U.S. Supreme Court Rules Employees Of Private Companies May Bring Claims For Whistleblower Retaliation Under Sarbanes-Oxley

Today, in an opinion issued in Lawson v. FMR LLC, Case No. 12-3, the United States Supreme Court held that the Sarbanes-Oxley Act of 2002 provides whistleblower protections for employees of private contractors performing work for public companies. The expansive interpretation of the statute was based on the Court's reading of the statutory text and its understanding of the congressional purpose behind the Act.

Section 806 of the Sarbanes-Oxley Act, codified at 18 U.S.C. § 1514A, provides

No [public] company . . . or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee—

"(1) to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of [various criminal statutes], any rule or regula¬tion of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders, when the information or assistance is provided to or the investigation is conducted by [a federal agency, Congress, or supervisor] . . . ."

The question presented to the Court was whether Section 806 extends to provide a private cause of action for employees of privately held contractors that performed work for public companies who claimed that they had been retaliated against due to their whistleblower activity.

The Petitioners, Jackie Hosang Lawson and Jonathan Zang, had worked for entities affiliated with Fidelity, the mutual fund. Lawson and Zang each claimed that they had suffered adverse employment action in retaliation for raising concerns about purportedly unlawful practices in which their employer had engaged. After Lawson and Zang filed administrative complaints with the Department of Labor's Occupational Safety and Health Administration - the regulatory entity with the responsibility of administering the Sarbanes-Oxley Act's whistleblower regulations - they brought suit in the U.S. District Court for the District of Massachusetts. The Respondents moved to dismiss the suits, arguing that Lawson and Zang had failed to state a claim for relief under 18 U.S.C. § 1514A because their employers were private contractors, not public companies regulated by the statute.

The District Court rejected the...