Are your employees covered by the Sarbanes-Oxley Act's whistleblower protection simply because your company contracts with a public company? The Supreme Court made clear this week that the answer to that question is "yes," thus expanding protection to vast numbers of employees and contractors not previously thought to be covered. In general, the Sarbanes-Oxley Act protects covered employees from workplace retaliation, such as termination or demotion, because they have reported fraud, accounting abuses, or violations of the securities laws by publicly traded companies.
In Lawson v. FMR LLC, the Supreme Court addressed who is a covered employee under the Act and held that whistleblower protection extends not only to employees of the public company itself, but also to employees of private contractors and subcontractors retained by the public company. The plaintiffs in the case were former employees of privately held companies (collectively, FMR) that contracted to advise or manage the Fidelity family of mutual funds. They had sued their former employers alleging that, in violation of 18 U.S.C. § 1514A (the whistleblower provision), they reported suspected fraud relating to certain Fidelity mutual funds and, as a result, experienced retaliation. FMR moved to dismiss the lawsuits, arguing that § 1514A protects only employees of public companies who "blow the whistle." The district court denied the motions to dismiss, but a divided panel of the First Circuit reversed on appeal, agreeing with FMR that only employees of public companies were afforded protection by the Act.
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