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
Updated to include information on Digital Realty Trust, Inc. v. Somers, a Supreme Court case that addresses whistleblower protections.
The Occupational Safety and Health Administration (OSHA) enforces the OSH Act's Whistleblower Statute along with 21 other whistleblower statutes for various industries. This Legal Insight discusses these whistleblower statutes and employee rights under them.
This How To provides employers the steps to implement an ethics program.
HR guidance on Sarbanes-Oxley Act (SOX) compliance.