Fired Tyco Accountant Lacks SOX Act Retaliation Claim

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By Kevin McGowan

Feb. 2 — A Tyco Electronics Corp. accountant terminated after an investigation into his alleged sexually inappropriate conduct toward female co-workers has no retaliation claim under the Sarbanes-Oxley Act, the U.S. Court of Appeals for the Third Circuit ruled Feb. 2.

Affirming summary judgment for Tyco, the court said even assuming Jeffrey Wiest had engaged in protected activity under the SOX Act by questioning certain business expenses, he failed to show that activity caused his termination. A reasonable jury couldn't find the protected conduct was a contributing factor in Tyco's September 2009 “preliminary” decision to terminate Wiest, the court said.

Wiest's whistle-blower case previously made law when the Third Circuit in 2013 revived his SOX Act claim, endorsing the Labor Department's view that an employee who has a reasonable belief he is reporting fraud engages in protected activity, even if there's no specific reference to the federal laws enumerated in the SOX Act .

But the court's latest decision illustrates that even if an employee engages in SOX Act protected activity, he has no statutory retaliation claim unless that activity is a “contributing factor” to an adverse employment action. Publicly traded companies pay close attention to litigation under the SOX Act, which was enacted to deter reprisals against corporate whistle-blowers and encourage employees to report suspected wrongdoing.

Plaintiff Will Seek Rehearing

It's a “shock” the Third Circuit affirmed the district court's dismissal of Wiest's retaliation claim because factual disputes are rife about why Tyco decided to fire him in September 2009, said lawyer Richard Angino in Harrisburg, Pa., who represented Wiest.

Wiest will file a petition for panel rehearing or review by the full Third Circuit, Angino told Bloomberg BNA Feb. 2.

Disputing the court's conclusion that no reasonable jury could find Wiest's protected activity contributed to his termination, Angino questioned why Tyco would fire an employee with more than 30 years' experience who received outstanding reviews and bonuses for his performance.

The decision to terminate Wiest occurred less than a year after he exchanged “hundreds of emails” with Tyco executives questioning their deductions as business expenses of costs run up at two resorts, Angino said.

The sexual misconduct investigation was “blown so out of proportion,” with Tyco's lawyers involved from the beginning of the probe, Angino said. The company failed to follow its own progressive discipline policy, which would have required warnings for a first offense, Angino said. Those circumstances among others raise a jury issue of retaliation, he said.

Meanwhile, the company, which now is called TE Connectivity, said it is “very pleased” with the court's decision.

The court reached the result TE Connectivity expected and “validated” that the employer and its executives acted properly in their handling of Wiest's situation, company spokeswoman Jane Crawford told Bloomberg BNA Feb. 2.

TE Connectivity is a Swiss company with its U.S. headquarters in Berwyn, Pa.

No Evidence of Causal Link

The evidence doesn't support Wiest's claim that his protected activity led Tyco to terminate him, the Third Circuit said.

A 10-month gap between Wiest's last protected activity and the termination decision and the “legitimate intervening events” that included the sexual misconduct investigation by Tyco human resources personnel with no knowledge of his prior protected activity “negate” any inference of causation for SOX Act retaliation purposes, Judge Morton I. Greenberg wrote.

Even if Wiest could raise a jury issue that his protected activity contributed to the adverse action, Tyco established a SOX Act affirmative defense. The company “amply demonstrated” it would have terminated Wiest, based on the results of its sexual misconduct investigation, even absent any protected activity, the court said.

On remand, the district court had granted summary judgment to Tyco, finding “clear and convincing evidence” the company would have made the same decision to fire Wiest even absent his alleged protected activity .

Dismissal of Wiest's SOX Act is warranted both because he failed to show protected activity was a “contributing factor” and because Tyco established the affirmative defense, the Third Circuit said.

That Wiest received a positive performance review and a bonus after his 2008 accounting inquiries to company executives indicate his protected activity didn't cause Tyco to initiate the sexual misconduct probe or to act on its results, the court said.

Instead, Tyco began to investigate only after receiving “multiple complaints” from female employees that Wiest made sexually offensive remarks and approaches toward them, the court said.

“That investigation found ample support for those complaints, and Tyco did not violate the Sarbanes-Oxley Act when it took adverse employment actions against [Wiest] without either warning him or imposing a probationary period,” the court said.

Although the employee handbook calls for progressive discipline “when possible,” it also reserves management's right to discipline or terminate employees “without resorting to prior disciplinary measures,” the court said.

Wiest failed to identify any evidence connecting the investigation to his protected activity or “casting doubt” on the integrity of Tyco's probe, the court said.

Judges Julio M. Fuentes and Michael A. Chagares joined in the opinion.

Angino of Angino & Lutz in Harrisburg, Pa., represented Wiest. Peter O. Hughes, Brian D. Lee and Ryan T. Warden of Ogletree Deakins Nash Smoak & Stewart in Morristown, N.J., represented Tyco.

By Kevin McGowan

To contact the reporter on this story: Kevin McGowan in Washington at kmcgowan@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com