Workforce Bulletin

By:  William J. Milani and Anna Kolontyrsky

The Eastern District of New York has rejected a claim for relief under the New York State Human Rights Law (“NYSHRL”) brought by a job applicant who alleged that a bank unlawfully discriminated against her based on her criminal history. In Smith v. Bank of America Corp. (subscription required), Smith, who worked as a temporary employee at Bank of America, was encouraged by her supervisor to apply for full-time employment.  Before doing so, she informed her supervisor that she had been arrested and charged with a misdemeanor but that the ...

By:  John F. Fullerton III

As a direct result of the financial crisis, an increasing number of states have enacted or are considering statutes that prohibit or restrict employers from obtaining and using credit reports for making hiring and other employment decisions.  Eight states have now passed such legislation - California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Washington and Vermont.  Similar legislation is pending in many other states - including New Jersey and New York - and bills have been introduced at the federal level as well.  In most states that have ...

Before the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”) was enacted, whistleblower claims by registered representatives, including those arising pursuant to the Sarbanes-Oxley Act of 2002 (“SOX”) were subject to mandatory arbitration at FINRA.  See FINRA Notice 12-21 (PDF).  Dodd Frank changed that.  Dodd Frank specifically amended SOX to provide that “[n]o dispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section.”  In addition, SOX was also amended to ...

By:  William J. Milani and Anna Kolontyrsky

The New York Court of Appeals has rejected a wrongful discharge cause of action brought by a hedge fund compliance officer who claimed that he was terminated for questioning a series of personal stock trades by the company’s president.  Sullivan v. Harnisch, No. 82 (N.Y. May 8, 2012) (PDF)

Sullivan, who was the Chief Compliance Officer, Executive Vice President, Treasurer, Secretary and Chief Operating Officer of the hedge fund, was terminated after confronting the hedge fund's president about stock trades that Sullivan believed ...

By:  John F. Fullerton III

On May 16, I co-hosted a small roundtable discussion here at the firm entitled “Employee Misclassification Issues in the Financial Services Industry:  Preventive Maintenance and Proactive Strategies.”  The topics included proper application of the administrative exemption from federal and state overtime laws; the nettlesome employee v. independent contractor question; and contingent workforce issues.  In attendance was a healthy mix of in-house employment counsel, human resources professionals, management consultants and outside counsel.  ...

By:  Dena L. Narbaitz

 This is the fourth in our series of posts on practice and procedure in employment-related arbitrations before FINRA.  Check back often for future posts, subscribe by e-mail (see the sidebar), or follow @FSemployer on Twitter so you don’t miss any updates!

The FINRA Code of Arbitration Procedure provides for a simplified arbitration process in both employment and customer disputes if the dollar amount in controversy is below a certain threshold. The SEC recently approved FINRA’s proposal to raise the dollar limit eligible for simplified arbitration ...

On May 9, 2012, the Second Circuit held that Title VII’s “participation clause,” prohibiting an employer from retaliating against any employee who participates in an investigation “under” Title VII, requires participation in a formal investigation involving the Equal Employment Opportunity Commission (“EEOC”) – participating in purely internal investigations, conducted pursuant to the employer’s own policies and procedures, is not sufficient to trigger the statutory protections. Townsend v. Benjamin Enterprises, Inc., No. 09-0197. 

The Second ...

Guest Post By:  Kenneth J. Kelly and Diana Costantino Gomprecht

It is not uncommon for international financial institutions to face the conundrum of being required to provide documents and information for litigations in the United States that would violate privacy laws in their home country or where their affiliates are located.  The most common issues arise in connection with discovery requests that seek information prohibited by the European Union (“EU”) Data Protection Directive (Directive 95/46/EC) (PDF) that restricts the transfer and processing of broadly ...

The Administrative Review Board (“ARB”) on April 27, 2012 held that where an employer charged with retaliation under the AIR21 Statute can point to evidence of misconduct by a whistleblower which would have justified termination, but which was acquired after the termination had already occurred, that evidence may be used to limit the period for which back pay damages are recoverable. Clemmons v. Ameristar Airways, Inc., ARB Case No. 08-067. The ARB remanded the matter to the Office of Administrative Law Judges (“OALJ”) to clarify whether the employer must prove that it ...

By: Anna Kolontyrsky and Jeffrey Landes

As summer internship season approaches, financial service employers should confirm that their internship programs comply with all relevant laws, including the requirements of the Fair Labor Standards Act (“FLSA”) and applicable state laws.  Ascribing the term “intern” to a college or postgraduate student working for an employer for a short duration during the summer months does not automatically exempt the employer from federal and state minimum wage and overtime requirements. Unless the position meets certain statutory and ...

By:  John F. Fullerton III

This is the third in our series of posts on practice and procedure in employment-related arbitrations before FINRA.  Check back often for future posts, subscribe by e-mail (see the sidebar), or follow @FSemployer on Twitter so you don’t miss any updates!

Once upon a time, it was mandatory under Form U4 that registered representatives file any statutory claims of discrimination (such as age, gender, or race discrimination) in arbitration rather than in court.  A well known Supreme Court case decided in 1991, Gilmer v.  Interstate/Johnson Lane Corp.

By:  John F. Fullerton III

This is the second in our series of posts on practice and procedure in employment-related arbitrations before FINRA.  Check back often for future posts, subscribe by e-mail (see the sidebar), or follow @FSemployer on Twitter so you don’t miss any updates!

As a general rule, it is more common to read about employers who have been sued in court by a former employee attempting to compel the claims into arbitration than an employer trying to compel arbitration claims to be filed in court.  Yet, under the occasionally overlooked FINRA Rule 13803, employers who ...

Michelle Capezza, our colleague at Epstein Becker Green, recently posted a useful summary of the JOBS Act, and we recommend it to our readers in the financial services industry.  See below for an excerpt and link.

On April 5, 2012, President Obama signed into law the Jumpstart Our Business Startups Act, or JOBS Act.  In light of the sharp decline in the number of companies entering the U.S. capital markets through IPOs over the last ten years, Congress recognized a need for this legislation since small companies are critical to economic growth and job creation.  To promote growth and ...

By:  Allen B. Roberts and Frank C. Morris, Jr.

Continuing its trend from 2011, the Department of Labor (DOL) Administrative Review Board (ARB) seems intent on extending whistleblower protection under the Sarbanes-Oxley Act of 2002 (SOX) beyond allegations of securities fraud – even where that means reversal of its own administrative law judges who believe they are applying the law as Congress intended and consistent with ARB precedent. For now, whistleblowers and their attorneys can expect a more hospitable reception in this administrative forum for innovative claims alleging that adverse employment actions have occurred in reprisal for activity claimed to be covered by SOX Section 806. 

The ARB’s March 28, 2012 decision in Zinn v. American Commercial Lines Inc. (pdf) builds from the groundbreaking May 2011 holding in Sylvester v. Paraxel, Int’l LLC that “a reasonable belief about a violation of any rule or regulation of the Securities and Exchange Commission could encompass a situation in which the violation, if committed, is completely devoid of any type of fraud,” and a whistleblower need not prove fraud to win a retaliation claim. Zinn, at 8. Further, even if the whistleblower’s belief is mistaken, and no actual violation of the law has occurred, whistleblower protections are available and will be enforced.  Id. at 10.

By: John F. Fullerton III

This is the first of a series of posts on practice and procedure in employment-related arbitrations before FINRA.  Check back often for future posts, subscribe by e-mail (see the sidebar), or follow @FSemployer on Twitter so you don’t miss any updates!

More than one lawyer has been burned by a FINRA arbitration panel that seemed ideal on paper, but then, at the hearing, just did not “get it.”  Conversely, a panel that initially looks troubling sometimes does a great job at the hearing and gets the decision right (i.e., in your favor, of course). And there ...

By:  John F. Fullerton III

The New York Court of Appeals recently upheld a jury verdict in favor of a brokerage firm employee who claimed that his employer breached an oral promise (and violated New York wage law) when it failed to pay him a guaranteed bonus of $175,000, to be paid at the end of his first year of employment.  The discussions with the hiring manager regarding compensation were not put in writing.  Nevertheless, the employee subsequently signed an acknowledgment in the formal employment application that  “compensation and benefits are at will and can be terminated, with or ...

Guest Post By: H. David Kotz

H. David Kotz is a Managing Director at Gryphon Strategies, a full-service investigation firm, which he joined in January 2012 after serving for over four years as the Inspector General for the SEC.  He was a guest speaker at Epstein Becker & Green’s March 7, 2012 breakfast briefing, “2012’s Key Issues for Financial Services Employers.”

The head of the Securities and Exchange Commission’s (SEC’s) Whistleblower program reported on March 14, 2012 that the SEC Whistleblower program has been receiving a continuous volume of complaints since the ...

By: Lauri F. Rasnick

FINRA recently announced that it fined Merrill Lynch, Pierce, Fenner & Smith (“Merrill”) one million dollars for failing to arbitrate claims with employees. See January 25, 2012 News Release.    The disputes at issue arose out of promissory notes executed by Merrill employees in connection with the Bank of America Corporation (“BOA”) acquisition.  After the BOA acquisition, Merrill created a program called the Advisor Transition Program (“ATP”).  Pursuant to this program, Merrill was to pay particular registered representatives lump sum ...

By: John F. Fullerton III

A recent New York state court decision granted a fairly unique petition to disqualify the attorney for a group of former employees from representing them in an intra-industry arbitration at FINRA. Why?  Because the lawyer had turned himself into a fact witness by negotiating the termination explanation in the U5 notice of two of the employees. The decision raises an interesting question about whether the same logic could be applied in a U5 expungement hearing at FINRA when there have been discussions between counsel about the U5 language, regardless of whether ...

By:  Dena L. Narbaitz

Here is the scenario:  your company, a FINRA Member Firm, terminates a broker for “violation of company policies” and reports this as the reason for termination on the broker’s Form U-5 (Uniform Termination Notice for Securities Industry Registration).  The broker then sues your company in state court asserting several claims, including defamation for the language contained on his Form U-5.  Your company thinks there is a good legal basis to have the broker’s claims dismissed as a matter of law before the case is tried.  Should your company litigate the case ...

By Stuart M. Gerson

Lawson v. Fidelity Management & Research LLC, et al., No. 10-2240 (1st Cir. Feb. 3, 2012) (pdf), discussed in our February 16 posting, comes as a welcome development to privately-held companies that are providers of health care goods and services because it should, if followed generally, preclude whistleblowers from bringing the kinds of audit-related and financial accounting claims that are within the compass of the Sarbanes-Oxley Act (SOX).

Many of these companies are, however, the recipients of payments that directly or indirectly involve funds ...

By: Christina Fletcher

Confronting an issue of first impression, the U.S. Court of Appeals for the First Circuit recently held that the “whistleblower” protections of the Sarbanes-Oxley Act of 2002 (“SOX”) cover only employees of public companies, and do not extend to the employees of a public company’s contractors or subcontractors which are themselves private companies. Lawson v. Fidelity Management & Research LLC, et al., No. 10-2240 (1st Cir. Feb. 3, 2012) (pdf). This holding provides private-company employers with a potentially strong defense to claims of retaliation against employees. However, it should be anticipated that Congress may revisit the scope of the protections and ultimately expand them in response to Lawson.

Section 806 of SOX prohibits discrimination against employees who engage in protected whistleblowing activities and work for publicly traded companies subject to the requirements of the Securities Exchange Act of 1934. 18 U.S.C. § 1514A(a).  In Lawson, Fidelity Investments, a public company covered by Section 806 of SOX, contracted with a private investment advisory firm to provide investment advisory services. Plaintiff Zang alleged that he had been terminated in retaliation for raising concerns about inaccuracies in a draft revised registration statement for certain Fidelity funds. Plaintiff Lawson alleged retaliation for raising concerns relating to cost accounting methodologies. She resigned her employment in September 2007, claiming constructive discharge. Defendants’ motions to dismiss the complaints argued that the plaintiffs were not covered employees under Section 806 of SOX. The district court agreed with the plaintiffs, holding that subcontractors to a public company subject to SOX were protected by SOX’s whistleblower provision.

The First Circuit reversed, basing its decision on the language of SOX, principles of statutory interpretation, and SOX’s legislative history. The Court noted that plaintiffs’ suggested reading of the Act created anomalies and provided very broad coverage not intended by Congress. The Court explained that the clause “officer, employee, contractor, subcontractor, or agent of such company” in the whistleblower protection provision goes to who is prohibited from retaliating or discriminating, not to who is a covered employee. Thus, covered employees are limited to employees of public companies

By Allen B. Roberts and Stuart M. Gerson

Those concerned with managing or insuring risk are affected increasingly by the evolution of whistleblowing, especially as new laws and interpretations since 2009 have changed the stakes by redefining whistleblower protections and bounty award entitlements.

Virtually any risk management program written prior to the 2008 elections may need to be recalibrated to take account of new definitions introduced by whistleblower features of legislation nominally concerning healthcare and financial services, but in reality reaching much ...

Allen B. Roberts and Stuart Gerson  are co-authors of the recent Law360 article Examining The Purpose Of Sarbanes-Oxley. This summary of recent Administrative Review Board actions explains the shift in the standards whistleblowers must meet, and how employers should prepare for this new era of litigation.

In previous articles and postings, we have cautioned that legislative policy of the Dodd-Frank Wall Street Reform and Consumer Protection Act threatens to circumvent corporate compliance programs and drive whistleblowers having vital information outside the organization in the hope of receiving rich bounty awards. In a recent article published by Bloomberg Law Reports®, Allen Roberts discusses some of the challenges businesses subject to SEC jurisdiction need to address in the face of the SEC’s Final Rule – mindful that the plaintiffs’ bar has geared up to ...

By: Stuart M. Gerson

On May 16, 2011, the U.S. Supreme Court decided the case of Schindler Elevator Corp. v. United States ex rel. Kirk (pdf), holding that the public disclosure bar of the False Claims Act (FCA) is triggered by a federal agency’s written response to a Freedom of Information Act (FOIA) request. This important, and much awaited, decision makes it clear that an agency’s FOIA response constitutes a “report” for purposes of the FCA’s public disclosure bar, which forecloses private parties from bringing qui tam whistleblower suits to recover falsely or ...

By: Allen B. Roberts, Stuart M. Gerson and Daniel J. Schuch

In a case packed with allegations of the kind rarely found beyond the script of a soap opera, the U.S. Department of Labor ("DOL") Administrative Review Board ("ARB") determined that protected activity under the Sarbanes-Oxley Act of 2002 ("SOX") does not require a showing of fraud against shareholders. Rather, per the ARB, it is sufficient that an employee reasonably believes conventional mail or wire fraud has occurred. The holding in Brown v. Lockheed Martin Corp. (pdf) evidences the ARB's adherence to a literal, and clinical, construction of SOX – and serves as a clear indication of the ARB's willingness to reach beyond the underlying objectives envisioned by Congress in the wake of the infamous collapse of Enron and WorldCom. If upheld and followed, Brown effectively expands SOX whistleblower protections well beyond the intended beneficiary of the law – the "innocent investor."

By Allen B. Roberts and John Houston Pope

With virtually no fanfare, a major sector of the American workforce – those who handle food – won whistleblower protections under the FDA Food Safety Modernization Act (“FSMA”), Pub. L. No. 111-353. The Food and Drug Administration (“FDA”) describes FSMA, signed into law on January 4, 2011, as improving food safety by preventing hazards “from farm to table” and making “everyone in the global food chain responsible for safety.”

While much attention and controversy surrounded the whistleblower bounty awards of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) enacted in July 2010, the potentially more significant whistleblower provision of FSMA passed in the final days of the 2010 legislative session in routine and undramatic fashion. Indeed, the most significant whistleblower portions of the bill did not emerge until a version of the bill was reported out of a Senate committee in mid-November. (No written report explained the major changes written into the law.) Because of the sheer size of the workforce that touches food and the comprehensive definition of “protected activity,” however, the relatively unheralded law extends coverage and companion employer obligations in potentially unprecedented measure. The claims that result could dwarf those arising under whistleblower laws receiving far more media and business attention.

By David W. Garland and Allen B. Roberts

Major provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) will gain substance and vitality only with amplifying interpretive rules. On December 17 the period closed for submitting comments on rules proposed by the Securities and Exchange Commission (SEC) to implement whistleblower provisions added in a new Section 21F to the Securities Exchange Act of 1934 (Exchange Act). With the comment period having closed, and final rules expected to be implemented in the Spring of 2011, this is a good time to take account of the proposed rules regarding the statute’s anti-retaliation provisions and their potential impact on employers.   

Dodd-Frank authorizes bounty awards to eligible whistleblowers who voluntarily provide original information to the SEC about a violation of the federal securities laws leading to a successful enforcement action and resulting in a monetary sanction exceeding $1,000,000.  It is not surprising that much of the analysis and media attention generated by Dodd-Frank concerns the bases on which the SEC will make determinations about paying potentially enormous bounty awards that can range from 10% to 30% of the amount of monetary sanctions. 

Section 21F also protects whistleblowers against retaliation by their employers, with the scope of protection circumscribed by the statutory definition of a whistleblower.  Rather than providing protection equally for internal disclosures to the employer and external disclosures to authorized agencies and authorities, as is seen commonly in whistleblower statutes, Section 21F protects only certain external disclosures. It defines a whistleblower narrowly as any individual, acting alone or jointly, who provides information relating to a violation of the securities laws to the SEC in the manner prescribed by the SEC.

Whistleblower considerations are likely to be especially prominent in the new year and as a new Congressional term begins, leading to the 2012 election campaign.

Please join me and other attorneys from my firm, EpsteinBeckerGreen, as we present a full-day program covering labor and employment law topics that have increasingly impacted employers over the past two years. In addition, we will offer an outlook of what we should expect in the coming two years. Our keynote speaker is Darrel Thompson, Senior Advisor to Senate Majority Harry Reid, who will offer comments concerning the ...

An in-house patent attorney who protested that his employer knowingly assigned a $50 million value to acquire patents alleged to be worthless could not link his discharge to whistleblower activity protected by the Sarbanes-Oxley Act. Affirming dismissal in Vodopia v. Koninklijke Philips Electronics, N.V., et al., the Second Circuit Court of Appeals observed that: (1) the complaint clearly centered on the plaintiff’s concern that the patents were invalid, not on the value the company assigned to them; and (2) the complaint did not allege that the $50 million value assigned to those patents was ever reported to the public or to shareholders.

Sarbanes-Oxley Section 806 makes it unlawful for an employer to take an unfavorable personnel action by discharging, or in any other manner discriminating against, an employee in the terms or conditions of employment because of any lawful act done by the employee to provide information or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of certain enumerated federal laws. 

In the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), Congress has crafted an array of bounty awards and whistleblower protections broadly affecting securities, commodities and futures, and consumer financial products firms and those associated with them. Although there was an opportunity to create incentives promoting internal reporting in aid of corporate compliance programs and to rationalize whistleblowing with standardized definitions, procedures and remedies, Congress went in different directions. The result is a set of whistleblower ...

[Ed. Note: We thank our colleague Richard D. Tuschman for this post, which was originally published on EBG’s Florida Employment & Immigration Law Blog]

An employee claiming Whistleblower protection under the Sarbanes-Oxley Act must have actually believed that his company’s conduct was illegal in order to state a claim under the Act, according to a recent decision by the Eleventh Circuit Court of Appeals, Gale v. U.S. Department of Labor, Case No. 08-14232 11th Cir. June 25, 2010) (pdf).

The case arose when Michael Gale was terminated from his employment at World Financial Group (“WFG”). Gale filed a Whistleblower complaint with the Occupational Safety and Health Administration, which enforces the SOX Whistleblower provisions. Gale alleged that he was terminated because he opposed decisions made by company officers relating to waste and misuse of corporate funds, and because he raised concerns regarding the alleged violation of SEC rules and regulations.

Under SOX, a publicly traded company and its officers are prohibited from discharging an employee for providing information to a supervisory authority about conduct that the employee “reasonably believes” constitutes a violation of federal laws against mail fraud, wire fraud, bank fraud, securities fraud, any SEC rule or regulation, or any provision of federal law relating to fraud against shareholders. 18 U.S.C. § 1514A(a)(1). 

We continue to follow developments on Wall Street financial reform legislation and the whistleblower rights and protections that will come with its enactment. Now recast as the Dodd-Frank Wall Street Reform and Consumer Protection Act, the bill will be considered with its Conference Report (pdf).

A preview of the legislation is addressed in the interview of Allen Roberts by Bloomberg legal analyst Spencer Mazyck, now available in video, below:

By: Allen B. Roberts, Victoria M. Sloan

The typical set of protections or awards featured in a familiar array of whistleblower statutes has a new entrant with the imposition of mandated reporting in the Elder Justice Act section of the recently enacted Patient Protection and Affordable Care Act (“PPACA”). In a notable departure from other laws, the Elder Justice Act provides that every individual employed by or associated with a long-term care facility as an owner, operator, agent or contractor has an independent obligation to report a “reasonable suspicion” of a crime affecting residents or recipients of care. Reports must be made directly to both the Secretary of Health and Human Services (“HHS”) and one or more law enforcement entities in as little as two hours following the formation of the reasonable suspicion.

Although limited to reports of crimes against residents and recipients of services of long-term care facilities, the mandate of the Elder Justice Act sets a new standard of conduct – and backs it up with stiff penalties affecting long-term care facilities and those associated with them.

A new wave of whistleblower monetary awards and protections will come to the financial services industry once the Restoring American Financial Stability Act of 2010 (RAFSA) is enacted. With final resolution of differences between House and Senate versions accomplished, both houses of Congress now will consider the conference committee bill.

Bloomberg legal analyst Spencer Mazyck has been following whistleblowing changes we are likely to see with the anticipated enactment of RAFSA. Spencer explored with me some contours and ramifications of the pending legislation during ...

On the heels of its 2-1 decision in Hyman v. KD Resources, allowing equitable estoppel to extend the Sarbanes-Oxley (SOX) statute of limitations (noted in our blog posting of April 20, 2010), the Department of Labor Administrative Review Board (ARB) has issued a unanimous decision clarifying the burden for whistleblowers to survive dismissal of complaints that are not filed within the explicit 90-day statute of limitations. Daryanani v. Royal & Sun Alliance, ARB No. 08-106, ALJ No. 2007-SOX-79 (ARB May 27, 2010).

Adhering to the principle that equitable estoppel may apply when certain employer conduct interferes with a whistleblower-employee’s exercise of rights, the ARB nevertheless refused to extend the SOX statute of limitations on the basis of alleged inaction by an employer. Holding equitable estoppel would not be available in the circumstances, the ARB observed that the employer had no affirmative obligation to:

• inform the employee of potential causes of action,
• inform the employee of time limitations applicable under statutes creating a cause of action, or
• counter-sign a severance release agreement within the statute of limitations deadline.

By Allen B. Roberts, Douglas Weiner

The U.S. District Court for the District of Massachusetts held in Lawson v. FMR LLC (pdf) that SOX coverage can apply not only to employees of publicly traded companies, but to employees of private management services firms as well.

The typical business model in the financial services industry is that public mutual fund companies generally have no employees of their own, but are managed by private investment advisors. The public company’s investment assets are thus managed by employees of a private employer.

Plaintiffs, employees of a private investment advisor to a public mutual fund, alleged they had engaged in activity protected by SOX, for which they suffered retaliation. The employer moved to dismiss the lawsuit, arguing plaintiffs were not covered by the Section 806 whistleblower protections because they were not employees of a publicly traded company. The defendants noted the very title of the whistleblower section of SOX is “Protection for Employees of Publicly Traded Companies Who Provide Evidence of Fraud.” The plaintiffs countered that Congress intended to extend coverage to private employees in cases such as the plaintiffs.

The Lawson court, the first federal court to decide the issue, agreed with the putative whistleblowers and held that SOX covers employees of private firms providing contract services to the public company.

Like several other statutes, the Sarbanes-Oxley Act (“SOX”) requires whistleblowers to initiate their complaints by an administrative filing with the Department of Labor’s Occupational Safety and Health Administration. But when a preferred outcome in that designated arena appears unlikely, a whistleblower may be allowed to abandon the administrative process before a final order issues and seek a new opportunity in court.  Faced with the prospect of another round of de novo litigation, employers may turn increasingly to pre-dispute arbitration agreements as an alternative to litigating in court.

As exemplified by Stone v. Instrumentation Laboratory Co.(4th Cir. 2009) (pdf), filing an administrative complaint and participating in the administrative process, as required by SOX, do not foreclose access to a federal court before the issuance of a final administrative order. The court explained that the preclusion doctrine, intended to avoid duplicative litigation, does not bar de novo consideration by a federal district court if a lawsuit is filed at least 180 days after the administrative filing and before the Department of Labor has issued a final decision, even where administrative proceedings have progressed to Administrative Review Board consideration of an administrative law judge’s dismissal of a complaint. 

By Allen B. Roberts, Douglas Weiner

While most attention in the legislative and political process leading to enactment of the Patient Protection and Affordable Care Act (“PPACA”) focused on the significant impact on the delivery of health care, employers need to be aware, also, of amendments to the Fair Labor Standards Act ("FLSA"). The FLSA amendments impose certain employer responsibilities in providing health care benefits, confer whistleblower protections and authorize the U.S. Department of Labor ("DOL") to undertake increased enforcement related to health care.

While other features of the FLSA amendments are addressed in our client alert, "Health Care Reform Legislation Amends the Fair Labor Standards Act to Give the U.S. Department of Labor Increased Enforcement Authority over Health Care," here is a summary of whistleblower protections:

By: Allen B. Roberts, Victoria M. Sloan

Employers who thought they were free of exposure if no complaint was filed within the statute of limitations applicable in Sarbanes-Oxley ("SOX") and other whistleblower claims administered by the Secretary of Labor need to recalibrate their risk based on a recent decision allowing equitable estoppel.

In Hyman v. KD Resources, an employee missed the 90-day SOX statute of limitations by filing his complaint 160 days after he was discharged. Two newly appointed members of the Administrative Review Board (“ARB”) allowed the complaint to survive and remanded it to the Administrative Law Judge who had dismissed it as untimely.

By Stuart M. Gerson

Suits in the name of the United States under the Federal False Claims Act (“FCA”) brought by private individuals known as qui tam relators are among the most common forms of whistleblower actions in the federal system. The Supreme Court rendered its much-anticipated decision in Graham County Soil and Water Conservation District, et al. v. United States ex rel. Wilson (pdf), imposing a significant limitation on the ability of these relators to satisfy an important jurisdictional bar.

The FCA authorizes both the Attorney General and private qui tam relators to bring actions against persons who make or facilitate fraudulent claims for payment from the United States. However, in the absence of the government, a relator will be barred from proceeding on his own if the action is based upon the public disclosure of allegations or transactions in, inter alia, "a congressional, administrative, or Government Accounting Office ("GAO") report, hearing, audit, or investigation." 31 U. S. C. §3730(e)(4)(A). The Graham County case involved federal contracts and funding for the repair of flood damage. The relator, Wilson, a local government employee, alerted both federal and county and state officials to irregularities in performance. Both the county and the state issued reports making findings about these potential irregularities and Wilson thereupon filed a qui tam action against the county conservation districts administering the contracts. The District Court dismissed for lack of jurisdiction because it held that the allegations publicly disclosed in the county and state reports constituted "administrative" reports under the FCA's public disclosure bar. The Fourth Circuit reversed, holding that only federal administrative reports may trigger the public disclosure bar.