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DOL Solicitor Asserts that SOX Covers Employees of Consolidated Subsidiaries of Publicly-Traded Companies

The Solicitor of Labor filed an amicus curiae brief arguing that in enacting Section 806 of Sarbanes-Oxley Act (SOX), Congress intended to protect whistleblowers working for the consolidated subsidiaries of publicly-traded companies.  In Klopfenstein v. PCC Flow Technologies Holdings, Inc., the ARB applied an “agency test” in which the general common law of agency is employed to determine whether an employee of a subsidiary is covered under SOX.  The Solicitor argues that the text, legislative history, and remedial purpose of SOX demonstrate that coverage should extend to employees of all consolidated subsidiaries: 

Although SOX’s legislative history is not conclusive on the issue of subsidiary coverage, SOX’s purpose and its goal of protecting whistleblowers strongly suggest that Congress intended [the whistleblower provisions of SOX] to sweep broadly. Indeed, Congress specifically recognized that subsidiaries play an important role in determining the financial health of a publicly traded company, and that they can be used by the parent company to deceive investors. The Senate Report [No. 107-146] details the potential that corporate fraud would be hidden behind layers of subsidiaries and partnerships and a corporate code of silence that extended beyond the publicly traded parent company.

The employment lawyers at The Employment Law Group® law firm have substantial experience representing employees in Sarbanes-Oxley whistleblower proceedings and have written numerous articles about the whistleblower provisions of the Sarbanes-Oxley Act.  For more information about TELG’s Sarbanes-Oxley Whistleblower Practice, click here.

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