The whistle-blower protections of the Sarbanes-Oxley Act do not extend to foreign workers employed by the overseas subsidiaries of U.S. companies, according to a court ruling reported by The National Law Journal.
“If the whistle-blower protection provision is given extraterritorial reach in a case like the present one, it would empower U.S. courts and [the Department of Labor] to delve into the employment relationship between foreign employers and their foreign employees,” Judge Levin H. Campbell reportedly wrote on behalf of the First U.S. Circuit Court of Appeals. “We believe if Congress had intended that the whistle-blower provision would apply abroad to foreign entities, it would have said so.”
Judge Campbell also reportedly asserted that Congress did not make a provision for international enforcement, noting that it did not allocate money for overseas investigations, for coordination with the Department of State, for interpreters, or for the use of foreign personnel.
The ruling stems from a case involving Ruben Carnero, an Argentinean who worked for two Brazilian subsidiaries of Boston Scientific Corp. In 2002, he asserted in a whistle-blower suit filed in Boston that he was fired in retaliation for disclosing to the parent company that its subsidiaries created false invoices and inflated sales figures, according to the Journal.
“We think the opinion is inconsistent with the statute, not only the legislative history but its plain meaning,” Carnero’s attorney, Edward Griffith of Bolatti & Griffith in Boston, told the publication. He asserted that other provisions of Sarbanes-Oxley have been interpreted by the Securities and Exchange Commission to apply to foreign companies.
Boston Scientific’s attorney, James W. Nagle, told the Journal: “I think this is the first time any circuit court has come to grips with the international aspects of the Sarbanes-Oxley whistleblower rules. For multinational corporations it is an important question to answer.”
Unanswered by the court ruling, according to the publication, are two related issues. Do U.S. citizens working for a foreign subsidiary have whistle-blower protection for overseas conduct? And do foreign citizens have such protection if they work directly for a publicly traded U.S. company overseas?
According to the Journal, the appeals court did note that Carnero might have been protected if he blew the whistle on a domestic subsidiary over alleged misconduct in the United States.
Whistle-blowing has been controversial in Europe as well. Last year, the French data-protection authority, the Commission Nationale de l’Informatique et des Libertés (CNIL), refused to approve ethics or whistle-blowing programs proposed by French subsidiaries of two American companies, according to a report from law firm Morrison & Foerster.
Those two subsidiaries — — McDonald’s France and CEAC, a division of Exide Technologies — sought the French agency’s approval for ethics hotlines to help comply with Sarbanes-Oxley. The report noted, however, that CNIL found these hotlines at odds with French privacy law, prone to abuse, and likely to cause undue distress to employees who might be the target of libelous or unfounded accusations. CNIL recently promulgated new guidelines for acceptable whistle-blower systems, reported Compliance Week.
Also last year, a German court ruled that Wal-Mart’s proposed whistle-blower process violates that country’s labor laws.