?The U.S. Supreme Court recently agreed to hear a case that could expand workers’ retaliation protections under the federal Sarbanes-Oxley Act of 2002. The case will examine whether a whistleblower must prove an employer acted with retaliatory intent or whether the employer has the burden to show it did not intend to retaliate.
Background
The Sarbanes-Oxley Act protects whistleblowers who report financial wrongdoing at publicly traded companies.
Trevor Murray sued UBS Securities, a broker-dealer based in Weehawken, N.J., and its Swiss parent company, UBS AG, alleging that UBS terminated his employment because he reported alleged fraud. He claimed the company violated the whistleblower protections under the Dodd-Frank Wall Street Reform and Consumer Protection Act. He later alleged a violation of the retaliation prohibitions in Sarbanes-Oxley.
Murray worked as a strategist in UBS’s mortgage strategy group, focused mostly on commercial mortgage-backed securities. He was laid off as part of a reduction in force prompted by the 2008 financial crisis. UBS rehired him in a similar role in 2011, then laid him off again in 2012, stating it was part of another reduction in force.
Murray claimed he was targeted for whistleblowing to his supervisors about illegal efforts by colleagues to skew or sway his independent research analysis. UBS said Murray did not qualify as a whistleblower under the Dodd-Frank Act because he didn’t allege that he reported the misconduct to the U.S. Securities and Exchange Commission (SEC). The company also argued he could not have had a reasonable belief that the conduct he reported was a violation of any applicable law or regulation.
However, in 2017, the U.S. District Court for the Southern District of New York concluded that Murray could be considered reasonable in believing that his colleagues engaged in wrongdoing. It found that his whistleblowing was a contributing factor in his termination.
Murray’s salary ranged from $437,000 to $500,000 per year, according to court documents. In his Sarbanes-Oxley anti-retaliation claim, a jury awarded him $653,300 in back pay and $250,000 in noneconomic compensatory damages.
However, the 2nd U.S. Circuit Court of Appeals reversed that decision and concluded that the law requires a whistleblower to prove that the employer took an adverse employment action with retaliatory intent.
Murray argued that he only needed to show that his whistleblowing was a contributing factor in his termination. In a friend-of-the-court brief, Public Citizen, a nonprofit consumer advocacy organization in Washington, D.C., said the burden is on the employer to show it would have taken the adverse action even without the whistleblowing.
To prove it did not retaliate, “an employer would need to show that it treated an employee adversely for other reasons than whistleblowing. If the decision-makers did not know about the whistleblowing, that would be another way to prove lack of discriminatory intent,” said Susan Coler, an attorney with Halunen in Minneapolis.
“Retaliation can be proved in many different ways, and a whistleblower does not have to produce, for example, drop-dead evidence that a decision-maker put in writing that the employee was being terminated because of whistleblowing conduct,” she added. Examples of retaliation include shunning and isolating someone, excluding someone from business meetings, removing job responsibilities, depriving someone of information needed to do their work, and putting someone on sham or impossible-to-achieve performance improvement plans, she said.
Tips for Employers
Companies should train HR and managers on the subtle ways retaliation can occur and hold accountable anyone who retaliates against employees, Coler said.
“Employers should treat whistleblowers with respect and take action to resolve the whistleblower’s concerns,” she noted. “Whistleblowers just want bad behavior to stop. They should be embraced, rather than shunned.”
Furthermore, employers “should strongly consider enhancing their speak-up policies, so they are aware of internal complaints emanating from employees,” said Gregory Keating, an attorney with Epstein Becker Green in Boston. They should examine and modify their protocols, he said, so they know exactly who will be tasked with investigating concerns that flow through internal speak-up channels.
