U.S. Supreme Court Extends SOX's Whistleblower Protection To Employees Of Publicly Traded Company's Contractors

On March 4, 2014, the United States Supreme Court decided Lawson v. FMR LLC, holding that SOX's whistleblower protection extends to employees of a publicly traded company's contractors and subcontractors. Lawson v. FMR LLC, 571 U.S. __ (2014). Notably, this is the first time the Supreme Court has decided a case under Section 806 of the Sarbanes-Oxley Act of 2002 ("SOX").

Background

Section 806 of SOX, codified at 18 U.S.C. § 1514A, prohibits retaliation against employees of public companies who report certain types of allegedly unlawful conduct. Section 1514A(a) provides that no public company (i.e., registers securities under Section 12 of the Securities Exchange Act of 1934, required to file reports under Section 15(d) of the Securities Exchange Act of 1934 or certain subsidiaries thereof) or "officer, employee, contractor, subcontractor, or agent...of such company" may "discriminate against an employee" for engaging in a protected activity. 18 U.S.C. § 1514A(a).

Two former employees, Jackie Hosang Lawson and Jonathan M. Zang brought separate suits alleging unlawful retaliation under § 806 of SOX against FMR LLC and other related private companies ("FMR") that provide, pursuant to contract, investment advising services to the Fidelity family of mutual funds. The Fidelity mutual funds were not parties to either suit and are investment companies organized under the Investment Company Act of 1940. The Fidelity mutual funds are not owned, controlled by or affiliated with FMR.

After initially filing complaints with the Occupational Safety & Health Administration ("OSHA"), Lawson and Zang commenced de novo actions in federal district court. FMR moved to dismiss Plaintiffs' claims, arguing they were not "covered employees" under § 1514A(a) because the statute does not protect employees of private subsidiaries of public companies. FMR maintained that the listing of "contractor" and "subcontractor" (along with other possible actors) merely identifies those who are barred from retaliating against employees of public companies, but does not extend protection to the employees of those contractors and subcontractors. Plaintiffs took the position that both the employees of public companies and those who are the employees of those public companies' contractors and subcontractor are protected employees under the SOX whistleblower provisions. Following the district court's denial of its motion to dismiss on this basis, FMR successfully petitioned for an interlocutory appeal of § 1514A(a)'s applicability to the Plaintiffs to the First Circuit Court of Appeals.

The First Circuit's Decision

On February 3, 2012, as the first (and only)...