Yesterday, the U.S. Supreme Court held, in a 6-3 decision - its first regarding a Sarbanes-Oxley (SOX) whistleblower case - that SOX's anti-retaliation provision covers employees of a public company's private contractors and subcontractors.
This case was brought by two former employees of FMR LLC, a private company that contracted to advise and manage Fidelity Investment's mutual funds. As is typical in the mutual fund industry, although the mutual fund itself is a public company, it is operated and managed by employees of a separate private company. In this matter, plaintiffs, who were employees of the private company, alleged that they engaged in whistleblowing after discovering putative fraud relating to the mutual funds, and that they were thereafter retaliated against and discharged. Each plaintiff then commenced a retaliation claim against FMR (but not against the mutual funds) pursuant to SOX's whistleblower protections.
The SOX provision at issue before the Court states: "No [public] company . . ., or any . . . contractor [or] subcontractor . . . of such company, may discharge, demote, suspend, threaten, harass, or . . . discriminate against an employee in the terms and conditions of employment because of [whistleblowing activity]." 18 U.S.C. §1514A(a). Justice Ruth Bader Ginsburg, delivering the opinion of the Court, found that the ordinary meaning of this provision's language supports the holding that the anti-retaliation provision of SOX covers employees of a public company's private contractors and subcontractors. Justice Ginsburg also noted that the Court's reading supports SOX's goal to prevent another Enron situation and avoids shielding the whole of the mutual fund industry (which primarily relies on contractors and not employees). The majority opinion also asserts that the Court's decision will not lead to a tidal wave of SOX whistleblower lawsuits, which is disputed by the dissent.
Given the Court's decision in this case, employers that are privately held companies, but which contract to provide services to public companies, must be aware that SOX's whistleblower protections now extend to their employees to the extent such employees provide services to public companies. Such whistleblowing may include providing information or assisting an investigation regarding conduct that an employee reasonably believes constitutes mail fraud, wire fraud, bank fraud, securities or commodities fraud, a violation of any U.S. Securities and Exchange Commission rule or regulation, or any other provision of federal law relating to fraud against shareholders. If an employee engages in such protected activity, he or she is shielded from retaliation, including discharge, demotion, suspension, threats, harassment, or any other discrimination in the terms and conditions of that individual's employment. Accordingly, for an employer to take an adverse action against a whistleblower, it must have a legitimate business reason for doing so that is unrelated to the employee's whistleblowing conduct. The Court's decision does not change this legal requirement, but it does broaden the scope of its application.
The case name is Lawson v. FMR LLC et al., case number 12-3 at the United States Supreme Court.
Patrick McCarthy and Christopher Stracco are scheduled to speak on Friday, February 10, at the New Jersey Institute of Continuing Legal Education's Annual 2017 Redevelopment Law Institute at the Renaissance Woodbridge Hotel in Iselin, New Jersey.
On January 17, John DeSimone and Heather Weine Brochin presented a discussion about employment agreements and negotiation strategies at the NYU School of Medicine.
On October 10, James Bowers will share his personal perspectives on the History of Slavery and Race in South Carolina at UConn School of Law.
Day Pitney Alert
Rachel Gonzalez, Mary Rogers and Patrick McCarthy wrote an article "NLRB Eases Organizing of Temporary Workers" for CBIA’s H&R Safety Newsletter on the impact of the recent decision of the National Labor Relations Board (NLRB).
Michael Furey was quoted in an article, "The Biggest New Jersey Cases of 2016," which was published in Law360.
Michael Furey was quoted in an article, "NJ Panel Grills Hospitals Over Discovery In Horizon Row," in Law360. Day Pitney is representing five New Jersey hospitals in a lawsuit against Horizon Healthcare, relating to its new, multi-tiered health plan called OMNIA. Furey advocated on behalf of the five hospitals on Wednesday before a New Jersey appeals court that Horizon should turn over a consultant's report and certain agreements relating to how Horizon categorized hospitals under its controversial OMNIA Alliance program and the impact of OMNIA on the hospitals. These Tier 2 hospitals are alleging various claims, including breach of contract and citing concerns that being ranked in the lower tier of the program will cost them business. Horizon contends the sought-after materials, including a financial analysis, strategic alliance agreements and rate agreements between the insurer and OMNIA network hospitals, contain trade secret and confidential information. "If we're going to prove our hospitals should be Tier 1 alliance members, we need the documents and the information," Furey said.
Hartford, Conn., May 26, 2016 - Day Pitney LLP is pleased to announce that Employment and Labor attorney Albert Zakarian has been chosen as a Lifetime Achievement winner of The Connecticut Law Tribune’s second annual Professional Excellence Awards 2016. The Professional Excellence Awards 2016 recognize 28 lawyers, who were chosen from over 60 nominees, as either Lawyer of the Year or Lifetime Achievement recipients, according to The Connecticut Law Tribune. The Lifetime Achievement Awards honor "attorneys who have excelled over a career."
John McLafferty was quoted in an article, "Final overtime regulations less drastic than feared," in Massachusetts Lawyers Weekly. In the article, McLafferty discusses how the Department of Labor’s final revised federal overtime regulation will impact businesses. "The reality is that the rule made more people eligible for overtime; it didn’t create any obligation for employers to pay more overtime," he said. McLafferty added that the regulation’s impact on employees could have a wider effect on office culture and policies, which may affect a company’s ability to attract and retain workers. In addition, he noted that employers should take this opportunity to ensure that all of their employees are properly classified for overtime purposes.
Albert Zakarian has been chosen as a winner of The Connecticut Law Tribune's second annual Professional Excellence Awards. The awards recognize two dozen lawyers for outstanding service to the profession during their long careers. The publication received more than 70 nominations. Profiles of awardees will appear in the Law Tribune in May. An event will also be held in May to recognize the winners. More about the awards can be found here.