Ohio Whistleblower Attorney Best Answer: Can my employer force me out after I report securities violations? What kind of lawyer do I need to pursue a whistleblower claim under Sarbanes-Oxley? Do I have a wrongful termination claim if my boss fired me for no reason one week after I reported illegal activity at work?
As our employment attorneys have previously blogged about, a number of federal and state laws protect employees who report the misconduct of their employers and coworkers. (See Am I Protected As A Whistleblower? Best Lawyer Answer!; Can I Be Fired For Reporting A Customer’s Illegal Acts? Best Attorney Answer! and Can I Be Fired For Reporting Financial Fraud At My Company? I Need A Lawyer!). One such law is the Sarbanes-Oxley Act, which was enacted in 2002 in the wake of a number of high profile corporate scandals. Section 806 of Sarbanes-Oxley protects employees of publicly-traded companies, as well as contractors of publicly-traded companies, from retaliation for reporting securities fraud, shareholder fraud, bank fraud, wire fraud, mail fraud, and violations of any SEC rule or regulation. The whistleblower protections of Section 806 prohibit employers from firing, demoting, threatening, harassing, or otherwise discriminating against any employee who reports qualifying misconduct.
To establish a prima facie whistleblower case under Sarbanes-Oxley, an employee must demonstrate that (1) she engaged in a legally protected activity (reporting fraud, securities violations, etc.); (2) the employer knew that she engaged in such conduct; (3) she suffered an adverse employment action(terminated, demoted, disciplined, etc.); and (4) the protected activity was a contributing factor in the adverse employment action. If a plaintiff can establish these four elements, an employer may avoid liability if it can show that it would have undertaken the adverse employment action even if the employee had not engaged in the protected activity. An employee who brings a successful whistleblower claim under Sarbanes-Oxley may be entitled to lost wages, reinstatement, and special damages, which include damages for emotional distress and harmed business reputation.
So, if an employee witnesses fraud and feels compelled to speak up about it, how can she report it to her company in such a way that she will be protected under Sarbanes-Oxley? Up until recently, how detailed an employee’s internal complaint of wrongdoing needed to be and, thus, what constituted engagement in legally protected conduct under Sarbanes-Oxley’s whistleblower provisions was an open question.
The plain language of Section 806 provides that an employee engages in legally protected conduct when she undertakes any lawful act that provides information to a company supervisor regarding conduct that the employee “reasonably believes” constitutes fraud or SEC violations. A number of federal courts, however, have held that an employee can only be said to have engaged in protected activity when her report of wrongdoing approximates the basic elements of the alleged underlying fraud or violation. Basically, those courts held that a whistleblower, in her internal complaint about wrongdoing, must state a specific legal theory of why the acts complained of are illegal. Those courts essentially expected employees to act as lawyers and prove, in their report of misconduct, why the company’s acts were illegal. This is not always an easy task, even for lawyers, and it presents a very high hurdle for employees. This is one of the critical reasons that we recommend hiring an employment lawyer as soon as possible – even before reporting if you can.
More recently, though, federal courts have begun to back away from the so-called “definitively and specifically” standard, in favor of a standard more in keeping with Sarbanes-Oxley’s plain language. The Sixth Circuit Court of Appeals (Ohio) recently weighed in on the standard for protected conduct under Sarbanes-Oxley’s anti-retaliation provisions in Rhinehimer v. U.S. Bancorp Investments, Inc,.
In the case, Michael Rhinehimer, a certified financial planner, alleged that one of his coworkers at U.S. Bancorp had engaged in unsuitable trades that harmed an elderly client. When Rhinehimer learned of these trades, he called his direct supervisor and emailed another higher-up, complaining that the trades were made behind Rhinehimer’s back, that the coworker harmed the client’s estate plan, and that the coworker was “untrained, uneducated, irresponsible, and careless.” In retaliation for making the complaint, Rhinehimer was given a written warning for unprofessional language and placed on a performance improvement plan. Rhinehimer was then fired when he failed to meet the goals of the performance improvement plan.
Rhinehimer brought suit against U.S. Bancorp for retaliation in violation of the Sarbanes-Oxley Act and a jury returned verdict in his favor, awarding him damages for economic loss, as well as emotional damages.
On appeal, U.S. Bancorp argued that to satisfy the reasonable belief standard, Rhinehimer must “establish facts from which a reasonable person could infer each of the elements” of the underlying corporate misconduct, in this case unsuitability fraud. U.S. Bancorp argued that Rhinehimer could not show that he had adequate information to form a reasonable belief that his coworker intentionally, or with reckless disregard, misrepresented or omitted material facts in communications with the client about the trades. That is, U.S. Bancorp argued that Rhinehimer did not “definitively and specifically” lay out the elements of unsuitability fraud in his internal complaint and, thus, did not engage in legally protected activity when he reported the coworker’s inappropriate trades.
Noting the plain language of Sarbanes-Oxley, as well as the current trend away from the “definitively and specifically” standard, the court in Rhinehimer rejected that onerous standard and concluded that an employee need only show that he or she “reasonably believes” that the conduct complained of constitutes fraud or a violation of SEC rules or regulations.
The court held that Rhinehimer knew the structure of the elderly client’s long-held estate plans and learned of trades that a reasonable investment professional would view as contrary to those plans. Further, Rhinehimer understood that the trades his coworker made on behalf of the client altered the way in which the client’s funds were titled and how they would be distributed upon his death. Rhinehimer was also aware of his client’s vulnerability as an elderly man and Rhiinehimer knew that the coworker and U.S. Bancorp had financial incentives to make trades that ran counter to the client’s risk tolerance and long-term goals.
Specifically, the Sixth Circuit Court of Appeals held:
Defendant contends on appeal that the evidence did not support a finding that Plaintiff could have had an objectively reasonable belief that Harrigan’s conduct constituted unsuitability fraud. Defendant argues that to satisfy the reasonable belief standard, Plaintiff was required to establish facts from which a reasonable person could infer each of the elements of an unsuitability fraud claim, including the misrepresentation or omission of material facts, and that the broker acted with intent or reckless disregard for the client’s needs. Def.’s Br. at 22-25. This argument is based on this Circuit’s unpublished decision in Riddle v. First Tennessee Bank, National Association, 497 F. App’x 588 (6th Cir. 2012) adopting the standard that under § 1514A an employee’s complaint “must definitively and specifically relate to one of the six enumerated categories” of fraud by “approximat[ing] the basic elements” of the fraud claim. 497 F. App’x at 595 (citations omitted).
The district court accepted Defendant’s statement of the legal standard and instructed the jury that Plaintiff must show that he had “an objectively reasonable belief” that each of the elements of unsuitability fraud “existed in connection with the sale by Mr. Harrigan to Mr. Purcell.” (R. 114, Jury Instructions, PGID 3844-45.) Plaintiff unsuccessfully argued for a lower standard, citing jurisprudential developments …. On appeal, Defendant argues that Plaintiff cannot show he had adequate information to form a reasonable belief that USBII intentionally or with reckless disregard misrepresented or omitted material facts in its communications with Purcell about the trades.
For the reasons discussed below, we reject the “definitively and specifically” standard recited in Riddle as inconsistent with § 1514A and the statutory scheme, and we adopt the emerging rule that the employee’s reasonable belief is a simple factual question requiring no subset of findings that the employee had a justifiable belief as to each of the legally-defined elements of the suspected fraud. …
The well-established intent of Congress supports a broad reading of the statute’s protections. The Sarbanes-Oxley Act was enacted in 2002, in the wake of the Enron scandal, to “prevent and punish corporate and criminal fraud, protect the victims of such fraud, preserve evidence of such fraud, and hold wrongdoers accountable for their actions.” S. Rep. No. 107-146, 2002 WL 863249, at *2 (2002), quoted in Lawson, 134 S.Ct. at 1162. In particular, Congress sought to counteract the “corporate code of silence” resulting from practices that discouraged employees from reporting fraud “not only to the proper authorities . . . but even internally,” finding that such practices had allowed Enron’s fraudulent accounting practices to flourish in a climate of impunity… The whistleblower provisions of the Act address this concern, and were drafted broadly for that purpose. Lawson, 134 S.Ct. at 1163. “The legislative history of Sarbanes-Oxley makes clear that its [whistleblower] protections were `intended to include all good faith and reasonable reporting of fraud, and [that] there should be no presumption that reporting is otherwise, absent specific evidence.’“ Van Asdale v. Int’l Game Tech., 577 F.3d 989, 1002 (9th Cir. 2009) …an interpretation demanding a rigidly segmented factual showing justifying the employee’s suspicion undermines this purpose and conflicts with the statutory design, which turns on employees’ reasonable belief rather than requiring them to ultimately substantiate their allegations. …[R]elief pursuant to § 1514A turns on the reasonableness of the employee’s belief that the conduct violated one of the enumerated provisions—which is contrary to the “definitively and specifically” standard. The objective prong of the reasonable belief test focuses on the basis of knowledge available to a reasonable person in the circumstances with the employee’s training and experience. Many employees are unlikely to be trained to recognize legally actionable conduct by their employers. Accordingly, the centrality of the belief of the whistleblower that her employer has engaged in wrongdoing leads us to conclude, in accord with the ARB’s interpretation in Sylvester, that the “definitively and specifically” requirement is not in keeping with the language of the statute. Nielsen, 762 F.3d at 221…
The court found that, based on the totality of the circumstances, the evidence was more than sufficient to sustain a finding that Rhinehimer “reasonably believed” that his coworker’s trades constituted unsuitability fraud. Thus, when U.S. Bancorp retaliated against Rhinehimer for complaining about the trades, it violated Sarbanes-Oxley’s whistleblower protections.
Ohio law provides job protections to those employees that report or oppose illegal or unsafe conduct or work conditions, such as OSHA violations, embezzlement, unlawful discrimination, or patient abuse, to name a few. However, in order to have the protections under the law, there are a lot of steps that each employee must take. That is why it is absolutely critical for any employee confronted with illegal or unsafe conduct or work conditions at work to immediately consult with employment law lawyers in order to make sure that everything is done right. If you wait until you are fired, you may have already lost your claim. Do not wait. If you have seen any illegal or dangerous conduct on your job, then the best thing you can do is call the right attorney to schedule a free and confidential consultation at 866-797-6040. The Spitz Law Firm, and its attorneys are experienced and dedicated to protecting Ohio employees from retaliation after blowing the whistle on unlawful and hazardous activities at work.
The materials available at the top of this whistle blower claims page and on this employment law website are for informational purposes only and not for the purpose of providing legal advice. If you are still asking, “what should I do if I am being harassed for reporting…”, “how do I …?”, “Am I …?”, “what should I do if…” or “can my boss fired me for …”, it would be best for you to contact an Ohio attorney to obtain advice with respect to particular whistleblower claims questions or any particular employment law issue. Use and access to this employment law website or any of the links contained within the site do not create an attorney-client relationship. The legal opinions expressed at or through this site are the opinions of the individual lawyer and may not reflect the opinions of The Spitz Law Firm, attorney Brian Spitz, or any individual attorney.