by Jackson Lewis

A Federal Court has ordered the reinstatement of two former employees under the Sarbanes-Oxley Act (SOX), demonstrating the broad remedial powers that the Act has granted to the Occupational Safety and Health Administration. Bechtel v. Competitive Technologies, Inc., (Dist. Conn., May 13, 2005).

Two former vice presidents of the defendant company filed a whistleblower complaint under the SOX Act with the Department of Labor, alleging the company terminated their employment due to concerns they raised with the company's CEO regarding disclosures to the Securities and Exchange Commission and company shareholders. In keeping with SOX procedure, OSHA conducted the investigation and issued a preliminary order finding that the company had violated the Act. The preliminary order required that the individuals be reinstated to their previous positions with the same salaries and all other benefits the individuals held prior to termination. Although the company filed timely objections to the order under SOX regulations, the reinstatement order went into effect.

Despite the ALJ's decision, the company refused to reinstate the individuals, triggering their lawsuit in federal court. In ordering reinstatement, the court found the plain language of the SOX Act mandates that the DOL, through OSHA, and not the District Court, make the determination whether an order of reinstatement is appropriate. The United States Supreme Court had upheld the DOL's ability to order reinstatement based on an investigation under other whistleblower statutes enforced by the DOL, and the court concluded the individuals were entitled to an injunction enforcing the DOL's preliminary order of reinstatement.

The ALJ decision and the decision of the District Court underscore the broad powers granted to OSHA under the SOX Act. Based solely upon an investigation conducted by OSHA (i.e. interviews of witnesses identified by the employee) in response to the filing of a whistleblower complaint, it is possible an employer will be required to reinstate a discharged employee. Employers need to be aware of the remedies available to aggrieved individuals under the SOX Act and of the real possibility of a court order to reinstate a terminated employee under the Act.

Note:

Nearly five months after the reinstatement and a full hearing on the matter, the ALJ concluded that the vice president had not shown a violation of the SOX whistleblower protections. Accordingly, the ALJ dismissed the complaint and effectively reversed the OSHA preliminary order, which had served as the basis for the court ordered reinstatement. See Bechtel v. Competitive Technologies, Inc., 2005-SOX-00033 (Oct. 5, 2005). According to the Office of Administrative Law, the vice president has filed a petition for review of the ALJ's decision. The SOX Act and the regulations do not provide guidance to employers regarding a situation in which the decision by OSHA to preliminarily reinstate a complainant is later reversed as part of the appellate review process. As this case illustrates, even though the ALJ ultimately determined there was no violation of the Act, the district court had ordered the employee's preliminary reinstatement.