• Employer Seeks En Banc Review of Federal Appeals Court Decision Liberalizing SOX Whistleblowing Standards
  • April 11, 2013
  • Law Firm: Jackson Lewis P.C. - White Plains Office
  • Tyco Electronics Corp. has filed for en banc review of a federal Court of Appeals’ decision in Wiest v. Lynch, No. 11-4257 (3d Cir. Mar. 19, 2013), in which a majority of a Third Circuit panel adopted a liberal standard for determining protected whistleblower activity under the whistleblower provisions of Sarbanes-Oxley Act (“SOX” or the “Act”).

    The Court had adopted the “reasonable belief” standard for SOX Section 806 whistleblower complaints first articulated by the Department of Labor’s Administrative Review Board (“ARB”) in Sylvester v. Parexel International, LLC, ARB No. 07-123, ALJ Nos. 2007-SOX-39, 42 (ARB May 25, 2011). Sylvester loosened the standards by stating a SOX whistleblower need have only a “reasonable belief” that his or her employer violated a statute or rule stated in Section 806. This decision rejected the prior “definitively and specifically” standard, adopted by the ARB in Platone v. FLYi, ARB No. 04-154, ALJ No. 2003-SOX-27 (ARB Sept. 29, 2006). (Under the “definitively and specifically” standard, to be protected, an employee’s communication regarding suspected fraud had to assert specific elements of securities fraud.) The Third Circuit has jurisdiction over Delaware, New Jersey, Pennsylvania, and the U.S. Virgin Islands.

    The Third Circuit determined that Sylvester was entitled to Chevron deference as it was based on a permissible construction of the law, and thus the “reasonable belief” standard should be followed in Wiest. The district court had previously granted summary judgment for Tyco, applying the “definitively and specifically” standard to the plaintiff’s claims. (For additional details, see our article, Third Circuit Adopts DOL’s Liberal Test for Determining Protected Whistleblower Activity under SOX.)

    In seeking en banc review, Tyco’s petition argued that in adopting the “reasonable belief” standard, the panel had put the Third Circuit in conflict with nine other Circuit Courts. Tyco also argued that the Third Circuit panel had improperly altered the pleading standard for federal court analysis by giving undue deference to the ARB’s decision.

    The Court’s decision whether to grant en banc review is greatly anticipated by the employment law bar.