United States Court of Appeals for the Fifth Circuit Upholds Decision Against Halliburton

    In a recent case handed down by the United States Court of Appeals for the Fifth Circuit (Halliburton, Incorporated v. Administrative Review Board, and United States Department of Labor, Case No. 13-60323), the court upheld a decision issued by the United States Department of Labor Administrative Review Board (the “Review Board”).  At issue in the case was whether the mere identification of an employee by Halliburton as a whistleblower constituted an illegal retaliation under Section 806 of the Sarbanes-Oxley Act.  The court found in the affirmative and upheld the decision by the Review Board.

    As described in the Court’s decision, an employee complained to the Securities and Exchange Commission (the “SEC”) that Halliburton had engaged in “questionable” accounting practices.  Thereafter, an email was circulated within Halliburton identifying the employee that complained to the SEC.  The whistleblowing employee was then ostracized by his colleagues, many of whom refused to work with him any longer.  The employee in question was deemed not to be a “team player” by Halliburton’s then Chief Accounting Officer.  Halliburton took the position that the employee had not suffered any harm as a result of Halliburton’s conduct.  The Court saw the matter differently, noting  that “[i]t is inevitable that such a disclosure would result in ostracism, and, unsurprisingly, that is exactly what happened to [the employee] 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.”
    Though the decision is limited to businesses subject to the strictures of Sarbanes-Oxley (generally, issuers of securities traded on a national exchange), medium and large privately held companies should be aware of the potentially negative impact of identification of whistleblowers within their organizations.
    Uploaded by Ryan Gustafson, Esq.
    November 19, 2014