When employers receive notice of a complaint filed against them with a federal or state regulatory agency, their first question is often "Who complained?" While it may be tempting for management to learn who brought the government into the picture, this curiosity can lead to significant retaliation claims. Last month, the Department of Labor's Administrative Review Board concluded that a company's General Counsel who sent an email to its management identifying the complaining employee, engaged in an adverse employment action under the Sarbanes-Oxley Act (SOX).

In Menendez v. Halliburton, the plaintiff was an in-house accountant who raised internal questions with regard to Halliburton's financial statements. These concerns were investigated, but ultimately rejected by the company. He then filed a complaint with the Securities and Exchange Commission, making the same allegations he had previously raised internally.

In response to the SEC complaint, Halliburton's General Counsel sent a document retention memorandum to several company executives. In the memo, the General Counsel identified the plaintiff as the presumed source of the complaint. Melendez alleged that as a result of this disclosure, he was subsequently "shunned" by his managers and co-workers. He eventually quit, and filed a retaliation complaint under SOX, alleging that the disclosure of his identity resulted in his constructive discharge from employment.

Halliburton contended that the plaintiff had not been constructively discharged or retaliated against, because the company never took any adverse employment action against him. The Administrative Review Board disagreed, reversing an earlier dismissal of the retaliation claim. In its decision, the Board noted that adverse employment action includes non-tangible effects on an employee's work. In this case, the General Counsel's breach of the plaintiff's confidentiality violated Section 301 of SOX, and constituted violation of an implied terms and condition of the plaintiff's employment.

The Board concluded that this breach of confidentiality directly led to the reluctance of Melendez's co-workers to associate with him. While these reactions may not have been adverse employment actions in and of themselves, the initial disclosure of his identity was enough to carry the plaintiff's burden of proof under SOX.

When faced with a government investigation, companies should avoid the temptation to ferret out the source of the complaint. For purposes of responding to the government agency, the identity of the complaining party is usually irrelevant. In this case, the SEC ultimately dismissed Melendez's underlying complaint. However, the General Counsel's identification of him as the complaining party resulted in an expensive retaliation determination.