Labor Panel Defines Global Scope of Whistleblower Law, Reviving Contractor’s Claims

A federal labor appeals panel has restored a whistleblower’s claims versus the defense specialist Exelis Systems Corp., ruling that the staff member can declare retaliation even though he raised issues about illegal conduct outside the United States and was fired while overseas.

In an Aug. 29 choice, the three-judge panel of the United States Department of Labor’s Administrative Review Board ruled that federal whistleblower defenses under the Sarbanes-Oxley Act can encompass staff members operating in foreign nations who suffer retaliation after reporting prospective offenses of U.S. law.

The judgment reversed an administrative law judge’s termination of the case on the premise that the whistleblower, Gary Blanchard, was operating at an American military base in Afghanistan when he implicated his manager of attempting to cover a security breach and filing incorrect time sheets. Private investigators with the Labor Department’s Occupational Safety and Health Administration had formerly also concluded that federal whistleblower securities do not cover unfavorable actions, such as shootings and other kinds of retaliation, that happen outside the United States.

Blanchard’s lawyer, Hessam Parzivand, stated the Administrative Review Board’s choice sets “substantial precedent on the extraterritorial application” of the Sarbanes-Oxley Act’s whistleblower defenses.

” Without this precedent, the statutory plan didn’t make sense. A U.S.-based worker might report scams on U.S. financiers to the tune of 100 million dollars and have retaliation security whereas a worker in China would have no job security under [Sarbanes-Oxley] for securing U.S. financiers in the very same way,” Parzivand stated in an e-mail to The National Law Journal on Wednesday. “I question Congress planned to leave such an open hole in the business scams security plan for the openly traded business, specifically because most of the openly traded business have international operations.”.

A lawyer for Exelis, Amy Bess of Vedder Price, was not instantly grabbed remark Wednesday.

The appeals panel did not rule on whether Blanchard’s activity is safeguarded by whistleblower laws or whether his conduct added to his termination. The judges remanded the case to an administrative law judge for additional evaluation.

The Administrative Review Board and federal courts have grappled over the last few years with whether and in what scenarios federal whistleblower defenses use extraterritorially– a question rooted in the law’s silence on that issue. In 2011, the Administrative Review Board dismissed a whistleblower’s claims of illegal retaliation based, in part, on that he was operating in Colombia and was fired after reporting a prospective infraction of that nation’s tax law.

In the choice restoring the Exelis whistleblower’s claims, the Administrative Review Board stated the December 2011 choice “included a Colombian resident’s accusations that his Colombian company’s Dutch parent company had participated in Colombian tax scams.” That choice, Villanueva v. Core Laboratories, exposed the possibility that federal whistleblower securities might extend extraterritorially in “a case where the plaintiff, for instance, is working for a covered company in the United States but might have operated in a foreign workplace of the company for part of the time.”.

A group from Littler Mendelson, composing in 2012 on the Villanueva case, stated: “The problem in future cases will be identifying the level to which the important claims at issue trigger extraterritorial application of SOX.”.

In Blanchard’s case, the reports of misbehavior were “based exclusively on offenses of U.S. law,” composed Administrative Appeals, Judge Joanne Royce.

” Blanchard’s secured activity accusations included infractions of domestic law covered under [Sarbanes-Oxley] Extraterritorial reach of the statute is not needed to cover Blanchard’s secured activity despite the ALJ’s assertions that the supposed unlawful activity happened in Afghanistan, was found in Afghanistan and efforts to deal with the illegality were mostly situated in Afghanistan,” Royce composed.

Administrative Appeals Judge E. Cooper Brown accompanied Royce in setting out how federal whistleblower securities can extend worldwide. The chief administrative appeals judge, Paul Igasaki, would not go so far. While he does not “always disagree with their thinking,” Igasaki composed, he found that the case “does not provide us the chance to exceed holding that the place of [the base in Afghanistan] does not make the case extraterritorial.”.

” Nor does another element as examined in Judge Royce’s choice,” Igasaki composed. “This is an intriguing conversation that, relying on the realities of a future case that does present concerns of extraterritoriality, might be considered by the judges evaluating that case.”.

Jason Zuckerman, a whistleblower lawyer in Washington, stated Blanchard’s case provided no “real issue” of Sarbanes-Oxley’s application to retaliation versus staff members in foreign nations because the whistleblower was a U.S. resident working for a U.S. corporation operating in a U.S. area. The panel’s choice, he stated, supplies a structure to examine the extraterritorial application of federal whistleblower laws.

” For too long there was an inaccurate dominating presumption that an infraction of the [Sarbanes-Oxley] whistleblower arrangement outside the United States is not actionable,” Zuckerman composed in an e-mail to the NLJ. “This viewpoint, nevertheless, exposes that [Sarbanes-Oxley] is as much an anti-fraud law as it is an employment security law and for that reason can use to carry out abroad.”.