Supreme Court Will Decide Whether Sarbanes-Oxley Whistleblower Protections Extend to Employees of Private Companies

Supreme Court Will Decide Whether Sarbanes-Oxley Whistleblower Protections Extend to Employees of Private Companies

 Excerpt:

More than a decade after passage of the Sarbanes-Oxley Act (SOX), the Supreme Court will hear its first case interpreting provisions of the statute. In Lawson v. FMR LLC, the Court will address whether SOX's whistleblower protections apply to employees of private contractors or subcontractors of a public company.

Background

Congress enacted SOX in 2002 to rectify the widespread accounting and investment disasters created by Enron, WorldCom, and other publicly-traded corporations. SOX is actually the compilation of myriad statutes geared toward increased investor protection.

SOX's Whistleblower Provisions

Section 806 of SOX sets forth the Act's whistleblower protections. The statute prohibits public companies from retaliating against employees reporting fraud or securities violations to the government or a supervisor. In particular, Section 806 as enacted states the following:

SEC. 806. PROTECTION FOR EMPLOYEES OF PUBLICLY TRADED COMPANIES WHO PROVIDE EVIDENCE OF FRAUD.

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(a) Whistleblower protection for employees of publicly traded companies. – No company with a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l), or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)), 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 because of any lawful act done by the employee . . .

Such "lawful acts" include providing information to or assisting in an investigation by a government authority or supervisor regarding conduct the employee reasonably believes constitutes fraud or a securities law violation. [footnotes omitted]

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