SOX Protections For Employees Of Public Companies’ Contractors And Subcontractors

The U.S. Supreme Court extends Sarbanes-Oxley whistleblower protections, but the reach of the decision may be curtailed by "limiting principles" referenced by the Court.

On March 4, the U.S. Supreme Court issued its decision in Lawson v. FMR LLC,1 holding that the whistleblower protections afforded by 18 U.S.C. § 1514A of the Sarbanes-Oxley Act of 2002 (SOX) extend to employees of contractors and subcontractors of public companies. The Court addressed concerns about the potential reach of its decision, however, by referencing "various limiting principles" that were advanced by the plaintiffs and Solicitor General, including that an entity may not be considered a "contractor" unless its "performance of [the] contract will take place over a significant period of time" and that SOX would "protect[] contractor employees only to the extent that their whistleblowing relates to the contractor fulfilling its role as a contractor for the public company, not the contractor in some other capacity."2 Because the plaintiffs at issue sought only "mainstream application" of SOX protections, however, the Court determined that it did not need to "determine the bounds of §1514A today."3

Background and Summary

Plaintiffs Jackie Hosang Lawson and Jonathan M. Zang originally filed separate complaints with the Occupational Health & Safety Administration of the U.S. Department of Labor (DOL) alleging unlawful retaliation under § 1514A by their respective former employers—privately held companies (collectively, the defendants) that provide advisory and management services to a family of SOX-covered mutual funds that have no employees and thus were not parties to either case. Each plaintiff separately sought de novo review of his or her complaint by the U.S. District Court for the District of Massachusetts after the 180-day period specified in § 1514A(b)(1) concluded without a final decision by the DOL.

The defendants moved to dismiss both complaints on the grounds that neither plaintiff was covered by § 1514A as both were employees of privately held companies and SOX whistleblower protections extend only to employees of defined publicly traded companies. The district court denied the defendants' motions to dismiss, holding that the whistleblower protections of § 1514A extend to employees of private agents, contractors, and subcontractors to public companies.4

A divided panel of the U.S. Court of Appeals for the First Circuit, reviewing the district court's...