NWC Comments on DOL Dodd-Frank Regulations

Posted on January 4, 2012 by Richard Renner

Just before last night’s deadline, I submitted comments on modifications to the Department of Labor’s regulations for corporate fraud whistleblowers. The Occupational Safety and Health Administration (OSHA) originally issued regulations at 29 CFR Part 1980 to govern its whistleblower program under the 2002 Sarbanes-Oxley Act (SOX). The modifications OSHA published on November 3, 2011, reflect changes made by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and also make some policy changes. I made my comments on behalf of the National Whistleblowers Center (NWC) with helpful input from NWC Executive Director Stephen M. Kohn (especially on the issues of extraterritoriality and confidentiality). My colleague Erik Snyder helped me finish the comments in time for last night’s deadline.

OSHA’s modifications reflect the new expanded time limit for filing retaliation claims. Section 922(c) of Dodd-Frank extended the statutory filing period for SOX retaliation complaints from 90 to 180 days. 29 CFR § 1980.103(d) now requires claims to be filed within 180 days of the date on which the employee became aware of the violation. Section 922(c) also protects the whistleblower’s right to a trial by jury in cases where the employee removes a case to U.S. district court. Section 922(c) invalidates pre-dispute arbitration agreements that would keep whistleblowers from using the Department of Labor process or the “kick out” provision for going to U.S. district court. Section 922(b) of Dodd-Frank expanded SOX’s coverage to include employees of nationally recognized statistical rating organizations (as defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c). My colleague Lindsey Williams, Advocacy Director of NWC, reported on these changes when Dodd-Frank passed in 2010.

In a significant policy improvement, the new regulations eliminate the former requirement that whistleblowers give the Department 15 days advance notice before filing a complaint in U.S. district court. This requirement is not contained in the SOX Act, and my comments point out how legal precedent made the rule invalid. Department of Labor (DOL) staff could have used the 15-day notice to hurry the issuance of a final decision and deprive the district court of jurisdiction. This use would have been contrary to the remedial purpose for which Congress created the “kick out” provision. The new 29 CFR § 1980.114(b) requires whistleblowers to give the Department notice of an action in U.S. district court within seven (7) days of filing the action. I thank the Department for removing this unnecessary hurdle to deciding SOX cases on the merits.

However, the modified rules preserve another unnecessary hurdle to deciding SOX cases on the merits. Section 1980.110(a) requires that to appeal a bad decision by an Administrative Law Judge (ALJ), a party must file a petition for review with the Administrative Review Board (ARB) within ten (10) days of when the ALJ issued the decision (not the date on which the decision is received), and that petition must describe all the legal issues on which the party seeks ARB review. This is a very difficult part of practicing before DOL. In normal appeals in court, a party has thirty (30) days to file a notice of appeal, and that notice does not have to say anything about the reasons for the appeal. The attorney then has time to review the whole record to set out the “assignments of error” in the brief. Not at the ARB. Section 1980.110(a) says that issues not set out in the petition for review will normally be waived. I could understand that the ARB wants to see that a petitioner has some good ground for the appeal before setting a briefing schedule. This goal can be accomplished by requiring the appellant to state some good reason for ARB review. The ARB’s job of assessing worthiness for briefing is fully met by seeing at least one good issue for briefing. The ARB has no need, at the petition level, to know all the reasons for review. The effect of a regulation that says issues are waived is to prevent good issues from being decided on the merits just because the party could not make a complete list in the short time allowed. That is contrary to the purpose of a whistleblower protection, and even of due process itself. I suggested that DOL eliminate the waiver rule and allow thirty (30) days to submit a petition for review. I also suggested that the regulations make public an ARB practice of allowing a party to make a motion for extension of time to set out the grounds for review.

I also suggest that SOL make explicit that SOX has extraterritorial effect — the same extraterritorial effect that the Securities Exchange Commission (SEC) applies. This provision in the regulations would save much time and confusion in litigation over the scope of extraterritorial effect of SOX. It would also help fulfill the purposes of SOX which was born after Enron abused off-shore subsidiaries to scam the investing public. The rule would be especially important for whistleblowers disclosing bribery of officials in other countries — a violation of the Foreign Corrupt Practices Act (FCPA).

Finally, I suggested that DOL take a cue from the Dodd-Frank provisions for confidentiality. Congress made clear that for some whistleblowers, the risk of public disclosure of their whistleblowing will discourage them from coming forward. It provided for confidentiality of those who raise concerns about violations. See 15 U.S.C. 78u-6(h)(2). The SEC regulations provide for awards to confidential and even anonymous whistleblowers. See SEC Rule 240.21F-7. Even the U.S. Tax Court recognized the public interest in allowing whistleblowers to make their claims anonymously. See Whistleblower 14106-10W v. Commissioner of Internal Revenue, 137 T.C. No. 15 (12-8-2011). My comments give the DOL language they could use to protect the identity of whistleblowers in the DOL process.

Here are links to:

DOL’s announcement of the modified SOX regulations

NWC’s comments in PDF format

NWC’s comments in TXT format



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