U.S. Supreme Court Determines Scope of Whistleblower Protection under the Sarbanes-Oxley Act

In Lawson v. FMR LLC, whistleblowers worked for mutual fund advisers, rather than the public company mutual funds. The Court of Appeals determined they did not fall within the whistleblower protections of the Sarbanes-Oxley Act of 2002. The Court of Appeals held that the protections only applied to employees of public companies, not those of contractors, while the Administrative Review Board of the Department of Labor in Spinner v. David Landau & Assoc. LLC held that a contractor’s employee was protected by Sarbanes-Oxley. The Supreme Court sought to determine the scope of whistleblower protections since there had been a split in interpreting this provision.

The Supreme Court reversed the Court of Appeals, ruling that the anti-retaliation protection provided to whistleblowers by the Sarbanes-Oxley Act applies to employees of private companies that contract with public companies, for the following reasons:

• The majority opinion reiterates the goal of Sarbanes-Oxley, which is to “safeguard investors in public companies and restore trust in the financial markets following the collapse of the Enron Corporation.” The type of harm that the whistleblowers tried to prevent in Lawson is the exact type of harm the Act seeks to prevent.
• The statutory text at issue states that no public company or any contractor may retaliate against an employee because of actions protected by Sarbanes-Oxley.
• The Act, given its text and purpose, should protect employees of contractors of private companies, not just employees of public companies.
• The majority noted that the Sarbanes-Oxley act was based on an air-carrier whistleblower statute that covered employees of air carriers’ contractors and subcontractors.
• The Defendants argued that the limited scope of whistleblower protection is evident from the statute’s caption, which reads, “Whistleblower Protection for Employees of Publicly Traded Companies.” The Court explained, however, that when a caption is inconsistent with the statute’s text, the text trumps the caption.

The Court also rejected Defendants’ assertions that a broader reading of the statute’s protections could lead to claims by household employees of corporate officers, since measures to prevent an overly expansive interpretation could be implemented.

If you are an employee or employer with questions about whistleblower protections, contact a Washington D.C. attorney who is highly experienced in labor and employment law.