U.S. Supreme Court Expands Whistleblower Protections

In reaction to the verdict reached in Lawson vs. FMR LLC, the nation’s top court extended the Sarbanes-Oxley whistleblower protection to include consultants, contractors and advisors. Anyone who performs work for a company – as a steady employee or by contract – cannot be punished in any way for exposing fraud, according to the ruling.

This decision, made on March 4, 2014, stems from a case of two employees from a financial firm doing research for the Fidelity family of mutual funds. In their research, they found that the company in question was overstating its expenses and that that the company could be committing securities fraud. At the very least, the two former employees claimed they exposed questionable mutual fund management practices. Upon reporting this, the employees claimed they were reprimanded and fired in retaliation.

In response, the two dismissed employees filed a lawsuit under the Sarbanes-Oxley Act, only to see their suit defeated. The original ruling said that the whistleblower protections only extended to direct employees of public firms, not outside consultants and advisors.

The appeal in the U.S. Supreme Court was much more successful. Justice Ruth Bader Ginsburg said that the initial ruling was a misinterpretation of the whistleblower protections. In her majority statement, she wrote: “We hold, based on the text of Section 1514A, the mischief to which Congress was responding, and earlier legislation that 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. Given Congress’s concern about contractor conduct of the kind that contributed to Enron’s collapse, we regard with suspicion construction of Section 1514A to protect whistleblowers only when they are employed by a public company, and not when they work for the public company’s contractor.”

Opponents of the Supreme Court 6-3 ruling argued that the extended protections would open the floodgates for attorneys trying weak cases, in hopes that companies will look to settle, rather than accumulate legal costs through a long litigation battle.

Only time will tell what impact these new protections will have on the overall public. Under the Consumer Protection Act, Dodd-Frank Wall Street Reform and the Financial Reform Act, whistleblowers who report securities law violations are protected against retaliation and are entitled to a reward if the Securities and Exchange Committee (SEC) Commodity Futures Trading Commission or any other government entity recovers funds as a result of the information provided.

The Qui Tam attorneys at Begelman & Orlow have been defending the rights of whistleblowers throughout the United States for more than 115 years. If you’ve discovered a person or company making fraudulent claims for government funds, contact us immediately for a consultation. Call 866-627-7052.

Request an Appointment

Over 115 Years combined experience protecting your rights New Jersey Employment Law Attorneys A Full Service Law Firm Handling Cases Across Pennsylvania and New Jersey

Serving Clients Nationwide

Cherry Hill Office

411 Route 70 East
Cherry Hill, NJ 08034

Telephone: 856.428.6020

Telephone: 856-547-7400

Fax: 856-428-5485