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Fourth Circuit Says Lower Profit Warning Not Whistleblowing under SOX

    Client Alerts
  • December 19, 2008

Under the Sarbanes-Oxley Act (SOX), publicly-traded companies are prohibited from retaliating against employees who complain about financial or securities improprieties.  A new Fourth Circuit Court of Appeals decision continues a line of cases discussing what is and what is not a protected complaint under SOX.


In Platone v. Department of Labor, the plaintiff worked for an airline.  She discovered what she believed was collusion between the airline and its pilots union to unfairly compensate pilots attending union meetings on days when they were not scheduled to fly.  After being terminated, the employee complained that she was terminated in retaliation for raising this financial issue, in violation of SOX.


The airline appealed the initial SOX decision, contending that the plaintiff’s complaints were not protected because they did not represent conduct that was materially adverse to investors’ interests.  The Fourth Circuit agreed with this reasoning, dismissing the complaint.  The court concluded that none of the plaintiff’s complaints fell within the fraud or securities violations set forth under SOX.  The plaintiff’s complaints were made to the employer as if they constituted a billing dispute between the union and the airline.  A billing discrepancy does not rise to the level of wire or mail fraud required to articulate a SOX violation.


When faced with allegations or illegal retaliation under SOX, employers should carefully scrutinize the alleged behavior to determine if it falls within the statute’s protections.