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. 

Once a whistleblower gains access to a federal court, there is no assurance the case will remain there to be adjudicated, if an arbitration agreement is in place. In Hill v. Ricoh Americas Corp., (10th Cir. Apr. 19, 2010) (pdf), the court heldthat a SOX whistleblower’s lawsuit should be stayed and arbitration compelled because a pre-dispute agreement to arbitrate contained in an employment agreement is enforceable. An earlier Second Circuit Court of Appeals decision, Guyden v. Aetna Inc., (2d Cir. 2008) (pdf), similarly held that SOX whistleblower claims are arbitrable.  

Decisions in the Tenth and Second Circuits show judicial receptiveness to referring such matters to arbitration if appropriate pre-dispute agreements are in place, and judicial authorization of appropriately structured agreements to arbitrate SOX claims may gain even greater currency as whistleblowers seek to avoid an unfavorable administrative determination by finding another forum.

Nevertheless, while judicial construction permits arbitration within the confines of SOX and certain other whistleblower laws, Congress recently has turned less friendly to alternative dispute resolution, as reflected in the American Recovery and Reinvestment Act of 2009 ("ARRA") (pdf), where arbitration of stimulus package whistleblower protections is expressly disfavored. Under the ARRA, procedural, as well as substantive, rights and remedies may not be waived by any agreement, policy, form or condition of employment, and pre-dispute arbitration agreements will not be valid or enforceable, unless contained within a collective bargaining agreement. See Stimulus Package Brings Sweeping Whistleblower Protections Affecting Employers Receiving Covered Funds. 

Going forward, the favorable regard courts are tending to show for arbitration – available under statutes that do not specifically preclude that alternative to court litigation –  may give both impetus and poignancy to precise legislation, like the ARRA, barring arbitration.

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