The Sarbanes-Oxley Act significantly expands
existing federal whistleblower protection laws, and
public companies would be well advised to pay
special attention to these new protections for
corporate whistleblowers. Section 806 of the Act
prohibits an employer from engaging in retaliation or
discrimination against employees who report
suspected accounting or financial fraud, and
establishes a new system by which aggrieved
employees can bring an action for damages against
their employer before the Department of Labor or in
federal District Court.
The whistleblower provisions are an integral part of
the new law. Many of the questionable accounting
practices that gave rise to the Sarbanes-Oxley Act
came to light, at least in part, as a result of employees
who blew the whistle. Even before the scandals at
Enron and other companies broke, Congress had
embraced the policy of whistleblower protection as a
means to help federal regulators ferret out violations
and wrongdoing. In fact, the whistleblower
provisions of the Sarbanes-Oxley Act are patterned
after similar statutory schemes for protecting workers
in the airline and nuclear power industries.1
Experience has shown that whistleblower cases
can inflict serious damage on a company's
reputation as well as on the careers of accused
managers. Accordingly, companies should
consider taking a strategic approach to
implementing the new whistleblower provisions.
Below we summarize the key provisions and offer
some suggestions for employers.
Whistleblower Provisions of
Prohibition of Discrimination. Section 806 of the
Act establishes a system for whistleblower protection
for employees of publicly traded companies. That
provision provides that no public company or any
officer, employee, contractor or agent of such
company "may discharge, demote, suspend, threaten,
harass, or in any other manner discriminate against an
employee in the terms and conditions of... [continues]
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