United States: Seminal Decision Could Make It Harder For Publicly Traded Employers To Defeat Sarbanes-Oxley Whistleblower Claims

Last Updated: October 28 2014
Article by Kevin E. Griffith, Gregory C. Keating and Edward T. Ellis

Long awaited in Sarbanes-Oxley Act (SOX) whistleblower circles, on October 9, 2014 the U. S. Department of Labor's Administrative Review Board (ARB) issued a split 2-1 panel decision in Fordham v. Fannie Mae, ARB No. 12-061, reversing in part and remanding an administrative law judge's post-hearing dismissal of a former employee's Section 806 whistleblower retaliation claim. The ARB's decision in Fordham is significant because it addresses squarely, and at length, how ALJs and OSHA investigators should apply the separate and two-stage burden of proof required under Section 806 whistleblower retaliation claims. The result of the ARB's Fordham decision likely will energize the plaintiffs' bar, and could make it more difficult for covered employers – and their contractors and subcontractors based on Lawson v. FMR LLC – to obtain dismissals of SOX Section 806 whistleblower retaliation claims, whether at the investigatory stage or following a full-blown evidentiary hearing before an ALJ. If the ARB's decision is appealed but withstands judicial review, Fordham v. Fannie Mae could lead to a sea change in publicly traded employers' and their contractors' and subcontractors' involvement in, and potential exposure to, SOX whistleblower claims.

In its 47-page decision – supported by 117 footnotes(!) and a strong dissent attacking the overall "unfairness" of the majority's decision – the ARB reversed and remanded the ALJ's dismissal of the Section 806 whistleblower retaliation claim.  Section 806 of SOX provides a federal cause of action for employees who allege their employers retaliated against them for reporting violations of federal securities laws. In Fordham, the claim was brought by a former IT technical risk specialist who worked in the employer's SOX Technology Department. The ARB's reversal comes over two-and-a-half years after the March 19, 2012 ALJ dismissal of the former employee's claim. Noting that its decision addressed "a matter of first impression," the ARB in Fordham attempted to clarify the ARB's, ALJs' and reviewing courts' often conflicting approaches to how Section 806's two separate burdens of proof should be applied. In doing so, the ARB extensively analyzed the legislative history of Section 806 and the current body of Section 806 ARB and court decisions that have interpreted its burden of proof provisions. In addition, the ARB extensively analyzed the legislative history and case law interpretations of the burden of proof models under the Aviation Investment Reform Act (upon which Section 806 was modeled), the Energy Reorganization Act, and, ultimately, the federal employment Whistleblower Protection Act and its supporting case law.

While the ARB mentioned the first three elements of the Section 806 whistleblower's prima facie burden: (1) protected activity; (2) the employer's knowledge; and (3) adverse employment action, the Fordham decision deals primarily and extensively with the burden of proof applicable to element (4) – i.e., the complainant's burden of showing that her protected activity was a "contributing factor" in the employer's adverse decision. The new decision's key holding addresses the treatment of evidence supporting the employer's affirmative defense that it would have taken the same action against the employee even if the employee had not engaged in protected SOX activity.  The ARB held that such evidence cannot be taken into account by the ALJ until the ALJ first decides whether the SOX complainant has met her burden of proving, by preponderance of the evidence, that her conduct was a "contributing factor" in the employer's adverse decision. According to the ARB, allowing otherwise would permit ALJs to weigh the employer's evidence by a preponderance of the evidence standard and not by SOX's required clear and convincing standard. Thus, in the end, the ARB's final holding in Fordham v. Fannie Mae is that Section 806 claims have two separate burdens of proof: a preponderance of the evidence burden for the whistleblower, and a higher, clear and convincing burden for the employer. In addition, ALJs and OSHA investigators are to apply the burdens of proof in two separate stages.

As the ARB held:

The determination whether a complainant has met his or her initial burden of proving that protected activity was a contributing factor in the adverse personnel action at issue is required to be made based on the evidence submitted by the complainant, in disregard of any evidence submitted by the respondent in support of its affirmative defense that it would have taken the same personnel action for legitimate, non-retaliatory reasons only.  Should the complainant meet his or her evidentiary burden of proving "contributing factor" causation, the respondent's affirmative defense evidence is then to be taken into consideration, subject to the higher "clear and convincing" evidence burden of proof standard, in determining whether or not the respondent is liable for violation of SOX's whistleblower protection provisions.

The ARB in Fordham reversed and remanded the ALJ's dismissal order because the ARB determined the ALJ committed reversible error by improperly "weighing evidence offered by Fannie Mae in support of its affirmative defense...against [the] complainant's causation evidence" of how her SOX-protected activity purportedly was a contributing factor in the employer's adverse employment action against her. According to the ARB, mixing and weighing the evidence in this fashion impermissibly resulted in applying to the employer's evidence the lower preponderance of the evidence standard that is only properly applicable to the complainant's evidence, rather than applying the higher clear and convincing evidence standard required to be applied to the employer's evidence.  As the ARB further clarified:  

...should a respondent seek to avoid liability by producing evidence of a legitimate, non-retaliatory basis or reason for the personnel action at issue, the respondent must prove, not by a preponderance of the evidence, but by clear and convincing evidence, that its evidence of a non-retaliatory basis or reason for its action was the sole basis or reason for its action; that it would have taken the same personnel action based the demonstrated non-retaliatory reasons even if the complainant had not engaged in the protected activity.   

An obvious problem with the ARB's holding is that evidence in most cases is not as easily compartmentalized as this opinion appears to presume. Often evidence that establishes a legitimate reason for terminating an employee (the defense's burden) will deprive the complainant of the quantum of proof necessary to demonstrate that the activity protected by SOX was a contributing factor in the adverse employment action (the complainant's burden). Eliminating other events occurring in the workplace during the relevant time period means that the finder of fact may consider two factors: (a) direct evidence of unlawful animus, and (b) temporal proximity. Since (a) is rare, most cases at this stage of the analysis will turn on timing.

The Fordham decision provides other guidance on the terms "protected activity" and "adverse employment action" under Section 806. The decision also contains a vigorous dissent, which likely has set the stage for judicial review. So, stay tuned.

A final takeaway from Fordham pertains to employer investigations of employee complaints. The ARB's statement of facts does not paint a sympathetic picture of the complainant. Rather, the facts show she exhibited significant performance, conduct and attendance problems over a period of time. When the employer attempted to address those problems, the complainant lashed out and accused management of race and gender discrimination, incompetence, and trying to intentionally undermine her employment. She also began raising complaints about the sufficiency of, and deficiencies in, the employer's SOX-related internal controls and methodologies for testing those controls. The facts do not indicate that the employer ever investigated the employee's complaints or brought them to a resolution. Then, after the employer later informed the employee that it was taking her off her main IT project due to her lack of progress, it also threatened that, if she did not turn around her performance and behavior issues, the employer would be having a "different conversation" with her. The facts show that this communication provoked the employee to intensify her SOX-protected complaints to management, and even resulted in her faxing a complaint to the SEC and filing a Section 806 retaliation complaint with OSHA.  Subsequently, the employer informed the complainant it was considering terminating her employment but wanted to gather more data.  So, it placed her on paid administrative leave, but told her it was not due to her performance; rather, it was due to her violation of the employer's attendance policy. Two-and-a-half months later, the employer sent the employee a letter informing her that it had decided to terminate her employment due to "unacceptable performance, conduct and attendance issues."  

We made some general recommendations to employers regarding handling internal investigations in an October 13, 2014 ASAP titled, "Government's Message to Corporate America—'We Want Your Whistleblowers!'" The recommendations included the importance, in light of the rapidly expanding federal and state law protections for whistleblowers, of taking every employee complaint of unlawful conduct seriously, investigating such complaints promptly and thoroughly and resolving each such complaint. The challenging facts of this case illustrate why properly and promptly conducting an investigation is important to help protect the employer in the event future litigation occurs. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Kevin E. Griffith
Edward T. Ellis
In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions