Federal Law > Discipline & Termination > Sarbanes-Oxley Act of 2002

Sarbanes-Oxley Act of 2002

President Bush signed into law the Sarbanes-Oxley Act of 2002 (the "Act"). The Act provides tough new tools to expose and punish acts of corporate corruption, promote greater accountability by financial auditors, and protect small investors and pension holders. The Act also protects whistleblowers from retaliation by employers.

Whistleblower protections. The Act also imposes new penalties for retaliating against corporate whistleblowers. The Act provides enhanced civil and criminal penalties for retaliating, harassing or discriminating against employees who report suspected corporate wrongdoing. Public companies should be training key personnel about the new law.

Civil action to protect against retaliation in fraud cases.
No company with a class of securities registered under section 12 of the Securities Exchange Act of 1934, or that is required to file reports under section 15(d), or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee:
  1. to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of section 1341, 1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders, when the information or assistance is provided to or the investigation is conducted by:

    1. a Federal regulatory or law enforcement agency;
    2. any Member of Congress or any committee of Congress; or
    3. a person with supervisory authority over the employee (or such other person working for the employer who has the authority to investigate, discover, or terminate misconduct); or

  2. to file, cause to be filed, testify, participate in, or otherwise assist in a proceeding filed or about to be filed (with any knowledge of the employer) relating to an alleged violation of certain sections of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders.

Statute of limitations. An action shall be commenced with the DOL not later than 90 days after the violation occurs.

Remedies. Relief for any action under paragraph (1) shall include:
  1. reinstatement with the same seniority status that the employee would have had, but for the discrimination;
  2. the amount of back pay, with interest; and
  3. compensation for any special damages sustained as a result of the discrimination, including litigation costs, expert witness fees, and reasonable attorney fees.

Criminal Penalties - Retaliation Against Informants. New subsection (e) of 18 U.S.C. § 1513 creates a felony offense for any person knowingly to take any action, with intent to retaliate, harmful to a person who provides such information concerning a federal offense, including fines as defined by the Act or imprisonment of not more than 10 years, or both.
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