Whistleblower Law Blog

DOL ARB Holds Sarbanes-Oxley Covers Claims by Employees of Subsidiaries of Publicly-traded Companies

Agreeing with arguments posed by The Employment Law Group® attorneys, the DOL Administrative Review Board (ARB) held that an amendment to the Sarbanes-Oxley Act (SOX) in Section 929A of the Dodd-Frank Act, which provides that Section 806 applies to employees of subsidiaries of publicly-traded companies, was a clarification of existing law and therefore “is not typically subject to a presumption against retroactivity and is applied in all cases pending on the date of enactment.”

The ARB had requested parties and amici curiae in Johnson v. Siemens Building Technologies, Inc. to supplement their briefs by addressing what effect, if any, Section 929A had in whistleblower Carri Johnson’s case. On August 13, 2010, The Employment Law Group® attorneys filed an amicus curiae brief on behalf of the Government Accountability Project, National Employment Lawyers Association, and National Whistleblowers Center arguing that Section 929A of the Dodd-Frank Act clarifies and confirms existing law on the scope of coverage under SOX, and therefore should be applied to pending cases. A copy of the brief is available here. The ARB agreed in its opinion here that clarifications of existing law apply to pending cases, stating:

Courts examine several factors in determining whether an intervening statutory provision clarifies preexisting law rather than substantively changes it, including: [1] whether the enacting body declared that it was clarifying a prior enactment; [2] whether a conflict or ambiguity existed prior to the amendment; and [3] whether the amendment is consistent with a reasonable interpretation of the prior enactment and its legislative history (quotations and citations omitted).

The ARB found that while Congress did not expressly indicate it intended to clarify Section 806, language in Section 806 such as the subsidiary coverage provision was “far from settled law” and Section 929A of the Dodd-Frank Act is a reasonable interpretation of Section 806. Accordingly, the court ruled that Section 929A applies to pending cases:

We conclude that Section 929A is a clarification of Section 806 and does not create retroactive effects. Section 929A’s addition of subsidiary coverage merely makes “what was intended all along ever more unmistakably clear.” United States v. Montgomery Cnty., 761 F.2d 998, 1003 (4th Cir. 1985). Because the amendment by Section 929A does not create retroactive effects, it applies to Johnson’s case on appeal. Accordingly, we hold that, at a minimum, the SOX whistleblower provision covers a subsidiary whose financial information is included in a publicly traded parent company’s consolidated financial statements. The record suggests that SBT is a consolidated entity of Siemens AG, but we do not find the record before us to conclusively establish that fact. The ALJ and parties on remand can address SBT’s status as a consolidated entity in accordance with this order and, if so, determine the issue of liability under the facts presented at hearing.

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