In Halliburton, Inc. v. Administrative Review Board, 771 F.3d 254 (5th Cir. 2014), the Fifth Circuit upheld an ARB ruling that the identification of an employee as a whistleblower was an “adverse action” under the Sarbanes-Oxley Act of 2002. The complainant had raised a concern to his supervisors and others about Halliburton’s revenue recognition policies. He later reported the same concerns to the SEC. When the SEC contacted Halliburton and instructed it to retain certain documents regarding revenue recognition, Halliburton assumed (correctly) that the complainant had reported his concerns to the SEC. The general counsel sent an email to the complainant and his colleagues, instructing them to retain certain documents because “the SEC has opened an inquiry into the allegations of [complainant].” The complainant claimed that after he was identified as having blown the whistle to the SEC, his colleagues began treating him unfavorably.
An ALJ dismissed his complaint, finding that the disclosure of the complainant’s name was not an adverse action. The ARB disagreed and remanded. The ALJ then ruled that Halliburton had demonstrated a legitimate business reason for disclosing the complainant’s identity. The ARB reversed again, ruling that Halliburton failed to prove by clear and convincing evidence that its disclosure of the whistleblower’s identity was dictated by “a legitimate, non-discriminatory business reason unrelated to his protected activity.” The Fifth Circuit upheld the ARB’s ruling, finding that the disclosure of a whistleblower’s identity may constitute an adverse action under SOX because “[i]t is inevitable that such a disclosure would result in ostracism.” The court said that when identifying the whistleblower, “the boss could be read as sending a warning, granting his implied imprimatur on differential treatment of the employee, or otherwise expressing a sort of discontent from on high.” The Fifth Circuit also held that the whistleblower need not show that the disclosure was driven by improper motive.
Notably, in this case, the SEC declined to pursue the allegations of accounting improprieties, yet Halliburton found itself in litigation for years over its handling of the whistleblower. The case highlights the difficult position in which employers find themselves when a current employee makes whistleblower claims. Maintaining absolute confidentiality of a whistleblower’s identity, even where colleagues clearly know the source of the complaints, may conflict with an employer’s ability to preserve evidence and gather information about those complaints.