or any congressional committee.124 As can be seen from the above, the Act gives whistleblowers a relatively large amount of freedom to choose the addressee of the disclosure.
SOX prohibits any retaliation against whistleblowers resulting from their disclosure activities and it grants them special protection.125 Anyone who knowingly takes any action harmful to a whistleblower with intent to retaliate risks increased civil and criminal liability.126 The Act broadly covers retaliatory measures, which include127 dismissal, demotion, suspension, threatening, harassment, or any other form of discrimination against an employee connected with employment conditions due to the reporting of misconduct under the Act. The case law indicates that one of the actions not prohibited by the Act is the negative periodic assessment of an employee, if it does not contribute to the deterioration of the employee’s employment conditions.128 The provisions of the Act that prohibit retaliation against whistleblowers cover both legal persons and natural persons associated with the employer.129 The prohibition applies to companies, but also to their officers, other employees, contractors, subcontractors, and agents of such companies.130
The Act provides that a whistleblower who suffered negative consequences for their actions may file a written complaint to the Secretary of Labor not later than ninety days later. Under the terms of the Dodd-Frank Act from 2010, this period was extended to 180 days. The period commences on the date on which retaliation happens or on the date on which the employee becomes aware of the retaliation.131 If the Secretary of Labor did not make a final decision within 180 days of the date of the complaint and “there ←33 | 34→is no showing that such delay is due to the bad faith of the claimant,” the employee may file a lawsuit with the appropriate federal court.132 The court shall then deal with the case irrespective of the value of the matter at issue.133 The literature stresses that making it possible for whistleblowers to exercise their rights in this way was an innovative solution.134
If the Secretary makes a decision in favor of an employee, the latter shall be entitled to all necessary remedies to protect them.135 The remedies include:
a) reinstatement to work with the same length of service as the employee would have had he not been retaliated against;
b) payment of outstanding remuneration with interest; and
c) compensation for any damage suffered as a result of discrimination, including legal costs, fees of experts, and lawyer fees.136
However, practice shows that proceedings rarely end at this point, as parties to a dispute have a wide range of appeal possibilities against a decision of the Secretary.137
1.2.1.4 The Dodd-Frank Wall Street Reform and Consumer Protection Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act138 signed by President Barack Obama on July 21, 2010, was a response to the 2008 financial crisis.139 It aimed to transform the US regulatory system in a number of areas, including, but not limited to, consumer protection, trade restrictions, credit ratings, financial product regulation, corporate ←34 | 35→governance, disclosure, and transparency.140 The adoption of the law was also a further significant step towards enhancing the protection of whistleblowers in the United States. Although the Act primarily regulated functioning of financial markets and protection of consumer interests, it also contained protection measures and a number of incentives for whistleblowers.141 Pursuant to section 922, a new section 21F was added to the Securities Trading Act of 1934. The Act gave whistleblowers increased protection against employer retaliation, guaranteed confidentiality, and provided the opportunity to receive a financial award.142
Section 15 U.S.C. § 78u-6(a)(6) of the Dodd-Frank Act defines the term “whistleblower” as one or more individuals acting jointly, who provide information about a violation of securities laws to the Commission [SEC]143 in a way determined by rule or regulation of the Commission.144 Furthermore, according to the regulations issued by the SEC after the adoption of this law, a whistleblower must have a “reasonable belief” that the aforementioned regulations have been infringed.145 Only natural persons may report infringements.
The Dodd-Frank Act prohibits retaliatory measures against whistleblowers, who disclose information of violations in accordance with procedures. Whistleblowers who experience such retaliation have the right to be reinstated with the length of service they would have enjoyed had they not disclosed the information, double the amount of outstanding wages with interest, along with compensation for legal fees, litigation costs, ←35 | 36→and court fees.146 The protection against retaliation covers whistleblowers regardless of whether they have reported violations internally within the company or directly to the SEC.147
A particularly effective way of encouraging whistleblowers to act was to create the possibility of receiving financial incentive for the actions.148 Providing important and previously unknown information to SEC by an authorized whistleblower – which leads to the imposition of sanctions on the entity infringing the law in a specified manner – entitles the person who reports the irregularities to receive a reward of 10–30 % of the funds, which the entity will be forced to pay for its infringements.149 Whistleblowers may receive a financial award if their information leads to effective securities law enforcement actions.150 The Act authorized the Commission to grant financial awards to eligible individuals if the sanctions imposed exceed one million dollars.151 A high level of potential reward that a whistleblower may receive is intended to secure the existence of such a person in the event of loss of job, breakdown of professional career or even the need to change the place of residence.152 SEC may exercise its freedom in determining the appropriate percentage of the award and take into account a number of factors in relation to the specific facts and circumstances of each reported case. Factors that may increase the amount of the prize include:
– the importance of provided information;
– the assistance given by the whistleblower;
– the interest of law enforcement authorities; and
– the participation in internal compliance systems.153
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On the other hand, factors that may reduce the amount of a whistleblower’s award are:
– their guilt;
– unjustified delay in reporting a violation;
– violation of internal compliance and reporting systems by the whistleblower.154
The order of the above criteria does not determine their validity. It should be noted that some whistleblowers are excluded from the possibility to receive an award.155 Among others, these are:156
– certain US law enforcement officers;
– employees of foreign governments;
– people convicted in criminal actions related to the information provided to the SEC; and
– certain auditors, including those who would violate Sections 10A of the Exchange Act by reporting information to the commission in order to obtain a whistleblower reward.
Moreover, the Dodd-Frank Act provides a possibility of anonymous transmission of information to the SEC by a counsel.157 However, prior to payment of the award, the whistleblower discloses their identity and other information that SEC may request, either directly or by
