by Jackson Lewis
The long, strange trip of the first person to be awarded reinstatement
under the Sarbanes-Oxley Act recently took another turn. The U. S.
District Court for the Western District of Virginia dismissed the
petition to enforce an Administrative Law Judge's preliminary order of
reinstatement, finding that it lacked jurisdiction to enforce the
order. This is the second federal court to find it lacked jurisdiction
to enforce preliminary orders to reinstate SOX Act complainants to
their former positions.
The procedural facts of the case are messy but critical to
understanding the result. The individual's complaint filed with the
Occupational Safety and Health Administration alleging a violation of
the SOX Act was initially denied. Following an appeal and hearing on
that decision, an Administrative Law Judge issued a supplemental
recommended decision and ordered the company to reinstate the
individual to his previous position. Pursuant to SOX regulations, the
company appealed that decision and order to the Administrative Review
Board.
In the meantime, even though it had not obtained a stay of the
recommended order, the company refused to reinstate the individual, who
subsequently sought enforcement. Since the ALJ held that the order
could only be enforced in the district court, the individual applied
for but was denied enforcement by the court which found there were
questions as to whether the ALJ intended the supplemental recommended
decision and order to be an order of reinstatement.
Following clarification from the ARB that the ALJ's supplemental
recommended decision and order was, in fact, a preliminary order of
reinstatement, the individual filed a petition to enforce it in the U.
S. District Court for the Western District of Virginia. The court said
while it had jurisdiction to enforce a final order, the preliminary
order of reinstatement was not a final order and the court lacked
jurisdiction to enforce it. The court noted that although the
regulations promulgated by the Department of Labor under SOX provide
for enforcement of preliminary orders of reinstatement in the district
court, this conflicted with the plain language of the statute.
In support of its decision, the court relied on a decision of the U. S. Court of Appeals for the Second Circuit in Bechtel v. Competitive Tech, Inc.,
448 F.3d 469 (2d. Cir. 2006). There, the federal appeals court declined
to enforce a preliminary order of reinstatement, noting that the
regulations were not authoritative over the district court. Other
federal statutes with enforcement mechanisms similar to the SOX Act
further supported the court's decision. Moreover, the court reasoned
that its conclusion was consistent with the efficient administration of
justice in that it insured appeals of ALJ orders would go through all
levels of the administrative process before reaching federal court. If
it were otherwise, "the immediate enforcement at each level would cause
a rapid sequence of reinstatement and discharge and a generally
ridiculous state of affairs."
Reaching its decision, the court acknowledged that this situation
represented a departure from the Congressional intent that
Sarbanes-Oxley claims would be adjudicated quickly and that the remedy
of reinstatement would be provided in a short amount of time.
Recognizing that over 18 months had passed since the ALJ had issued his
supplemental recommended decision and order, the appeal was still
pending before the ARB, and the delay was inordinate, the court noted
that the SOX Act provides an alternative procedure in the district
court if a final decision by the administrative process is not reached
within 180 days from filing the complaint.
This decision is a positive development for employers regarding the
remedy of reinstatement, one of the most worrisome aspects of the SOX
Act. However, in recognizing the delays in the administrative
adjudicative process and the inability to enforce a preliminary order
of reinstatement, this decision ultimately may lead more SOX
complainants to opt for de novo review in federal district court after
the 180-day period from the time the complaint is filed. This option
would take the dispute out of the administrative review process and
into the federal judicial process with all the risks associated with
litigation.
Jackson Lewis attorneys are available to assist employers in advising
and counseling, as well as establishing compliance programs and
defending the litigation of SOX complaints.
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