Ninth Circuit: SOX Whistleblower Protection Doesn't Cover Employee Disclosures To The Media
Time 4 Minute Read

On May 3, the Ninth Circuit ruled in Tides v. Boeing Co., No. 10-35238, that the whistleblower provisions of the Sarbanes-Oxley Act (“SOX”) do not protect employees who disclose information to the media. Although SOX bars public companies from retaliating against employees who report conduct that they reasonably believe constitutes certain types of fraud or securities violations to Congress, federal regulatory or law enforcement agencies, or a person with supervisory authority over the employee, the Ninth Circuit held that this protection does not extend to employee disclosures to the media. Federal appeals courts have previously ruled on press disclosures under other whistleblower statutes, but the Ninth Circuit’s ruling is the first to analyze such disclosures under SOX.

The plaintiffs, who worked as auditors in Boeing’s Information Technology SOX Audit group, complained to management about what they saw as auditing deficiencies and pressure from management to rate Boeing’s internal controls favorably, and they eventually spoke with a reporter from a Seattle newspaper, who later ran an investigative report. Even before the article was published, Boeing suspected that employees were releasing company information to the media, and as a result, authorized an investigation that included monitoring the plaintiffs’ work computers and email accounts. The investigation revealed that the plaintiffs were communicating with a reporter without permission. 

Boeing has corporate policies, of which the plaintiffs were aware, that require employees to refer inquiries of any kind to Boeing’s communications department and that prohibit employees from releasing company information without prior review and authorization by that department. Two months after the publication of the article, the plaintiffs were interviewed separately by HR investigators, and they both admitted to speaking with the reporter about Boeing’s auditing practices and to providing her with company documents. After the interviews, Boeing suspended the plaintiffs indefinitely. Their cases were then referred to an Employee Corrective Action Board, a committee comprised of five voting members and one non-voting ethics advisor. After reviewing the applicable Boeing policies and the investigative reports, the Board unanimously voted to terminate the plaintiffs for violating company policies.

Following their terminations, the plaintiffs filed SOX whistleblower complaints with OSHA, and later filed suit. On February 9, 2010, the U.S. District Court for the Western District of Washington granted Boeing’s motion for summary judgment.  In affirming, the Ninth Circuit explained that one of the required elements for establishing a prima facie case of retaliation under SOX is for the plaintiff to show that he or she engaged in protected activity or conduct, and that because the SOX whistleblower provision, codified at 18 U.S.C. § 1514A(a)(1), specifically enumerates three categories of recipients, none of which are the news media, the plaintiffs’ disclosures to the reporter did not qualify as protected activity. Thus, there was no triable issue of fact as to whether Boeing’s reason for terminating the plaintiffs was pretextual.

The court reasoned that if Congress had intended to protect employee reports to the media, it could have added the media as one of the entities to which protected reports may be made or it could have, like the Whistleblower Protection Act that covers federal employees, protected “any disclosure” of specified information without limiting the recipients of such information. The court also observed that the legislative history reinforced its conclusion, finding that Congress intended to protect disclosures only to individuals and entities with the capacity or authority to act effectively on the information provided. The court rejected the employees’ argument that reports to the media may eventually cause information to be provided to members of Congress or federal regulatory or law enforcement agencies. The plaintiffs plan to seek a rehearing en banc.

The Ninth Circuit’s holding reinforces the right of employers to prevent their information from being disclosed to non-governmental entities. In the event that employers do not yet have in place policies that control employees’ communications with the press, they may want to consider implementing such policies. And as before, employers should take care to have in place comprehensive policies that convey that the company has a right to access its technology systems and that employees do not have a right of privacy in those systems.


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