Posted Mar 04, 2014 03:49 pm CST
Federal whistleblower protections that shield employees of public companies from retaliation also protect those who work for the companies’ privately held contractors and subcontractors, the U.S. Supreme Court has ruled.
The court ruled in a case involving whistleblowers who work at privately held companies advising Fidelity mutual funds, but Justice Ruth Bader Ginsburg’s opinion (PDF) for the court indicated that employees of law firms could also be protected in such cases.
Ginsburg framed the issue this way: Do whistleblower protections of the he Sarbanes-Oxley Act “shield only those employed by the public company itself, or does it shield as well employees of privately held contractors and subcontractors—for example, investment advisers, law firms, accounting enterprises—who perform work for the public company?” Ginsburg said the answer was yes.
Absent whistleblower protections for privately held subcontractors, Ginsburg said, “legions of accountants and lawyers” would be denied protections under the law, enacted in the aftermath of Enron’s collapse. She says Congress acted after learning that some employees of Enron and its accounting firm, Arthur Andersen, faced retaliation for trying to report misconduct.
Ginsburg’s opinion was joined in full by Chief Justice John G. Roberts Jr. and Justices Stephen G. Breyer and Elena Kagan. Justice Antonin Scalia, in an opinion joined by Justice Clarence Thomas, concurred in Ginsburg’s conclusion based on her analysis of the statute’s text, but disagreed with her occasional excursions “into the swamps of legislative history.”
Justice Sonia Sotomayor wrote a dissenting opinion that was joined by Justices Anthony M. Kennedy and Samuel A. Alito Jr. Sotomayor argued that the majority opinion had “a stunning reach.”
“As interpreted today,” Sotomayor wrote, “the Sarbanes-Oxley Act authorizes a babysitter to bring a federal case against his employer—a parent who happens to work at the local Walmart (a public company)—if the parent stops employing the babysitter after he expresses concern that the parent’s teenage son may have participated in an Internet purchase fraud. And it opens the door to a cause of action against a small business that contracts to clean the local Starbucks (a public company) if an employee is demoted after reporting that another nonpublic company client has mailed the cleaning company a fraudulent invoice.”
The case is Lawson v. FMR.