Publicly traded companies need to remain vigilant to avoid employment-related retaliation against employees who may complain about company violations of accounting controls and possible violations of SEC related rules or regulations. In a whistleblower case under SOX, OSHA recently ordered Tennessee Commerce Bank to reinstate its former chief financial officer and pay him more than $1 million in back wages, interest, attorneys fees and compensatory damages.

Apparently fostering the Obama administration’s push for stricter enforcement of Department of Labor and financial industry regulations, an Assistant Secretary of Labor for OSHA issued this statement about OSHA’s order: “This case clearly shows the Department’s commitment to ensuring individuals are provided the protections and relief forwarded by the laws and sends a strong message that retaliatory actions will not be tolerated.”

In the case, the former CFO alleges he raised concerns to the Bank’s audit committee and later to the Federal Deposit Insurance Corporation about internal controls, certain employee accounts and possible insider trading. For reasons not yet publicized, apparently the CFO was placed on administrative leave in March 2008, filed a whistleblower complaint with OSHA in April 2008, and he was terminated from employment in May 2008. In its defense, Tennessee Commerce claims that it terminated the CFO “for cause” and that any alleged whistleblowing occurred only after his termination. Tennessee Commerce is appealing OSHA’s determination.

Meanwhile, Tennessee Commerce has a very challenging situation. Under the whistleblower provisions of SOX, Tennessee Commerce has to reinstate the CFO to a position that will make him “whole” in terms of pay, benefits and seniority status. That puts Tennessee Commerce in a very awkward situation since the former CFO has not worked for the Bank since March 2008. Worse yet, under the SOX rules, Tennessee Commerce legally cannot obtain a stay of the reinstatement order while it appeals OSHA’s decision.

Obviously, OSHA’s order gives the former CFO tremendous settlement leverage if Tennessee Commerce wants to avoid the awkwardness and employee relations impact of re-employing its former CFO. If the parties do not settle the case and continue with the formal legal proceedings, we will keep you apprised. The Tennessee Commerce case certainly is a clear and loud reminder to all publicly traded companies to respond carefully to any SOX-related whistleblower allegations in an appropriate manner.