On February 8, 2024, the U.S. Supreme Court reversed a federal court of appeals decision, resolving a relatively recent federal appeals court split regarding the standard for liability in Sarbanes-Oxley whistleblower claims. In 2022, the U.S. Court of Appeals for the Second Circuit held that employees who allege that they were retaliated against by their employers for whistleblowing activity and who then file suit under the Sarbanes-Oxley Act must present specific proof of the employer’s “retaliatory intent” to prevail on their claim. In a 9-0 unanimous decision, the Court (Sotomayor, J.) rejected the Second Circuit’s high bar for these lawsuits and sided with other federal courts of appeals that under Sarbanes Oxley a claimant need only show that retaliation was a “contributing factor” in an employment decision, and once they do the burden shifts to the employer to prove it would have taken the employment decision even without considering the protected activity.

This case underscores what most employers and human resources professionals already know: compliance with workplace anti-discrimination and anti-harassment laws is critical to a healthy workplace and avoiding time-consuming and costly lawsuits and other (often public) disputes. A critical component of that compliance is understanding and ensuring that employees who complain about discrimination or harassment are not retaliated against for raising those complaints. Read part two of our series—Important Lessons for Employers from SCOTUS Whistleblower Decision—to learn how employers can implement best practices to avoid workplace retaliation claims.

Background

Overview of the Sarbanes-Oxley Act of 2002

In the wake of several major corporate and accounting scandals, Congress enacted the Sarbanes-Oxley Act of 2002 to prevent fraudulent accounting and financial practices at publicly traded companies. Sarbanes-Oxley also includes robust anti-retaliation protections that prohibit publicly traded companies from retaliating against an employee because of the employee’s participation in either an investigation or a formal proceeding regarding alleged violations by the company of certain securities and anti-fraud laws. An employee who feels that they have faced such retaliation may, after first seeking relief from the U.S. Department of Labor (DOL), sue the employer in federal court.

Murray’s Lawsuit Against UBS

With that overview, let’s turn to the facts in Murray v. UBS Securities, LLC. In 2011, UBS hired Trevor Murray as a strategist to research and report on certain UBS products, services, and transactions for current and potential clients. Under Securities and Exchange Commission (SEC) regulations, Murray was required to certify that his reports were independently produced, reflected his own views, and were not tied to his compensation. But according to Murray, two senior employees of UBS’s trading desk improperly pressured Murray to skew his research and to publish reports to support their business strategies. For example, Murray testified that in September 2011, one senior UBS representative told him “if we’re going to accomplish what we want to accomplish as a business, it’s important that we maintain consistency of message between originations, trading desk, and research,” and that “it would be best if you clear your research articles with the [trading] desk going forward,” and the other agreed.

Murray alleged that he complained about this pressure to his direct supervisor and that after that he was excluded from routine meetings and ultimately terminated. UBS argued that Murray was laid off as part of a strategic reorganization triggered by the company’s financial difficulties.

District Court Proceedings

After exhausting his efforts to obtain relief with the DOL, Murray filed a whistleblower action in federal district court, alleging that UBS terminated his employment in violation of Sarbanes-Oxley’s anti-retaliation provision. UBS argued it was entitled to judgment as a matter of law on Murray’s whistleblower claim because Murray “failed to produce any evidence that [his supervisor] possessed any sort of retaliatory animus toward him.” The district court denied the motion.

The case went to trial before a jury. The court instructed the jury that, to prove his retaliation claim, Murray must establish by a preponderance of the evidence that his complaint was “a contributing factor” in his termination: “For a protected activity to be a contributing factor, it must have either alone or in combination with other factors tended to affect in any way UBS’s decision to terminate plaintiff’s employment.” The jury instructions clarified that Murray was “not required to prove that his protected activity was the primary motivating factor in his termination, or that UBS’s articulated reasons for his termination...was a pretext” to satisfy the contributing factor element. UBS unsuccessfully argued that the jury instructions lacked a key element of a retaliation claim—namely, proof of UBS’s retaliatory intent which it asserted was Murray’s responsibility to establish.

The jury therefore found in Murray’s favor, concluding that UBS had failed to prove that it would have fired Murray even if he had not engaged in protected activity. Murray was awarded $903,300 in damages: $653,300 in back pay, $250,000 in non-economic damages, and $1,769,287.52 in attorney’s fees and costs.

Second Circuit Appeal

On appeal, the Second Circuit (which reviews federal cases from the states of Connecticut, New York, and Vermont) vacated the jury’s verdict and remanded for a new trial. In a groundbreaking decision in 2022, the Second Circuit held that the district court erred by not instructing the jury that the “contributing factor” element required Murray to prove that UBS had retaliatory intent in terminating his employment. This was at odds with the Fourth, Fifth, Ninth, and Tenth Circuits on a whistleblower’s burden of proof under Sarbanes-Oxley.

Supreme Court of the United States

The U.S. Supreme Court reversed the Second Circuit, resolving the split in the Federal Circuit, and held that under Sarbanes Oxley, a whistleblower must prove only that their protected activity was a contributing factor in the employer’s unfavorable personnel action (here, the termination), but is not required to prove retaliatory intent. The Court reasoned that “showing that an employer acted with retaliatory animus is one way of proving that the protected activity was a contributing factor in the adverse employment action, but it is not the only way.”

This significant decision has far-reaching implications for employers dealing with claims of retaliation in the workplace. In part two of our series—Important Lessons for Employers from SCOTUS Whistleblower Decision—we discuss best practices and key takeaways for employers resulting from the Murray decision.