Of major significance to the employer-employee relationship, the Act requires the newly mandated audit committees of corporate boards of directors to establish procedures for the anonymous, confidential submission of employee concerns relating to improper corporate financial, accounting, or auditing practices and creates new civil and criminal liabilities relating to informants. In addition to requiring internal complaint procedures, Section 806 of the Act created a new federal civil claim under the title "Whistleblower Protection for Employees of Publicly Traded Companies." The nature of the claim is broader and imposes fewer burdens on a claimant than other federal whistleblower laws; thus, employers should expect to encounter more claims and litigation arising from the Act.
Recent rulings by the U.S. Department of Labor include:
Getman v. Southwest Securities Inc, No. 2003- SOX-00008, DOL ALJ
Welch v. Cardinal Bankshares Corp., 2003-SOX-15, DOL ALJ
Morefield v. Exelon Servs. Inc., DOL ALJ, No. 2004-SOX-2
In addition to complying with all of Sarbanes-Oxley’s requirements regarding financial reporting controls and corporate governance, prudent employers—whether public or private—must be proactive in implementing policies and procedures to navigate the post-Sarbanes-Oxley landscape. We recommend that employers first conduct a top-to-bottom review of existing policies and practices, ideally in a manner that will maintain all available legal privileges and protections. A review of insurance coverage, including but not limited to Directors’ and Officers’ liability coverage, must be a part of that review. Following that review and follow-up, employers should be in a position to show, at a minimum:
* A code of conduct that spells out specifically the duties of all employees;
* A code of ethics for senior financial officers;
* Establishment and a clear publication of a hotline and other avenues for confidential, anonymous complaints;
* Personnel policies and procedures that comply with the law’s requirements on handling of complaints, document handling and retention, and non-retaliation;
* A clear designation and publication of those persons within the company who have the authority to investigate, discover, or terminate financial misconduct;
* Personnel policies clearly addressing inappropriate conduct, e.g., prohibited conduct regarding media contact, removal of documents, destruction of documents, refusing to participate in investigations;
* Benefit plans and practices that comply with all requirements and prohibitions;
* Procurement practices and procedures to ensure proper screening of human resources consultants and auditors;
* Hiring practices and procedures to ensure proper screening of executives; and
* Comprehensive and documented training programs for all employees that implement the requirements of Sarbanes-Oxley.