Supreme Court Holds That Sarbanes-Oxley (SOX) Act Protects Employees of Private Contractors

In Lawson v. FMR, the Supreme Court recently broadened the reach of the Sarbanes-Oxley Act of 2002, which was enacted following the collapse of Enron Corporation.

The whistleblower portion of the Sarbanes-Oxley Act, codified at 18 U.S.C. § 1514A, provides:

No [public] company . . . , or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment be- cause of [whistleblowing or other protected activity].

The Supreme Court addressed the following question: “Does § 1514A shield only those employed by the public company itself, or does it shield as well employees of privately held contractors and subcontractors—for example, investment advisers, law firms, accounting enterprises—who perform work for the public company?”

It held, “based on the text of § 1514A, the mischief to which Congress was responding, and earlier legislation Congress drew upon, that the provision shelters employees of private contractors and subcontractors, just as it shelters employees of the public company served by the contractors and subcontractors”.

It thus agreed with plaintiff’s reading of the statute as stating that “[n]o … contractor … may … discriminate against [its own] employee [for whistleblowing]”, and rejected FMR’s interpretation, which would have required inserting the words “of a public company” after the words “an employee.”

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