"Stunning" Expansion of SOX to Contracted Employees of Private Employers

Document created by 1050210 on Nov 7, 2014
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Published Date: 03/17/2014


Pat; Rountree

By Pat Rountree


“Stunning” was the word used by Justice Sonia Sotomayer, a dissenting judge, to describe the US Supreme Court decision on March 4, 2014 expanding the Sarbanes-Oxley Act (SOX) to cover employees of private employers who are contracted out to publicly-traded companies. To read the case, go to http://j.mp/sox-14.


SOX was enacted in 2002 in response to fraudulent practices at Enron and other publicly-traded corporations who were “cooking the books” to deceive investors and shareholders. One purpose of SOX is to protect employees who report ethical violations and corrupt accounting practices from retaliation or discrimination.


SOX includes a whistleblower protection provision for covered employees who report conduct that they believe violates the Act, or participate in investigations of violations under the Act. The Act covers actions of fraud against shareholders of publicly-traded companies and violations of the Securities and Exchange Act.


Employees who believe they have been retaliated against for protected activity under SOX whistleblower provisions may file a complaint with the US Department of Labor (DOL) within 180 days of the alleged retaliation by the employer. According to the DOL, if the evidence supports an employee’s claim of retaliation and a settlement cannot be reached, it will issue an order requiring the employer to reinstate the employee, pay back wages, restore benefits and other possible relief to make the employee whole, including:


  • Reinstatement with the same seniority status.
  • Payment of back pay with interest.
  • Compensation for special damages, attorney’s fees, expert witness fees and litigation costs.


Newly-covered private employers (those who have contracted employees with public employers) should review the SOX whistleblower protections and review any negative employment actions in the future to assure that they are not related to employee SOX whistleblowing.