On September 13, 2011, the Administrative Review Board (Board) of the US Department of Labor (DOL) issued an opinion reversing the Administrative Law Judge dismissal of an employee's retaliation claims against his former employer, Halliburton. The key issue in Menendez v. Halliburton, Inc. was whether the employee, Menendez, was subjected to an adverse action under Section 806 of the Sarbanes-Oxley Act (SOX) when Halliburton released his identity as someone who filed an SEC complaint against the company.

Halliburton hired Menendez in 2005 to support the company's finance and accounting operations. Shortly after beginning work, Menendez began raising concerns with his superiors about Halliburton's accounting practices. Dissatisfied with Halliburton's response, Menendez filed a complaint with the SEC alleging the company engaged in questionable accounting practices. Menendez also sent an e-mail to Halliburton's audit committee about the same concerns and implicating his direct superior. The e-mail contained Menendez' name and contact information.

Although Menendez believed this information would remain confidential under SOX and company policies for whistleblower submissions, an e-mail from Halliburton's general counsel disclosed his identity to company management as the author of the SEC complaint. That e-mail was then forwarded to 15 members of the Halliburton's finance and accounting group.

Menendez left the company on paid administrative leave soon afterwards. Two months later, Menendez filed a SOX whistleblower complaint with the DOL, alleging that Halliburton had retaliated against him for filing complaints with the SEC and the company's audit committee. This complaint was dismissed.

After resigning his position, Menendez obtained a hearing before a DOL Administrative Law Judge (ALJ) at which he alleged retaliation in violation of Section 806 of SOX and sought damages, reinstatement and attorneys' fees. The ALJ dismissed the complaint, finding that while Menendez was engaged in protected activity under SOX when he filed complaints with the SEC and Halliburton's audit committee, he did not suffer a retaliatory adverse employment action.

Among other findings, the ALJ held that Halliburton's breach of confidentiality did not qualify as an actionable adverse action under SOX. The ALJ also rejected Menendez' argument that Halliburton took other adverse actions by isolating him, removing his duties, demoting him or constructively discharging him.

Menendez appealed the decision to the Board. Halliburton filed a cross appeal.

On September 13, 2011, the Board concluded that the ALJ applied an overly strict standard when it required Menendez to show that he suffered tangible job consequences as a result of Halliburton's breach of confidentiality. Instead, the Board held that the plain language of SOX Section 806, the legislative history of the statute and the SOX provisions requiring employers to set up procedures for confidential submission of concerns about accounting matters indicate an intent to prohibit a much broader range of adverse actions against whistleblowers.

Relying on the Board's decision in Williams v. American Airlines, which interpreted a similarly-worded statute, the Board concluded that:

Under this standard, and in light of the chain of events that followed Halliburton's disclosure of Menendez' identity, the Board concluded that the company's breach of confidentiality constituted an adverse action.

The Board also disintinguished Burlington N. & Santa Fe Railway Co. v. White, a case relied on by Halliburton, by noting that the stricter standard for an adverse action applied by the Supreme Court in that case was derived from the different and narrower statutory language of Title VII of the Civil Rights Act of 1964.

Ultimately, the Board:

The Board's decision makes clear than an employee need not suffer tangible employment consequences to sustain a retaliation claim brought under the whistleblower provisions of SOX. The adverse action standard adopted by the Board deprives employers of one possible defense to whistleblower retaliation actions.

To learn more about whistleblower protections under SOX and the Dodd-Frank Act, see Practice Note, Whistleblower Protections under Sarbanes-Oxley and the Dodd-Frank Act.

For general information on retaliation claims, see Practice Note, Retaliation.

For information on OSHA's Whistleblower Investigations Manual, see OSHA Issues Updated Whistleblower Investigations Manual.