Tag Archives: Sarbanes-Oxley

ARB Clarifies Burden Whistleblowers Bear for Equitable Extension of SOX Statute of Limitations

On the heels of its 2-1 decision in Hyman v. KD Resources, allowing equitable estoppel to extend the Sarbanes-Oxley (SOX) statute of limitations (noted in our blog posting of April 20, 2010), the Department of Labor Administrative Review Board (ARB) has issued a unanimous decision clarifying the burden for whistleblowers to survive dismissal of complaints that are not filed within the explicit 90-day statute of limitations. Daryanani v. Royal & Sun Alliance, ARB No. 08-106, ALJ No. 2007-SOX-79 (ARB May 27, 2010).

Adhering to the principle that equitable estoppel may apply when certain employer conduct interferes with a whistleblower-employee’s exercise of rights, the ARB nevertheless refused to extend the SOX statute of limitations on the basis of alleged inaction by an employer. Holding equitable estoppel would not be available in the circumstances, the ARB observed that the employer had no affirmative obligation to:

  • inform the employee of potential causes of action,
  • inform the employee of time limitations applicable under statutes creating a cause of action, or
  • counter-sign a severance release agreement within the statute of limitations deadline.
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Federal Court Finds SOX Whistleblower Provisions Cover Employees of Private Firms Acting Under Contract to Public Mutual Funds

By Allen B. Roberts, Douglas Weiner

The U.S. District Court for the District of Massachusetts held in Lawson v. FMR LLC (pdf) that SOX coverage can apply not only to employees of publicly traded companies, but to employees of private management services firms as well.

The typical business model in the financial services industry is that public mutual fund companies generally have no employees of their own, but are managed by private investment advisors. The public company’s investment assets are thus managed by employees of a private employer. 

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Beyond the Administrative Process — Courts Show Receptivity to Arbitration of Certain Whistleblower Claims

Like several other statutes, the Sarbanes-Oxley Act (“SOX”) requires whistleblowers to initiate their complaints by an administrative filing with the Department of Labor’s Occupational Safety and Health Administration. But when a preferred outcome in that designated arena appears unlikely, a whistleblower may be allowed to abandon the administrative process before a final order issues and seek a new opportunity in court.  Faced with the prospect of another round of de novo litigation, employers may turn increasingly to pre-dispute arbitration agreements as an alternative to litigating in court.

As exemplified by Stone v. Instrumentation Laboratory Co.(4th Cir. 2009) (pdf), filing an administrative complaint and participating in the administrative process, as required by SOX, do not foreclose access to a federal court before the issuance of a final administrative order. The court explained that the preclusion doctrine, intended to avoid duplicative litigation, does not bar de novo consideration by a federal district court if a lawsuit is filed at least 180 days after the administrative filing and before the Department of Labor has issued a final decision, even where administrative proceedings have progressed to Administrative Review Board consideration of an administrative law judge’s dismissal of a complaint. 

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Newly Constituted Administrative Review Board Allows Equitable Considerations to Extend 90-Day Statute of Limitations for Whistleblower Claims

By: Allen B. Roberts, Victoria M. Sloan

Employers who thought they were free of exposure if no complaint was filed within the statute of limitations applicable in Sarbanes-Oxley (“SOX”) and other whistleblower claims administered by the Secretary of Labor need to recalibrate their risk based on a recent decision allowing equitable estoppel.

In Hyman v. KD Resources, an employee missed the 90-day SOX statute of limitations by filing his complaint 160 days after he was discharged. Two newly appointed members of the Administrative Review Board (“ARB”) allowed the complaint to survive and remanded it to the Administrative Law Judge who had dismissed it as untimely.

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