MORRISON & FOERSTER PROVIDES SHORT ANALYSIS OF SUPREME COURT RULING IN KEY WHISTLEBLOWER CASE

The Supreme Court issued a ruling this week in a closely watched whistleblower case, and Morrison & Foerster has provided a quick analysis below by one of the country’s leading authorities on whistleblower statutes.

A 6-3 ruling in Lawson v. FMR LLC held that workers of private firms that contract with publicly traded companies are protected by federal whistleblower laws. If they see something, they can say something with the same impunity as direct employees – and can be subject to the same rewards.

In reversing a First Circuit decision, the Supreme Court majority held that whistleblower provisions of the Sarbanes-Oxley Act cover employees of private contractors and even subcontractors that are hired by publicly traded companies. The case at issue involves the mutual fund industry, where nearly all individual funds “are structured so that they have no employees of their own but are managed by independent investment advisors.”

The short piece was co-written by MoFo partner Daniel Westman, lead author of a primary legal textbook on whistleblower laws.

Mr. Westman writes that “the Court’s holding extends far beyond the mutual fund industry to cover other contractors, including law and accounting firms.” He provides the following action steps:

• Privately owned companies that have contracts or subcontracts with publicly traded companies may wish to consider revising any policies against retaliation to include protection for employees who raise concerns about shareholder fraud at the publicly traded companies to which services are provided by the private company.
• Human resources or legal personnel at privately owned businesses may wish to train management about the ruling to ensure that negative personnel actions are not based on retaliation for raising concerns pursuant to such revised policies.
• Privately owned companies should be aware of the remedies available under §1514A, particularly reinstatement. Unlike most federal and state employment legislation, the preferred remedy under §1514A is reinstatement of employment, which can be ordered after an administrative investigation by the federal Occupational Safety and Health Administration, and before a full hearing on the merits before an Administrative Law Judge from the U.S. Department of Labor.