Posted on June 7, 2010 by EPSTEIN BECKER & GREEN, P.C.

ARB Clarifies Burden Whistleblowers Bear for Equitable Extension of SOX Statute of Limitations
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On the heels of its 2-1 decision in Hyman v. KD Resources, allowing equitable estoppel to extend the Sarbanes-Oxley (SOX) statute of limitations (noted in our blog posting of April 20, 2010), the Department of Labor Administrative Review Board (ARB) has issued a unanimous decision clarifying the burden for whistleblowers to survive dismissal of complaints that are not filed within the explicit 90-day statute of limitations. Daryanani v. Royal & Sun Alliance, ARB No. 08-106, ALJ No. 2007-SOX-79 (ARB May 27, 2010).

Adhering to the principle that equitable estoppel may apply when certain employer conduct interferes with a whistleblower-employee’s exercise of rights, the ARB nevertheless refused to extend the SOX statute of limitations on the basis of alleged inaction by an employer. Holding equitable estoppel would not be available in the circumstances, the ARB observed that the employer had no affirmative obligation to:

  • inform the employee of potential causes of action,
  • inform the employee of time limitations applicable under statutes creating a cause of action, or
  • counter-sign a severance release agreement within the statute of limitations deadline.

The ARB also clarified that:

  • responsibility for discovering a cause of action and filing a timely complaint remains an obligation of the complainant, and
  • a complainant’s delayed awareness of a possibly retaliatory motive for an adverse employment action is not a ground for equitable estoppel. 

Administrative Appeals Judge Wayne C. Beyer, who dissented in Hyman v. KD Resources, wrote a concurring opinion to emphasize two supplemental points. First, he would find a pre-complaint settlement agreement and release of “all claims” binding, even though the release did not expressly refer to SOX claims. Second, consistent with his Hyman v. KD Resources dissent, he would not allow settlement discussions to toll the limitations period.

While Hyman v. KD Resources may have created a broader opening of the equitable estoppel door, Daryanani v. Royal & Sun Alliance helps to define the space within by placing the burden squarely on the complainant – even while ARB members continue to show different tolerances for applying principles of equitable modification.
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Posted on April 20, 2010 by EPSTEIN BECKER & GREEN, P.C.

Newly Constituted Administrative Review Board Allows Equitable Considerations to Extend 90-Day Statute of Limitations for Whistleblower Claims
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By: Allen B. Roberts, Victoria M. Sloan

Employers who thought they were free of exposure if no complaint was filed within the statute of limitations applicable in Sarbanes-Oxley ("SOX") and other whistleblower claims administered by the Secretary of Labor need to recalibrate their risk based on a recent decision allowing equitable estoppel.

In Hyman v. KD Resources, an employee missed the 90-day SOX statute of limitations by filing his complaint 160 days after he was discharged. Two newly appointed members of the Administrative Review Board (“ARB”) allowed the complaint to survive and remanded it to the Administrative Law Judge who had dismissed it as untimely.

Equitable Estoppel Principles

According  to the ARB, equitable estoppel becomes available to extend a statutory time limitation when a whistleblower can show that the failure of a timely filing is attributable to reasonable reliance on an employer’s misleading or confusing representations or conduct.

Among the bases for equitable estoppel in whistleblower cases are:

  1. the employer has actively misled the whistleblower respecting the cause of action;
  2. the whistleblower has in some extraordinary way been prevented from asserting his rights;
  3. the whistleblower has raised the precise statutory claim in issue but has mistakenly done so in the wrong forum; and
  4. the employer’s own acts or omissions have lulled the whistleblower into forgoing prompt attempts to vindicate his rights.

The principles to extract from KD Resources:

  • It may be immaterial whether the employer engaged in intentional misconduct if the employer’s conduct, innocent or not, reasonably induced the whistleblower not to file within the statutory limitations period.
  • The whistleblower may have to prove prejudice caused by the allegedly misleading conduct.
  • Settlement discussions are not sufficient to toll the running of the limitations period, absent a showing that the employer misled or otherwise prevented the whistleblower from filing a complaint.
  • The whistleblower carries the burden to prove the bases for equitable extension of the statute of limitations.
  • Equitable estoppel may not be available to complainants who are represented by counsel.

The Significance of the Decision

The KD Resources decision comes within months of the January 11, 2010 announcement by Secretary of Labor Hilda Solis of new appointments to the Administrative Review Board.  The 2-member majority opinion emphasized the “fact intensive” nature of the considerations applicable when a whistleblower seeks to revive a dismissed complaint on grounds of equitable estoppel or equitable tolling (where ignorance excuses timely filing because essential information bearing on a claim could not be discovered by the whistleblower’s exercise of reasonable diligence). For its part, the dissent emphasized that settlement discussions may have offered “hope” to the complainant but fell well short of the “promise” necessary to support an equitable estoppel argument. The dissent also noted the whistleblower’s improper appellate reliance on documents that were not disclosed in the record before the Administrative Law Judge and the unavailability of equitable estoppel to complainants who are represented by counsel. 

Apart from its immediate impact – possibly opening the door to more litigation of claims that do not satisfy a rigid application of the statute of limitations – the ARB’s KD Resources decision may signal ARB reluctance to dispose of cases by summary processes and a trend to more evidentiary hearings. Looking forward, there may be a message, also, that the newly constituted ARB will be hospitable to other bases for remanding summary dispositions. If this happens, employers and complainants alike will increasingly encounter the rigors and expense of developing a full evidentiary record in whistleblower proceedings.
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