Supreme Court Rules that the Employees of Private Contractors Protected by SOX’s Whistle-Blower Provision
A divided Supreme Court ruled in Lawson v. FMR LLC
, that the anti-retaliation protection provided to whistleblowers by the Sarbanes-Oxley Act of 2002 (“SOX”) applies to employees of private complaints that contract with public companies. The whistleblower plaintiffs worked for mutual fund advisors, rather than the public company mutual funds themselves. This is common practice in the mutual fund industry.
The statute at issue provides that “No public company . . . or any . . . contractor . . . of such company may [retaliate] against an employee . . . because of [SOX-protected activity].” The Court ruled that the statutory text, along with the law’s purpose, favored an interpretation that extended protections to employees of contractors of public companies. With regards to the text, the Court ruled that the ordinary meaning of the text meant that “employee” included a contractor’s employee. Further, the majority found that the Enron situation that prompted the statute included contractors and subcontractors that participated in Enron’s fraud and cover-up. Given Congress’ concern about contractor conduct, the statutory purpose was served by a broad interpretation.
The majority rejected the dissent’s concern that at broad reading of the statute could lead to claims by household employees of corporate officers.
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