Whistleblower Protection Now Extends to Employees of Private Contractors

The United States Supreme Court has extended whistleblower protections to private contractors of public companies.

The Wall Street Journal reported on the Court’s March 4, 2014 decision wherein the court, in a 6-3 decision led by Justice Ruth Bader Ginsburg, held that whistleblower protections under the 2002 Sarbanes-Oxley Act extend to private contractors and subcontractors of a public company.

The case involved former employees of FMR, LLC (FMR), a group of private companies that contracts to advise or manage public-company mutual funds.  The actual public company mutual funds typically do not have employees.  The former employees of FMR blew the whistle on alleged fraud relating to the mutual fund and claim they were retaliated against as a consequence.  FMR attempted to dismiss the suits by arguing that the whistleblower laws only protect “employees” of public companies, as that term is defined under law, and not employees of the private companies that contract with them.  The Supreme Court disagreed and held that “Section 1514A’s whistleblower protection includes employees of a public  company’s private contractors and subcontractors.”

This ruling means that exposure to Sarbanes-Oxley (SOX) whistleblower protection claims is now something both public companies and private companies have to assess as “any private employer who happens to be a contractor of a public company is subject to a suit,” according to the WSJ article.  The court noted in its opinion that the intent of SOX is to “ward off another Enron debacle” by empowering employees to report fraud.

Following the Supreme Court’s ruling it is expected that private companies will be strengthening their policies and implementing new compliance programs aimed at preventing retaliation against whistleblowers.  As noted in the WSJ article, the ruling also means that these private companies now must be prepared for employee retaliation claims and lawsuits. Employees of private contractors who have reported suspected wrongdoing, and who believe they have suffered retaliation as a result, may file a complaint with the Department of Labor and ultimately proceed to court.

How Do I Get More Information?  

If you believe you have questions about whistleblower protections, or believe you may have been wrongly retaliated against for reporting wrongdoing, contact the law firm of Audet & Partners, LLP to learn more about your legal rights from an experienced whistleblower lawyer  Call us at (800) 965-1461 or fill out the confidential case inquiry form on the right side of this web page.

*Source:  Ensign, Rachel Louise (2014, March 4); Retrieved from http://blogs.wsj.com/riskandcompliance/2014/03/04/whistleblower-ruling-means-new-risks-for-private-companies/

See also:  Supreme Court decision in Lawson v. FMR, LLC, decided March 4, 2014; Retrieved from: http://www.supremecourt.gov/opinions/13pdf/12-3_4f57.pdf