In Lawson v. FMR LLC, No. 10-2240, 2012 U.S. App. LEXIS 2085 (1st Cir. Feb. 3, 2012), the United States Court of Appeals for the First Circuit, in a case of first impression, held that the whistleblower provision in Section 806 of Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A (“SOX”), applies only to employees of public companies, and does not protect employees of private companies who are contractors or subcontractors for the covered public company. This decision, the first decision by a United States Court of Appeals on this issue, helps clarify the definition of “covered employee” under whistleblower provisions of SOX.
Plaintiffs Jackie Hosang Lawson and Jonathan M. Zang each brought separate actions in which they alleged unlawful retaliation by their employers in violation of the whistleblower protections of Section 806 of SOX. Section 806(a) of SOX provides, in relevant part, that “[n]o company with a class of securities registered under section 12 of the Securities Exchange Act of 1934 . . . 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 . . . . ”
The employers of Lawson and Zang were each private companies that provided advising or management services by contract to the Fidelity family of mutual funds. Lawson’s and Zang’s employers each moved to dismiss the claims arguing, in part, that the plaintiffs were not “covered employees” within the meaning of Section 806. The United States District Court for the District of Massachusetts denied the motions, ruling that the SOX whistleblower protection of Section 806 extended to employees of private agents, contractors and subcontractors to public companies. Defendants moved for an interlocutory appeal and the district court certified a “controlling question of law” to the First Circuit.
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