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October 09, 2002
Whistle-Blower Protections Called Weak
October 9, 2002

The new "whistleblower" protections in the Sarbanes-Oxley Act - the law Congress passed to fight corporate corruption - are cumbersome and anemic, employment lawyers tell the Wall Street Journal.

It means workers who report allegations of fraud should still expect the companies to fight back fiercely, producing what may be months or years of emotional and financial turmoil.

Congress enacted the legislation following implosions by companies like Enron and WorldCom, which fell victim to accounting scandals. Coming at a time when public pressure was on Congress to push strong legislation, the Sarbanes-Oxley Act includes measures to protect "whistleblowers" who report financial wrongdoing, the first-ever that apply to employees at all public companies, the Journal reported.

Taken as a whole, the law "will significantly change the way business is done and the way violations or possible violations are responded to," Stephen Crimmins, a Washington, D.C., defense lawyer involved in securities-law cases, said to the Journal.

However, workers may still find themselves asking "how to save [their] job and how to do the right thing," Michael Kohn, a Washington, D.C., attorney who represents employees, said to the Journal. "And it's very often difficult to do both things."

The new whistleblower protections of the Sarbanes-Oxley legislation don't prevent workers from waiving their rights to sue, according to the Journal, including those workers who signed a mandatory-arbitration agreement as a condition of their employment, which critics cite as problematic omission.

Robert Lipman, a Jericho, N.Y., attorney, would prefer stronger legislation, but says it at least gives him some ammunition. "We used to get a lot of phone calls from mid- and senior-level employees who had complained about financial wrongdoing and were fired" and "there was nothing we could do to help those people," Lipman, who represents both workers and management, said to the Journal.

The Sarbanes-Oxley law requires companies to set up procedures for anonymous reporting of fraud allegations, the Journal reported. Setting up such systems, legal experts predict, could create a culture in which these allegations are taken more seriously, according to the Journal's reporting. Through the new law, employees may file lawsuits if they have been fired, demoted or even threatened or harassed for reporting such allegations of fraud. The worker can disclose his or her concerns within the company or to regulators, law-enforcement officials or Congress and doesn't have to have proof that a crime has occurred, just a "reasonable belief" that a law has been violated.

The law also authorizes criminal penalties against someone who retaliates against a worker for reporting concerns about illegal conduct to a public official.

The statute requires workers to file a complaint with the U.S. Department of Labor within 90 days of the alleged retaliation, which can involve merely a phone call to the agency, the Journal said. A Labor Department spokeswoman told the Journal that the Occupational Safety and Health Administration would field Sarbanes-Oxley complaints.


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