Release Date: 10/ 03/ 2005
In response to the mounting public concern created by the massive bankruptcies of corporations like Enron and Worldcom, Congress passed and the president signed into law the Sarbanes-Oxley Act of 2002. While dealing mostly with corporate bankruptcy law, Sarbanes-Oxley also created provisions to protect whistleblowers from being retaliated against by their employers. State and federal law already protected workers against employer retaliation for whistleblowing in situations related to health and safety, but Sarbanes-Oxley increased this coverage to include employees who report financial improprieties as well.
While many small-business owners may think that the Sarbanes-Oxley Act applies only to large multimillion dollar enterprises, the act has very strong ramifications for all businesses, both small and large alike. The broad whistleblower provision of Sarbanes-Oxley can apply to any business, whether it is publicly traded or privately owned. As a result, small-business owners should make themselves aware of these provisions and modify their employment practices accordingly.
Sarbanes-Oxley at a glance- Criminalizes any form of employer retaliation against whistleblowers
- Applies to both publicly traded and privately owned companies
- Punishable by fines and up to 10 years in prison
- Broader than any prior regulations
- Retaliation complaints are handled by the Occupational Health and Safety Administration
- Gives the Department of Labor the right to force companies to reinstate employees who having pending Sarbanes-related proceeding
- Gives the Securities and Exchange Commission the ability to participate in any Sarbanes-related proceedings
Application to small business
- Privately owned businesses are typically exempt from most civil provisions regarding whistleblowing
- The criminal provisions of Sarbanes-Oxley do apply to privately owned companies
- The law is not retroactive and only applies to employees who were retaliated against after Sarbanes was signed into law
What small businesses can do
- Handle whistleblowing claims in the same way sexual harassment and discrimination claims are handled – seriously and immediately
- Establish a strict nonretaliation policy
- Appoint an ethics officer to investigate whistleblowing claims
- Consider employing an ethics hotline service
- Make employees aware of your company's whistleblowing procedures
- Keep careful documentation of all whistleblowing claims in case there are disputes later
- If an employee involved in a whistleblowing claim must be terminated, keep thorough documentation of the grounds for their termination to avoid potential disputes later.
Punishments For noncompliance
- Damages to the employee who was retaliated against
- Back pay with interest if the employee was terminated
- Maximum fine - $250,000
- Maximum prison time – 10 years
For more information regarding the Sarbanes-Oxley Act or any other questions related to whistleblowers contact the Occupational Health and Safety Administration at 1-800-321-OSHA (6742).
