Third Circuit decision may expand whistleblower protection

A recent precedential decision by the U.S. Court of Appeals for the Third Circuit has helped expand whistleblower protection under the Sarbanes-Oxley Act (SOX). In the case of Wiest v. Lynch, the Court redefined the standard for a valid SOX complaint to require that the employee has an "objectively reasonable" and good-faith belief that his employer has violated a SOX provision. This removes the previous barrier that was in place which required an employee to know of a definitive and specific violation of a statute prior to making an SOX claim.

The plaintiff in this case, Jeffrey Wiest, brought his claim after working for Tyco Electronics for over 30 years as an accountant. As part of his duties, he was in charge of approving funds for different company functions and events. Often times these events were extravagant, cost thousands of dollars, were held in tropical locations, and did not include any aspects that were actually related to the company's business. One company function even had performers dressed as mermaids and pirates to entertain guests. Mr. Wiest routinely questioned these expenses and brought up relevant taxation issues, but he was always told by his supervisor to find a way to continue processing the funds.

Mr. Wiest claims that Tyco eventually grew tired of his attempts to follow proper accounting protocol and launched a campaign of retaliation and harassment against him. Wiest was forced to take medical leave shortly later, and Tyco subsequently terminated his employment. Mr. Wiest brought an action claiming that he was terminated due to his objections to Tyco's questionable accounting practices. Although the district court sided with Tyco and originally threw out Wiest's claim, the Third Circuit reversed and allowed Wiest's claim to continue based on its new "objectively reasonable" standard for SOX complaints.

The new standard put in place by this decision poses only a small burden on whistleblowing employees, making it easier for them to be more comfortable when raising SOX concerns. Going forward, it is now more likely that an employee who simply has a good faith belief that his employer is performing an illegal activity will receive whistleblower protection from the legal system.

For more information, you may contact one any of our skilled whistleblower protection attorneys.

Source: http://www.ca3.uscourts.gov/opinarch/114257p.pdf