On October 31, 2012, the Administrative Review Board (the “ARB”) upheld dismissal of a Sarbanes-Oxley Act (“SOX”) whistleblower complaint brought by Boris Galinsky (“Mr. Galinsky”) against Bank of America (“BOA”).  The ARB concluded that the Administrative Law Judge (the “ALJ”) correctly held that BOA proved by clear and convincing evidence that it would have disciplined and terminated Mr. Galinsky regardless of his protected activity.  In doing so, the ARB affirmed the notion that whistleblower protection only goes so far, and that employers are not required to tolerate inappropriate behavior by an employee even if that employee engaged in SOX-related protected activity.

The Wrong Platform

In 2006, Mr. Galinsky, a software developer and senior vice president, began working on BOA’s Anti-Money Laundering (“AML”) surveillance project.  The AML project was designed to monitor BOA’s compliance with federal regulations by using statistical models to identify potential money laundering in several key areas of bank operations.  During his work on the AML project, Mr. Galinsky expressed concern that BOA had chosen to use the wrong platform and that the project, as a whole, had many design flaws.  Mr. Galinsky went as far as complaining that the AML project was such a failure that it could be construed as fraud.  At Mr. Galinsky’s request, BOA removed him from the AML project.

Failure to Communicate

After his removal from the AML project, Mr. Galinsky began having significant communication problems with both his co-workers and managers.  For example, Mr. Galinsky had a heated exchange with a subordinate from another group and sent several colleagues an inappropriate email about bathroom usage.  As a result of his communication problems, Mr. Galinsky received negative peer feedback in a leadership survey and had a discussion with his managers on how to improve his behavior and communication problems.  Thereafter, Mr. Galinsky sent another inappropriate email criticizing BOA employees for soliciting donations for the United Way.  Mr. Galinsky received a negative year-end review and, consequently, did not receive a year-end bonus.  In addition, Mr. Galinsky received another written warning for communication problems.  Mr. Galinsky eventually filed a whistleblower complaint claiming that his negative year-end review, loss of the year-end bonus, and written warning were a result of his complaints about the AML project.

New Position, Same Problems

In February 2007, BOA transferred Mr. Galinsky to a production-support team; Mr. Galinsky complained that the transfer set him up to fail.  Afterward, in June 2007, BOA conducted a division-wide job code and band realignment; Mr. Galinsky was just one of many BOA employees whose job code and band were changed, but, nevertheless, he complained that the realignment was a demotion.  After his job code and band were realigned, Mr. Galinsky downloaded and exported data from BOA’s computer systems and ran a program to compare his code and band with other vice presidents within the Company.  During this time, Mr. Galinsky continued having communication problems with his managers.  As a consequence, Mr. Galinsky received a negative mid-year review.  Unbeknownst to his managers, Mr. Galinsky recorded his mid-year review meeting.  Toward the end of 2007, Mr. Galinsky received another written warning citing his improper disregard of the chain of command and negative attitude toward other employees.  In response, Mr. Galinsky asserted that BOA’s failed products constituted fraud.  Mr. Galinsky then filed a second whistleblower complaint alleging that BOA changed his job code and band in retaliation for his protected activity.

The Straw That Broke the Camel’s Back

In the spring of 2008, Mr. Galinsky was assigned to follow-up on a minor change to software.  Based on his conversations with his co-workers and managers, Mr. Galinsky believed that BOA employees did not document change requests in order to avoid discovery of such requests by the Securities and Exchange Commission.  Mr. Galinsky secretly recorded his conversations.  In March 2008, human resources learned of Mr. Galinsky’s numerous indiscretions.  Specifically, it came to light that Mr. Galinsky had been recording conversations with co-workers for nearly a year and that Mr. Galinsky improperly downloaded and used company data for personal purposes.  Following an investigation, the bank terminated Mr. Galinsky’s employment due to continued disciplinary problems with workplace behavior, loss of trust and confidence arising out his misuse of company data, and for secretly recording conversations with his colleagues and supervisors.  Mr. Galinsky filed a third whistleblower complaint claiming that his termination was retaliatory.

The ALJ’s Decision

The ALJ consolidated Mr. Galinsky’s three SOX whistleblower complaints and concluded that Mr. Galinsky stated a prima facie case of retaliation in all three instances.[1]  Specifically, the ALJ reasoned that complaints regarding the AML project and discussions regarding the hiding of change requests constituted SOX-related protected activities, and that those protected activities contributed to much of the adverse action that Mr. Galinsky suffered at BOA.  Nevertheless, the ALJ ruled in favor of BOA holding that it had proven by clear and convincing evidence that it would have taken the same adverse actions regardless of Mr. Galinsky’s protected activity.[2]  According to the ALJ, BOA’s consistency was the key in its determination.  BOA managers undertook many efforts to coach Mr. Galinsky regarding his behavior in an effort to improve his communication skills.  Despite these efforts, Mr. Galinsky continued to display inappropriate behavior with his co-workers and managers.  In addition, the ALJ determined that BOA would have realigned Mr. Galinsky’s job code and band as part of its division-wide reorganization as numerous other employees were also affected.  Finally, the ALJ held that BOA would have terminated Mr. Galinsky’s employment in the absence of any protected activity due to his violating company policy by secretly recording conversations with co-workers and improperly downloading company information for personal use.

The ARB Affirms

The ARB affirmed the ALJ’s decision dismissing Mr. Galinsky’s complaints against BOA on the grounds that BOA proved by clear and convincing evidence that it would have disciplined and terminated Mr. Galinsky in the absence of his protected activity.  Applying the “substantial evidence” standard of review, the ARB held that the evidence in the record adequately supported the ALJ’s determination.  Once again, the ARB emphasized that BOA’s consistency in addressing Mr. Galinsky’s behavioral problems and his continued failure to improve his behavior showed a lack of retaliatory motive.  In essence, the ARB confirmed that BOA did not have to tolerate Mr. Galinsky’s inappropriate behavior toward his co-workers and supervisors just because he engaged in activity protected under SOX.  Moreover, the ARB concluded that Mr. Galinsky’s secret tape recording and downloading activities violated BOA employee handbook rules.  The ARB distinguished its 2011 decision in Vannoy v. Celanese, holding such activities potentially protected if undertaken for whistleblower purposes.  The Galinsky hearing record, however, indisputably established that Galinsky violated company rules solely for unprotected personal reasons.  As such, Mr. Galinsky’s claim of retaliatory termination necessarily failed.

Lessons Learned

Despite the broad protections afforded to whistleblowers under SOX, the Galinsky decision affirms that those protections are not unlimited.  The ALJ correctly held, and the ARB correctly affirmed, that an employee’s protected activities do not insulate that employee from discipline or termination for inappropriate behavior and violation of company policy.  Galinsky serves as a useful reminder that, as whistleblower complaints are becoming more common, employers must continue to document employee disciplinary issues and to apply their internal discipline policies consistently.  Such documentation could prove invaluable in proving that any adverse employment action taken against an employee, including termination, was taken for legitimate, non-retaliatory reasons