NWC letter to ARB explains how Dodd-Frank Act ices SOX subsidiary coverage

Last week, I posted here an amicus brief for the U.S. Department of Labor’s Administrative Review Board (ARB) explaining how the Sarbanes-Oxley Act (SOX) protects corporate whistleblowers employed by the subsidiaries of publicly traded companies. What a difference a day makes. With President Obama’s signature today on the Dodd-Frank Wall Street Reform Act, SOX is now amended to explicitly protect the employees of subsidiaries. What is more is that Senate Report 111-176 makes clear that the amendment was intended to restore SOX to the broad scope originally intended, and that defenses based on subsidiary status should now be unsuccessful. The National Whistleblowers Center (NWC) has now filed a supplemental letter brief with the ARB in its test case of Carri Johnson v. Siemens Building Technologies, Inc., ARB Case No. 08-032. The letter brief makes clear that the Dodd-Frank Act firmly establishes that SOX has always covered the employees of subsidiaries. NWC Executive Director Stephen M. Kohn led our work on this letter, with myself and NWC intern Margot Weisberg. The ARB, meanwhile, has invited supplement briefs on the effect of the Dodd-Frank Act on subsidiary coverage under SOX. The ARB has allowed an additional ten (10) days for these briefs, but ours is already filed.

Here is the text of our letter:


July 21, 2010

Paul M. Igasaki, Chair & Chief Judge

Administrative Review Board

U.S. Department of Labor

2000 Constitution Ave., N.W., N5404

Washington, D.C. 20210

Re: Johnson v. Siemens Building Technologies, Inc., ARB No. 08-032/ALJ No. 2005-SOX 015

Dear Chair and Chief Judge Igasaki:

We are writing in further regard to the briefing order issued in the above-captioned case on April 15, 2010 and your letter issued today.

As you are aware, today President Obama signed into law the Dodd-Frank Wall Street Reform Act, which directly impacts the issue under consideration in this case. The Dodd-Frank Act amends The Sarbanes–Oxley Act of 2002 (SOX) to include liability for subsidiary companies. Based on the text of this amendment and its legislative history the issue of subsidiary coverage under SOX should be readily resolved.

The portion of Dodd-Frank that concerns subsidiary coverage is contained in Section 929A of the Act. The legislative history for this section is set forth on page 114 of Senate Report No. 111-176. A copy of the relevant page of the report is attached.

The Report explains that section 929A amended section 806 of the Sarbanes-Oxley Act of 2002 in order to “make clear that subsidiaries and affiliates of issuers may not retaliate against whistleblowers . . . .” The amendment was designed to eliminate the current employer defense that subsidiaries of publicly traded corporations somehow were not covered under SOX, and explicitly clarified the original intent of the statute: The “clarification” contained in section 929A “would eliminate a defense now raised in a substantial number of actions brought by whistleblowers under the statute.” 1

Congress’ use of the phrase “make clear” in explaining the legislative intent behind the amendment was not an accident. This precise phrase was used in another leading case interpreting a similar whistleblower law, also administered by the Department of Labor. In Willy v. Administrative Review Bd. 423 F.3d 483, 489, n. 11 (5th Cir. 2005), the Fifth Circuit gave effect to a similar legislative action on the basis that the legislative history and indicated that such an amendment is intended to “make clear” the original intent: “The legislative history of the 1992 Energy Policy Act, too, makes clear that Congress intended the amendments to codify what it thought the law to be already.” (Emphasis added). Accord., Kansas Gas & Elec. Co. v. Brock 780 F.2d 1505, 1512 (10th Cir. 1985) (applying amendment to law as indication of Congress’ original intent).

Based on section 929A of the Dodd-Frank Act, and consistent with this section’s legislative history and controlling case law, we believe the issue of subsidiary coverage has been resolved by explicitly and clear legislative action. It is now imperative that the Department of Labor effectuate this intent, and ensure that the SOX is fully and properly administered in a manner intended by Congress.

Respectfully submitted,

Stephen M. Kohn

Executive Director

Richard R. Renner

Legal Director

Enclosure: Page 114 from S. Rep. 111-176

1 The minority report which accompanied S. Rep. 111-176 did not object to this interpretation of either the original intent behind the SOX or Congress’ need to clarify this issue based on the dispute among various courts.

Exit mobile version