05.17.2012 Administrative Review Board Holds that Title VII Burden-Shifting Scheme Is Inapplicable to Claims of Retaliation under the Sarbanes-Oxley Act.



In Zinn v. American Commercial Airlines, Inc., ARB No. 10-029, ALJ No. 2009-SIX-025 (ARB Mar. 28, 2012), the Administrative Review Board (“ARB”) held that the Administrative Law Judge (“ALJ”) erred in applying the Title VII burden-shifting framework to a claim of retaliation under the Sarbanes-Oxley Act (“SOX”).  Specifically, the ARB held that, unlike a Title VII plaintiff, a SOX complainant need not establish that an employer’s purportedly legitimate reason for an adverse employment action was pretextual.


In Zinn, the complainant alleged that she was subjected to a drug test, increased performance monitoring, and additional work assignments after she raised concerns about her employer’s Securities and Exchange Commission reporting practices.  The employer argued that the reasons for her termination were poor performance and insubordination, and that her alleged protected activities were not a contributing factor.  The ALJ found in favor of the employer on both arguments.[1]


In reversing the ALJ’s determination as to causation, the ARB reasoned that “the ALJ conflated the SOX burden of proof standard with the Title VII burden of proof, which SOX Section 806 replaced.”  Accordingly, the ALJ imposed a lower burden of proof on the employer while imposing a higher burden of proof on the complainant.  The ARB emphatically rejected the notion that, once an employer demonstrates a legitimate, non-discriminatory reason for the adverse employment action, the burden shifts back to the complainant to prove that the reason was pretext.  Instead, the ARB held that all that SOX requires is that the complainant prove by a preponderance of the evidence that her protected activity was a “contributing factor” to the adverse employment action.  A showing of pretext is not required under this standard.


The Zinn decision is the latest in a line of ARB decisions relaxing the burden imposed on complainants bringing whistleblower actions.  Previously, Sylvester v. Parexel Int’l LLC, ARB No. 07-123, ARB No. 07-123, ALJ Nos. 2007-SOX-039, 2007-SOX-042 (ARB May 25, 2011), lowered complainants’ burden of demonstrating “protected activity.”  In that decision, the ARB held that: (1) the heightened Twombly and Iqbal pleading standards are inapplicable to SOX retaliation complaints; (2) a complainant need not wait until a violation has occurred so long as the complainant reasonably believes that a violation is likely to occur; (3) a complainant need not complaint of conduct that “definitively and specifically” relates to a violation of any of the categories listed in SOX Section 806; (4) a complainant need not establish fraud against shareholders; and (5) a complainant need not establish the various elements of securities fraud.  Likewise, in Menendez v. Halliburton, Inc., ARB Nos. 09-002, 09-003, ALJ No. 2007-SOX-005, (ARB Sept. 13, 2011), the ARB lowered complainants’ burden of demonstrating an adverse employment action.  In that decision, the ARB held that a complainant need not show that he suffered any “tangible employment consequences” in order to demonstrate an adverse employment action.  Rather, the term “adverse action” refers to unfavorable employment actions that are more than trivial, either as a single event or in combination with other deliberate employer actions that are alleged.  Read together, Zinn, Menendez, and Sylvester have lowered the bar on each of the three elements of whistleblower claims: (1) protected activity; (2) adverse employment action; and (3) causation.


Although the Zinn decision is certainly a setback for employers, it does not eviscerate their chances of prevailing entirely.  While the ARB explicitly removed the requirement that a complainant must prove that the employer’s articulated reason for the adverse employment action was pretext, the burden remains on the complainant to prove by a preponderance of the evidence that her protected activity was a contributing factor to the adverse employment action.  The Zinn decision still requires the ALJ to “weigh the circumstantial evidence as a whole [which includes any ‘pretext’ evidence] to properly gauge the context of the adverse action in question.”  Accordingly, employers must continue to document carefully employees’ performance and disciplinary issues in order to articulate, with evidentiary support, legitimate, non-discriminatory reasons for adverse employment actions should a whistleblower complaint be filed.

[1] The ARB reversed the determination that the complainant failed to set forth a SOX-protected activity on the grounds that the ALJ (1) erred in concluding that SOX-protected activity must relate to fraud against shareholders; (2) erred in concluding that a SOX complainant must establish the various elements of securities fraud to prevail on a retaliation claim; and (3) erred in concluding that the protected activity must describe an actual violation of law.