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Federal Protections for Employee Whistleblowers

Whistleblowers may come forward with information to report against an employer or third party for moral reasons or for the money, i.e., a bounty for filing a “tip” with the SEC (which can be anonymous) – so long as the employee did not engage in the misconduct being reported. There are protections under federal law in place in case they suffer adverse employment action as a result of their reporting. Depending on which statute the employee chooses to sue under or qualifies for, their rights, remedies and potential costs vary. Below are two of the legal protections presently available to whistleblowers in the securities industry.

A. DODD-FRANK

The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010 under the Obama administration, was created in order to effectively acknowledge the 2008 recession and subsequently ensure regulation of the financial service industry. This type of sweeping adjustments to financial regulatory agencies is the first of its kind post the Great Depression. Amalgamating regulatory agencies, assessing wide-ranging risks to financial markets, guaranteeing investor protection, and increasing the standard within our capital markets are just a few of the passed proposals within this bill. The whistleblower provision of this bill is critical to catch illicit behavior early. The Dodd-Frank Act facilities this process and subsequently protects employees that come forward with fraud.

Whistleblowers are protected by Dodd-Frank from adverse employment action for providing information to the Commission that is covered by Dodd-Frank or by SOX. SOX( See 15 U.S.C. § 78u-6(h)(1)(A) refers to the Sarbanes Oxley Act which safeguards and defends individuals from corporate disclosures and other deceitful practices in the financial sector. Employees may bring their actions directly to Federal District Court. Id. at (h)(1)(B)(i). Such an action may be brought within 6 years of the violation of the three years after the discovery of “facts material to the right of action are known or reasonably should have been known by the employee.” Id. at (h)(1)(B)(iii).

An employee who suffers adverse employment action may be entitled to reinstatement, double back pay with interest, and their costs, expert fees, and reasonable attorneys’ fees. Id. at (h)(1)(C). No provision is made for the employer’s attorneys’ fees in case an action is dismissed. These Dodd-Frank provisions do not supersede any other rights held by the employee pursuant to Federal or State law, or by collective bargaining agreement.Id. at (h)(3).

B. SOX

The Sarbanes Oxley Act(SOX) is a federal law enacted in 2002 as a response to various accounting misconduct. The legislation provides extensive guidelines for how public corporations ought to follow legal protocol. Section 806 of SOX, 18 U.S.C. 1515A provides whistleblower protection to employees who report up or out regarding accounting violations. § 1514A speaks to any lawsuits that can be pursued to protect against retaliation in cases of such fraud. That section is limited to companies with publicly registered securities or who are required to file pursuant to Section 15(d) of the Securities Exchange Act of 1934 or are “nationally recognized statistical rating organizations.” See § 1514A(a). These companies cannot cause adverse employment action upon an employee who acts lawfully to provide information about which the employee “reasonably believes” constitutes a violation of sections 1341, 1343, 1344, or 1348 (18 USCS § 1341, 1343, 1344, or 1348), the SEC rules or regulations or any provision of federal law relating to fraud against shareholders. See § 1514A(a)(1).

An employee who believes they have suffered adverse employment action in violation of SOX’s whistleblower protection must first file with the Secretary of Labor within 180 days after the adverse employment action. See§ 1514A(b)(1)(A), (2)(D). The Secretary of Labor has 180 days to issue a decision. Id. See at § 1514A(b)(1)(B). If no decision is forthcoming within that time, the employee may file the complaint in Federal District Court. Id

Various whistleblowers as such have been represented and protected to the extent legally possible through the depth of experience at Malecki Law. Our law firm has been able to obtain millions of dollars for our clients through the original Sarbanes Oxley statute and the current Dodd-Frank Act. Malecki Law continues to represent, serve, and protect clients willing to encourage transparency in public corporations and the financial sector.

Under SOX, the employee may recover “make whole” relief, including compensatory damages, reinstatement, back pay with interest and compensation for costs, expert fees, and reasonable attorneys’ fees. Id. at (c). No provision is made for the employer’s attorneys’ fees in case an action is dismissed. Importantly, SOX’s whistleblower protections do not supersede any other statutory rights or collective bargaining agreement held by the employee. Id. at § 1514A(d).

If you have something to report, Malecki Law stands ready, willing, and able to successfully help you through the process.

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Client Reviews
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Jenice Malecki is a highly successful securities law attorney. She is a brilliant strategist. She is a well respected litigator who knows how to win in court. As a former CEO and President of a public company traded on the NASDAQ (and currently a College President), I can attest, as a client, that Jenice Malecki's understanding of the law along with her business acumen and intellectual gravitas resulted in a 100% victory in my case before the Supreme Court of New York State. Jenice is a passionate and determined lawyer -- I want her in my corner -- anytime!​ Dr. John J. McGrath
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I worked with Jenice and her team to successfully resolve a brokerage / securities related issue for an elder relative and was quite pleased with how they walked us through the process and took into account the challenges that age sometimes unfortunately present. They were all professional - and effective. I would use them again without question if the need arose. Bart
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