Fourth Circuit leaves SOX whistleblower out in the cold
The Fourth Circuit U.S. Court of Appeals has affirmed an administrative appeal decision that leaves corporate whistleblower Stacy Platone out in the cold. The December 3, 2008, opinion affirms a decision of the U.S. Department of Labor's Administrative Review Board that took away Platone's order from an Administrative Law Judge. The Court held that under the Sarbanes-Oxley (SOX) employee protection, whistleblowers have to be specific about their allegations of fraud to be protected from retaliation.
In 2002, Atlantic Coast Airlines (ACA) lured Stacy Platone away from her career position with the Airline Pilots Association (ALPA) to become a labor relations manager. Platone soon noticed that the company was not billing the union for flight-loss time. Flight-loss time arises when pilots miss flying time to attend meetings on behalf of the union. Platone discovered that the company continued to pay the pilots, even though they did not fly. She raised the issue to her superior in the company and was promptly fired.
Platone filed a whistleblower complaint with the U.S. Department of Labor. The company claimed it was not aware of Platone's concern, but the notes of an assistant to the director confirmed that Platone had raised the flight-loss issue in a meeting shortly before she was fired. An administrative law judge (ALJ) issued a decision finding that Platone had a reasonable basis to believe that company officials were involved in a fraud. The ALJ also found that the company's director was not credible, and that he clearly knew about Platone's concern when he fired her. In 2004, the ALJ ordered ACA to pay backpay and attorney fees.
ACA appealed to the Department of Labor's Administrative Review Board (ARB). Meanwhile, ACA changed its name to Flyi, Inc., and then went out of business. In 2006, the ARB reversed the ALJ and held that Platone had not been specific enough in raising her concern about fraud. The ARB held that when Platone raised the flight-loss issue, she had not specifically informed her boss that the company had created to acquiesced in a scheme to provide improper payments to the union officers. The ARB required whistleblowers to be specific in raising their concerns about fraud.
Even though the company was out of business, Platone and her lawyers did a favor for whistleblowers by asking the federal Fourth Circuit to overturn the ARB decision. Sadly, though, the Fourth Circuit approved the ARB decision. The court defered to the ARB's conclusion the Platone had only alerted management to a billing issue, and had not "specifically and definitively" implicated any fraud when she reported the issue.
The "definite and specific" standard for SOX whistleblowing is not in the SOX law. It is a creation of the ARB. The ARB used the same rule to overturn another ALJ decision in the very first SOX case. The Fourth Circuit also affirmed that ARB decision. See Welch v. Chao, 536 F.3d 269, 275-76 (4th Cir. 2008). This special SOX rule is a departure from prior ARB decisions in environmental cases that only required employee concerns to touch on and relate to the issues protected by law. Does the ARB really mean to encourage law-breakers to fire workers at the first sign of conscience and backbone, before that worker can put all the pieces together to make a specific report of a violation? Apparently yes.
The outcome in the Platone case exemplifies the way that the current ARB has undercut what Congress made clear in passing SOX and other whistleblower protections. Hopefully, President-elect Obama will move quickly to appoint new members to the ARB, and to the federal circuits courts of appeals, to protect working people and restore a sense of the law's true purpose.
Between this and the False Claims Act, it appears that both federal and private employees should be protected against retaliations for blowing the whistle on contractors. But where is there any regulation or guidance for contractors to blow the whistle on the Government for violations of laws, rules, regulations, abuse of authority, fraud, or gross mismanagement? It seems to me we need to expand this regulation, or create an alternative reg, that provides contractor/contract employees an avenue, and makes it mandatory, to likewise blow the whistle on the Government.
The definite and specific standard is NOT a "creation of the ARB" -- it was a the Sixth Circuit's reasoned interpretation of a whistleblower law.