News Releases

Supreme Court Extends Whistleblower Protections to Contractors


In its first decision under Section 806 of the Sarbanes-Oxley Act of 2002 ("SOX"). the United States Supreme Court earlier this month extended whistleblower protection to employees of a publicly traded company's contractors and subcontractors. Lawson v. FMR LLC, No. 12-3, slip op. at 2 (U.S. Mar. 4, 2014).

Employees of public companies who report certain types of allegedly unlawful conduct or "officer, employee, contractor, subcontractor, or agent...of such company" are protected from discrimination or retaliation for engaging in a protected activity. 18 U.S.C. § 1514A(a).

FMR maintained that merely listing "contractor" and "subcontractor" does not extend protection to the employees of those contractors and subcontractors. Plaintiffs argued that both the employees of public companies and those who are the employees of those public companies' contractors and subcontractors are protected employees under the SOX whistleblower provisions.

The Supreme Court reversed a First Circuit's decision, holding that SOX's whistleblower protection extends to employees of a public company's contractors and subcontractors. The majority decision stated that the whistleblower provision was consistent with the purpose of SOX, i.e., the protection of the investing public from fraud by public companies and preventing "another Enron debacle."

With this decision, the Supreme Court has expanded the number of public companies regulated by the SOX whistleblower provision to potentially millions of private ones. Employers who are contractors or subcontractors of publicly traded companies will have to be cognizant of potential SOX whistleblower retaliation claims. However, the Supreme Court is attempting to prevent unfair employment discrimination and provide anti retaliation protection for whistleblowers in the financial sector.

The message for employers who contract with publicly traded companies is to take a page from the publicly traded company's book. Adopt codes of conduct, disseminate policies to employees and subcontractors, train employees on best practices, and have a robust internal reporting and investigation procedure that is scrupulously followed.

Lindquist attorneys are skilled in development of such policies, review of existing practices, and investigation of reported activities. Please contact us if you seek guidance regarding this topic.

Duff, Christine
Communications and Brand Manager

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