CONTRIBUTING CAUSE; RIF OF PLAINTIFF'S ENTIRE AUDITING UNIT
In Harp v. Charter Communications, Inc., No. 07-1445 (7th Cir. Mar. 16, 2009), the Plaintiff alleged that her termination was in retaliation for her whistleblowing activities in violation of the Sarbanes-Oxley Act. The Seventh Circuit affirmed the district court's grant of summary decision, finding that the Plaintiff had failed to point to any evidence to indicate that her termination was attributable to something other than the financial problems that necessitated a RIF. The Plaintiff's entire technical auditing department plus about 25 employee from other departments had been RIFed. The record showed that the Employer had not met its budget revenues, and as a result missed its cash flow in the first month of the year, resulting in a need to address the problem as soon as possible. The Plaintiff's supervisor was instructed to move quickly to reduce expenses, and he decided to eliminate positions least related to customer recruitment and retention to minimize impact on revenues. Consequently, the Plaintiff's audit department was targeted, and its functions turned over to a department in charge of quality control. The court found that the Plaintiff was only able to reply to these facts by pointing out minor discrepancies as to when the directive to reduce costs was issued. Rather, the Plaintiff mainly focused on the timing of the RIF, which was proximate to her protected activity. The court, however, found that the timing was also proximately tied to revenue shortfall. Moreover, the court found that the sheer scope of the RIR was relevant to whether an inference of retaliation could be drawn. The court stated that a "jury would have to conclude that in an effort to cover up the retaliatory action against [the Plaintiff], [the Defendant] laid off the entire audit department as well as approximately 25 other individuals in other departments." One member of the court dissented. Although acknowledging that on initial blush the Plaintiff's contention that the RIF was merely cover for retaliation was highly implausible, the dissenter found that the Plaintiff had offered enough evidence to make the contention plausible enough to go to a jury.
20 MONTH GAP BETWEEN PROTECTED ACTIVITY AND ADVERSE ACTION FOUND TO ESTABLISH THAT PROTECTED ACTIVITY WAS NOT A CONTRIBUTING FACTOR IN THE PLAINTIFF'S TERMINATION
In Johnson v. Stein Mart, Inc., No. 3:06-cv-00341 (M.D.Fla. June 20, 2007) (case below 2006-SOX-52), the district court found that – not only did a 20 month gap between the protected activity and the adverse action fail to indicate a temporal link sufficient to establish causation – but in fact showed that the protected activity was not a contributing factor in the Plaintiff's termination.
CONTRIBUTING FACTOR; MARANO v. DEPT. OF JUSTICE STANDARD
Under the evidentiary framework [of a SOX whistleblower cause of action], Plaintiff must also establish that there are circumstances which suggest that the protected activity was a contributing factor to the unfavorable action. 49 U.S.C. § 42121(b)(2)(B)(iii); see Marano v. Dep't of Justice, 2 F.3d 1137, 1140 (Fed. Cir. 1993)(stating that under the Whistleblower Protection Act, 5 U.S.C. § 1221(e)(1), "[t]he words ‘a contributing factor' . . . mean any factor which, alone or in connection with other factors, tends to affect in any way the outcome of the decision" and noting that "[t]his test is specifically intended to overrule existing case law, which requires a whistleblower to prove that his protected conduct was a ‘significant,' ‘motivating,' ‘substantial,' or ‘predominant' factor in a personnel action in order to overturn that action.").
ADMINISTRATIVE REVIEW BOARD DECISIONS
CONTRIBUTING CAUSE; EVIDENCE OF TEMPORAL PROXIMITY, PRETEXT AND RETALIATORY ANIMUS, FOUND TO BE SUBSTANTIAL EVIDENCE SUPPORTING ALJ'S FINDING THAT PROTECTED ACTIVITY WAS A CONTRIBUTING FACTOR IN COMPLAINANT'S DISCHARGE
In Kalkunte v. DVI Financial Services, Inc., ARB Nos. 05-139, 05-140, ALJ No. 2004-SOX-56 (ARB Feb. 27, 2009), the Complainant, a contract attorney, had reported allegations of financial improprieties to the board of directors, the audit committee and other officials. Later, she made inquiries about the status of the investigation by an outside law firm, which had been delayed because a bankruptcy court declined to authorize payment for the outside investigation. After being discharged, the Complainant filed a SOX whistleblower complaint. The ARB found that substantial evidence supported the ALJ's finding that the Complainant proved by a preponderance of the evidence that her protected activity was a "contributing factor" in her discharge. First, there was temporal proximity between the protected activity and her discharge. Second, there was evidence of pretext and retaliatory animus. Within hours of receipt of an e-mail in which the Complainant asked to discuss the status of the outside law firm's investigation into her SEC violations report, the turnaround specialist acting as CEO began looking into the Complainant's tasks and responsibilities but not those of other in-house attorneys. At a meeting, the CEO suggested that the Complainant worked for him and not the audit committee and that her interest in following up on the investigation was outside her assigned duties and a source of irritation to him. The CEO admitted that the meeting made him focus on the Complainant's role in the organization "hastening our inevitable decision to terminate her." The acting chief administrative officer consulted some, but not other outside counsel about the Complainant's duties and responsibilities, and in making the termination decision, never met with the Complainant about those duties and responsibilities. The ARB found that the "surrounding circumstances clearly suggest pretext; that, notwithstanding legal work for her to do, [the Complainant] had become a thorn in [the CEO's] side, and he was devising a way to eliminate her." A reduction in force was given as as the reason for the Complainant's discharge. At the hearing, this was explained as being so that the Complainant could collect unemployment and get another job. At the hearing the Respondent also alleged that the Complainant was also discharged for performance issues. The ARB, however, observed that the only other position eliminated during the same month that the Complainant was discharged was an administrative assistant who had requested to be laid off for personal reasons. Moreover, although the Complainant was told her position was no longer necessary, another lawyer was transferred in to take over her work. Finally, the ARB found evidence of animus in that the Complainant was the only discharged employee to be immediately escorted out of the building. The ARB emphasized that the Complainant did not need to show that her protected activity was the only factor in her discharge, but just that it was a "contributing factor."
One member of the ARB dissented, finding that the majority had applied too narrow a canvassing of the record, and that examination of the whole record revealed overwhelming evidence that supported findings contrary to the ALJ's.
CONTRIBUTING FACTOR STANDARD
In Allen v. Stewart Enterprises, Inc., ARB No. 06-081, ALJ Nos. 2004-SOX-60 to 62 (ARB July 27, 2006), the ARB summarized the "contributing factor" standard:
To prevail under the SOX, the whistleblower must prove by a preponderance of the evidence that her protected activity was a contributing factor in the unfavorable personnel action. A contributing factor is "any factor, which alone or in combination with other factors, tends to affect in any way the outcome of the decision." The contributing factor standard was "intended to overrule existing case law, which requires a whistleblower to prove that her protected conduct was a 'significant,' 'motivating,' 'substantial,' or 'predominant' factor in a personnel action in order to overturn that action."
Slip op. at 16-17.
CONTRIBUTING FACTOR STANDARD; COMPLAINANT IS NOT REQUIRED TO ESTABLISH PRETEXT
In Klopfenstein v. PCC Flow Technologies Holdings, Inc., ARB No. 04-149, ALJ No. 2004-SOX-11 (ARB May 31, 2006), the ARB stated the correct standard for establishing whether protected activity was a contributing factor to the adverse employment action, and clarified that a complainant does not have the burden to establish that a respondent's articulated reason for the adverse action was pretext, albeit it if often wise to do so. The Board wrote:
Under the SOX, the correct standard is whether protected activity was a contributing factor in Klopfenstein's termination. See Getman, slip op. at 8; AIR 21, § 42121(a)-(b)(2)(B)(iii)-(iv); Halloum v. Intel, ARB No. 04-068, ALJ No. 2003-SOX-7 (Jan. 31, 2006), slip op. at 8 (SOX complainant need not show protected activity was primary motivating factor in order to establish causation). A contributing factor is "any factor, which alone or in combination with other factors, tends to affect in any way the outcome of the decision." Marano v. Department of Justice, 2 F.3d 1137, 1140 (Fed. Cir. 1993) (interpreting the Whistleblower Protection Act, 5 U.S.C.A. § 1221(e)(1)). As Marano explains, the contributing factor standard was "intended to overrule existing case law, which requires a whistleblower to prove that his protected conduct was a ‘significant,' ‘motivating, ‘substantial,' or ‘predominant' factor in a personnel action in order to overturn that action." Id.
Because, in examining causation, the "ultimate question" is whether the complainant has proven that protected activity was a contributing factor in his termination, a complainant need not necessarily prove that the respondent's articulated reason was a pretext in order to prevail. Of course, most complainants will likely attempt to prove pretext, because successfully doing so provides a highly useful piece of circumstantial evidence. But a complainant is not required to prove pretext, because a complainant alternatively can prevail by showing "that the defendant's reason, while true, is only one of the reasons for its conduct, and another ‘motivating factor' is the plaintiff's protected characteristic." Rachid v. Jack in the Box, Inc., 376 F.3d 305, 312 (5th Cir. 2004).
USDOL/OALJ Reporter at 18-19 (footnotes omitted).
CAUSATION; CONTRIBUTING FACTOR; LEGALITY OF RESPONDENT'S ACCOUNTING PRACTICES AS EVIDENTIARY FACTOR ON MOTIVE
In Henrich v. Ecolab, Inc., ARB No. 05-030, ALJ No. 2004-SOX-51 (ARB June 29, 2006), the ALJ had found that, because the Complainant's concerns about certain accounting practices did not result in the exposure of illegal conduct, the decision to terminate the Complainant's employment could not be explained as a hostile reaction to such exposure. The Complainant argued on appeal that it was error to use the legality of the accounting practices as a basis for concluding that protected activity did not contribute the termination decision because such a standard would eviscerate the reasonable belief standard – i.e., requiring the Complainant to show actual illegality. The ARB held that the ALJ had not created such a rule, but had merely repeated the parties' assumption that the accounting practices were not illegal. The ARB found that the ALJ had properly focused on whether the Complainant had a reasonable belief that the practice was a violation of SOX-listed law or regulation and whether expression of that belief contributed to the termination decision.
CAUSATION; COMPLAINANT ONLY NEEDS TO ESTABLISH THAT PROTECTED ACTIVITY WAS A MOTIVE, NOT NECESSARILY THE PRIMARY MOTIVE
In Halloum v. Intel Corp., ARB No. 04-068, 2003-SOX-7 (ARB Jan. 31, 2006), the ARB concurred with the ALJ's determination that the Respondent's decision to modify a Corrective Action Plan pertaining to the Complainant was motivated in part by the Complainant's protected activity. It was not necessary for this motive to have been the primary motivating factor in order to establish causation.
ADMINISTRATIVE LAW JUDGE DECISIONS
CONTRIBUTING FACTOR; FIRING FOR INSUBORDINATION FOR REFUSING TO COOPERATE IN INVESTIGATION
In Grove v. EMC Corp., 2006-SOX-99 (ALJ July 2, 20007), the ALJ found that the Complainant did not meet his burden of proving by a preponderance of the evidence that protected activity was a contributing factor in his termination. The ALJ acknowledged that the SOX contributing factor standard is a relatively low hurdle, but found that the evidence clearly showed that rather than contributing to his termination, protected activity if anything insulated the Complainant from adverse actions for a period of time and effectively delayed the termination decision which was not based on conduct protected under SOX. The decision to terminate the Complainant was initiated when the Complainant failed to appear at a mandatory training session by a manager who at that time did not know about the Complainant's protected activity. Rather, when other managers learned of the protected activity, the Complainant was immediately reinstated. The ALJ found that at this point, the Complainant "had blown the whistle, and [the Respondent] was ready to listen. However, over the next several weeks, [the Complainant] swallowed the whistle and decided not to cooperate with [the Respondent] in investigating his concerns...." Slip op. at 27. The Complainant argued that he was entitled to something like asylum after "entering protected activity." The ALJ rejected this contention, finding that the legislative history of SOX "expresses an implicit expectation that when an employee makes a protected disclosure of fraudulent activity to an employer, the employee would not unreasonably refuse to cooperate in the employer's lawful investigation into the disclosure." Slip op. at 27. It was when the Complainant refused to cooperate in the investigation and stopped working that he was discharged for insubordination. The ALJ found that the Complainant had offered no evidence that he had a valid reason to be wary of the Respondent's general counsel, who tried repeatedly with no success to meet with the Complainant to discuss the allegations.
CAUSATION; DEFINITION OF CONTRIBUTING FACTOR; TEMPORAL PROXIMITY AS INFERENTIAL EVIDENCE
In Halloum v. Intel Corp., 2003-SOX-7 (ALJ Mar. 4, 2004), the ALJ, after finding that the Complainant had established protected activity, knowledge of that activity by the Respondent, and adverse employment action in the form of unreasonable modifications to a Corrective Action Plan (CAP), wrote:
As the final element, Complainant must prove that his disclosures to the SEC and to Intel's CEO contributed to the decision to modify his CAP. 29 C.F.R. § 1980.109(a). In the context of similar whistle blower cases, a contributing factor includes "any factor which, alone or in connection with other factors, tends to affect in any way the outcome of the decision." Marano v. Dep't of Justice, 2 F.3d 1137, 1140 (Fed. Cir. 1993) (citations omitted) (defining "contributing factor" in the Whistleblower Protection Act for federal employees). A whistle blower need not prove his protected conduct was a "significant," "motivating," "substantial," or "predominant" factor in an adverse personnel action.
An unfavorable personnel action taken shortly after a protected disclosure may lead the fact finder to infer that the disclosure contributed to the employer's action. 29 C.F.R. § 1980.104(b)(2). Judges have drawn inferences of causation when the adverse action happened as few as two days later, Lederhaus v. Donald Paschen & Midwest Inspection Serv., Ltd., 1991-ERA-13 (Sec'y Oct. 26, 1992), to as much as about one year later. Thomas v. Ariz. Pub. Serv. Co., 1989-ERA-19 (Sec'y Sept. 17, 1993). The causal connection may be severed by the passage of a significant amount of time, or by some legitimate intervening event. Tracanna v. Arctic Slope Inspection Serv., 1997-WPC-1 (ARB July 31, 2001) (slip op. at 7-8).
Employer imposed the CAP modifications on August 19, 2002, some five months after Complainant made his allegations to the SEC on March 14, 2002, two months after Intel assigned Steve Rodgers to investigate whether those allegations were true, and immediately upon Complainant's actual return to work. Callaghan, the author of the modifications, had learned of the charges Complainant made about him to Intel's CEO Barrett and to the SEC in May. I do not believe he could segregate this knowledge from other reasons for the modifications; it played some role in his decision to modify the CAP as he did. It was not the primary motivating factor, but it need not be for Complainant to establish this element of his case. More than just the timing, the unreasonable nature of the two new assignments also leads me to infer retaliation. Setting Complainant up to fail by adding unreasonable goals to his CAP carried a none-too-subtle message of management's displeasure that would make others think twice about disclosing suspicions of corporate wrongdoing to the government.
The ALJ then proceeded to analyze the case under the dual motive analysis.
See also Welch v. Cardinal Bankshares Corp., 2003-SOX-15 (ALJ Jan. 28, 2004) (citing Marano v. Dep't of Justice, 2 F.3d 1137 (Fed. Cir. 1993) for the definition of "contributing factor").
EVIDENCE; ADVERSE INFERENCE; LACK OF DOCUMENTATION OF NON-DISCRIMINATORY REASONS FOR ADVERSE ACTION
In Allen v. Stewart Enterprises, Inc., 2004-SOX-60, 61 and 62 (ALJ Feb. 15, 2005), the ALJ rejected the Complainants' contention that the Respondent's lack of documentation stating why they had been selected for a RIF supported an inference of discrimination. The Complainants cited Tyler v. Union Oil Co. of California, 304 F.3d 379 (5th Cir. 2002), an age discrimination case in which the employers failed to follow its HR Manual instruction to document non-discriminatory reasons for adverse personnel decisions. The court in that case concluded that such a failure may, in appropriate circumstances, support an inference of discrimination if the employee establishes some nexus between the employment action and protected activity. The ALJ distinguished Tyler because the Respondent's HR guide in the instant case did not prescribe such an analysis in selection for layoffs; moreover, the Complainants had not established a nexus between their alleged protected activity and the employment action. The ALJ also noted that the SOX does not mandate documentation of employment actions.
CAUSATION; SUMMARY DECISION APPROPRIATE WHERE RECORD DOES NOT SUPPORT A FACTUAL OR LEGAL INFERENCE OF RETALIATORY DISCRIMINATION
In Gallagher v. Granada Entertainment USA, 2004-SOX-74 (ALJ Apr. 1, 2005), the ALJ granted summary decision in favor of the Respondent where, inter alia, the Complainant failed to make out a triable issue of fact on the causation element of his claim. The Complainant learned that he was not to receive an expected promotion to Senior Vice President following a merger, and after he presented a set of demands and refused to report to the Respondent's choice for the position, a decision was made not to renew his employment contract. For purposes of summary decision, the ALJ assumed that the Complainant had complained about violations of laws relating to fraud against shareholders. The ALJ found, however, that there was insufficient evidence in the record to support a factual or legal inference of retaliatory discrimination, citing Hasan v. U.S. Dept. of Labor, __ F.3d __, 2005 WL 578791 (7th Cir. Mar. 14, 2005). In that case, the 7th Circuit had affirmed an ARB ruling on a job applicant case that a Complainant must show that "only he and not any similarly situated job applicant who did not file [a safety complaint] was not hired even though he was qualified for the job for which he was applying." Id., 2005 WL 578791 at *1. In the instant case, the Complainant's counterpart at the other merged company was not made a senior vice president but was laid off, and a more senior executive than the Complainant was demoted in the reorganization as compared to his pre-merger status. Neither had made any whistleblower complaints. The ALJ also noted that had there been an intent to retaliate against the Complainant, he would have been the obvious layoff candidate rather than his counterpart at the other company being merged.
CONTRIBUTING FACTOR; TEMPORAL PROXIMITY; SIX MONTH GAP BETWEEN PROTECTED ACTIVITY AND ADVERSE ACTION INSUFFICIENTLY PROXIMATE TO RAISE INFERENCE
In Pardy v. Gray, 1:07-cv-06324-LAP (S.D.N.Y. July 15, 2008), the court held that a six month gap between the time the Plaintiff sent letters to a manager complaining of a possible misuse of cash authority and the Plaintiff's termination from employment was "not sufficiently proximate to permit the inference that the protected activity was a contributing factor to her termination...." Slip op. at 15. The court therefore found that the Plaintiff had not established this element of a prima facie case and granted summary judgment in favor of the Defendants.
CAUSATION; ABSENCE OF PROXIMITY BETWEEN PROTECTED ACTIVITY AND DISCHARGE DOES NOT SUPPORT SUMMARY JUDGMENT WHERE A JURY COULD FIND OTHER FACTS SUPPORTING CAUSAL LINK
In Mahony v. Keyspan Corp., No. 06CV00554 (E.D.N.Y. Mar. 12, 2007) (case below 2004-SOX-24), the Defendant filed a motion for summary judgment arguing that the Plaintiff could not show a causal relationship between his alleged protected activity and his termination because of a 13-month gap. The court denied the motion noting that the gap in time was only one factor that a jury could consider in determining causation. In the instant case, the Plaintiff alleged that he began to experience retaliation almost immediately after a meeting about a co-worker's allegations about accounting irregularities. The Plaintiff had helped to facilitate the CEO"s attendance at the meeting. Specifically the Plaintiff began to experience isolation within the company, a dramatic change in his performance evaluations, and a falling out of favor with the CEO.
CAUSATION; PASSAGE OF TIME AND INTERVENING EVENTS
In Sussberg v. K-Mart Holding Corp., No. 05-70378 (E.D.Mich. Nov. 15, 2006), the court granted summary judgment against the Plaintiff under the Sarbanes-Oxley Act whistleblower provision because it found that a reasonable jury could not find that the Plaintiff's alleged protected activity was a contributing factor in his termination. The court observed that "[a] plaintiff must show by a preponderance of evidence that the plaintiff's protected activity was a contributing factor in the unfavorable action. If the employee does so, the burden shifts to the employer to show by clear and convincing evidence that it 'would have taken the same unfavorable personnel action in the absence of [protected] behavior.' 49 U.S.C. § 42121(b)(2)(B)(iv)." Slip op. at 14. In Sussberg, the court found that the complaint failed on causation grounds because of the passage of time between the alleged protected activity and adverse action and the existence of intervening events. The court held that the Plaintiff had failed to establish a genuine issue of fact as to whether he had been subjected to a pattern of retaliation or that one of the managers who recommended that the Plaintiff be fired was motivated by a friendship with a manager against whom the Plaintiff had made allegations of receiving kickbacks from vendors; that complaints about the Plaintiff had been made to this manager before she learned about the Plaintiff's role in investigating the other manager; and that the manager who ultimately made the decision to fire the Plaintiff based his decision on more than the recommendation of the other manager.
ADMINISTRATIVE REVIEW BOARD DECISIONS
TEMPORAL PROXIMITY MAY ESTABLISH CAUSATION, BUT IS NOT ITSELF SUFFICIENT TO ESTABLISH RETALIATORY INTENT
In Taylor v. Wells Fargo Bank, NA, ARB No. 05-062, ALJ No. 2004-SOX-43 (ARB June 28, 2007), the ARB wrote: "Temporal proximity does not establish retaliatory intent, but may establish the causal connection component of the prima facie case. The ultimate burden of persuasion that the respondent intentionally discriminated because of complainant's protected activity remains at all times with the complainant." USDOL/OALJ Reporter at n.12 (citation omitted).
CAUSATION; TEMPORAL PROXIMITY; PROBATIVE VALUE DECREASES AS TIME GAP LENGTHENS, PARTICULARLY WHEN SUBSEQUENT PRECIPATING EVENTS EXIST
"The probative value of temporal proximity decreases as the time gap lengthens, particularly when other precipitating events have occurred closer to the time of the unfavorable personnel action." Henrich v. Ecolab, Inc., ARB No. 05-030, ALJ No. 2004-SOX-51 (ARB June 29, 2006), slip op. at 18 (citation omitted).
ADMINISTRATIVE LAW JUDGE DECISIONS
CAUSATION; TEMPORAL PROXIMITY; INTERVENING EVENT
In Reines v. Venture Bank and Venture Financial Group, 2005-SOX-112 (ALJ Mar. 13, 2007), the Complainant argued that her supervisor removed her authority over the IT department because he knew she would quit; and he wanted to stop her from challenging his future stock trades and retaliate against her for doing so in the past. Reines, slip op. at 57. The ALJ held, however, that there was no evidence in the record indicating that the Complainant's supervisor or anyone else wanted the Complainant to resign. Id. at 58. Rather, the ALJ found that the restriction placed on the Complainant's authority over network access was a reasonable security measure. Id. at 59. The security measure was reasonable given that the Complainant was romantically involved with another of the Respondent's officers who had just been terminated. Id.
The ALJ noted that since the adverse action taken against the Complainant came only a month and a half after the Complainant engaged in protected activity, there would normally be an inference of causation based on such temporal proximity. Id. at 59. Here, however, the ALJ said the inference was severed by the termination of the Complainant's romantic partner, "a significant event which immediately preceded" the removal of the Complainant's network access authority. Id. Finally, the ALJ concluded that even had the Complainant satisfied her burden, the Respondent established by clear and convincing evidence that it had sufficient non-discriminatory reasons to restrict the Complainant's authority over the Respondent's network access. Id.
CAUSATION; TEMPORAL PROXIMITY; ONE YEAR TOO LONG TO RAISE INFERENCE; ONE MONTH RAISES INFERENCE
In McClendon v. Hewlett Packard, Inc., 2006-SOX-29 (ALJ Oct. 5, 2006), the Complainant had filed two earlier SOX complaints. The Complainant was transferred to a new position one year after he filed the first SOX claim with OSHA and five months after he filed the claim in District Court. The ALJ found that the temporal proximity between the filings and Complainant's transfer was not significant enough, without other evidence, to warrant an inference of causation. McClendon, slip op. at 83.
The ALJ, however, ruled that the temporal proximity between Complainant's filing of his second SOX claim and his transfer to a new position one month later—and his letters to several congressman, the SEC chairman and Respondent's CEO, sent one week before his transfer—was significant enough to infer that Complainant's protected activity contributed to his transfer. McClendon, slip op. at 83-84. The ALJ ultimately held that although Complainant proved temporal proximity in relation to the filing of his second SOX claim and his transfer, he did not show causation by a preponderance of the evidence. Id. at 84.
PRIMA FACIE CASE; TEMPORAL PROXIMITY
In Heaney v. GBS Properties LLC, 2004-SOX-72 (ALJ Dec. 2, 2004), the Complainant was a real estate agent. The ALJ found that Complainant's concerns over a condominium project allegedly built in violation of certain codes within the knowledge of the Respondent was arguably a bank fraud against mortgage lenders and may be protected activity under the Sarbanes Oxley Act. Nonetheless, the ALJ found that the complaint did not arise to the level of a prima facie case because the Complainant's concerns about the project had been raised several years before his termination, and the Complainant had served in uninterrupted employment of the Respondent in the interim, even receiving awards. The ALJ found no temporal proximity between the Complainant's concerns and his termination, and no evidence, either direct or circumstantial, of retaliatory animus on the part of the Respondent and/or discrimination against the Complainant in violation of the Sarbanes Oxley Act.
EMPLOYER'S KNOWLEDGE OF PROTECTED ACTIVITY; IN ORDER TO ESTABLISH THIS ELEMENT IT IS ONLY NECESSARY TO SHOW THAT THE INFORMATION WAS PROVIDED TO A PERSON WITH SUPERVISORY AUTHORITY OVER THE COMPLAINANT, NOT THE PERSON WHO MADE THE TERMINATION DECISION
In Van Asdale v. International Game, Technology, No. 3:04-CV-00703-RAM (D.Nev. June 13, 2007), the Magistrate Judge rejected the Defendant's contention that only complaints to those who actually made the termination decision can be used to satisfy the element of a SOX whistleblower complaint that the employer knew of the protected activity. Rather the Magistrate stated that the rule is that "the employee must show that he or she provided the information to some person at the company with supervisory authority over the employee." Slip op. at 16, citing Collins v. Beazer Homes USA, Inc., 334 F. Supp. 2d 1365, 1378 (N.D. Ga. 2004).
KNOWLEDGE OF PROTECTED ACTIVITY; COURT'S SUSPICION WHERE A "SOLE DECISIONMAKER" IS BROUGHT IN MERELY FOR THE PURPOSE OF FIRING A COMPLAINANT
In Collins v. Beazer Homes USA, Inc., __ F.Supp.2d __, 2004 WL 2023716 (N.D.Ga. Sept. 2, 2004), the Defendants moved for summary judgment alleging that the person who made the decision to fire the Plaintiff did not know about the Complainant's most recent protected activity. The court denied the motion, finding that the decisionmaker did know about some of the Complainant's complaints. The court stated: " To permit an employer to simply bring in a manager to be the 'sole decisionmaker' for the purpose of terminating a complainant would eviscerate the protection afforded to employees by Sarbanes-Oxley. Collins, 2004 WL 2023716 * 9.
ADMINISTRATIVE REVIEW BOARD DECISIONS
CAUSATION; "FACTS" AS THEY APPEARED TO DECISIONMAKER AT TIME OF ADVERSE ACTION ARE WHAT IS RELEVANT – NOT WHETHER THE FACTS WERE WELL-GROUNDED; IMPUTED ANIMUS OF SUBORDINATE OFFICIAL MUST BE GROUNDED IN COMPLAINANT'S PROTECTED ACTIVITY RATHER THAN GENERAL ENMITY
In Henrich v. Ecolab, Inc., ARB No. 05-030, ALJ No. 2004-SOX-51 (ARB June 29, 2006), a resigning production line supervisor made a series of allegations in an exit interview reciting misconduct by the Complainant. The Respondent argued that executives of the Respondent terminated the Complainant because they believed the allegations. On appeal, the Complainant argued that the ALJ failed to consider evidence that the allegations were false. The ARB held that whether the allegations themselves were false was not relevant. The ARB wrote:
Even if Henrich were correct about the falsity of Kelso's allegations – a matter on which we express no opinion – the ALJ did not need to determine the truth or falsity of Kelso's allegations in order to determine that the Ecolab executives relied upon them in deciding to terminate Henrich's employment. AccordEEOC v. BCI Coca-Cola Bottling Co. of Los Angeles d/b/a Phoenix Coca-Cola Bottling Co., __ F.3d __, 2006 WL 145501 (10th Cir. 2006), slip op. at 13, 21 (except where plaintiff has proven that "subordinate bias" caused higher-level decision to terminate, courts generally should determine whether employer had discriminatory intent by evaluating "facts as they appear[ed] to the person making the decision to terminate").
Slip op. at 20. The ARB acknowledged that the Respondent might still be liable if the Complainant was able to prove that the Complainant's supervisor had retaliatory animus and influenced the decisionmakers (i.e., imputing retaliatory animus of a subordinate official to the decisionmakers). The ARB held that any alleged retaliatory animus of the subordinate official "must arise from and be based upon protected activity." Slip op. at 21. Thus, even if the subordinate official was antagonistic toward the Complainant, the Complainant must have shown that the enmity existed because of protected activity. In the instant case, the evidence the Complainant presented was too attenuated and speculative to establish such animus.
ADMINISTRATIVE LAW JUDGE DECISIONS
CAUSATION; EVIDENCE OF PERFORMANCE DEFICIENCIES BOTH PRIOR TO AND AFTER PROTECTED ACTIVITY; SUPERVISOR WHO INITIATED EMPLOYMENT ACTIONS AGAINST THE COMPLAINANT DID NOT KNOW ANY DETAILS ABOUT THE PROTECTED ACTIVITY
In Robinson v. Morgan Stanley, 2005-SOX-44 (ALJ Mar. 26, 2007), the Complainant was a senior internal auditor who engaged in protected activity when she submitted a memorandum to senior executives setting out her concern that banking regulations were being violated in regard to the prompt charge off of credit card bankruptcies. The ALJ, however, found that the Complainant failed to prove that this protected activity contributed to her discharge. Although temporal proximity provided some circumstantial evidence of a causal link between the protected activity and the discharge, the record demonstrated that the Complainant had well documented, pre-existing performance issues in the areas of professional communications, timely work product, and acceptance of feedback, all of which were unrelated to any protected activity. Moreover, the same performance deficiencies persisted after the protected activity. The direct supervisor who initiated the Complainant's post-protected activity job actions was only aware that the Complainant had submitted a memorandum that generated an investigation. This supervisor did not know the nature or extent of the memorandum and related investigation, did not discuss the memorandum with the Complainant, and no one from the investigation or HR contacted the supervisor about the memorandum. The ALJ found, therefore, that the protected activity would not have been a basis for this supervisor's decision to terminate the Complainant's employment. The ALJ found based on credible testimony that the supervisor initiated the post-protected activity job actions on her own. The executive who approved the supervisor's termination decision was aware of the Complainant's protected activity, the expense of the consequent investigation, and the fact that it produced no significant findings. Nonetheless, the ALJ found credible this executive's testimony that his decision to accept the termination decision (which was initiated by the supervisor and not the executive) was based solely on the documented performance issues and not protected activity.
EMPLOYER'S KNOWLEDGE; DISCLOSURE TO PERSON WITH AUTHORITY TO INVESTIVATE, DISCOVER OR TERMINATE MISCONDUCT; ALJ FINDS THAT SOX REQUIRES AN EXPRESS, NOT MERELY A CONSTRUCTIVE, COMMUNICATION
In Frederickson v. The Home Depot, U.S.A., Inc., 2007-SOX-13 (ALJ July 10, 2007), the Complainant, a department supervisor, had used some hooks in his department, and was told by a supervisor for a different department (who had no supervisory authority over the Complainant) that nothing was to be marked in the store computer as for store use, but rather entered as damaged goods. When the Complainant protested, the other supervisor told him that these were the orders of the store manager. Another employee was present. After the incident, the Complainant mentioned it to several other non-supervisory employees. He did not discuss it with his direct supervisor or the store manager. Several days later, he entered some other items into the store computer under the "store use" category. The Complainant knew that the store manager watched the books closely and concluded that the manager would become aware that he had contravened his instructions as relayed by the other supervisor. The Respondent filed a motion for summary decision arguing that none of the persons that the Complainant complained to had the authority to act on the complaints. The Complainant responded that this was an issue of fact, which could not be determined based upon the Respondent's assertions and self-serving affidavits.
The ALJ noted that the SOX:
… anticipates and encourages employees to report fraudulent conduct, to outside agencies, Congress, and company personnel in a supervisory capacity over the employee or "such other person working for the employer who has the authority to investigate, discover, or terminate misconduct." 18 U.S.C. § 1514A (a)(1)(c). Communication of an employee to their supervisor would be a natural course of reporting, following established lines of authority. Likewise, reporting wrongful conduct to another employee vested with the power to take remedial steps would be a logical course to effect change. However, communication of wrongful conduct to parties lacking supervisory authority over the whistleblower, or "authority to investigate, discover, or terminate misconduct," does not constituted [sic] protected activity, as it does not serve the underlying purpose of the Act.
Slip op. at 10 (emphasis as in original). The ALJ found that the Complainant's communications with the other supervisor and non-supervisory employees could not constitute protected activity because none had supervisory authority over the Complainant or the authority to investigate, discover or terminate misconduct. The ALJ found that the Complainant's assumption that the store manager would discover his computer entries would, at best, constitute a constructive communication of the issue of proper input of items for store use. The ALJ found that the SOX encourages employees to come forward with information of wrongdoing, but does not indicate an intent to protect constructive communications. Thus,
…the Act seeks to protect employees from retaliation for their purposeful protected communications. There is nothing in the Act to indicate that it intended to protect any constructive communication, as such does not require purposeful effort by the employee and thus would not subject him to retaliation for such effort. Therefore, for a communication to be protected, it arguably must be an express, not constructive, communication.
Slip op. at 11.
EMPLOYER'S KNOWLEDGE; DISCLOSURE TO PERSON WITH AUTHORITY TO INVESTIVATE, DISCOVER OR TERMINATE MISCONDUCT; OUTSIDE LAW FIRM ENGAGED BY AUDIT COMMITTEE; EXTERNAL AUDITORS
In Deremer v. Gulfmark Offshore Inc., 2006-SOX-2 (ALJ June 29, 2007), the ALJ found that disclosures made to a law firm hired by the audit committee to investigate allegations made by the Complainant were disclosures to "such other person working for the employer who has the authority to investigate, discover or terminate misconduct." See 18 U.S.C. § 1514(A)(1)(c). The ALJ, applying a broad interpretation to comport with the intent of SOX, also found that disclosures made to an external auditor fit within the "complaint to a proper person" element of a SOX whistleblower complaint.
EMPLOYER'S KNOWLEDGE; CONSTRUCTIVE KNOWLEDGE
In Deremer v. Gulfmark Offshore Inc., 2006-SOX-2 (ALJ June 29, 2007), the ALJ, although denying the claim because he found that the Complainant had not engaged in protected activity, noted that:
A complainant is not required to prove "direct personal knowledge" on the part of the employer's final decision-maker that he engaged in protected activity. The law will not permit an employer to insulate itself from liability by creating "layers of bureaucratic ignorance" between a whistleblower's direct line of management and the final decision-maker. Frazier v. Merit Systems Protection Board, 672 F.2d 150, 166 (D.C. Cir. 1982). Therefore, constructive knowledge of the protected activity can be attributed to the final decision-maker. Id.; seealsoLarry v. Detroit Edison Co., Case No. 1986-ERA-32 @ 6 (ALJ October 17, 1986); Platone, supra.
Slip op. at 61-62.
RESPONDENT'S KNOWLEDGE OF PROTECTED ACTIVITY; IMPUTATION OF KNOWLEDGE BY EXECUTIVES WITH CONTROL OVER COMPLAINANT'S EMPLOYMENT WHERE IMMEDIATE SUPERVISORS KNEW ABOUT PROTECTED ACTIVITY
Where a complainant provides credible evidence that his immediate supervisors knew of his protected activity, this knowledge may be imputed to outside executives who had ultimate authority about the complainant's employment status. Henrich v. Ecolab, Inc., 2004-SOX-51 (ALJ Nov. 23, 2004) (finding that some of the Complainant's allegations of reporting violations to supervisors were not documented and not credible, but that one of his allegations that his immediate supervisors knew of his protected activity was credible and could be imputed to the executives who fired him; the Complainant, however, ultimately failed to establish a causal link between such knowledge and his termination from employment).
EMPLOYER'S KNOWLEDGE; CONSTRUCTIVE KNOWLEDGE WHERE IMMEDIATE SUPERVISOR, WHO HAD KNOWLEDGE OF THE COMPLAINANT'S PROTECTED ACTIVITY, FOUND TO HAVE "PLANTED THE SEED" FOR THE COMPLAINANT'S SUSPENSION
In Platone v. Atlantic Coast Airlines, 2003-SOX-27 (ALJ Apr. 30, 2004), the ALJ found that the Respondent was constructively aware of the Complainant's protected activity under the whistleblower provision of the Sarbanes-Oxley Act, even though the official who made the ultimate decision to terminate the Complainant's employment was not aware of the Complainant's protected activity. The ALJ found that the Complainant's immediate supervisor was aware of her protected activity and had " planted the seeds for the Complainant's dismissal, being careful not to taint any other person among the group that debated [the Complainant's] fate with any knowledge of her protected activities." The ALJ found that the supervisor had "actively participated in the discussions and decisionmaking regarding the Complainant's future employment" and that under such circumstances, "it is appropriate to attribute constructive knowledge of the Complainant's protected activity to the ultimate decision-makers." Slip op. at 26.
CAUSATION; CONTRIBUTING CAUSE; WHERE THE GROUND FOR DISMISSAL IS THE COMPLAINANT'S ADMISSION OF MISCONDUCT, THE COMPLAINANT'S BURDEN IS TO SHOW THAT THE REPORTING OF THE MISCONDUCT WAS A FACTOR IN THE DISMISSAL
In Tice v. Bristol-Myers Squibb Co., 2006-SOX-20 (ALJ Apr. 26, 2006), the ALJ found that, even though there was a degree of temporal proximity between the alleged protected activity and the adverse action, the Complainant's own admitted falsification of sales call data provided a legitimate intervening basis providing overwhelming evidence showing lack of a link between the protected activity and the adverse action. Although the Complainant's admissions of falsification constituted the same subject matter for the asserted protected activity and the ground for termination, the ALJ stated that the Complainant needed to demonstrate that her reporting of these admissions constituted a factor in the Respondent's decision. The overwhelming evidence of record established that she was terminated for the act of falsifying calls, and not for the reporting of doing do.
