Supreme Court Expands Sarbanes-Oxley Whistleblower Protections

March 5, 2014

On March 4, the United States Supreme Court handed down its opinion in Lawson et al. v. FMR LLC et al. (No. 12-3), issuing an important decision expanding Sarbanes-Oxley whistleblower protections.

Sarbanes-Oxley was passed in 2002 in the wake of financial scandals at Enron and other public companies. It provides, in part, 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 Supreme Court ruled that those protections extend not only to employees of publicly traded companies, but also to employees of private contractors and subcontractors that do business with public companies.

Although Sarbanes-Oxley is not limited in application ot the financial industry, this case did arise in the context of fraud relating to mutual funds. It is common practice for publicly traded mutual funds to have no traditional employees of their own, but instead for them to rely on external management by (private) third party companies. The plaintiffs in Lawson were employees of those private contractors who filed a lawsuit claiming that they were retaliated against after they blew the whistle on fraudulent activities involving the mutual fund. The private employers asked to have the lawsuit thrown out, arguing that Sarbanes-Oxley protected only employees of public companies. A federal District Court rejected that argument, but the First Circuit Court of Appeals reversed and dismissed the case. The United States Supreme Court granted the employes’ petition for certiorari, and in its March 4 opinion, authored by Justice Ginsburg, held that Sarbanes-Oxley’s whistleblower protections apply to employees of private companies who do business with public companies. The Court remanded the case to the District Court, where the employees will now have the right to have their case heard by a jury.

This is an important decision for employees of private companies. Under the ruling, employees who work as investment advisers, lawyers, accountants, and in other capacities for public companies are protected against being fired or otherwise retaliated against if they report fraudulent activity, even if they are technically employed and paid by a private contractor or subcontractor. You can read the entire opinion here.

The employment lawyers at Parks, Chesin & Walbert have handled numerous whistleblower claims and retaliation lawsuits under Sarbanes-Oxley, the Georgia Whistleblower Act, and other federal and state laws. If your employer – public or private – has taken adverse action against you because you reported fraud, waste, or abuse, it is important that you seek legal counsel right away to ensure that your legal rights are protected. Often employers will present a fired employee with a severance agreement promising to pay them a modest amount of money in exchange for waiving all of their legal rights. Employees often do not know that the value of the rights they are waiving far exceeds what the employer is offering to pay as severance, and they feel pressured to sign within the short period of time they are given to do so. Contact us right away if you have been fired so that we can review your situation and any severance agreement you have been offered and advise you as to whether it makes sense – both legally and practically – to pursue a whistleblower claim.

Client Reviews
★★★★★
Their insight, expertise and experience provided us with invaluable guidance during times when we faced critical decisions. Lewis M.
★★★★★
Just wanted to send a formal thank you note to emphasize just how grateful I am for the outcome of my case! You truly have taken the stress out of this unfortunate situation. N.S.
★★★★★
Very professional, updated me once a week, very thorough and knocked it out of the park. We got everything we were looking for. The overall staff was very encouraging and gave me the strength to keep going. Chris J.