Sarbanes-Oxley and DODD-Frank retaliation claims compared

         Blog, Fit Row, Uncategorized

  1. Avoid Arbitration b Pleading Sarbanes Oxley

The Sarbanes-Oxley Act (SOX) and Dodd Frank Act (Dodd Frank) were enacted, in part, as a means to provide whistleblower protection to employees who report or participate in proceedings involving corporate wrongdoing.  The legislation prohibits retaliation against whistleblowing employees.

Many believe SOX has effectively been superseded by Dodd Frank with respect to retaliation claims. On its face, Dodd Frank would seem to provide a better remedy since it authorizes double back pay, does not require whistleblowers to exhaust their administrative remedies before filing in federal court, and has a longer statute of limitations. However, one very important distinction between SOX and Dodd Frank is the different effect the acts have on arbitrability.

Whereas whistleblower retaliation claims pleaded as SOX claims are expressly exempt from mandatory arbitration, whistleblower retaliation claims pleaded under Dodd Frank are not exempt. In Khazin v. TD Ameritrade Holding Corp., the Third Circuit held that Dodd Frank whistleblower retaliation claims were not exempt from predispute arbitration agreements. 773 F.3d 488 (2014).  The court came to this conclusion by carefully analyzing the statutory framework.  First, the court recognized that Dodd Frank did not only create a new cause of action for whistleblowers but it also amended the Anti-Arbitration Provision to the SOX cause of action as well. Id. at 491. The new Anti-Arbitration Provision specifically limited the eligible categories to those “arising under this section,” meaning Section 1514A of the United States Code. Id. at 492.  That section contains the SOX cause of action for retaliation against whistleblowers and not the Dodd Frank cause of action (which is located in a completely different title of the United States Code).  The court reasoned that Dodd Frank Act’s silence on the arbitrability of Dodd Frank retaliation claims (as opposed to SOX retaliation claims) was evidence that the omission was deliberate – especially since Dodd Frank specifically amended the Anti-Arbitration Provision for SOX claims.

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  1. The SOX and Dodd Frank Whistleblower Claims

The following table provides a side-by-side comparison of the main provisions of SOX and Dodd Frank.

Sarbanes-Oxley Act (as amended to date)Dodd Frank Act
Whistleblower defined“Employees” who engage in certain protected activities. “Employee” includes: present workers, former workers (if the protected activity occurred during the course of their employment), applicants for employment with a covered employer, and individuals whose employment may be affected by a covered person.

29 C.F.R. §1980.101(g)

Any individual who provides … information relating to a violation of the securities law to the SEC in a manner established, by rule or regulation, by the Commission.

7 U.S.C. § 26(a)(7)

Protected Activity–    Report or assist in reporting corporate wrongdoing covered by the statute that they reasonably believe has occurred.  See 18 U.S.C. § 1514A(a)(1)–    File, testify, participate in, or assist in a proceeding filed (or about to be filed) related to alleged wrongdoing covered by the statute. Wrongdoing includes: mail fraud, wire fraud, bank fraud, securities fraud, violating any SEC rule or regulation, violating any provision of federal law relating to fraud against the company’s shareholders.  See 18 U.S.C. § A(a)(2)–    Providing information to the Securities and Exchange Commission (SEC) or Commodities Futures Trading Commission (CFTC) in any covered judicial or administrative action–    Initiating, testifying in, or assisting in any investigation or covered judicial or administrative action of the SEC or the CFTC

–    Making a disclosure required or protected under other provisions of federal law including SOX

–    Providing information regarding violations of the Dodd-Frank Act or any other provision of law that is subject to the jurisdiction of the Bureau of Consumer Financial Protection


15 U.S.C. § 78u-6(h) and 7 U.S.C. § 26


Whistleblowers must report a violation of US securities or commodities laws; complaints about violations of general banking regulations are not covered.

Statute of Limitations180 days after violation or after the employee becomes aware of the violationNo more than:–    Six years after the violation; or

–    Three years after facts material to the right of action are known or reasonably should have been know by the employee, but no later than ten years after the date on which the prohibited retaliation occurred.

Exhaustion RequirementPrior to filing in federal court, a whistleblower must first file an administrative complaint with the Secretary of Labor through the Occupational Safety and Health Administration (“OSHA”).Dodd Frank does not have an exhaustion requirement. Whistleblowers may file in federal court immediately.
RemediesReinstatement with the same seniority status that the employee would have had but for the discrimination and back pay with interest.

Reasonable attorneys’ fees and related costs are recoverable


Reinstatement with the same seniority status that the individual would have had but for the discrimination and two-times back pay with interest

Reasonable attorneys’ fees and related costs are recoverable

Mandatory ArbitrationSOX now includes an anti-arbitration provision which eliminates an employer’s ability to enforce waivers of whistleblowers’ rights or remedies, or to require arbitration of claims of retaliation through pre-dispute agreements


Section 806 of SOX includes an express exemption from mandatory arbitration

When DF amended SOX to include an Anti-Arbitration Provision, it did not include a similar provision in itself. The Khazin court reasoned that the omission was intentional – especially in light of DF’s amendment to SOX.

Section 922 claims are subject to mandatory arbitration.