What damages can a whistleblower recover under SOX?

A prevailing SOX whistleblower can recover “all relief necessary to make the employee whole,” which includes:

• back pay (lost wages and benefits);

• reinstatement with the same seniority that the employee would have had, were it not for the retaliation;

• special damages (damages for impairment of reputation, personal humiliation, mental anguish and suffering, and other noneconomic harm that results from retaliation); and 

• attorney’s fees, and costs.^[i]

 Back pay includes promotions and salary increases that the whistleblower would have obtained but for the retaliation. Note that back pay is offset by interim earnings.

 Uncapped special damages can be substantial where the retaliation has derailed the whistleblower’s career. “When reputational injury caused by an employer’s unlawful discrimination diminishes a plaintiff’s future earnings capacity, [they] cannot be made whole without compensation for the lost future earnings [they] would have received absent the employer’s unlawful activity.”^[ii] Therefore, it is important to proffer specific evidence of the impact of the retaliation on the whistleblower’s career prospects and the value of lost future earnings.

If reinstatement is not feasible, can a judge award front pay in lieu of reinstatement?

Yes. Although reinstatement is the preferred and presumptive remedy to make an employee whole, some SOX whistleblowers have recovered front pay in lieu of reinstatement.  In Hagman v. Washington Mutual Bank, Inc., an ALJ awarded $640,000 in front pay to a banker whose supervisor became verbally and physically threatening when the banker disclosed concerns about the short funding of construction loans.^[iii]

 In Deltek, the Fourth Circuit affirmed an award of approximately three and a half years of back pay (lost wages and benefits from the date of the termination of Ms. Gunther’s employment through the date of the hearing), plus four years of front pay and tuition benefits. The ALJ found that Ms. Gunther worked in administrative positions prior to working at Deltek and had been unable to obtain a finance position before and after her tenure at Deltek because she lacked a college degree. And since the ALJ found that Ms. Gunther was unlikely to find a comparable financial analyst position without a degree, the ALJ concluded that Ms. Gunther would need four years of front pay to account for the time Gunter would need to obtain a college degree, especially in the absence of the tuition-reimbursement benefits that Ms. Gunther was receiving while employed at Deltek.

 On appeal, Deltek vigorously contested the front-pay award, contending that four years of front pay is unduly speculative. Noting that “some speculation about future earnings [was] necessary,” the court agreed with the ALJ’s finding that it would take Gunther four years to find comparable work. The court concluded that the ALJ and ARB “made the reasonable choice to assume that Gunther would have continued to earn the same salary and benefits at Deltek had she not been unlawfully terminated.”

Does SOX authorize an award of punitive damages?

 No. But if a SOX whistleblower exercises the option to remove the claim to federal court, the whistleblower can potentially add other claims under which a prevailing party can recover punitive damages. For example, Mr. Sanford Wadler, a former in-house counsel at Bio-Rad, recovered $5 million in punitive damages in a retaliation action brought under SOX and under the California common law tort of wrongful discharge in violation of public policy. Mr. Wadler alleged that Bio-Rad terminated his employment because he raised concerns about potential violations of the Foreign Corrupt Practices Act.

The large award of punitive damages appears to have been motivated by the company’s Chief Executive Officer (CEO) backdating a negative performance review of Mr. Wadler that the CEO drafted after firing Wadler. That review was an aberration from the positive reviews that Mr. Wadler received during his 25-year tenure at Bio-Rad. The company’s apparent attempt to create a post-hoc justification for the termination of Mr. Wadler’s employment may have backfired by enabling Mr. Wadler to prove malice and thereby recover punitive damages.

To learn more about SOX whistleblower law, download the new eBook Sarbanes-Oxley Whistleblower Law: Robust Protection for Corporate Whistleblowers.

_{[i] 18 U.S.C. § 1514A(c).}

_{[ii] Mahony v. KeySpan Corp., No. 04 Civ. 554 (SJ), 2007 WL 805813, at *1 (E.D.N.Y. Mar. 12, 2007).}

_{[iii] ALJ Case No. 2005-SOX-00073, at 26–30 (ARB Dec. 19, 2006), appeal dismissed, ARB Case No. 07-039 (ARB May 23, 2007)}