Overview: The Sarbanes-Oxley Act of 2002 (SOX), also known as the Public Company Accounting Reform and Investor Protection Act, set enhanced standards for public companies, executives and accounting firms in response to the collapse of Enron and other business giants due to ethically questionable corporate practices. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) amended portions of SOX, providing for enhanced whistleblower and antiretaliation protections.
SOX requires certain employers to adopt an internal ethics program. This ethics program should include a code of ethics and a communications plan, as well as the provision of adequate staff training on the overall program. SOX also contains mandates regarding the establishment of payroll system controls.
SOX contains a number of enforcement provisions, including penalties for falsifying records or retaliating against whistleblowers. SOX violations may result in criminal sanctions for wrongdoers. The Occupational Safety and Health Administration's Whistleblower Protection Program enforces SOX's whistleblower provisions.
Trends: In compliance with Dodd-Frank regulatory requirements, the SEC created an internal Office of the Whistleblower in order to process complaints and offer bounties to whistleblowers. Employers can expect substantial awards in the upcoming months and years. In addition, the Supreme Court has extended the scope of SOX's protections to include employees of private contractors and subcontractors of a public company.
Author: Marta Moakley, JD, Legal Editor
The Occupational Safety and Health Act (OSH Act) was passed in 1970 to assure safe and healthy workplaces for employees. The Act established the Occupational Safety and Health Administration (OSHA), an agency within the US Department of Labor. OSHA enforces the OSH Act by requiring employers to conform to regulations that specify safe and healthy conditions. An employee has the right to notify OSHA of a violation of an OSHA regulation, that is, to be a whistleblower. OSHA enforces the OSH Act's Whistleblower Statute along with 20 other whistleblower statutes for various industries, including the one for the Sarbanes-Oxley Act (SOX), which regulates the securities industry. This Legal Insight discusses these whistleblower statutes and employee rights pursuant to them.
Updated to reflect whistleblower immunity protections under the Defend Trade Secrets Act, effective May 11, 2016.
XpertHR Legal Editor Marta Moakley takes an in-depth look at the Supreme Court's ruling in Lawson v. FMR and other notable recent whistleblower developments affecting employers.
This How To provides employers the steps to implement an ethics program.
In Tides v. Boeing Co., 644 F.3d 809 (9th Cir. 2011), cert. denied, No. 11-309, 132 S. Ct. 518 (U.S. Oct. 31, 2011), the 9th Circuit Court of Appeals addressed whether Section 806(a)(1) of the Sarbanes-Oxley Act (SOX) protects an employee working at a publicly held company from retaliation when that employee discloses information to the media regarding certain types of fraud violations.
HR guidance on Sarbanes-Oxley Act (SOX) compliance.