The Fifth Circuit Court of Appeals recently affirmed the Department of Labor’s Administrative Review Board’s decision that an employee’s termination did not violate the whistleblower protection provisions of the Sarbanes-Oxley Act. Klopfenstein v. Admin. Rev. Board, No. 10-60144 (5th Cir. Nov. 23, 2010), available at http://www.ca5.uscourts.gov/opinions/unpub/10/10-60144.0.wpd.pdf.
Klopfenstein’s employer discharged him for violating revenue recognition rules. Klopfenstein alleged this reason was a pretext and that he was actually discharged because he reported inventory balance sheet discrepancies to his employer. Klopfenstein filed a SOX whistleblower complaint, and it was determined that his purported whistleblowing activities did not contribute to his termination.
SOX creates a private cause of action for an employee of a publicly-traded company who is retaliated against because the employee provided information about corporate fraud to a federal agency or to the employer. The employee must prove: (1) he engaged in protected activity; (2) the employer knew he engaged in protected activity; (3) he suffered an unfavorable personnel action; and (4) the protected activity was a contributing factor in the unfavorable action. In this matter, the Court found that the record clearly demonstrated that Klopfenstein’s reporting activity was not a contributing factor in his termination because the employees who terminated Klopfenstein’s employment did not know that he had raised concerns about inventory discrepancies. Thus, the Administrative Review Board’s decision was not an abuse of discretion.
To speak to a Dallas employment lawyer with experience in handling SOX matters, contact the employment lawyers at Clouse Dunn Khoshbin LLP at [email protected].
