The collapse of the company Enron in 2001 prompted serious legislative change that was aimed at helping protect investors from fraudulent accounting activities. We are talking about the Sarbanes-Oxley Act. This piece of legislation was not only directed at investors, but it also provided protection for employees who reported an employer’s illegal activity — more commonly referred to as whistleblowers.
Two individuals recently filed a whistleblower rights lawsuit citing the protection of Section 806 of Sarbanes-Oxley. This section is titled “Whistleblower Protection for Employees of Publicly Traded Companies,” but what does that mean? Who is covered as an “employee of a publicly traded company”?
In this case, the two individuals worked for a private company that contracted with a public company. This private company was tasked to provide directive advice or manage mutual funds. These two individuals were not direct employees of the public company, and thus, argued their private employer, not protected by the act.
The trial court agreed with the private employer and dismissed the case. When the employees appealed, the court upheld the dismissal. The case made its way up to the Supreme Court of the United States. There, the justices disagreed with the basis of the dismissal.
In a 6-3 vote, the court held that the Sarbanes-Oxley section could not be so limited to include only direct employees of the publicly traded company. This section, the majority ruled, “shelters employees of private contractors and subcontractors, just as it shelters employees of the public company served by contractors and subcontractors” citing a portion of the dissent written by Judge O. Rogeriee Thompson of the appeals court.
Congress understood “that outside professionals bear significant responsibility for reporting fraud by the public companies with whom they contract,” noted Justice Ruth Bade Ginsburg when she authored the majority opinion.
The law may be a clear set of words, but there is often room for interpretation. The job of a Palm Beach employment attorney is to ensure that this interpretation reflects the intent of the law, but more importantly upholds the rights of the employee.
Source: Courthouse News Service, “Supreme Court Extends Whistleblower Protection,” Annie Youderian, March 4, 2014
