered employer's refusal to allow the employee to return to work does not constitute discipline in violation of section 20109(c)(2) if the employer's refusal is based on FRA medical standards for fitness for duty or, secondarily, the railroad carrier's medical standards for fitness for duty. We do not, however, construe section 20109(c)(2) as affording an employer defenses to a charge of unlawful discipline beyond those the section expressly identifies." USDOL/OALJ Reporter at 16-17 (footnote omitted).
The ARB continued: "Moreover, we view the defenses afforded an employer under section 20109(c)(2) within the context of the FRSA's rebuttal burden-of-proof standard required of an employer where the complainant has met his initial burden of establishing that his protected activity (i.e., the employee's return to work based on his treating physician's medical release) was a contributing factor in the employer's refusal to permit the employee's return. The employer must establish by clear and convincing evidence that its refusal to permit the return to work was based on FRA medical standards for fitness of duty or, absent those, on the employer's fitness-for-duty standards." USDOL/OALJ Reporter at 17 (footnote omitted).
One member of the Board stated in a separate opinion that while he agreed that the ALJ wrongly applied Subsection 20109(c)(2), he did not agree with the majority's interpretation, and that much more analysis would be needed before the Board decides this issue.
Bowie v. New Orleans Public Belt Railroad
, ARB No. 13-007, ALJ No. 2012-FRS-9 (ARB Mar. 27, 2013)
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Approval of settlement agreement.
Bailey v Consolidated Rail Corp.
, ARB Nos. 13-030, 13-033, ALJ No. 2012-FRS-12 (ARB Mar. 27, 2013)
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STAY OF ALJ'S PRELIMINARY REINSTATEMENT ONLY GRANTED IN EXCEPTIONAL CIRCUMSTANCES
In Bailey v Consolidated Rail Corp. , ARB Nos. 13-030, 13-033, ALJ No. 2012-FRS-12 (ARB Mar. 27, 2013), the ARB denied the Respondent's motion for a stay of the ALJ's reinstatement order. The ARB noted the regulatory history to the FRSA whistleblower regulations make it clear the ARB may grant a motion to stay only in an exceptional case, and only if the moving party can establish the necessary criteria for equitable injunctive relief, i.e., irreparable injury, likelihood of success on the merits, a balancing of possible harms to the parties, and the public favors a stay. In the instant case, the Respondent argued that it was likely to succeed on the merits because the ALJ improperly required it to prove beyond any reasonable doubt that it would have discharged the Complainant even in the absence of protected activity. The ARB, however, found that the ALJ applied the correct "clear and convincing evidence" standard. The Respondent also argued that the ALJ's findings are not supported by substantial evidence. The ARB, however, found that although subject to further review and possible reversal, the ALJ's decision weighed disputed facts in light of the totality of circumstances after an apparently thorough evidentiary hearing, and that the Respondent failed to show in its motion a likelihood of success on the merits.
The Repondent also argued that reinstatement would present irreparable harm because of the Complainant presented a threat of workplace violence. The ARB rejected this argument noting that the ALJ had not found credible testimony at the hearing that the Complainant's supervisor felt threatened by the Complainant during the incident that lead to the Complainant's discharge. The ARB found, conversely, that the Complainant would be irreparably harmed if reinstatement was stayed because the record shows that he had suffered emotional and financial hardship as a result of his discharge.
Chief, Div. of Enforcement, OLMS v. Local 2419, AFGE
, ARB No. 13-037, ALJ No. 2012-SOC-2 (ARB Mar. 20, 2013)
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DEFAULT JUDGMENT BASED ON FAILURE TO ANSWER OLMS COMPLAINT; ARB ADOPTS ALJ DECISION GRANTING RELIEF SOUGHT WITH THE EXCEPTION OF ORDER REQUIRING RESPONDENT TO PAY COSTS OF ACTION; ALJ NOTED LACK OF AUTHORITY CITED BY OLMS FOR COSTS ORDER
In Chief, Div. of Enforcement, OLMS v. Local 2419, AFGE , ARB No. 13-037, ALJ No. 2012-SOC-2 (ARB Mar. 20, 2013), the ARB notified the parties that it was summarily adopting the Chief ALJ's Recommended Decision and Order imposing a default judgment against the Respondent for failing to file an answer to the OLMS's complaint. 29 C.F.R. §� 458.68(b) and 458.71. The Chief ALJ had granted all the relief sought by OLMS with the exception of OLMS's request that the ALJ order that the Respondent pay the costs of the action. The Chief ALJ noted that OLMS has cited no authority in support of that request.
Menendez v. Halliburton, Inc.
, ARB No. 12-026 ALJ No. 2007-SOX-5 (ARB Mar. 15, 2013) (reissued with corrected caption Mar. 20, 2013)
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CAUSATION; BREACH OF ASSURANCE OF CONFIDENTIALITY IS ALMOST CERTAINLY CAUSALLY LINKED TO WHISTLEBLOWING ACTIVITY
AFFIRMATIVE DEFENSE; CLEAR AND CONVINCING EVIDENCE TO SHOW THAT BREACH OF ASSURANCE OF CONFIDENTIALITY WOULD HAVE OCCURRED IN ABSENCE OF PROTECTED ACTIVITY IS A DIFFICULT BUT NOT IMPOSSIBLE BURDEN
In Menendez v. Halliburton, Inc. , ARB No. 12-026 ALJ No. 2007-SOX-5 (ARB Mar. 15, 2013) (reissued with corrected caption Mar. 20, 2013), the Complainant alleged that the Respondent retaliated against him in violation of SOX's employee protection provision after he had alerted the SEC and the Respondent's Audit Committee to concerns about GAAP principles with respect to revenue recognition and joint venture accounting practices. Following a hearing, the ALJ had dismissed the complaint finding that the Complainant failed to prove retaliatory adverse action. On appeal, the ARB reversed, and held that the Respondent's breach of the Complainant's confidentiality was adverse action. The ARB remanded for the ALJ to determine whether the protected activity was a contributing factor to this adverse action, and if so, whether the Respondent demonstrated by clear and convincing evidence that it would have acted adversely in the absence of the Complainant's whistleblowing.
The Complainant had emailed the Respondent's Audit Committee with his concerns after ascertaining his right to whistleblowing confidentiality. The Respondent's Assistant General Counsel forwarded the Complainant's email to the Audit Committee and to the Respondent's General Counsel and the Respondent's CFO. The CFO in turn forwarded the complaint to other persons. Later, the Respondent's General Counsel emailed a "document retention" email, identifying in the email the Complainant's identity. This email was forwarded by the CFO to 15 members of the Respondent's Finance and Accounting (F&A) group, including the Complainant. The Complainant's work was in support of the F&A group.
On remand, the ALJ found that the Respondent proved by clear and convincing evidence legitimate business reasons for its disclosure of the Complainant's identity, and again dismissed the complaint. The ALJ, however, recognized that the ARB may not agree that motive or legitimate business reasons are relevant, and therefore made alternative findings that (1) the causation element needed no discussion because it was proven by operation of law, and (2) it would be "metaphysically impossible" for the Respondent to demonstrate its affirmative defense.
Causation (Contributing Factor) � Exposure of Complainant's Identity is Almost Certainly a Contributing Factor in Adverse Action of Breach of Confidentiality
On the appeal of the remand decision, the ARB affirmed the ALJ's alternative findings. In regard to causation, the ARB noted that proof of causation or "contributing factor" in a SOX whistleblower case is not a demanding standard. The complainant need only establish by a preponderance of the evidence that his or her protected activity, alone or in combination with other factors, tended to affect in any way the outcome of the adverse personnel decision. The ARB reiterated that "motive or animus is not a requisite element of causation as long as protected activity contributed in any way � even as a necessary link in a chain of events leading to adverse activity." USDOL/OALJ Reporter at 15 (footnote omitted). The ARB noted that it had observed in its earlier decision that "it is difficult to conceive of any case in which a whistleblower's anonymous and confidential submission of concerns regarding questionable accounting or auditing matters to his employer would not be a �contributing factor' to any subsequent disclosure of his identity." Id. at 14-15. The ARB wrote:
As the ALJ observed in his most recent opinion, in a strictly literal sense, the exposure of a whistleblower's identity is always "caused" by his whistleblowing. But this seemingly circular logic is supported by sound policy reasons. The availability of confidential avenues for reporting fraud is required under SOX and crucial to encouraging employees to expose violations of law. Effective enforcement of SOX requires a prophylactic rule prohibiting the disclosure of a whistleblower's identity where anonymity is reasonably to be expected as Section 301 provides. Given the Board's previous ruling that the right to confidentiality afforded by Section 301 constitutes a "term and condition" of Menendez's employment, the breach of which constitutes an adverse action in violation of SOX Section 806, the conclusion is inescapable under the facts of this case that Menendez's protected activity was a contributing factor in the disclosure of Menendez's identity.
Id . at 15 (footnote omitted).
Respondent's Affirmative Defense (Clear and Convincing Evidence Standard) � Showing that Breach of Confidentiality Would Have Occurred in Absence of Protected Activity Difficult but Not Impossible
In regard to the Respondent's affirmative defense, the ARB found that the ALJ's construction of the standard as proof by clear and convincing evidence of legitimate business reasons for the disclosure did not comport with the statutory standard of proof, which is that the Respondent would have taken the adverse action even in the absence of protected activity. The ARB noted that Congress had purposely set a high burden of proof for the affirmance defense. The ARB acknowledged that this was a difficult case, writing that
�the ALJ's confusion regarding the application of the SOX affirmative defense in this case is understandable given the difficulty of applying the classic whistleblower law formula to the particular facts of this case. The ALJ observed: "It is metaphysically impossible for Respondent to show that if Complainant had never filed his complaints (the protected activity), it still would have disclosed him as the one who made them (the adverse action)." Certainly Halliburton's burden of proof is a high one and, as explained above, purposely so. But it is not impossible. For example, a court order would provide a ground for disclosure extrinsic to the whistleblowing activity itself.
Id . at 16 (footnote omitted). The ALJ had, in holding that the Respondent met its burden on the affirmative defense, found that the Complainant's colleagues were already aware that the Complainant had raised accounting concerns internally; but the ARB found that this was irrelevant to the question of whether the Respondent would have disclosed his identity for reasons outside the whistleblowing activity. The ARB stated that "[c]laiming that the disclosure was harmless does nothing to show that the disclosure advanced a legitimate business reason that would have occurred for reasons extrinsic to the activity itself." Id . at 17 (footnote omitted). The ARB found that the Respondent's supervisor's claim that his intent was to show that the company was addressing the Complainant's concerns did not require the disclosure of the Complainant's identity. The ARB found as a matter of law that the evidence of record was insufficient to support a finding by clear and convincing evidence that the Respondent would have disclosed the Complainant's identity absent his protected activity.
COMPENSATORY DAMAGES; DAMAGES FOR EMOTIONAL DISTRESS AND LOSS OF REPUTATION ARE PERMITTED UNDER SOX SECTION 806; BREACH OF ASSURANCE OF CONFIDENTIALITY IS PARTICULARLY SUITED TO AWARD OF DAMAGES FOR EMOTIONAL DISTRESS AND LOSS OF REPUTATION
COMPENSATORY DAMAGES; DAMAGES FOR NON-PECUNIARY LOSS ARE SUBJECTIVE, BUT MAY BE QUANTIFIED BY REFERENCE TO AWARDS MADE IN SIMILAR CASES
In Menendez v. Halliburton, Inc. , ARB No. 12-026 ALJ No. 2007-SOX-5 (ARB Mar. 15, 2013) (reissued with corrected caption Mar. 20, 2013), the Complainant, whose identity as the source of a complaint to the Respondent's Audit Committee had been improperly disclosed by the Respondent, was awarded compensatory damages by the ALJ for emotional distress and reputational harm. On appeal, the Respondent argued that non-pecuniary damages are not authorized under SOX and, in any case that the Complainant failed to prove entitlement to such damages. The ARB rejected the argument that non-pecuniary compensatory damages are not available under SOX, noting that there was ARB precedent for such awards under SOX, and under the ERA and AIR21 on which Section 806 was modeled. (In a footnote, the ARB acknowledged that there was a spilt of opinion about the availability of compensatory damages in the federal courts.) The ARB found that Congress, when enacting Section 806, was aware of the decades of DOL precedent awarding non-pecuniary compensatory damages under comparable whistleblower statutes, and that Section 806 should be interpreted in conformity with that well-established precedent.
In regard to the size of the award, the ALJ made alternative findings. His primary finding was the Complainant was entitled to a $1,000 award because he had suffered no financial loss or reputational harm outside Halliburton and KMPG. The ARB, however, found that entitlement to compensation for reputational harm does not require proof of financial loss, and that even if it was true that the reputational loss was confined, such a loss within two large firms warrants more than nominal damages. The ARB noted that in a prior decision in this matter, it had explained that the Complainant had suffered real, if not quantifiable, professional and emotional harm, and that based on this evidence of harm, it would affirm the ALJ's alternative award of $30,000. The ARB agreed with the Complainant that the nature of the adverse action in this case � a breach of an assurance of confidentiality � is particularly suited to recognition of non-pecuniary compensatory damages. The Board stated that "[g]iven the inherent subjectivity of non-pecuniary awards, the Board looks to damage awards in similar whistleblower cases for instruction. An award of $30,000.00 is well within the range of awards for emotional distress and reputational injury under Section 806 and other whistleblower statutes." USDOL/OALJ Reporter at 23 (footnote omitted).
Hasan v. Enercon Services, Inc.
, ARB No. 12-096, ALJ Nos. 2004-ERA-22 and 27 (ARB Mar. 14, 2013)
Final Decision and Order PDF | HTM
The ARB summarily affirmed the ALJ's denial of the Complainant's ERA whistleblower complaint. The ALJ had found persuasive the Respondent's witnesses' testimony that the reasons for its decisions not to hire the Complainant were not related to any protected activity but many other reasons related to the previous experience, skill, and expertise of the individuals selected over the Complainant. The ARB found that the ALJ had thoroughly explained his factual and legal findings, and incorporated those explanations into its decision.