In several prior posts, we have highlighted the growth of retaliation actions, including retaliation under Title VII and the FMLA. We have also provided suggestions for minimizing the likelihood of your company being found liable for retaliation.
There are many other statutes that also provide employees with protection from retaliation for bringing a claim. In particular, the trend in recent years has been for statutes containing whistleblower provisions to couple those whistleblower provisions with retaliation provisions. This provides employees with further confidence and assurance that it will be “worth it” for them to come forward—either to their employer or to the government—with information concerning a violation of the statute.
Recently, a federal judge in the District of Connecticut was the first to allow a Dodd-Frank Act retaliation claim to survive a motion to dismiss. There have only been three other cases involving a Dodd-Frank Act retaliation claim, and in each of those cases, the court did not allow the retaliation claim to proceed. So this recent case is the first of its kind, and it should be considered by employers.
By way of background, the Dodd-Frank Act went into effect in 2010. Among other things, it contains a highly robust whistleblower provision, by which a whistleblower who reports “information relate[d] to a possible violation of the federal securities laws (including any rules or regulations thereunder)” may collect an award between 10 to 30% of a sanction imposed by the Securities and Exchange Commission (SEC) that exceeds $1 million.
In August 2012, the SEC made its first award under the Dodd-Frank whistleblower program, awarding the whistleblower 30% of a multi-million dollar sanction. The SEC has said that at least eight whistleblower tips have come in a day since the program was initiated in August 2011.
Plainly, the Dodd-Frank whistleblower program is very attractive to potential whistleblowers. There has been some confusion, however, related to its anti-retaliation provision. While the Act’s whistleblower provision defines a whistleblower as someone who has reported a securities law violation to the SEC, the anti-retaliation covers other activities—short of reporting a securities law violation to the SEC.
In the few cases considering the Dodd-Frank anti-retaliation provision, the courts have generally taken expansive views as to whether employees have been retaliated against in violation of the Act. This seems to be motivated by the goal of the Act, which was to “improve the accountability and transparency of the financial system” and create “new incentives and protections for whistleblowers.”
Accordingly, the courts have found that an employee claiming protection under the anti-retaliation provision of the Dodd-Frank Act needs only to have engaged in activity protected by the Act, namely (1) reporting to the SEC; (2) initiating, testifying in, or assisting in any investigation or judicial or administrative action of the SEC upon or related to such information; or (3) making disclosures required or protected under the Sarbanes Oxley Act of 2002, the Securities Exchange Act of 1934, and any other law, rule, or regulation subject to the jurisdiction of the SEC.
It is this third, broad, catch-all provision into which employees may attempt to shoehorn themselves in order to be protected by the anti-retaliation provisions of the Act. Notably, this third category includes individuals who report to individuals or governmental authorities that are not the SEC.
What does this mean to you?
If your company is regulated by the SEC, employees may try to shield themselves using this third category of Dodd-Frank protected activity. Terminated employees who bring such a claim can obtain reinstatement, double back pay, and attorneys’ fees and costs if successful. Most importantly, the practical effect of the Act’s anti-retaliation provision is that it gives employees leverage when they don’t like an adverse employment action. Employees who fear that termination is imminent may “cook-up” and report a frivolous violation of an SEC rule in order to try to get protection under the Act’s anti-retaliation provision.
How does your company protect itself?
You should protect your complany in the same way that you protect yourself against any retaliation claim. As we have repeatedly advised, your company should (1) enforce a non-discrimination and non-retaliation policy; (2) educate supervisors on what constitutes a “protected activity” and an “adverse action;” (3) investigate carefully and fully before any adverse action is taken to determine if the employee could argue that he or she had undertaken protected activity; and (4) act consistently and fairly, and document what occurs.
The Dodd-Frank Act’s anti-retaliation provision is yet another tool that can give employees leverage. You must consider it when determining whether to take action against an employee.