United States Supreme Court Affirms DOL's Interpretation of Whistleblower Protections in SOX

On March 4, 2014 the U.S. Supreme Court, in Lawson et al. v. FMR, LLC, issued an important decision with respect to the whistleblower protections contained in the Sarbanes-Oxley Act of 2002 (SOX).

In a decision written by Justice Ginsberg, the Supreme Court held that the whistleblower provisions of SOX, 18 U. S. C. §1514A(a), extend to employees of a public company's private contractors and subcontractors. Th ruling is consistent with the U.S. Department of Labor's long-standing interpretation of the whistleblower provision and makes clear that scope of employees entitled to protections under SOX include not only those employed by the publicly traded company itself, but investment advisors, accounting firms and even law firms who perform work as contractors or subcontractors for the publicly traded company.

The SOX whistleblower provision provides that "[n]o [public] company . . . or any . . . contractor [or]subcontractor . . . of such company, may discharge, demote, suspend,threaten, harass, or . . . discriminate against an employee in the terms and conditions of employment because of [whistleblowing activity].”  18 U. S. C. §1514A(a). In Lawson, the Court found from the plain language of this Section, as well as other similar provisions enacted by Congress, an intent to extend whistleblower protections to employees and subcontractors. Specifically, in rendering its decision, the Supreme Court looked to the legislative history of SOX and, specifically, Congress' understanding that contractors have significant responsibility for reporting fraud by publicly traded companies with whom they contract, and that fear of retaliation was the primary deterrent to such reporting in the Enron’s scandal that preceded the enactment of SOX.

As noted above, the Court's ruling is consistent with the U.S. Department of Labor's interpretation of such whistleblower protections. While this decision is a victory for employees asserting whistleblower claims, it was not unexpected. Indeed, it would have been hard to imagine the U.S. Supreme Court reaching a different conclusion, given the language and legislative history related to this provision, Additionally, as Justice Ginsberg noted in her decision, the Court resisted "attributing to Congress a purpose to stop a contractor from retaliating against whistleblowers employed by the public company the contractor serves, while leaving the contractor free to retaliate against its own employees when they reveal corporate fraud."

Employees who believe they have been retaliated against for blowing the whistle must act quickly to protect their rights to bring a claim against their employer.  An employee can file a complaint with OSHA for, among other things, firing, laying off, blacklisting, demoting, adjusting compensation, disciplining, intimidation, threats and other forms of retaliation.  Complaints must be filed within 180 days after an alleged violation of SOX or after the date on which the employee became aware of the violation.

For additional information concerning SOX whistleblower claims, please contact our law firm.