By:  John F. Fullerton III

On March 5, 2013, the U.S. Second Circuit Court of Appeals clarified the burden-shifting framework applicable to whistleblower retaliation claims under Section 806 of the Sarbanes-Oxley Act, 18 U.S.C. § 1514A.  In Bechtel v. Administrative Review Board et al., (pdf), the Court issued a decision, consistent with prior decisions of several other Circuits, that affirmed the burden of proof standard applied by the Administrative Review Board (ARB) in its decision, which affirmed an administrative law judge’s (ALJ) decision that had dismissed the employee’s retaliation claim, but applied an erroneous standard in so doing.

"To prevail on Sarbanes-Oxley whistleblower retaliation claim under 18 U.S.C. §1514A, an employee must prove by a preponderance of the evidence that (1) he or she engaged in a protected activity; (2) the employer knew that he or she engaged in the protected activity; (3) he or she suffered an unfavorable personnel action; and (4) the protected activity was a contributing factor in the unfavorable action . . . If the employee proves these four elements, the employer may rebut this prima facie case with clear and convincing evidence that it would have taken the same unfavorable personnel action in the absence of the protected behavior."

Under this standard, the Court agreed with the ARB that the employee had failed to prove by a preponderance of the evidence that his alleged protected activity was a contributing factor to the company’s decision to terminate his employment.  Although the ALJ had applied an erroneous standard in sustaining the discharge, the Court found the mistake to be “immaterial” and, under the correct standard as applied by the ARB, the employee had failed to prove that the protected activity was a contributing factor.  “[T]he correct outcome was clear,” wrote the Court.

A few things to note.  First, the case serves as a good reminder that the employer has a heightened burden in SOX whistleblower cases to rebut the employee’s prima facie case with “clear and convincing” evidence, a higher evidentiary standard than that applied in cases under the federal anti-discrimination statutes, such as Title VII, the ADA, and the ADEA.  Second, in January the Supreme Court agreed to decide whether a plaintiff asserting a retaliation claim under Title VII must prove that the protected activity was the sole or “but for” cause of, or merely a motivating or contributing factor to, the adverse employment action.  The Supreme Court has previously held that standard under the ADEA’s retaliation provision is the more employer-friendly “but for” requirement, but under SOX, the more employee-friendly “contributing factor” standard is already firmly in place.  Finally, over ten years since the passage of SOX, there finally seems to be a growing trend toward increased consistency in the law under the statute, although in many instances the clarifications have been more favorable to employees than employers.

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