Halliburton Revealing Whistleblower’s Identity to Colleagues is Adverse Action

On November 12, 2014, the Fifth Circuit Court of Appeals affirmed a U.S. Department of Labor Administrative Review Board (ARB) ruling against Halliburton for its retaliation against a whistleblower.

In 2005, Anthony Menendez, an employee of Halliburton, used the company’s internal procedures to submit a complaint to management about what he thought were “questionable” accounting practices. He also filed a complaint with the Securities and Exchange Commission (SEC) about the company’s accounting practices, which led to an investigation by the SEC.

When Halliburton received the SEC’s notice of the investigation, the company inferred that Menendez had made a report to the SEC. Halliburton sent an email to Menendez’s colleagues that instructed them to start retaining certain documents because “the SEC has opened an inquiry into the allegations of Mr. Menendez.” Once his identity as the whistleblower was disclosed, Menendez’s colleagues, whom he had essentially accused of fraud, began treating him differently, generally refusing to work and associate with him.

The ARB determined that the company’s disclosure to Menendez’s colleagues of his identity as the SEC whistleblower who had caused an official investigation, thus resulting in Menendez’s workplace ostracism, constituted illegal retaliation under § 806 of the Sarbanes-Oxley Act (“SOX”). In upholding the ARB decision, the Court of Appeals stated:

“The undesirable consequences, from a whistleblower’s perspective, of the whistleblower’s supervisor telling the whistleblower’s colleagues that he reported them to authorities for what are allegedly fraudulent practices, thus resulting in an official investigation, are obvious. It is inevitable that such a disclosure would result in ostracism, and, unsurprisingly, that is exactly what happened to Menendez following the disclosure.

Furthermore, when it is the boss that identifies one of his employees as the whistleblower who has brought an official investigation upon the department, as happened here, the boss could be read as sending a warning, granting his implied imprimatur on differential treatment of the employee, or otherwise expressing a sort of discontent from on high. “

“In an environment where insufficient collaboration constitutes deficient performance, the employer’s disclosure of the whistleblower’s identity and thus targeted creation of an environment in which the whistleblower is ostracized is not merely a matter of social concern, but is, in effect, a potential deprivation of opportunities for future advancement.”

The Court also affirmed the ARB’s ruling that plaintiffs can receive damages for emotional distress and reputational harm under SOX. The Court stated that “Under SOX, the employee ‘shall be entitled to all relief necessary to make the employee whole.’” Thus holding “the plain language of SOX’s text relating to remedies for retaliation affords noneconomic compensatory damages.”

Read the Fifth Circuit Court of Appeals decision in Halliburton, Inc. v. Department of Labor ARB View the case history: 2007-SOX-5 Menendez v. Halliburton, Inc.

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