by Ed Ennis

Most people think the Sarbanes-Oxley Act applies only to publicly traded companies. Since President Bush signed SOX into law in July 2002, the bulk of the publicity has focused on the obligations of the highest levels of management of publicly traded companies to ensure the accuracy of financial information reported to shareholders.

But don’t let that fool you. There is “something for everybody” in SOX, including criminal penalties for retaliating against whistleblowers, tampering with witnesses, and destroying records. And these provisions apply to everyone—not just to publicly traded companies.

The “criminal” whistleblower provisions. Anyone is subject to criminal prosecution for taking “any action harmful to any person” for providing “to a law enforcement officer” “any truthful information relating to the commission or possible commission of any federal offense.” Violations of this provision can result in fines or 10 years in prison, or both. This provision is codified at 18 U.S.C. §1513(e).

Unlike SOX’s new civil whistleblower provisions, this new subsection subjects anyone to prosecution for committing one of the prohibited acts. Although included within its sweep, the focus of this new violation is not merely corporate wrongdoing; instead, this law makes it a crime to interfere with an informant’s livelihood in retaliation for the informant’s truthful reporting of possible wrongdoing in violation of federal criminal law. Thus, for example, §1513(e) would apply to a bank president who fired an internal auditor for reporting that the president was embezzling funds. But a much less obvious example—although no less true—is that §1513(e) would make it a federal crime to let the air out of the tires on the working vehicle of someone who reported a camper in a federal park for failing to extinguish his campfire.
In short, the sweep of §1513(e) is potentially vast. The only relevant issues are as follows:

  • Did the informant report what he perceived to be federal criminal conduct to a law enforcement officer?
  • Did the defendant interfere with the informant’s livelihood because he did so?

That’s it.

So far, it is not a federal crime to discriminate in employment, so §1513(e) will not suddenly render all retaliation in employment a federal crime. However, employers need to stay alert because the definition of a federal “crime” is constantly expanding and may someday encompass garden-variety employment discrimination. The Health Insurance Portability and Accountability Act ("HIPAA") and the immigration laws already contain criminal sanctions for certain violations. Thus, an employee who was retaliated against for reporting a violation of these laws might arguably have a claim under §1513(e) of SOX. Presumably, a failure to hire for a retaliatory reason would also constitute an “interference” with the informant’s livelihood.

Tampering with Documentary Evidence and Obstruction of Justice. In § 1102 of SOX, Congress created another new crime by adding a new subsection to 18 U.S.C. § 1512. Section 1512(c) provides that it is a crime subject to fines or prison up to 20 years for anyone to "corruptly" alter, destroy, mutilate, or hide a record with the intent to “impair the object’s integrity or availability for use in an official proceeding.” The same criminal penalties apply to anyone who “otherwise obstructs, influences, or impedes any official proceeding, or attempts to do so.”

Presumably, Congress was motivated by perceived Enron/WorldCom shenanigans, but they omitted any requirement that this misconduct occur in the corporate context in order to sustain a prosecution.

Finally, 18 U.S.C. § 1519 provides for the same penalties in any case in which anyone “knowingly” alters or destroys records, or falsifies records, with the intent to “impede, obstruct, or influence the investigation or proper administration” of any matter involving departments or agencies of the federal government.

Because the regulatory scope of the federal government is so broad, this law can arguably apply far beyond the scope of “Enron-style” issues —to EEOC investigations, OFCCP audits, OSHA complaints, NLRB matters, Department of Labor investigations (including FLSA and FMLA), and on and on.

At this point, there are no signs that the federal government intends to use these provisions against employers involved in normal federal investigations. However, it is prudent to be ready, just in case. With that in mind, we offer the following suggestions:

  • Carefully and strictly comply with federal document retention guidelines. A federal prosecutor may now contend that willful failure to comply with the guidelines is a crime and was carried out to avoid having the necessary documents available in the event of a federal investigation. See our handy “Clip and Save Guide to Recordkeeping Requirements” on page 7.
  • Be scrupulous about preserving all evidence in the event of an agency charge or complaint. This includes preservation of electronic evidence. You may want to refer to “What the Heck is a Zubulake?” in the Spring/Summer 2005 edition of Insights. Employers should be particularly careful to deactivate any automatic purging of e-mails once they are on notice of a charge or complaint.

Is it likely that a federal prosecutor will try to use these SOX criminal provisions against an employer who violates one of the statutes in a misguided defense against an administrative agency investigation? The risk is clearly present if the employer’s intent is to frustrate the agency’s effort to find the truth. Employers (and their attorneys) should be very careful to make sure that defensive measures are clearly within the bounds of the law.

Ed Ennis (Macon, GA) practices in the areas of employment litigation prevention and defense.

by Robin E. Shea

“Don’t ever fire an employee for ‘attitude.’” Have you heard that one before?

Conventional wisdom is that an employer can take action against an employee only if he or she performs poorly (after progressive discipline), violates a work rule, or commits gross misconduct (such as stealing or workplace violence). If the employee does his or her job well but makes everyone else’s life a living you-know-what while doing it, then there isn’t a thing the employer can do about it. Right?

Thankfully, the conventional wisdom is wrong. But where did this crazy rule come from?

It’s a distortion of a rule that once made perfect sense. The original rule was that an employer should state facts, not conclusions, in support of its actions. Bad “attitude” is a conclusion. It can mean anything from threatening to punch the supervisor (truly, a bad attitude) to making a legitimate complaint about race discrimination that management doesn’t want to hear. Therefore, employment lawyers cautioned their clients not to take action based on bad “attitude.”

Over the years, that wise message has been distorted into, “You can never take action against an employee for having a bad attitude.”

The distorted rule is wrong. It is lawful to take action against an employee for having a bad attitude, as long as you document the facts that give rise to the conclusion of bad attitude. For example, “For the third time in a week, when I asked Joe to catch up his filing, he slammed drawers, cursed, and complained in a loud voice that I was ‘working him to death.’” As long as you have factual support for your “attitude” assessment, you should be in good shape.

Update . . . last edition, an article by Carol Hawkins mentioned a case in which an employee claimed that it was discriminatory for General Motors to allow LGBT affinity groups but not religious affinity groups. When that edition went to press, the case was scheduled for oral argument before the Seventh Circuit Court of Appeals. The Seventh Circuit has recently issued its decision, holding that it is permissible for employers to allow LGBT affinity groups while prohibiting religious affinity groups.

Robin E. Shea, Editor—Winston-Salem, NC

by Robin E. Shea

Does your company cultivate a certain “image”? Do you reject applicants who don’t fit that image? Do you fire employees who don’t fit the image but somehow slipped through the hiring process?

If so, beware. You may be liable for “image discrimination.”

There are different types of image discrimination. Several varieties of image discrimination have been with us for some time. There is discrimination against people who are too homely or too Barbie/Ken-like, too fat or too skinny, too short or too tall, too bald or too hairy, or otherwise “visually less than ideal.” This type of discrimination falls into the “unfair but usually legal” category. There is also the (usually legal) discrimination against people who fail to dress or groom themselves appropriately for the job.

A newer type of image discrimination that has already resulted in some litigation is that against someone who is well-groomed and not unattractive, but who fails to achieve the corporate “look” that the employer wants to display to the world. If the ideal corporate “look” excludes people based on race, sex, age, national origin, or disability, then the employer may be subject to liability.

Abercrombie & Fitch is one of the most recent victims of this type of discrimination case. The giant retail chain had an “All-American” look that was decidedly Anglo-Saxon, male, and physically flawless. In June 2003, a group of Hispanic, African-American, and Asian-American employees and applicants filed suit against the chain, contending that Abercrombie failed to hire them or assigned them “out-of-sight” jobs because they didn’t fit the Northern European mold. The plaintiffs relied on Abercrombie’s ads, and alleged that corporate executives visited stores, surveyed the sales staff, and urged the managers to hire more employees who fit the Abercrombie “brand.”

The lawsuit ended with a $40 million settlement, “benchmarks” for hiring and promotion of women and minorities, establishment of an Office and Vice President of Diversity, the hiring of 25 recruiters whose primary focus will be to find female and minority employees, and a promise to include minorities in marketing materials.

Another employer who has recently been nailed on this theory is Red Robin Gourmet Burgers, Inc., a restaurant chain. If Abercrombie was going for the “Nordic look,” Red Robin was going for the All-American, hometown, clean-cut “Christian look.” Red Robin wasn’t accused of discriminating against minorities or women, but against adherents to “alternative” religions. Specifically, the chain frowned upon tattoos. Normally, this would not be illegal, but one particular waiter at a Bellevue, Washington, restaurant was required by his religious beliefs (Kemetic, an ancient Egyptian faith) to have a tattooed religious inscription less than a quarter-inch wide, encircling his wrist. The waiter claimed that it was against his religion to cover the tattoo.

The waiter thrived until he got a new manager, who objected to the tattoos. The waiter requested an exemption from the dress code, but his request was denied. Then he was terminated for failure to comply with the dress code. Red Robin ultimately settled the case for $150,000 and policy changes designed to ensure that managers understood their religious accommodation obligations.

“Image” can also be tied to sexual orientation. In 2000, a casino in Reno, Nevada, began requiring its female bartenders to wear makeup. The plaintiff, who had been a bartender at the casino for 20 years, sued for sex discrimination, claiming that the makeup requirement—which applied only to women—was discriminatory. It is not clear what the plaintiff’s sexual orientation was, but she received help from gay and lesbian activists. In 2004, a panel of the Ninth Circuit (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington, Guam, and Northern Mariana Islands) held that requiring female bartenders to wear makeup was not sex discrimination. However, the case is going to be reheard by the full Ninth Circuit.

Image discrimination is not always illegal. The sexy-burger chain Hooters was the target of aggressive enforcement action from the U.S. Equal Employment Opportunity Commission because the chain admittedly (and unashamedly) refused to hire men for server positions. Hooters held its ground, contending that the attractive waitresses were an integral part of the business. The EEOC finally backed down and let Hooters continue doing its thing.

Why did Hooters outlast the EEOC, while these other employers either didn’t or remain embroiled in litigation? Hooters had a strong case because its raison d’etre is the sexy (female) waitresses. The food is secondary to the women who serve it. Thus, by being required to hire waiters, Hooters would be fundamentally changing the nature of its business. This is not true for Abercrombie, which sells clothes and can sell them just as well by placing gorgeous women and minorities in its ads; or for Red Robin, which was a restaurant chain, not a religious organization. Whether the casino will be found to be a mere “gambling joint” that wants its female servers to look their best, or an establishment where people come primarily to be waited on by “Vegas-style” women and do a little gambling while they’re at it, remains to be seen.

One final caution on image discrimination: an employer should not discriminate based on alleged “customer preferences.” (It should be noted that there are legal exceptions for sex and privacy.) Georgetown Place, an entity that operates assisted living facilities in 14 states, learned this lesson the hard way. Allegedly, the elderly patients at Georgetown facilities preferred white caregivers. Therefore, employees were allegedly instructed to place a letter “Z” on employment applications from racial minorities. The letter “Z” on an application meant the candidate was automatically rejected for employment. According to the EEOC, Georgetown managed to carry on this practice for nine years. After it was finally caught, the company entered a $650,000 settlement with the EEOC.

If you think your employees need to convey a certain “image” to the public, be sure that your “image” does not result in unlawful discrimination. If you have any doubt, it’s wise to consult with counsel before you become the target of an EEOC lawsuit.

Robin Shea (Winston-Salem, NC) practices in the areas of employment litigation prevention and defense, and affirmative action.

by Robin E. Shea

When assessing whether your company’s “image” standard is legitimate or discriminatory, it’s a good idea to consider the following:

  • What is the fundamental purpose of our business? Is the “image” integrally related to that purpose?
  • Is our “image” one that should apply to all without regard to race, sex, national origin, age, color, or disability? (For example, these considerations should be irrelevant if all the company wants is “clean-cut,” “well-groomed,” or “beautiful” employees.)
  • Does our proposed “image” allow enough flexibility for reasonable accommodations that are required by law—whether religious or disability-based?
  • If we require males and females in the same job to dress or groom differently, are the dress/grooming codes “equivalent”? For example, the courts say that it is discriminatory to require women to wear uniforms while allowing men in the same job to wear business attire. On the other hand, it is generally lawful to require men and women to wear “appropriate business attire” for their sex (for example, hose for women, and neckties and short hair for men), or to have “men’s” and “women’s” uniforms.
  • Are we basing our “image” on the discriminatory (illegal) preferences of our customers?
  • Are we basing our “image” on improper stereotypes?
  • Do we feel so strongly that this “image” is essential to our business that we are willing to spend years in court defending it?

— Robin Shea


JOHN CAMPBELL (Tampa, FL, employment litigation prevention and defense, employee benefits litigation) received both his bachelor’s degree in mathematics and his law degree with honors from the University of Florida. Before attending law school, John had a brief career as a lifeguard. In addition to writing articles pertaining to employment law, John was co-chair of the Advanced Topic Labor and Employment Law Seminar of the Florida Bar. John is also very active in his church, and his hobbies include running, biking, and swimming – in fact, he has completed a half iron-man triathlon, which includes 1.2 miles of swimming, 60 miles of bicycle riding and 13.1 miles of running. John and his wife, Mona, have been married for 33 years.

MIKE SPENCER (Nashville, TN, employment litigation prevention and defense) received his bachelor’s degree in finance from James Madison University and his law degree from Washington and Lee University. Before joining Constangy he worked in private practice and as an Assistant United States Attorney for the Southern District of West Virginia. Michael has written several articles concerning employment law and human resource issues in publications such as the Nashville Business Journal and the Capital Defense Journal. Michael is admitted to practice law in West Virginia, Virginia, and the District of Columbia, as well as in Tennessee. He is active in One Hundred Black Men of America, Inc., the Urban League of Middle Tennessee, the Sigma Pi Phi fraternity, and the Alpha Phi Alpha Fraternity, Inc. When he is not practicing law, Michael enjoys football, soccer and weightlifting.

PENNI BRADSHAW (Winston-Salem, NC, immigration, employment litigation prevention and defense) received her undergraduate degree magna cum laude in American studies and religion from Randolph-Macon Woman’s College and her law degree with honors from the University of North Carolina at Chapel Hill. In law school, she was a Morehead Fellow, Research Editor for the law review, and member of the Order of the Coif. In 2004, Penni was named the top employment attorney in North Carolina by Business North Carolina magazine. She has also been named in Best Lawyers of America, Chambers, and Who’s Who in American Law. Penni serves on the boards for the Ronald McDonald House and Goodwill Industries of North Carolina, and has long been active in the community. For fun, Penni enjoys reading, volunteering at the local children’s hospital, and spending time at the beach. (She also managed to win and maintain the record for eating the most barbecue sandwiches at a local restaurant.) She and her husband, Mike, have a teenage son.

TIM NEWTON (Atlanta, GA, employment litigation prevention and defense) received his bachelor’s degree in economics from Transylvania University and his law degree magna cum laude from the University of Louisville School of Law. Tim has been a presenter at the Georgia State Board of Workers Compensation Annual Meeting and at CLE seminars. When he is not practicing law, Tim enjoys golf, music and ‘80’s trivia. He and his wife, Stephanie, have two young daughters.

AMY HOBBS (Macon, GA, employment litigation and defense, and Georgia workers’ compensation) received her bachelor’s degree in Management Information Systems magna cum laude from the Terry College of Business of the University of Georgia. She then received her law degree magna cum laude from Mercer University. In law school, Amy was an administrative editor of the law review, and served on the Moot Court Board. She also received a Faculty Award for Outstanding Achievement in Legal Writing. When she is not practicing law, Amy enjoys sewing, interior design and cooking. Amy and her husband, Kerry, have one young daughter, and another baby is on the way.


Megacorp gets an EEOC charge of retaliation from Grypa, who is one of those chronic complainers. Megacorp’s e-mail system contains thousands of e-mails from Grypa to various members of management and co-workers, complaining about everything under the sun, and from various members of management and co-workers to each other, complaining about Grypa’s complaining. Megacorp’s system automatically purges e-mails after 90 days. The Human Resources Director sends an e-mail to all employees instructing them that Grypa has filed an EEOC charge and that they should save all e-mails to or from so that the e-mails will not automatically be deleted. Has the HR Director done enough to avoid a finding of “spoliation” of evidence?

ANSWER: No. It’s a mistake to count on individual employees to go to the trouble to save e-mails, and at least one court has specifically said that this is an inadequate way to preserve electronic evidence. The HR Director should have worked with Megacorp’s counsel and its IT Department on a way to automatically save the e-mails (and any other relevant electronic material) going forward. She should also make sure that any old e-mails still in the system are located and preserved. Finally, any back-up tapes containing material more than 90 days old should be saved.

Looking backward, the electronic material should be preserved and gathered for at least the relevant statutory period (for example, in a deferral state, in which an employee has 300 days to file a charge, the record preservation and retrieval should go back at least 300 days).

Looking forward, all of this material should be preserved until the case is settled, or until a final judgment is issued and all avenues of appeal have either been exhausted or expired. If this sounds as if the material will have to be saved for many years, that’s because (unfortunately) it will.


We’ll never look at a Subway® meatball sandwich the same way again. The Iowa Court of Appeals dismissed a sexual harassment lawsuit brought by a “sandwich artist” at a Subway shop. The plaintiff, an older female, alleged that her teenage co-workers made obscene shapes out of doughnut holes and the ground beef used for meatball sandwiches. We don’t condone the whippersnappers’ creative use of food products, mind you, but the court found that their activity was not unwelcome to the plaintiff and that she had resigned because she was denied a promotion, not because of the alleged harassment.

Can’t stop talking without use of articles. Please help. The Sixth Circuit Court of Appeals (Kentucky, Michigan, Ohio, and Tennessee) affirmed dismissal of privacy and due process claims by a police officer after the police department released portions of his personnel file to the public. The controversy began after the officer was caught on tape shooting and killing a family’s dog. Now, here’s what happened: Family stops for gas. Dad accidentally leaves wallet on top of car. Car drives away, with money flying around. Officers stop car for suspected armed robbery. Officers order family out of car, handcuffing family while they kneel on ground. Friendly family dog jumps out of car and runs toward officers, wagging friendly little tail. Plaintiff shoots dog with shotgun from one foot away. Dog dies instantly. Incident is on tape. Media uproar ensues. Court finds that police department is immune from suit because officer himself had already released much of “private” information in personnel file.

“Do you have any idea what kind of a headache that Stairmaster can give ya?” The First Circuit (Maine, Massachusetts, New Hampshire, Rhode Island, and Puerto Rico) affirmed summary judgment for an employer who terminated an employee while he was on FMLA leave for migraine headaches. The employee had applied for short-term disability benefits, claiming that he could not perform any activities while suffering from a migraine. A private investigator caught him driving, shopping, and going to the gym on days that he was allegedly home with a migraine.


Never mind. The EEOC and the National Education Association have announced a joint initiative to raise teens’ awareness about workplace discrimination issues. Somehow, it doesn’t seem that “awareness about discrimination” is our nation’s most burning educational need. Those sorry kids would be much better off worrying less about their legal rights and more about acquiring a work ethic. I hear that Subway hires teens – uh – oh. We-ellllll, maybe the EEOC-NEA thing isn’t such a bad idea, after all.

“Uncool” is synonym for “older,” judge finds. A federal judge in Michigan has ruled that a 46-year-old radio producer was discriminated against because of his age when he was not hired for a “drive-time” show. The interviewer, who selected a 24-year-old, said that the plaintiff was unfamiliar with pop culture and that there were concerns about his ability to relate to a younger audience.

So, now, lying about sexual harassment is “protected activity”? Oy, vey! The Eighth Circuit (Arkansas, Iowa, Minnesota, Missouri, Nebraska, the Dakotas) has held that a governmental agency unlawfully retaliated against an employee by terminating him for having falsely accused two co-workers of sexual harassment.


Back to Page