Sylvester v. Parexel International

Kathy J. Sylvester and Theresa Neuschafer were both employees of Parexel International (“Parexel”), a biopharmaceutical services company. Sylvester and Neuschafer both filed separate complaints with the United States Department of Labor’s Occupational Safety and Health Administration (OSHA) to report unfair termination. Parexel attempted to justify the terminations on the grounds that Sylvester and Neuschafer had engaged in whistleblower activity. Sylvester and Neuschafer rejected this argument on the basis that their actions were protected under the Sarbanes-Oxley Act (“SOX”).

The question posed to the Administrative Review Board (“ARB”) was whether whistleblowers protection was to be issued under the “definitively and specifically” standard, or the standard of “reasonable belief”.

Former Executive Director and now Board Chair of the National Whistleblower Center (“NWC”) Stephen M. Kohn served as an amicus curiae on behalf of the NWC in support of Sylvester. The argument of the amicus brief hinged on Congress’s intended flexibility of the Sarbanes-Oxley Act. Designed to protect whistleblowers from corporate retaliation, the SOX was intended to be applied in broad circumstances so as not to exclude, and subsequently jeopardize, any whistleblowers. By setting the precedent of relying on the “definitively and specifically” standard of judgement, the number of scenarios in which the SOX could be applied would substantially decrease and as a result, the number of whistleblowers coming forward would experience a similar decline. This would be detrimental to the interests of the government because whistleblowers provide an unparalleled service by disclosing otherwise-inaccessible information. This information ultimately aids in the preservation and protection of the U.S economy.

On May 25, 2011, the Department of Labor’s Administrative Review Board (ARB) issued a major decision in favor of whistleblowers. The ARB held that a whistleblower only needs a “reasonable belief” of a violation to engage in protected activity under the 2002 Sarbanes-Oxley Act (SOX). The ARB makes clear that a whistleblower does not have to wait for a violation to actually happen, and need not inform management of the basis of that reasonable belief. Indeed, since SOX prohibits companies from violating rules of the Securities and Exchange Commission (SEC), a whistleblower can have a reasonable belief about a violation that has nothing to do with any fraud against shareholders. The ARB also rejects the idea that a SOX violation has to be “material” to form the basis of a whistleblower’s “reasonable belief.” The ARB has also freed whistleblowers of the unnecessary hurdle of “pleading” their claims under the high Iqbal standard.

The theme of “definitively and specifically” versus “reasonable belief” has been an idea visible in many popular whistleblower cases. This landslide ruling helped redefine the precedent surrounding the expectations of forthcoming whistleblowers and helps ensure that they receive the protection they deserve.

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