Oregon wrongful discharge remedy available for Sarbanes-Oxley violation

By Stacey Mark
July 25, 2011

The Oregon Court of Appeals last week revived a plaintiff's common law wrongful discharge claim against his former employer, based on his claim of retaliation for making complaints to his supervisors about management conduct and threatening to take his complaints to the corporate directors, and also for exercising his right to complain that his bonus was cut.  The trial court had dismissed the complaint for failure to state a claim.

In De Bay v. Wild Oats Market, Inc., the plaintiff alleged that he gave his supervisors a detailed written report questioning the management team's actions and motives in deviating from the company's strategic growth plan.  Plaintiff also alleged that his bonus was cut in half after he made the report, and that he was subsequently fired for threatening to bring his concerns to the board.  Plaintiff argued on appeal that these allegations were sufficient to state a wrongful discharge claim for exercising important societal rights and obligations protected under state and federal laws, specifically ORS 659A.230, ORS 652.355, and section 806 of the Sabanes-Oxley Act, 18 USC ยง 1514A. 

The Court of Appeals found that a wrongful discharge claim based on "whistleblowing" under ORS 659A.230 requires that the employee complain to a recognized outside authority with the power to take action on such complaints.  Plaintiff had not alleged a report to any outside authority and therefore failed to state a claim under that statute. 

Likewise, the court found that ORS 652.355, which prohibits retaliation for making a wage claim, did not apply to plaintiff's circumstances because he did not allege that he had filed or even discussed a "wage claim." 

However, for the purpose of a motion to dismiss, plaintiff's allegation that he was fired for reporting managerial wrongdoing to his supervisors fell within the scope of conduct protected by Sarbanes-Oxley, which prohibits a publicly-traded company from discharging an employee for reporting to a supervisor a violation securities laws or any federal law relating to fraud against shareholders.  In addition, the court found that Sabanes-Oxley did not provide the exclusive remedy for the alleged conduct because, unlike a wrongful discharge claim, the statute did not allow for the recovery of noneconomic or punitive damages.  On that basis, plaintiff was entitled to pursue a claim for common law wrongful discharge.

The opinion provides another reminder to employers that firing employees for internal reports of wrongdoing may provide the basis for "whistleblower" claims under both statutory and common law.

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