SOX Liability From A Whistleblower Outside the United States? Maybe
It is natural (and
logical) to assume that United States laws do not apply to an individual’s
actions in another country. Although this is not always the case — federal
discrimination laws, for example, cover U.S. citizens employed by U.S.
employers in a foreign country — one would usually expect that conduct is
governed by the law of the country where the alleged violation occurred. A
recent Department of Labor Administrative Review Board (“ARB”) decision,
however, held that Sarbanes-Oxley’s (“SOX”) whistleblower protections may also
apply to employees stationed outside the United States.
In Blanchard v.
Exelis Systems Corp./Vectrus Systems Corp., ARB Case No. 15-031 (August 29,
2017), the ARB allowed a whistleblower’s claim under SOX stemming from his employer’s
alleged mail and wire fraud to go forward despite the fact that both the
company and the employee were operating in Afghanistan in connection with an
engagement by the U.S. government. The employee was fired shortly after raising
concerns that certain employees had misreported their hours and allowed another
employee to illegally enter the country, which the whistleblower believed to be
mail or wire fraud. Even though the activity happened outside the United
States, the ARB reversed the Administrative Law Judge’s (“ALJ”) dismissal of
the complaint and remanded the issue to the ALJ because the complaint alleged a
violation of U.S. law by a U.S. company, and nothing in it implicated Afghani
Although the employer
in this case may ultimately escape liability on the question of whether it
violated SOX’s whistleblower protections — or the ARB’s finding could be
reversed on appeal — employers should not ignore potential whistleblower claims
from employees working abroad. When considered along with other recent
developments in this area, such as the position the U.S. government recently
took when it intervened in a False Claims Act case against an English clothing
retailer, it is clear that employers should reevaluate their retaliation and
whistleblower policies, procedures, and training in overseas operations.
Employers should review internal reporting requirements and ensure that they
have effective internal reporting and investigation procedures in place for
their overseas locations to ensure that, if SOX applies to those operations,
they are ready to comply with it.