What Is Tax Code 806? Sarbanes-Oxley Whistleblower Law

The term “tax code 806” is a common misnomer for Section 806 of the Sarbanes-Oxley Act of 2002 (SOX), not a part of the Internal Revenue Code. This provision establishes anti-retaliation protections for whistleblowers in publicly traded companies. Its purpose is to encourage employees to report suspected fraudulent activities internally or to authorities. The law provides a civil cause of action for individuals who face negative employment consequences for such reporting.

Individuals and Entities Covered

The protections afforded by Section 806 apply to employees, officers, and agents of publicly traded companies. This protection also extends to individuals working for contractors, subcontractors, and subsidiaries whose financial data is consolidated into the parent company’s financial statements. The entities subject to this law are those with a class of securities registered under Section 12 of the Securities Exchange Act or companies required to file reports under Section 15 of that act.

The coverage for contractor employees is specifically tied to their work for the public company; the reported misconduct must relate to the services the contractor is providing. The statute was later amended by the Dodd-Frank Act, which clarified the right to a jury trial for whistleblowers who file their cases in federal court. The amendments also barred employers from requiring pre-dispute arbitration for these claims.

Types of Protected Disclosures

An individual gains protection under Section 806 by reporting conduct they reasonably believe constitutes a violation of certain federal laws. The law does not require proof that fraud occurred, only that their belief of misconduct was reasonable at the time of the disclosure. Protected disclosures include reporting potential mail fraud, wire fraud, bank fraud, or securities fraud.

Disclosures are also protected if they relate to violations of any Securities and Exchange Commission (SEC) rule or any federal law concerning fraud against shareholders. An individual can make these reports to a federal regulatory or law enforcement agency, a member of Congress, or a person with supervisory authority to receive protection under the act.

Filing a Retaliation Complaint

An individual who believes they have suffered retaliation for a protected activity must file a complaint with the Occupational Safety and Health Administration (OSHA). This agency within the Department of Labor is tasked with investigating these claims. The complaint must be filed within 180 days of when the retaliatory action occurred or when the employee became aware of it.

The complaint does not require a specific form and can be submitted in writing or orally. If OSHA does not issue a final decision within 180 days, the individual has the right to file their case in a U.S. district court.