Corporate & Securities Law

By Jim Hamilton

Sarbanes-Oxley Whistleblower Entitled to Federal Court De Novo Review if No Timely DOL Final Decision

Under Section 806 of Sarbanes-Oxley, a corporate whistleblower had the right to a de novo proceeding in federal district court during his appeal of an Administrative Law Judge?s opinion within the Department of Labor since the DOL had not issued a final decision within the statutory 180-day time period. A Fourth Circuit panel ruled that Congress plainly has the authority, in balancing speed against resources, to rationally weigh timeliness as a more compelling concern and provide that proceedings begin anew in district court if the DOL is unable to reach a final decision within 180 days. If this aggressive statutory timetable is unworkable in practice, the remedy must be provided by Congress, not the courts. Stone v. Instrumentation Laboratory Company, CA-4, No. 08-1970, Dec. 31, 2009.

The panel also pointed out that the benefit of the aggressive timetable established by Congress does not inure solely to the benefit of whistleblowers, since Section 806 presents a whistleblower with an extremely limited window to file a retaliation claim, providing that a whistleblower action must be commenced not later than 90 days after the date on which the violation occurs. The fact that the statute requires both the DOL and the whistleblower to act swiftly further evidences the weight Congress placed on the timely resolution of whistleblower claims.

After repeatedly voicing concerns about company internal controls, the employee was terminated. He filed a retaliation claim under Section 806 of Sarbanes-Oxley with the Department of Labor. Despite the DOL?s concern that Congress created a framework allowing for duplication of efforts, said the appeals court, such a framework is precisely what Congress reasonably and unambiguously provided for in Section 806. Thus, even if the 180-day statutory period is arguably both overly aggressive and not the most efficient use of administrative and judicial resources, said the panel, the whistleblower was entitled to a fresh federal court review.

Congress unquestionably has the right to create a complainant-friendly whistleblower statutory scheme that affords no deference to non-final agency findings. Congress chose an aggressive timetable for resolving whistleblower claims and reasonably created a cause of action in an alternative forum should the DOL fail to comply with such schedule. A natural result of this aggressive timeframe is that efforts will be duplicated when the DOL engages in a thorough, yet non-final process that fails to resolve the administrative case within the prescribed timeframe. But neither DOL nor the courts have the authority to engage in creative interpretation of the statute to avoid duplication of efforts, even if the goal for doing so is laudable.

Full post as published by Jim Hamilton's World of Securities Regulation on January 21, 2010 (boomark / email).