|Sylvester v. Parexel International LLC|
UNITED STATES DEPARTMENT OF LABOR
ADMINISTRATIVE REVIEW BOARD
KATHY J. SYLVESTER and ARB Case No. 07-123
Complainants, OALJ Case Nos. 2007-SOX-39, 42
PAREXEL INTERNATIONAL LLC,
BRIEF OF AMICUS CURIAE
NATIONAL WHISTLEBLOWERS CENTER AND
Richard R. Renner, firstname.lastname@example.org
Stephen M. Kohn, email@example.com
Attorneys for Amicus
National Whistleblowers Legal Defense and Education Fund
3233 P St., N.W.
Washington, DC 20007
(202) 342-6984 (FAX)
A focus on the remedial purpose of SOX leads naturally to a broad construction of what is protected. Until 2006, this Board and the Secretary of Labor had interpreted “protected activity” broadly for the express purpose of encouraging employees to raise compliance concerns. Since 2006, a series of unfortunate decisions created a higher standard for protected activity, but none of these new decisions properly considered the prior law. This Board has an opportunity to restore the original broad standard that best comports with the remedial purpose.
Established in 1988, the National Whistleblowers Center (NWC) is a non-profit tax-exempt public interest organization. The Center regularly assists corporate employees throughout the United States who suffer from illegal retribution for lawfully disclosing violations of federal law. The NWC maintains a nationwide attorney referral service for whistleblowers, and provides publications and training for attorneys and other advocates for whistleblowers. The NWC has participated as amicus curiae in the following cases: English v. General Electric, 110 S.Ct. 2270 (1990), Kansas Gas & Electric Co. v. Brock, 780 F.2d 1505 (1985); EEOC v. Waffle House, 534 U.S. 279 (2002); Haddle v. Garrison, 525 U.S. 121 (1998); Vermont Agency Of Natural Resources v. United States ex rel. Stevens, (98-1828) 529 U.S. 765 (2000); Beck v. Prupis, 529 U.S. 494 (2000).
In 2002, the NWC worked closely with the Senate Judiciary Committee and strongly endorsed its efforts to “prevent recurrences of the Enron debacle . . ..” 148 Cong. Rec. S. 7420 (daily ed. July 26, 2002) (remarks of Senator Leahy, quoting from letter signed by the NWC and the Government Accountability Project).
Senator Leahy recognized the role of the NWC in the enactment of SOX (S. Rep. 107-146, at 10):
This “corporate code of silence” not only hampers investigations, but also creates a climate where ongoing wrongdoing can occur with virtual impunity. The consequences of this corporate code of silence for investors in publicly traded companies, in particular, and for the stock market, in general, are serious and adverse, and they must be remedied. …
Unfortunately, as demonstrated in the tobacco industry litigation and the Enron case, efforts to quiet whistleblowers and retaliate against them for being “disloyal” or “litigation risks” transcend state lines. This corporate culture must change, and the law can lead the way. That is why S. 2010 is supported by public interest advocates, such as the National Whistleblower Center, the Government Accountability Project, and Taxpayers Against Fraud, who have called this bill “the single most effective measure possible to prevent recurrences of the Enron debacle and similar threats to the nation’s financial markets.”
The NWC advocates on behalf of whistleblowers because these truth-tellers uncover grave problems facing our federal government and our nation. Whistleblowers are a bulwark of accountability against those who would corrupt government or corporations. Therefore, aggressive defense of whistleblowers is crucial to any effective policy to address wrongdoing or abuse of power. Conscientious employees who point out illegal or questionable practices should not be forced to choose between their jobs and their conscience.
Whistleblowers who take an ethical stand against wrongdoing often do so at great risk to their careers, financial stability, emotional well-being and familial relationships. Society should protect and applaud whistleblowers because they are saving lives, preserving our health and safety, and protecting vital fiscal resources.
II. PROTECTED ACTIVITY IS ACTIVITY THAT TOUCHES OR CONCERNS THE SCOPE OF THE SUBSTANTIVE ACT.
It is worthy of this Board to invite amicus briefs on the nature of protected activity. Until recently, this Department had construed protected activity broadly, consistent with the established law calling for broad interpretation to further the remedial purposes. See, e.g. Guttman v. Passaic Valley Sewerage Comm., 85-WPC-2, D&O of SOL, pp. 10-13 (March 13, 1992), aff’d, Passaic Valley Sewerage Comm. v. U.S. Department of Labor, 992 F.2d 474, 478-79 (3rd Cir. 1993); Willy v. Coastal Corp., 85-CAA-1, D&O of SOL, p. 13 (June 1, 1994). The Guttman case established the standard followed by this Board for years before the passage of SOX. Joseph Guttman was selected for layoff on account of his “highly vocal personality” and his “unyielding objections” just a few months after he raised a concern that end-user fees violated a fairness requirement of the Federal Water Pollution Control Act (FWPCA). The Secretary held that a complainant’s internal complaints were protected activity since the paramount purpose of the whistleblower provision of the FWCPA is the protection of employees. This purpose would be frustrated by failing to protect employees who report violations internally to their employers. The Secretary relied on Munsey v. Federal Mine Safety and Health Review Comm’n, 595 F.2d 735, 742-743 (D.C. Cir. 1978). The Third Circuit affirmed at 992 F.2d at 478-49, saying,
The whistle-blower provision was enacted for the broad remedial purpose of shielding employees from retaliatory actions taken against them by management to discourage or to punish employee efforts to bring the corporation into compliance . . ...
[A]n employee’s non-frivolous complaint should not have to be guaranteed to withstand the scrutiny of in-house or external review in order to merit protection under § 507(a) for the obvious reason that such a standard would chill employee initiatives in bringing to light perceived discrepancies in the workings of their agency.
Only after the 2002 enactment of SOX did this Board begin to require that protected activity “definitively and specifically” relate to a specific violation. Platone v. FLYi, Inc., 25 IER Cases 278, 287, 2006 DOLSOX LEXIS 105, *33 (Dep’t of Labor Sept. 29, 2006), aff’d Platone v. Department of Labor, 548 F.3d 322, 326 (4th Cir. 2008). This Board did not state how a heightened standard for protected activity would further the remedial purposes of the statute. Instead, this Board cited to Kester v. Carolina Power & Light Co., ARB No. 02-007, ALJ No. 2000-ERA-31, slip op. at 9 (ARB Sept. 30, 2003), for the proposition that in nuclear whistleblower complaints, protected activity must “definitively and specifically” relate to nuclear safety. In Kester, the complainant had raised a concern about falsified authorizations to access a nuclear power plant. The ARB rightly decided that these concerns were protected. As such, the Board’s usage of the words “definitively and specifically” was dicta and not intended to heighten the standard from the prior standard enunciated in Guttman. Neither in Kester nor in Platone did this Board cite to or address the broad Guttman standard that had been in use for years.
Giving deference to this Board’s authority in the area, courts have followed this Board’s lead on this standard. Van Asdale v. Int’l Game Technology, 577 F.3d 989, 997 (9th Cir. 2009); Day v. Staples, Inc., 555 F.3d 42, 54-55 (1st Cir. 2009); Welch v. Chao, 536 F.3d 269, 276 (4th Cir. 2008); Allen v. Admin. Review Bd., 514 F.3d 468, 476 (5th Cir. 2008) (“We agree with the ARB’s legal conclusion that an employee’s complaint must definitively and specifically relate to one of the six enumerated categories found in § 1514A.”). This ARB doctrine rejected a broad interpretation and reinforced a narrow reading of “protected activity,” thus “likely making the road steeper for future whistleblowers.” Richard Moberly, “Unfulfilled Expectations: An Empirical Analysis of Why Sarbanes-Oxley Whistleblowers Rarely Win,” William & Mary Law Review, Vol. 49, Fall 2007, at p. 138.
This Board remains free to adopt any standard permissible by law so long as it does so explicitly and states its reasons. FCC v. Fox Television Stations, Inc., 556 U.S. ___, 129 S. Ct. 1800 (2009); see also, Thompson v. U.S. Department of Labor, 885 F.2d 551 (9th Cir. 1989) (“It is an elemental tenet of administrative law that an agency must either conform to its own precedents or explain its departure from them.”). Once adopted by this Board, the new standard would be entitled to deference under Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843-44, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984). As the Platone decision does not cite to or even recognize the existence of Guttman or other cases adopting a broad standard, the Platone opinion fails to meet the requirements of Fox Television Stations to modify past policy. The NWC urges this Board to reject the “definitively and specifically” standard as a mistake, and return to the broad standard that better comports with the statute’s remedial purpose. There is every reason to expect that courts will defer to this Board’s expertise and follow the renewed standard. Stone & Webster Eng’g Corp. v. Herman, 115 F.3d 1568, 1571 (11th Cir. 1997) (Court must apply due deference to the Secretary of Labor’s interpretation of the statutes which he or she administers.); Collins v. Beazer Homes, 334 F.Supp. 2d 1365. 1374 n. 10 (N.D. Ga. 2004); Welch v. Chao, 536 F.3d 269, 276 n. 2 (4th Cir. 2008); Day v. Staples, Inc., 555 F.3d 42, 54 n. 7 (1st Cir. 2009).
A. The degree of connection to an SEC violation matters only to opposition cases, and not to participation cases.
Before addressing how this Board can improve the determination of protected activity, it is important to differentiate between “opposition” and “participation” activities. The law protects both, but requires different showings for each. 18 U.S.C. §§ 1514A(a)(1) and (2). The “about to be filed” clause in 18 U.S.C. § 1514A(a)(2) clearly anticipates the employer that would try to suppress official proceedings by firing employees for giving the first hint that they intended to commence proceedings. Such retaliation is prohibited because it would discourage employees from participation. Protection under the participation clause cannot be dependent on assessments of the content of that participation. The term “proceeding” which is often used within a statutory definition of protected activity, incorporates protection for “many things,” such as filing a federal law suit, assisting in a government investigation, and testifying at a hearing. McCafferty v. Centerior Energy, 96-ERA-6, D&O of Remand by ARB, at 9 (September 24, 1997).
Within the context of the internal controls required by SOX, raising a concern internally can be just as effective in identifying oneself as a person who is “about to file” an official proceeding. Congress enacted SOX with the specific purpose of encouraging both internal and external disclosures of suspicious activity. In Day v. Staples, Inc., 555 F.3d 42, 52 (1st Cir. 2009), the Court said:
Congress passed this protection in response to:
[A] culture, supported by law, that discourage[s] employees from reporting fraudulent behavior not only to the proper authorities . . . but even internally. This “corporate code of silence” not only hampers investigations, but also creates a climate where ongoing wrongdoing can occur with virtual impunity.
S. Rep. No. 107-146, at 5 (2002). Section 1514A was enacted to remedy this problem. The § 1514A whistleblower provision thus serves to “encourage and protect [employees] who report fraudulent activity that can damage innocent investors in publicly traded companies.” Id. at 19.
In the present case, respondent has set out the official channels for employees to use in raising compliance concerns. It has adopted and published the Parexel International Corporation Code of Business Conduct and Ethics to inform both its employees and its investors of the thoroughness of its internal controls. It declares, “[t]his Code is intended to deter wrongdoing and to promote the conduct of the Company business in accordance with high standards of integrity and in compliance with applicable laws and regulations.” On page 4, it states:
Every employee, officer and director has the responsibility to ask questions, seek guidance, report suspected violations and express concerns regarding compliance with this Code. Employees, officers or directors who are aware of conduct or circumstances that violate applicable law or this Code should notify his or her supervisor or the General Counsel.
Thus, reporting suspected violations of law to one’s supervisor is the official channel for Parexel’s employees to assure that the company is maintaining its internal controls as required by SOX. Reporting up the chain of command is the official proceeding to comply with SOX.
In a seminal case on the scope of protection, Judge Wilkey held that a miner’s notification to a foreman of possible dangers was “an essential preliminary stage in both the notification to the Secretary (A) and the institution of proceedings (B), and consequently brings the protection of the Safety Act into play.” Phillips v. Interior Bd. of Mine Operations Appeals, 500 F.2d 772 (D.C. Cir. 1974), cert. denied, 420 U.S. 938 (1975). Judge Wilkey explained as follows:
Safety costs money. The temptation to minimize compliance with safety regulations and thus shave costs is always present. [fn 24] The miners are both the most interested in health and safety protection, and in the best position to observe the compliance or noncompliance with safety laws. Sporadic federal inspections can never be frequent or thorough enough to insure compliance. Miners who insist on health and safety rules being followed, even at the cost of slowing down production, are not likely to be popular with mine foreman or mine top management. Only if the miners are given a realistically effective channel of communication re health and safety, and protection from reprisal after making complaints, can the Mine Safety Act be effectively enforced.
n. 24 Responsible mine operators who comply with health and safety standards have an obvious interest in seeing uniform standards enforced throughout the industry: competitors who get away with cutting costs by cutting safety are really engaged in unfair competition; the temptation to meet it by engaging in similar tactics is ever-present.
To hold that Phillips was not protected against discharge because he took the first prescribed step under the Kencar procedure to invoke the Mine Safety Act, to hold that only a miner’s discharge after he reaches the Bureau of Mines with his complaint is protected by the Safety Act, would nullify not only the protection against discharge but also the fundamental purpose of the Act to compel safety in the mines.
Judge Wilkey made clear that phrase “cause to” would be construed broadly to protect employees making disclosures. This phrase came from the Federal Coal Mine Health and Safety Act of 1969, Pub. L. No. 91-173, 83 Stat. 742, 30 U.S.C. §§ 801, et seq. (1970). Congress thereafter used the same or expanded wording to protect employees engaged in sensitive environmental or safety areas. In 1976, Congress enacted the Toxic Substances Control Act (TSCA), 15 U.S.C. § 2622, and protected an employee who, “commenced, caused to be commenced, or is about to commence or cause to be commenced a proceeding under this chapter . . . .” In 1977, Congress used the same language when it added 42 U.S.C. § 7622 to the Clean Air Act. When Congress enacted the Federal Mine Safety and Health Act of 1977, it preserved the phrasing Judge Wilkey relied upon and protected miners who, “instituted or caused to be instituted any proceeding under or related to this Act.” In 1978, Congress enacted the Energy Reorganization Act (ERA), 42 U.S.C. § 5851, and protected an employee who, “caused to be commenced, or is about to commence or cause to be commenced a proceeding under this chapter . . ..” That same year, the D.C. Circuit issued its decision in Munsey v. Federal Mine Safety and Health Review Comm’n, 595 F.2d 735 (D.C. Cir. 1978). In Munsey, the Court received a record in which an ALJ concluded that the mine had no “well defined procedures to implement the Act” and that Mr. Munsey had relied on “custom and usage” in complaining to the forman and superintendent. The Court concluded this “in accordance with established procedure” and protected under Phillips. 595 F.2d at 741. The Court also disregarded the ALJ’s findings that Mr. Munsey’s complainants were frivolous and made in bad faith. “The actual statutory language fails to suggest that notification is to be judged on any good faith or not frivolous standard.” 595 F.2d at 742. The Munsey Court then reviewed this legislative history at 595 F.2d at 742-43:
Senator Kennedy emphasized the need to encourage the reporting of suspected safety violations:
Mr. President, the rationale for this amendment is clear. For safety’s sake, we want to encourage the reporting of suspected violations of health and safety regulations. Section (103(g) of the Act) confirms this concern by calling for immediate inspection whenever a representative of miners believes that there may be a violation of health or safety standards.
But miners will not speak up if they fear retaliation. This amendment should deter such retaliation, and, therefore, encourage miners to bring dangers and suspected violations to public attention.
115 Cong.Rec. 27948 (1969). We believe that Senator Kennedy’s desire to “encourage” safety violation reports strongly suggests that Congress would not want to place additional procedural and substantive burdens on miners who seek the protection of section 110(b) by requiring that the miners demonstrate their state of mind and the merit of their complaints. See Baker v. Department of Interior, 193 U.S.App.D.C. 361, 595 F.2d 746 at 749-750 (1978) (requiring specific intent to notify federal authorities would place a burden on miners inconsistent with the purpose of section 110(b)).
In addition, Senator Kennedy stated that the new section would give coal miners the same protection from reprisal that workers already had under other legislation. 115 Cong.Rec. 27948 (1969). Specifically, he referred to section 8(a)(4) of the National Labor Relations Act, 29 U.S.C. § 158(a)(4) (1976). When section 8(a)(4) was debated on the floor of the Senate, the bill’s sponsor, Senator Wagner, was asked how the section would be applied in a situation much like the one the Board found in this proceeding:
MR. HASTINGS. Now let me inquire about paragraph (4), on page 11, which says that it shall be an unfair labor practice for an employer
To discharge or otherwise discriminate against an employee because he has filed charges or given testimony under this act.
Suppose an employee should file a perfectly outrageous charge, one which was not true, and which he knew was not true: Under paragraph (4) is it the Senator’s notion that the employer might, because of that, and even if that fact were shown, be found guilty of an unfair labor practice?
MR. WAGNER. Merely because he has filed charges related to unfair labor practices no employee should be discriminated against. That is exactly what that section means; otherwise, even though there might be flagrant violations of the provisions of this measure, an employee would not be free to file charges. He would know that the moment the charges were filed he would be discharged.
MR. HASTINGS. The trouble here is the same trouble we frequently have. In trying to correct one evil, we create a new one. I agree with all that. I agree that the worker ought to have a right to make complaint about the violation of this proposed law, and that he ought not to be discriminated against for so doing; but I had in mind whether we could not put in the measure a provision that a person who did so in good faith should not be discriminated against, and not leave the provision as broad as it is, so that an employee might file charges maliciously, for instance, knowing that he could not lose his job even if he did so maliciously.
MR. WAGNER. The suggestion of the Senator would bring up another question that would complicate the situation still more. I do not think the provision as it now stands will be subject to any abuse.
MR. HASTINGS. The Senator from New York is in charge of the bill.
MR. WAGNER. I am satisfied with the provision as it stands.
79 Cong.Rec. 7676 (1935). Following Senator Wagner’s interpretation of the section, the NLRB has held that section 8(a)(4) provides protection even for an employee who files meritless charges. Bayport Fabrication, Inc., 185 N.L.R.B. 516, 517 (1970); American International Aluminum Corp., 149 N.L.R.B. 1205, 1210 (1964).
After the Munsey decision, Congress enacted the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or “Superfund” Law), 42 U.S.C. § 9610, in 1980 and protected an employee or representative who, “has provided information to a State or to the Federal Government, filed, instituted, or caused to be filed or instituted any proceeding under this chapter . . . .” Congress used similar language in the Surface Transportation Assistance Act of 1982, 49 U.S.C. § 31105, the 2000 Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (“AIR 21”), 49 U.S.C. § 42121, and the Pipeline Safety Improvement Act of 2002 (PSIA), 49 U.S.C. § 60129. The pattern points to a congressional desire to draw upon the established body of law for a broad scope of protection. For over three decades, whistleblowers enjoyed an unbroken line of precedent, and continued expansion of statutory protections.
In the wake of the Enron scandal, Congress saw that the enforcement of corporate accounting and disclosure rules was also important enough for a whistleblower protection. Congress again turned to the “cause to” language thus assuring broad protection. Congress even increased the number of agencies to whom whistleblowers could “cause” disclosures to be made. Whereas earlier whistleblower law protected disclosures to law enforcement agencies, SOX Section 806 protections are triggered when a whistleblower causes information to be provided to a regulatory agency, a law enforcement agency, a member of Congress or a supervisor, or when the information assists an investigation conducted by these entities. Congress could not have intended to reduce the scope of protection when it increased the number of intended recipients to whom disclosures could be made.
The phrase “provide information” makes clear that it is the act of disclosure that creates protection. The breadth of protection for disclosures is emphasized in the next phrase which protects any lawful action to “cause information to be provided.” There is no limitation on how a complainant might cause the information to be provided, other than that it must be a lawful act.
In Romaneck v. Deutsche Asset Management, No. C-5-2473 (N.D.Cal. Aug. 17, 2006), the Defendant sought summary judgment on the ground that the Plaintiff could not establish that he engaged in protected activity based on his anticipated testimony before the SEC. The court denied the motion, finding that SOX protects employees who “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” securities laws. 18 U.S.C. § 1514A(a)(2).
In Grove v. EMC Corp., 2006-SOX-99 (ALJ July 2, 2007), the complainant, a salesman, testified that he called an SEC attorney to get information after he read about the “arrest” by the SEC of a person who had dealings with his employer relating to his accounts. The complainant reported to the SEC attorney his concerns about anomalous activity and GAAP violations, and inquired whether other arrangements were legal. The complainant, however, specifically refused to provide any evidence, opting instead to pursue his concerns internally with the respondent. The ALJ wrote:
On these facts, one might conclude that Grove’s contact with the SEC is not protected because he never initiated or participated in any proceeding before that agency. In my view, however, this would require a narrow and overly technical reading of the Act that would run counter to the legislative history which reflects that the law was intentionally written to sweep broadly, protecting any employee of a publicly traded company who took such reasonable action to try to protect investors and the market.’
Slip op. at 23-24 (citation omitted). The ALJ noted that the ARB had recognized that whistleblower laws should be interpreted liberally, and had suggested in a ERA case that an employee’s contact with a government agency for the purpose of obtaining a legal opinion related to the employee’s raising of protected concerns is protected activity. For example, the ARB has suggested that an employee’s contact with a government agency for the purpose of obtaining a legal opinion related to the employee’s raising of protected concerns is protected under Energy Reorganization Act. Jenkins v. United States Environmental Protection Agency, USDOL/OALJ Reporter (HTML) ARB No. 98-146, ALJ No. 1988-SWD-2 (ARB Feb. 28, 2003) at 16. Accordingly, the ALJ held in Grove that activity can be protected as participation “even if no formal SEC proceeding is ever initiated.”
In Guttman, cited above, the Secretary described the reach of protection for raising concerns through official channels as follows:
I note that in the present case, however misguided Complainant’s allegations may have been shown to be, there was never any contention that they were frivolous or brought in abuse of the statute. Rather, the record shows that they were pressed by the Complainant in good faith as his very strongly and seriously held beliefs. I find that Complainant’s communication of these alleged violations to P.V.S.C. officials was fully protected under the whistleblower provision of the FWPCA. 33 U.S.C. 1367.
Thus, as long as the concern was made in good faith, and was not frivolous, then it was protected. In Passaic Valley, cited above, 992 F.2d at 478-79, the Third Circuit affirmed saying:
protection would be largely hollow if it were restricted to the point of filing a formal complaint with the appropriate external law enforcement agency. Employees should not be discouraged from the normal route of pursuing internal remedies before going public with their good faith allegations. Indeed, it is most appropriate, both in terms of efficiency and economics, as well as congenial with inherent corporate structure, that employees notify management of their observations as to the corporation’s failures before formal investigations and litigation are initiated . . ..
The Third Circuit concluded that Mr. Guttman’s internal complaints constituted a “proceeding” and affirmed the finding that his activity was protected. 992 F.2d at 480.
The public policy against retaliation is so strong that the Supreme Court has found protection for participation in laws that do not explicitly provide a remedy for retaliation. Jackson v. Birmingham Board of Education, 544 U.S. 167 (2005) (Title IX); CBOCS West, Inc. v. Humphries, 553 U.S. 442, 128 S. Ct. 1951 (2008) (42 U.S.C. § 1981); Gomez-Perez v. Potter , 553 U.S. 474 (2008) (ADEA). As participation clauses assure that all persons can initiate and participate in proceedings, its scope of protection is broader. “The participation clause is designed to ensure that Title VII protections are not undermined by retaliation against employees who use the Title VII process to protect their rights.” Brower v. Runyon, 178 F.3d 1002, 1006 (8th Cir.1999). See, e.g., Deravin v. Kerik, 335 F.3d 195, 203 (2d Cir.2003) ( “[C]ourts have consistently recognized [that] the explicit language of § 704(a)’s participation clause is expansive and seemingly contains no limitations.”); Booker v. Brown & Williamson Tobacco Co., 879 F.2d 1304, 1312 (6th Cir.1989) (noting that “courts have generally granted less protection for opposition than for participation” and that the participation clause offers “exceptionally broad protection”); Sias v. City Demonstration Agency, 588 F.2d 692, 695 (9th Cir.1978) (stating that the opposition clause serves “a more limited purpose” and is narrower than the participation clause); Pettway v. American Cast Iron Pipe Co., 411 F.2d 998, 1006 n. 18 (5th Cir.1969) (noting that the participation clause provides “exceptionally broad” protection for employees covered by Title VII).Protections for participation apply regardless of the merits of the underlying proceeding. Pettway v. American Cast Iron Pipe Co., 411 F.2d 998 (5th Cir. 1969).
The Supreme Court recently addressed the distinction between the two forms of protection in Crawford v. Metropolitan Government of Nashville and Davidson County, 555 U.S. ___, 129 S.Ct. 846 (2009). Vicky Crawford participated in an internal investigation of sexual harassment. She reported conduct she felt was inappropriate, and she was later discharged. The Supreme Court held that her statements to the investigator constituted protected opposition. As such, it left for another day the question of whether it was also participation.
SOX Section 301 requires every company to have an audit committee that receives and investigates concerns about accounting and internal controls. See also, Section 13 of the Securities Exchange Act of 1934 which requires companies to “devise and maintain a system of internal accounting controls.” 15 U.S.C. § 78m(b)(2)(B); SEC Rule 10A-3. “No person shall knowingly circumvent or knowingly fail to implement a system of internal accounting controls.” 15 U.S.C. § 78m(b)(3)(B)(5). When an employee raises such a concern to the official audit committee, that employee has either filed a proceeding (with the audit committee) or has raised a concern that is “about to be filed.” Either one is protected by the participation clause of SOX’s whistleblower protection. 18 U.S.C. § 1514A(a)(2).
Unequivocal protection of witnesses and complainants in an employer’s internal processes is essential if those mechanisms are to be effective in detecting and correcting violations. The United States Chamber of Commerce has cautioned businesses that “witnesses are often reluctant to come forward out of fear of reprisal.” The EEOC has concluded from many years of experience that protection of witnesses and complainants is critical. See Enforcement Guidance on Vicarious Employee Liability for Unlawful Harassment by Supervisors, 2 EEOC Compl. Man. (BNA) Pt. V(C)(1)(b) at 615-0108 n. 59 (Oct. 2002). Employee cooperation is essential to making such internal investigations effective, yet employee cooperation will hardly be forthcoming if employees are unprotected from retaliation when they provide unfavorable information about their superiors. In the absence of protection against retaliation, witnesses would be understandably reluctant to participate in an investigation into unlawful conduct, which, in turn, would undermine the statutory purpose to spur employers’ efforts to deter and detect unlawful discrimination in the workplace.
Conversely, employees who fail to use official channels when they raise their concerns find that they have a harder time establishing that their activity is protected. Thus, in American Nuclear Res., Inc. v. United States Dep’t of Labor, 134 F.3d 1292, 1295 (6th Cir. 1998), Mr. Sprague found he was not protected when he impulsively complained to radiation protection technicians that he was not getting the correct report of his exposure. As the court noted, he had never filed an official conditions report (“CR”), he never spoke to a supervisor or manager about his concern, and he never contacted any government agency. His protest and request for a report “lacks a sufficient nexus to safety concerns.” It was not participation in proceedings, and therefore had a high standard to meet to show that he was opposing a violation.
The “exceptionally broad protection” accorded by the participation clause provides to potential claimants and potential witnesses unequivocal assurance that they cannot lawfully be punished for taking part in an employer’s internal processes. See, Pettway v. American Cast Iron Pipe Co., 411 F. 2d 998, 1006 n. 18 (5th Cir. 1969). “[O]nce the activity in question is found to be within the scope of the participation clause, the employee is generally protected from retaliation.” Booker v. Brown & Williamson Tobacco Co., Inc., 879 F. 2d 1304, 1312 (6th Cir. 1989). If an employee’s actions are covered by the participation clause, the employer cannot retaliate against the worker because it feels that his or her complaint was unwarranted or unfair. Pettway, 411 F. 2d at 1007; Womack v. Munson, 619 F. 2d 1292, 1298 (8th Cir. 1980). By according to participation in an employer’s internal processes the same degree of protection that is accorded to participation in the machinery of the SEC, SOX Section 301 avoids creating any incentive to shun the employer’s remedial mechanisms for those provided by the Commission.
Protection under the participation clause cannot be dependent on assessments of the content of that participation. The law accords to witnesses in civil and criminal litigation absolute immunity, rather than merely qualified immunity, precisely because such uncertainties as to the outcome of future litigation would be likely to chill “candid, objective, and undistorted” testimony. Briscoe v. LaHue, 460 U.S. 325, 330-34, 343 n. 29 (1983). Accordingly, this Board’s questions here must relate to the opposition clause, and not to protection for participation. Under the opposition clause, adjudicators must necessarily examine the content of the opposition to assess if it opposed an reasonably perceived violation. Here, this Board ask whether the “definitively and specifically” standard should apply. However, the Board can avoid that question by finding that Ms. Sylvester and Ms. Neuschafer engaged in participation by making their internal reports. As the SOX statute specifically requires companies to accept and investigate such internal reports, complainants were engaged in the protected statutory process. While the opposition clause protects activity that is aligned with the purpose of the law, the participation clause protects the process. As such, the content of that participation is immaterial.
B. Definitive and specific reference to an SEC violation is not necessary for protected activity that touches and concerns matters within the scope of SEC regulation.
Complaints to OSHA that touch on public safety and the environment are protected under the environmental whistleblower provisions. Scerbo v. Consolidated Edison of NY, 89-CAA-1, D&O of SOL, at 4-5 (Nov. 13, 1992); Williams v. TIW Fabrication & Machining, Inc., 88-SWD-3, D&O of SOL, at 8 (June 24, 1992). In Jayko v. Ohio EPA, 1999-CAA-5, RD&O, at 64 (October 2, 2000), ALJ Phalen explained the purposes of these protections in general terms that afford protection to lay people acting within those general concepts.
In Harp v. Charter, 558 F.3d 722, 728 (7th Cir. 2009), Judge Tinder, dissenting, identified “the dilemma facing an employee who thinks she may be able to stop a fraud from occurring.” He explains:
Employees who catch corporate misconduct in its formative stages are protected by the language and purpose of Sarbanes-Oxley (SOX). Yet, raising concerns before questionable practices are entirely resolved can be very awkward. An employee with a reasonable belief that she has detected corporate fraud as it is underway should not be discouraged from reporting it. Such a belief must be grounded in facts known to the employee, but the employer’s response to a disclosure of those facts may be suspicious enough to add support to a reasonable belief that fraud is afoot. The employee should not have to wait until the fraud has been accomplished to register a concern.
In Van Asdale v. Int’l Game Technology, 577 F.3d 989 (9th Cir. 2009), the Court stated, “An employee need not cite a code section he believes was violated . . ..” See also, Welch, 536 F.3d at 276. In Collins v. Beazer Homes, 334 F.Supp. 2d 1365. 1377 (N.D. Ga. 2004), the Court recognized that SOX protects all employees, not just those with specialized knowledge of accounting. While a complainant might not understand the nuances of corporate accounting and SEC law, those who receive and investigate the complaint should. The Collins Court further explained:
In short, if Congress had intended to limit the protection of Sarbanes-Oxley to accountants, or to have required complainants to specifically identify the code section that they believe was being violated, it could have done so. It did not.
C. Protected activity under the opposition clause requires both subjective belief and objectively reasonable circumstances to support the belief in a violation.
It is agreed that opposition-clause protected activity generally requires both a subjective and objective test. The Ninth Circuit explained this requirement in Van Asdale, 577 F.3d at 1000-01, as follows:
The plain language of this section, as well as the statute’s legislative history and case law interpreting it, suggest that to trigger the protections of the Act, an employee must also have (1) a subjective belief that the conduct being reported violated a listed law, and (2) this belief must be objectively reasonable. See Harp v. Charter Commc’ns, Inc., 558 F.3d 722, 723 (7th Cir. 2009); Day, 555 F.3d at 54; Welch, 536 F.3d at 275; Allen, 514 F.3d at 477 (“We agree that an employee’s reasonable belief must be scrutinized under both a subjective and objective standard.”); S. Rep. No. 107-146, at 19 (2002) (“[S]ubsection (a)(1) . . . is intended to impose the normal reasonable person standard used and interpreted in a wide variety of legal contexts.”).
See also, Welch v. Chao, 536 F.3d 269, 276 (4th Cir. 2008).
However, this is not always the case. For example, in cases were an employer retaliates on a mistaken belief of protected activity, the law will provide protection to the innocent victim of that retaliation. Willy v. Coastal Corp., 85-CAA-1, SOL D&O, pp. 13-14 (June 1, 1994). Accord, Assistant Secretary v. S&S Sand & Gravel, Inc., 92-STA-30, SOL D&O, p. 15 (Feb. 5, 1993); Fogleman v. Mercy Hospital, Inc., 283 F.3d 561, 571-72 (3d Cir. 2002); Brock v. Richardson, 812 F.2d 121, 123-25 (3d Cir. 1987); NLRB v. Burnup & Sims, 379 U.S. 21 (1964). The Van Asdale Court, 577 F.3d at 1001 explained that,
the Van Asdales only need show that they reasonably believed that there might have been fraud and were fired for even suggesting further inquiry. To encourage disclosure, Congress chose statutory language which ensures that “an employee’s reasonable but mistaken belief that an employer engaged in conduct that constitutes a violation of one of the six enumerated categories is protected.” Allen, 514 F.3d at 477.
There is no basis here for disputing the complainants’ testimony about their subjective beliefs, and they have put forward a reasonable basis for pursuing their concerns. The Van Asdale Court, 577 F.3d at 1002 stated:
The legislative history of Sarbanes-Oxley makes clear that its protections were “intended to include all good faith and reasonable reporting of fraud, and [that] there should be no presumption that reporting is otherwise, absent specific evidence.” 148 Cong. Rec. 57418-01, 57420 (daily ed. July 26, 2002) (statement of Sen. Leahy).
The subjective requirement does not require that the complainant’s purpose is to enforce the law. The employee may act for any purpose and be protected so long as the employee is acting with both a genuine belief of a possible violation and a reasonable basis for that belief. The law seeks to encourage all to come forward with potentially helpful information, and will not look past the belief and basis to question the motive. Even an unpleasant motive, such as to protect one’s job, the charge itself must be judged on whether it was made with a good faith belief in the violation. Johnson v. University of Cincinnati, 215 F.3d 561 (6th Cir. 2000).
It is not necessary that the complainant establish every element of a violation since the law protects activities that are founded on an objectively reasonable basis to pursue further investigation. The detection of fraud depends on employees raising reasonable suspicions, even if they have not put all the pieces together yet. Accordingly, employees are protected for raising a concern about an element of a fraud, even if they do not have evidence of the other elements. U.S. ex rel. Yesudian v. Howard University, 153 F.3d 731, 739-40 (D.C. Cir. 1998). SOX prohibits employers from terminating, or otherwise retaliating against, such employees when they report “potentially unlawful conduct” that has occurred or is in progress. Welch v. Chao, 536 F.3d 269, 275 (4th Cir. 2008); Stone v. Instrumentation Laboratory Co., 591 F.3d 239, (4th Cir. 2009). “Requiring an employee to essentially prove the existence of fraud before suggesting the need for an investigation would hardly be consistent with Congress’s goal of encouraging disclosure.” Van Asdale, 577 F.3d at 1002.
It is well established that the merits of the underlying complaints are not relevant to a determination of unlawful retaliation. Collins v. Beazer Homes, 334 F.Supp. 2d 1365. 1376 (N.D. Ga. 2004) (“[A] plaintiff is not required to show an actual violation of the law, but only that she reasonably believed’ that there was a violation of one of the enumerated laws or regulations.”). See also Day v. Staples, Inc., 555 F.3d 42, 55 (1st Cir. 2009) (“The employee is not required to show that there was an actual violation of the provision involved.”). An employee’s reasonable belief of a potential violation is sufficient to protect the employee from retaliation for reporting it. Reed v. A.W. Lawrence & Co., 95 F.3d 1170 (2d Cir. 1996); McDonnell v. Cisneros, 84 F.3d 256 (7th Cir. 1996); Taylor v. Runyon, 175 F.3d 861 (11th Cir. 1999) (Title VII cases); Oliver v. Hydro-Vac Services, Inc., 91-SWD-1, D&O of Remand by SOL, at 9 (November 1, 1995); Yellow Freight System, Inc. v. Martin, 954 F.2d 353, 357 (6th Cir. 1992) (STA whistleblower case); Minard v. Nerco Delamar Co., Case No. 92-SWD-1, Sec. Dec., Jan. 25, 1994, 17-24. Congress adopted this standard in its language for protection under SOX. 18 U.S.C. § 1514A(a)(1). The legislative history of Sarbanes-Oxley states that the reasonableness test “is intended to impose the normal reasonable person standard used and interpreted in a wide variety of legal contexts.” Legislative History of Title VIII of HR 2673: The Sarbanes-Oxley Act of 2002, Cong. Rec. S7418, S7420 (daily ed. July 26, 2002), available at 2002 WL 32054527 (citing Passaic Valley Sewerage Comm. v. U.S. Department of Labor, 992 F.2d 474 (3rd Cir. 1993)). “The threshold is intended to include all good faith and reasonable reporting of fraud, and there should be no presumption that reporting is otherwise, absent specific evidence.” Id.
In Allen v. Stewart Enters., No. 06-081, at 12 (ARB July 27, 2006), the ARB stated that a “reasonable belief” required a “high certainty” that that statute had been violated. This requirement is not in the statute or legislative history and is detrimental to the remedial purpose of the statute. Richard Moberly, “Unfulfilled Expectations: An Empirical Analysis of Why 5arbanes-Oxley Whistleblowers Rarely Win,” William & Mary Law Review, Vol. 49, Fall 2007, at p. 139-40. NWC urges this Board to reject the Allen standard and announce that an employee has a reasonable belief when the circumstances produce a “reasonable suspicion” of a violation such that further investigation is warranted. This standard will promote the remedial purpose of detecting fraud by encouraging employees to report all suspicious activity.
The participation clause can also apply here. Once participation in an internal or external enforcement process is shown, no further evidence is necessary to obtain protection.
D. Complainants need not establish that the concern they raised relates to fraud on shareholders.
While SOX clearly prohibits frauds on shareholders, it also establishes many other requirements, and employees are protected for raising any concerns about violations of the listed laws or SEC regulations. For example, SEC regulations require that listed companies maintain internal controls to assure that the financial reports are accurate. If a company is merely negligent in failing to establish or maintain its internal controls, that is still a violation of its legal duties under SEC regulations. There is no public purpose that is served by allowing company managers to punish employees who raise concerns about management’s neglect in failing to maintain required internal controls, even if no fraud is involved. Accord, Smith v. Corning, 496 F.Supp. 2d 244, 248 (W.D. NY 2007); see also Lynne Bernabei & Jason Zuckerman, “PROTECT THE WHISTLEBLOWER,” National Law Journal (June 19, 2006) (“Contravening the plain meaning of the statute, some judges have held that an employee who has raised a concern to management about a violation of an SEC rule has not engaged in protected conduct unless the issue implicates fraud against shareholders. . . . An employee who raises a concern about deficient internal controls should be protected from retaliation because these deficiencies can lead to false financial reporting. Under the narrow construction adopted by some judges, however, an employee who raises concerns about deficient internal controls would not be protected simply because the employee did not raise a concern about shareholder fraud.”)
In Klopfenstein v. PCC Flow Technologies Holdings, Inc., ARB Case No. 04-149, 2004-SOX-11 (May 31, 2006), the ARB addressed the scope of protected activity under SOX. At p. 17, the ARB explained:
SOX protection applies to the provision of information regarding not just fraud, but also “violation of … any rule or regulation of the Securities and Exchange Commission.” 18 U.S.C.A. § 1514A(a)(1). . . . A complainant need not express a concern in every possible way or at every possible time in order to receive protection, so long as the complainant’s actual communications “provide information, cause information to be provided, or otherwise assist in an investigation” regarding a covered violation. 18 U.S.C.A. § 1514A(a)(1).
Alleging fraud is not required for a SOX claim. Accord Smith v. Corning, 496 F.Supp. 2d 244, 248 (W.D. NY 2007); Deremer v. Gulfmark Offshore Inc., 2006-SOX-2 (ALJ June 29, 2007); Hughart v. Raymond James & Associates, Inc., 2004-SOX-9 (ALJ Dec. 17, 2004); Hendrix v. American Airlines, Inc., 2004-AIR-10, 2004-SOX-23 (ALJ Dec. 9, 2004). There is no requirement that protected activity include any “magic words” to invoke protection. See U.S. ex rel. Elms v. Accenture LLP, No. 07-1361, 2009 WL 2189795, at *4 (4th Cir. July 22, 2009) (finding plaintiff who alleged he “expressed his misgivings” and stated the company was “shortchanging the government” sufficiently pleaded that he took action in furtherance of a qui tam suit to survive a Rule 12(b)(6) dismissal). The ARB further explained in Klopfenstein:
It certainly is possible that Klopfenstein engaged in protected activity. The problems with PACO’s in-transit inventory suggested, at a minimum, incompetence in Flow’s internal controls that could affect the accuracy of its financial statements. See T. 716-717; RX 28. Klopfenstein’s communications thus related to a general subject that was not clearly outside the realm covered by the SOX, and it certainly is possible that Klopfenstein could have believed that the problems were a deficiency amounting to a “violation” — within the Collins zone of SOX protection.
In those cases where a complainant has raised a concern about fraud on the shareholders, it is not necessary for a complainant to establish all the elements of a fraud to be protected from retaliation for raising the concern. The law protects employees who are collecting information about possible fraud “before they have put all the pieces of the puzzle together.” See, e.g., U.S. ex rel. Yesudian v. Howard University, 153 F.3d 731, 739-40 (D.C. Cir. 1998) (drawing on the “filed or about to be filed” language of the False Claims Act).
E. Materiality is an element of some SEC violations, but complainants are not required to prove materiality for any concerns that are the basis of protected activity.
In Welch v. Chao, 536 F.3d 269, 276 (4th Cir. 2008), the Fourth Circuit discussed its prior holding in Livingston v. Wyeth, Inc., 520 F.3d 344, 355 (4th Cir. 2008) as follows:
[I]n Livingston, we merely noted that a statement or omission must concern a material fact to violate § 10(b) of the Securities Exchange Act and SEC Rule 10b-5. 520 F.3d at 355. Although many of the laws listed in § 1514A of the Sarbanes-Oxley Act contain materiality requirements, nothing in § 1514A (nor in Livingston) indicates that § 1514A contains an independent materiality requirement.
Many SEC violations do not have any threshold of materiality. For example, companies cannot put any false statements in the narrative portions of their 10-k or other public filings. There is no threshold of materiality on the truth. Viewed another way, if the company puts a claim in its Form 10-k, then it naturally expects that investors will rely on it. That is material. Even for those violations that do have materiality requirements, whistleblowers should be protected when they raise concerns about suspicious activity, even if they do not yet have a basis to know whether or not materiality might be required, or met, for any identified violation. The system of encouraging employees to come forward with information about suspicious activity would fail if employees could be fired for raising concerns before they had objective evidence of every element of the violation. Internal auditors or outside investigators may establish proof of a violation using information disclosed by disparate employees. Each employee may see only some of the pieces, yet an investigator must be able to assure each witness that they will be protected for sharing the pieces available to them. Therefore, no one employee’s whistleblower complaint should be dismissed solely because the employee did not have information establishing any one particular requirement of a violation, including materiality.
As complainant’s need not establish materiality, or an actual violation, the ALJ’s decision is clearly erroneous in requiring government enforcement action to establish jurisdiction. Government law enforcement agencies have discretion allowing them to pick and choose which cases they will pursue. Employers have no discretion and are always prohibited from retaliating against any employee’s protected activity.
In this case, Parexel’s own Form 10-K readily establishes the materiality of its good clinical practices (GCP). Page 6 of its 2006 filing states:
Clinical trials are monitored for CRS [Parexel’s Clinical Research Services business] and are conducted by CRS in strict adherence with, good clinical practice (“GCP”). ***
The information generated during these trials is critical to gaining marketing approval from the Food and Drug Administration (“FDA”), the European Agency for the Evaluation of Medicinal Products (“EMEA”), and other comparable regulatory agencies and market acceptance by clinicians and patients.
Page 12 states:
Lack of success in obtaining approval for the conduct of clinical trials can adversely affect PAREXEL. Lack of success in obtaining marketing approval or clearance for a product for which PAREXEL has provided clinical trial or other services can also adversely affect the Company. ***
Non−compliance with GCP can result in the disqualification of data collected during a clinical trial and in non−approval of a product application submitted to the FDA.
This is materiality. Good Clinical Practice is Parexel’s main product. Page 68 states:
The Company has adopted a code of business conduct and ethics applicable to all of its employees, including its principal executive officers and principal financial officer. The code of business conduct and ethics is available on the Company’s website (www.parexel.com) under the category “Investor Relations−Corporate Governance”.
This describes official channels. Parexel advertises to the investing public that it maintains accountability and transparency through its Code of Ethics. Its ethical practices are material to what it sells to investors.
This case presents the ARB with an opportunity to focus analysis of this and future cases on the remedial purpose of the statutes. On the merits here, this Board should find that Ms. Sylvester and Ms. Neucshafer are protected on account of their participation in the internal procedure respondent is required by law to maintain. In the alternative, this Board should hold that their concerns are protected because they aligned with, touch and concern the subject matter of SOX. In doing so, this Board can reject the mistaken “definitively and specifically” standard and restore the broad scope of protection that is consistent with SOX’s remedial purpose.
Respectfully submitted by:
Stephen M. Kohn, firstname.lastname@example.org
Richard R. Renner, email@example.com
Attorneys for National Whistleblowers Center
National Whistleblowers Legal Defense and Education Fund
3233 P St., N.W.
Washington, DC 20007
(202) 342-6984 (FAX)
CERTIFICATE OF SERVICE
I certify that a true copy of the foregoing Brief of Amicus Curiae National Whistleblowers Center was served by regular mail, unless email is indicated, on the following persons of the following address on this 31st day of December, 2010:
E. Patrick McDermott
2666 Ogleton Rd
Annapolis, MD 21403
BY EMAIL: firstname.lastname@example.org
Joseph Schuler and Matthew F. Nieman
Jackson and Lewis LLP
10701 Parkridge Blvd., Ste. 300
Reston, VA 20191
BY EMAIL: SchulerJ@jacksonlewis.com
David C. Weaver
Etheridge, Quinn, McAuliffe, Rowan and Hartinger
100 N Court St
Frederick, MD 21701
BY EMAIL: email@example.com
Attorney for Complainants Kathy J. Sylvester and Theresa Neuschafer
The Law Office of Brett Dieck, LLC
11035 Stratfield Court
Marriottsville, MD 21104
BY EMAIL: Briett.firstname.lastname@example.org
Administrative Review Board
200 Constitution Ave., NW, # S-5220
Washington, DC 20210
Directorate of Enforcement Programs
U.S. Department of Labor/OSHA
200 Constitution Avenue, NW
Room N-3603, FPB
Washington, DC 20210
U.S. Department of Labor/SOL
200 Constitution Avenue, NW
Room N-2716, FPB
Washington, DC 20210
Richard R. Renner
Attorney for Amicus
 Complainants’ counsel has invited NWC to submit this amicus brief.
 The ARB did cite to American Nuclear Res., Inc. v. United States Dep’t of Labor, 134 F.3d 1292, 1295 (6th Cir. 1998), and was apparently buttressing its decision to withstand review. Still, there is no indication that the ARB intended to modify the standard for finding protected activity.
 Parexel’s Code is available on its web page, under “Investors” and “Corporate Governance Documents” at:
 Congress amended the ERA in 1992 and clarified that the modes of engaging in protected activity include notifying one’s employer, refusing to engage in illegal activity, and testifying before Congress or in a governmental proceeding. None of these additions could be construed as constricting the protection for disclosures made through the media.
 29 U.S.C. § 158(a)(4) (1976) states: “It shall be an unfair labor practice for an employer . . . to discharge or otherwise discriminate against an employee because he has filed charges or given testimony under this subchapter.”
 The Chamber’s “sexual harassment aids” on “Interviewing Witnesses” were available in 2007 at http://www.uschamber.com/sb/business/tools/sxhrst_m.asp They are gone now.
 The ANR decision is now outdated in light of the Supreme Court’s thorough analysis of the scope of protection under the opposition clause in Crawford v. Metropolitan Government of Nashville and Davidson County, 555 U.S. ___, 129 S.Ct. 846 (2009).
 Parexel publishes its Forms 10-K on its web page for prospective investors at: http://investor.parexel.com/phoenix.zhtml?c=94569&p=irol-sec