Wyatt Employment Law Report

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U.S. Supreme Court Extends SOX Whistleblower Protection to Employees of Private Contractors Who do Business with Public Companies

By R. Joseph Stennis

In Lawson, et. al. v. FMR LLC, No. 12-3 (decided March 4, 2014), a divided U.S. Supreme Court confirmed that the whistleblower protections contained in the Sarbanes-Oxley Act of 2002 (“SOX”) extend to employees who work for private contractors that do business with public companies. At issue in the case was a bit of text in SOX which provides that, “[n]o public company. . . or any . . . contractor . . . of such company may [retaliate] against an employee . . . because of [SOX- protected activity].”

The U.S. Court of Appeals for the First Circuit had held this language applied exclusively  to employees of  public companies and not to employees of private contractors that do business with public companies. The First Circuit’s ruling was  in sharp contrast to  decisions issued by the Administrative Review Board of the U.S. Department of Labor (“ARB”).  For example, in Spinner v. David Landau & Assoc. LLC, Nos. 10-111 and 10-115 (decided May 31, 2012), the ARB held that a private contractor’s employee who was a whistleblower as to fraudulent activity by his company was covered by SOX and therefore protected by its anti-retaliation provisions.

In Lawson, the whistleblower plaintiffs were employed by private companies that performed as advisers to public mutual fund institutions.  Petitioners, Jackie Lawson and Jonathan Zang, urged the High Court to overrule the First Circuit and extend whistleblower protections to employees of private contractors of publicly held companies. The respondents argued that the petitioners’ interpretation would lead to an unlimited application of the statute.  Ultimately, the Supreme Court in a 6-3 ruling—penned by Justice Ginsburg—concluded that the plain meaning of SOX’s text, SOX’s legislative history, and its overall statutory purpose favored a wider interpretation and reading of the provisions than favored and advocated by the respondent companies.

Thus, Lawson establishes that an employee of a private contractor that does business for a public company and is retaliated against for engaging in SOX protected conduct would be entitled to pursue an anti-retaliation claim under SOX against that private employer.

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Supreme Court Decides FLSA Anti-Retaliation Provision Includes Oral Complaints

By Edwin S. Hopson

The U.S. Supreme Court on March 22, 2011,  issued its decision in Kasten v. Saint Gobain Performance Plastics Corp., 563 U.S. ____, No. 09-834 (2011) holding, in a 6 to 2 decision authored by Justice Breyer, that under the Fair Labor Standards Act (FLSA) anti-retaliation provision an oral complaint to a supervisor comes within the scope of 29 U. S. C. §215(a)(3), which forbids employers from discharging “any employee because such employee has filed any complaint” claiming a violation of the FLSA.  Kasten had lost in the district and appellate courts which had found that the term “filed” required a written complaint.  Justice Breyer, in a decision joined in by Chief Justice Roberts, and Justices Kennedy, Ginsburg, Alito and Sotomayor (Justice Kagan took not part in the case), noted that the statutory language must be viewed in context and with the purpose of the law in mind.  He also pointed out that a number of agencies allow oral “filings” and that the U.S. Department of Labor’s consistent interpretation of the provision included oral complaints as well as written ones.   The issue of whether the complaint must be filed with the government in order to come within the anti-retaliation provision was expressly not decided by the court.

In dissent, Justice Scalia, joined by Justice Thomas, argued, among other things, that the complaint must be in writing to be consistence with the term “complaint” as used elsewhere in the FLSA.  He also contends that it made no sense to decide the “oral versus written” question while side-stepping the question of who the addressee of the complaint should be, stating:  “[i]t presumably does not include a complaint to Judge Judy.” Slip opinion, page 8.