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Do the Provisions of the Sarbanes-Oxley Act Now Affect Your Private Company?

By James Shaker

The Sarbanes-Oxley Act was passed in 2002. One of its provisions protects “whistle blowers” who raise concerns about possible fraud and wrongdoing at public companies. Since its passage, it has been understood to apply only to public companies. However, a March 2014 decision of the U.S. Supreme Court now holds that private companies who are contractors, subcontractors, or agents of a public company are also subject to the whistle blower provision of the Sarbanes-Oxley Act. Before this Supreme Court decision, private companies had not been considered to be governed by these whistle blower provisions.

The whistle blower provisions protect employees from retaliation, such as discharging, demoting, suspending, threatening, harassing, or discriminating against an employee who engages in whistle blower activities under discrimination laws or under the public policy exceptions.

In light of this ruling, private companies that do business with public companies, or that fall within the criteria of a contractor, subcontractor or agent of a public company, should ensure that they have appropriate policies in place that not only outline a Corporate Ethics Policy, but further provide for steps for employees to file complaints, outline steps which the company will take to investigate said complaints, train employees to investigate complaints, and appropriately provide a summary of the findings resulting from the investigation. These steps should be taken to protect employers from potential claims by employees. Seeking legal advice as to how to conduct this should of course be done as well.

James Shaker is a partner in Ryan, Swanson & Cleveland, PLLC’s Employment Rights, Benefits and Labor Group where he counsels employers (regionally and internationally) and individuals on a wide variety of employment-related issues.

James can be reached at 206.654.2261 or shaker@ryanlaw.com.


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This message has been created by the Employment Rights, Benefits & Labor Group at Ryan, Swanson & Cleveland, PLLC to advise of recent developments in the law. Because each situation is different, this information is intended for general information purposes only and is not intended to provide legal advice on any specific facts and circumstances. Ryan, Swanson & Cleveland, PLLC is a full-service law firm located in Seattle, Washington.

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