In the case that was heard before the U.S. Supreme Court (Lawson v. FMR, U.S. Supreme Court, No. 12-3), the arguments made by FMR, LLC, the parent company of Fidelity Investments (Fidelity), that whistleblower protections should not extend to contractors working for the company, were ultimately rejected. This case affirms the position that under the Sarbanes-Oxley Act, whistleblower protection extends beyond direct employees. In a 6-3 vote, the Supreme Court ruled that whistleblower protections apply to the subcontractors who do business with the publicly traded companies covered by the terms of the Sarbanes-Oxley Act, including law firms, accounting firms, investment advisers, and other companies.
At issue in this case was the whistleblower protection provision in the Sarbanes-Oxley Act, which was passed in 2002 as a means of reforming financial transactions. The Act created a set of standards for management and public accounting firms, as well as publically traded company boards. Attorneys arguing against the broad interpretation of the whistleblower protection provision stated that the ruling would expand the application of the protection from 5,000 companies to more than a million businesses, including small businesses.
This case arose out of the termination of the contract of a senior director of finance and another individual after they reported some improprieties with cost-accounting. Fidelity Investments has mutual funds that are public companies required to file reports with the U.S. Securities and Exchange Commission (SEC). However, the management of the funds is carried out through private companies that are under contract. The whistleblowers in this case, Jackie Lawson and Jonathan Zang, worked for Fidelity Brokerage Services LLC. They brought a whistleblower retaliation case against Fidelity after they were terminated, allegedly as the result of reporting improper company practices. Due to the fact that Fidelity uses a contractor model to operate its funds, there are no direct employees. The dissenting judges stated that the decision was too broad, leading to the possibility of lawsuits brought by low-level employees who were terminated for other reasons after viewing a trivial offense. These federal retaliation claims could be brought against small businesses, leading to many cases that would not have been brought otherwise.
The Supreme Court’s decision in this case was based on the fact that the Sarbanes-Oxley Act granted whistleblower protection to “any officer, employee, contractor, subcontractor, or agent.” The Court ruled that it was not possible for Congress to have passed an act that did not offer protection to someone like Jackie Hosang Lawson and Jonathan Zang, the Fidelity contractor employees who brought the retaliation claim. In writing the opinion for the Court, Justice Ruth Bader Ginsburg addressed the arguments that there would be a lot more retaliation claims by stating that there was little evidence that the floodgates would open.
When a person brings a retaliation claim against a former employer stating that the employment was terminated or the employee was demoted based, at least in part, on retaliation for reporting a financial impropriety. The employee only needs to satisfy the “preponderance of the evidence” standard while the employer must show that the employee was terminated or demoted for legitimate reasons by clear and convincing evidence. Under the interpretation of the Sarbanes-Oxley Act, the financial impropriety might be based on mail fraud or wire fraud. Critics of the ruling claim that this imbalance will lead to inequity.
Whistleblower protections are necessary to provide a means of redress for employees who were terminated after reporting a problem within the business. Although it is never easy to go through a lawsuit, the skilled and compassionate whistleblower and qui tam attorneys at Barrett Law PLLC will work with you to enforce your rights and hold the company accountable for your wrongful termination. To discuss what happened to you, call us at (800) 707-9577. Our attorneys only get paid if we succeed on your claim.