SCOTUS: Employees of private contractors get SOX whistleblower protection

Includes employees of accountants, auditors, and lawyers. Today the US Supreme Court decided that Sarbanes-Oxley Act § 1514A’s whistleblower protection includes employees of a public company’s private contractors and subcontractors. Lawson v. FMR LLC (US Supreme Court 03/04/2014) (6-3).

Lawson and others are former employees of FMR and others, private companies that contract to advise or manage mutual funds. As is common in the industry, the mutualfunds served by FMR are public companies with no employees. Both former employees allege that they blew the whistle on putative fraud relating to the mutual funds and, as a consequence, suffered retaliation by FMR.

The 1st Circuit held that the term “an employee” in §1514A(a) refers only to employees of public companies.

The Supreme Court reversed, 6-3, relying on the "ordinary meaning" of the statute. The ordinary meaning of “an employee” in this statute is the contractor’s own employee. The prohibited retaliatory measures enumerated in §1514A(a) - discharge, demotion, suspension, threats, harassment, or discrimination in employment terms and conditions - are actions an employer takes against its own employees. Contractors are not ordinarily positioned to take adverse actions against employees of the public company with whom they contract.

The dissent sees a parade of horribles, for example, "authoriz[ing] a babysitter to bring a federal case against his employer." Oh my, I'm pretty worried now.

[For a list of current employment law cases, see Supreme Court Watch.]