Source: https://www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=FEDERAL_REGISTER&p_id=18223
Timestamp: 2015-04-21 11:48:41
Document Index: 314800359

Matched Legal Cases: ['§ 1980', '§ 1980', '§ 1980', '§ 1980', '§ 1980', '§ 1980', '§ 1980', '§ 1980']

Procedures for the Handling of Discrimination Complaints Under Section 806 of the Corporate and Criminal Fraud Accountability Act of 2002, Title VIII of the Sarbanes-Oxley Act of 2002; Final Rule - 69:52103-52117
69:52103-52117
1978; 1979; 1980; 1981
Procedures for the Handling of Discrimination Complaints Under Section 806 of the Corporate and Criminal Fraud Accountability Act of 2002, Title VIII of the Sarbanes-Oxley Act of 2002; Final Rule
RIN 1218 AC10
SUMMARY: This document provides the final text of regulations governing the employee protection ("whistleblower") provisions of section 806 of the Corporate and Criminal Fraud Accountability Act of 2002, Title VIII of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley" or "Act"), enacted on July 30, 2002. The Act generally was designed to protect investors by ensuring corporate responsibility, enhancing public disclosure, and improving the quality and transparency of financial reporting and auditing. The whistleblower provisions were intended to protect employees who report fraudulent activity that can mislead innocent investors in publicly traded companies. This rule establishes procedures and time frames for the handling of discrimination complaints under Title VIII of Sarbanes-Oxley, including procedures and time frames for employee complaints to the Occupational Safety and Health Administration ("OSHA"), investigations by OSHA, appeals of OSHA determinations to an administrative law judge ("ALJ") for a hearing de novo, hearings by ALJs, review of ALJ decisions by the Administrative Review Board (acting on behalf of the Secretary) and judicial review of the Secretary's final decisions.
DATES: This final rule is effective on August 24, 2004.
FOR FURTHER INFORMATION CONTACT: Thomas Marple, Director, Office of Investigative Assistance, Occupational Safety and Health Administration, U.S. Department of Labor, Room N-3603, 200 Constitution Avenue, NW., Washington, DC 20210; telephone (202) 693-2199.
The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"), Public Law 107-204, was enacted on July 30, 2002. Title VIII of Sarbanes-Oxley is designated as the Corporate and Criminal Fraud Accountability Act of 2002. Section 806, codified at 18 U.S.C. 1514A, provides protection to employees against retaliation by companies with a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l) and companies required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 780(d)), or any officer, employee, contractor, subcontractor, or agent of such companies, because the employee provided information to the employer or a Federal agency or Congress relating to alleged violations of 18 U.S.C. 1341, 1343, 1344, or 1348, or any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders. In addition, employees are protected against discrimination when they have filed, testified in, participated in, or otherwise assisted in a proceeding filed or about to be filed relating to any such violation or alleged violation. These rules establish procedures for the handling of discrimination complaints under Title VIII of Sarbanes-Oxley.
The Sarbanes-Oxley whistleblower provisions provide that a covered employee may file, within 90 days of the alleged discrimination, a complaint with the Secretary of Labor ("the Secretary").(1) The statute requires the Secretary to notify the person named in the complaint and the employer of the filing of the complaint. The statute further provides that proceedings under Sarbanes-Oxley will be governed by the rules and procedures and burdens of proof of the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century ("AIR21"), 49 U.S.C. 42121(b). These rules and procedures are described below in Section III.
Sarbanes-Oxley authorizes an award to a prevailing employee of make-whole relief, including reinstatement with the same seniority status that the employee would have had but for the discrimination, back pay with interest, and compensation for any special damages sustained, including litigation costs, expert witness fees and reasonable attorney's fees. See 18 U.S.C. 1514A(c)(2). If the Secretary has not issued a final decision within 180 days of the filing of the complaint and there is no showing that there has been delay due to the bad faith of the claimant, the claimant may bring an action at law or equity for de novo review in the appropriate district court of the United States, which will have jurisdiction over such action without regard to the amount in controversy.
On May 28, 2003, the Occupational Safety and Health Administration published in the Federal Register an interim final rule promulgating rules that implemented section 806 of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"), Public Law No. 107-204, 68 FR 31860-31868. In addition to promulgating the interim final rule, OSHA's notice included a request for public comment on the interim rules by July 28, 2003.
In response, seven organizations and one individual filed comments with the agency within the public comment period. Comments were received from Siemens Aktiengesellschaft ("Siemens"); Plains All American Pipeline, LP ("Plains AAP"); the American Society of Safety Engineers ("ASSE"); the Society for Human Resource Management ("SHRM"); the Human Resource Policy Association ("HRPA"); the U.S. Chamber of Commerce ("the Chamber"); the Government Accountability Project ("GAP"); and Mr. Bill Bremer, Director, Risk Manager for TMP Resource Solutions. Three organizations -- Cleary, Gottlieb, Steen & Hamilton; DaimlerChrysler; and the Edison Electric Institute -- filed comments that were received outside the public comment period.
OSHA has reviewed and considered the timely comments. The following discussion addresses the comments and OSHA's responses in the order of the provisions of the rule.
SHRM and the Chamber both commented generally that Sarbanes-Oxley is different from other whistleblower laws administered by OSHA, because it involves complex matters of corporate securities laws and other financial and accountancy laws and practices. As a result, these organizations are concerned about OSHA's preparedness to undertake Sarbanes-Oxley investigations. OSHA believes that the whistleblower provisions of Sarbanes-Oxley are similar to the other 13 whistleblower statutes that it administers in that it protects employees from adverse personnel actions taken in retaliation for their having engaged in protected activity. OSHA consequently believes that its investigators have ample experience and are well able to investigate the type of employment-related disputes that typically arise under Sarbanes-Oxley.
Both SHRM and the Chamber further commented generally that the regulatory time frames are unrealistic. The Sarbanes-Oxley regulatory time frames are either mandated by the statute or are designed to effectuate Congress's desire for an expedited administrative complaint process. OSHA believes that the time frames reasonably balance the needs of both employees and employers for timely and fair resolution of whistleblower complaints.
SHRM expressed a general concern about the broad nature of activity protected under the whistleblower provision of Sarbanes-Oxley, indicating that it might generate complaints based on actions taken in the normal course of business. For example, SHRM suggested that an employee may mistakenly view an employer's decision to dispose of certain documents in the normal course of business to be a violation of section 802 of Sarbanes-Oxley, which makes it a felony for a person to destroy evidence with the intent to obstruct justice or to fail to preserve certain audit papers of companies that issue securities. Related to this comment is SHRM's concern that section 806 of Sarbanes-Oxley requires the employer to meet a higher burden of proof than other discrimination laws, in that it requires an employer to establish by clear and convincing evidence that it would have taken the unfavorable personnel action even absent the protected activity. These rules are procedural in nature and are not intended to provide interpretations of the Act. Under section 806, Congress chose to protect a broad range of disclosures about corporate practices that may adversely affect stockholders. Similarly, Congress chose to apply the "clear and convincing" burden of proof standard, which also applies under the whistleblower protection provisions of the Energy Reorganization Act ("ERA"), 42 U.S.C. 5851(b)(3)(D); AIR21, 49 U.S.C. 42121(b)(2)(B)(iv); and the Pipeline Safety Improvement Act of 2002 ("PSIA"), 49 U.S.C. 60129(b)(2)(B)(iv). OSHA also notes that SHRM's concern that innocent business behavior will become the subject of a Sarbanes-Oxley complaint is addressed by the statutory requirement that an employee "reasonably believe" that his or her disclosure is related to fraud or a violation of a Securities and Exchange Commission rule or regulation. See 18 U.S.C. 1514A(a)(1). The legislative history of section 806 indicates that Congress intended to apply to 18 U.S.C. 1514A(a)(1) the normal "reasonable person" standard used and interpreted in a wide variety of legal contexts. See 148 Cong. Rec. S7420 (daily ed. July 26, 2002) (statement of Senator Leahy). If the named person establishes that the disclosures at issue in a complaint involve activities that occur in the normal course of business, an employee's belief might not be reasonable under that standard.
The American Society of Safety Engineers commented generally that it has no specific concerns with the interim final regulations, but that it hopes that OSHA will monitor their effect in encouraging corporations to be more accountable and will be flexible and willing to make changes should the regulations prove to be inadequate. OSHA intends to monitor the effectiveness of these regulations and will make any regulatory changes in the future deemed necessary.
Mr. Bremer commented generally that the regulations should be used as an opportunity to bridge a gap between industry and OSHA. OSHA always is interested in reaching out to industry and employees to ensure effective enforcement of the laws that it administers.
GAP commented generally that several of the rules evince a bias against employees. In this regard, GAP commented that the whistleblower provisions of Sarbanes-Oxley are remedial in nature and should be broadly construed and that therefore the regulations should not operate to deny a complainant the ability to fully and fairly litigate his or her complaint. As described more fully below, OSHA believes that these regulations appropriately balance a complainant's right to fully and fairly litigate his or her complaint before the agency with both the due process rights of named persons and Congress's desire for an expedited administrative complaint process.
Section 1980.100 Purpose and Scope
This section describes the purpose of the regulations implementing Sarbanes-Oxley and provides an overview of the procedures covered by these new regulations. No comments were received on this section.
Section 1980.101 Definitions
In addition to the general definitions, the regulations define "company" and "company representative" to together include all entities and individuals covered by Sarbanes-Oxley. The definition of "named person" includes the employer as well as the company and company representative who the complainant alleges in the complaint to have violated the Act. Thus, the definition of "named person" will implement Sarbanes-Oxley's unique statutory provisions that identify individuals as well as the employer as potentially liable for discriminatory action. We anticipate, however, that in most cases the named person likely will be the employer.
Three comments were received regarding the definitions contained in § 1980.101. Siemens commented that the regulatory definition of "company" should exclude foreign issuers to the extent that it relates to foreign national employees who do not work in United States facilities of the foreign issuers. In support, Siemens noted that many foreign industrialized nations already have laws that protect whistleblowers, that United States labor laws already apply to Siemens's affiliated United States companies, and that labor law forms part of the national sovereignty of a foreign country. Similarly, HRPA commented that the rule should be revised so as not to apply to employees employed outside of the United States by United States corporations or their subsidiaries; nor should it apply to foreign corporations that have no United States employees. HRPA suggested that applying the rule in these situations would divert the Department's resources and therefore undermine its fundamental mission. The purpose of this rule is to provide procedures for the handling of Sarbanes-Oxley discrimination complaints; this rule is not intended to provide statutory interpretations. Because the regulatory definition of "company" simply applies the language used in the statute, OSHA does not believe any changes to the definition are necessary.
Plains AAP commented that the regulatory definitions of "employee" and "company representative" work together to broaden the statutory definition of protected employees. Specifically, Plains AAP commented that section 806(a) of the Sarbanes-Oxley Act is captioned "Whistleblower protection for employees of publicly traded companies," yet the definitions of "employee" and "company representative" in the regulations provide protection to employees of contractors and subcontractors of publicly traded companies. OSHA believes that the definitions in this section accurately reflect the statutory language. Notwithstanding its caption, section 806(a) expressly provides that no publicly traded company, "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. * * *" The statute thus protects the employees of publicly traded companies as well as the employees of contractors, subcontractors, and agents of those publicly traded companies. Accordingly, OSHA does not believe that its regulatory definitions broaden the class of employees that are protected under the plain language of Sarbanes-Oxley.
Section 1980.102 Obligations and Prohibited Acts
This section describes the whistleblower activity which is protected under the Act and the type of conduct which is prohibited in response to any protected activity. Complaints to an individual member of Congress are protected, even if such member is not conducting an ongoing Committee investigation within the jurisdiction of a particular Congressional committee, provided that the complaint relates to conduct that the employee reasonably believes to be a violation of one of the enumerated laws or regulations.
Although no comments were received with regard to this section's description of adverse action under Sarbanes-Oxley, OSHA has modified § 1980.102(b) to eliminate language deemed redundant with that in § 1980.102(a). In this regard, unlike other whistleblower statutes administered by OSHA, Sarbanes-Oxley specifically describes the types of adverse actions prohibited under the Act. Because this statutory description appears in § 1980.102(a), § 1980.102(b) no longer lists actions deemed actionable under the Act.
HRPA commented that this section should be clarified to ensure that the description of protected activity covers only disclosures of fraud that harm shareholders or that relate to securities law. HRPA expressed concern that under this section's description of protected activity, employees might be able to bring claims based on ordinary business and employment disputes that the statute was not intended to address. HRPA suggested, therefore, that this section provide that to be protected, a reported violation must affect as much as 3% of a company's revenue before it is considered an issue that would implicate the securities laws. Finally, HRPA also suggested that this section delineate between the protected activity covered by Sarbanes-Oxley and that covered under some of the more expansive state whistleblower protection statutes.
The description of protected activity in this section comes from the statute. As stated above, the purpose of these regulations is to provide procedural rules for the handling of whistleblower complaints and not to interpret the statute. Furthermore, determinations as to whether employee disclosures concerning alleged corporate fraud are protected under Sarbanes-Oxley will depend on the specific facts of each case. It is not appropriate therefore for these regulations to specify a percentage or formula for use in defining protected activity. With regard to HRPA's final comment on this section, because these rules are procedural in nature and the description of protected activity comes from the statute, a delineation between what is protected under Sarbanes-Oxley and what is protected under other laws not administered by OSHA is neither necessary nor appropriate.
Section 1980.103 Filing of Discrimination Complaint
This section explains the requirements for filing a discrimination complaint under Sarbanes-Oxley. To be timely, a complaint must be filed within 90 days of when the alleged violation occurs. Under Delaware State College v. Ricks, 449 U.S. 250, 258 (1980), this is considered to be when the discriminatory decision has been both made and communicated to the complainant. In other words, the limitations period commences once the employee is aware or reasonably should be aware of the employer's decision. See Equal Employment Opportunity Commission v. United Parcel Service, 249 F.3d 557, 561-62 (6th Cir. 2001). Complaints filed under the Act must be made in writing, but do not need to be made in any particular form. With the consent of the employee, complaints may be made by any person on the employee's behalf.
Both SHRM and HRPA commented that this section should require complaints to allege wrongdoing under Sarbanes-Oxley with greater specificity. To ensure that an employee's belief that a reported violation is reasonable, HRPA also suggested that this section require that complaints contain detailed analyses of the securities laws at issue and of how they were violated, and added that OSHA should not conduct investigations if the employer demonstrates by clear and convincing evidence that the employee's belief was not reasonable. It is OSHA's view that these concerns are adequately dealt with in § 1980.104 herein, the section covering investigations. As set forth at § 1980.104(b)(2), and as directed by statute, OSHA will not investigate where a complainant has failed to make a prima facie showing that the protected behavior was a contributing factor in the unfavorable personnel action alleged. To make a prima facie showing, the complainant must allege that he or she engaged in protected activity. See § 1980.104(b)(1)(i). Activity under Sarbanes-Oxley is only protected if the employee provides information that he or she "reasonably believes" constitutes a violation of 18 U.S.C. 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. OSHA believes that it would be overly restrictive to require a complaint to include detailed analyses when the purpose of the complaint is to trigger an investigation to determine whether evidence of discrimination exists. To the extent that SHRM and HRPA are suggesting that a complaint on its face must make a prima facie showing to avoid dismissal, OSHA has consistently believed that supplementation of the complaint by interviews wit