A recent New York District Court decision seems to extend whistleblower protection to employees working outside the U.S.
In 2002, the U.S. enacted the Sarbanes-Oxley Act, commonly referred to as SOX. Among other things, the intent was "to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws and for other purposes."
To further that goal, the Act provides a private right of action to any employee of a publicly traded company who suffers retaliation for reporting fraud. If successful, the employee may be entitled to relief that includes back pay, reinstatement and compensatory damages. To succeed in a whistleblower claim under SOX, the following must be shown:
- the employee engaged in "protected activity" (reporting to the U.S. government or a supervisor at their place of employment information that the employee reasonably believes relates to fraud);
- the employer knew of the protected activity;
- the employee suffered an "unfavourable personnel action," including termination, demotion or any other negative treatment that would reasonably be likely to deter other whistleblowers; and
- it can be seen that the protected activity was a contributing factor to the unfavourable action.
Early this year, in the O'Mahoney case, the U.S. District Court for the Southern District of New York issued a decision to the effect that the SOX whistleblower provisions may indeed, under certain circumstances, apply to employees working outside the U.S. For Canadians, O'Mahoney teaches that the SOX whistleblower provisions may apply to employees working in Canada for a company publicly listed in the U.S. if:
- the employee has some history of working for a U.S. entity related to the employer (even if, at the time of the complaint, the employee happens to be working for a foreign entity); and
- the decisions to engage in fraud and to retaliate were made within the U.S.
Companies with publicly traded securities in the U.S. would be well advised to consider adopting effective whistleblower policies in their efforts to comply with the SOX provisions