If you report your company for a federal securities violation, just how safe is your job? Curiously, that may depend on where you live. Recently, the Ninth Circuit weighed in, adding to a split among courts across the country regarding retaliation protection for employees who turn in their employers for violations of federal securities laws.

What laws?

The Sarbanes-Oxley Act (SOX) and the Dodd-Frank Act (Dodd-Frank) are aimed at encouraging reporting of unlawful accounting and auditing procedures within public companies. Both SOX and Dodd-Frank include specific protections for employees who engage in that type of reporting. SOX, which was passed in 2002 after the Enron scandal, protects whistleblowers who lawfully provide information about illegal financial practices to “federal agencies, Congress, or a person with supervisory authority over the employee.” Dodd-Frank was passed in 2008 after the subprime mortgage crisis and protects employees who provide information relating to a violation of the securities laws to the Securities and Exchange Commission (SEC).

So what’s the rub on whistleblower protection?

Courts have differing opinions on whether an employee who reports a violation of Dodd-Frank to supervisors within the company, but not to the SEC, is entitled to retaliation protection. In 2013, the Fifth Circuit in Asadi v. G.E. Energy (USA) adopted a narrow definition of whistleblower under Dodd- Frank. In Asadi, an employee was terminated after he made an internal company report of a possible securities law violation. He sued claiming that his firing was a violation of the whistleblower protection from retaliation under Dodd-Frank. The lower court held that since Mr. Asadi only reported the violations within his company, and did not report them to the SEC, he was not entitled to any protection as a whistleblower. The Fifth Circuit agreed and affirmed the dismissal of Mr. Asadi’s case.

Both the Ninth and Second Circuits, however, have taken a much broader view of the whistleblower protection. Those courts noted that Dodd-Frank specifically references SOX protection—which expressly protects reporting securities violations to a supervisor. For that reason, those courts held that the whistleblower protection covers both an employee who only reports problems internally and an employee who reports potential violations to the SEC. In the Ninth Circuit case, Somers v. Digital Realty Trust, a vice president made several reports to senior management regarding possible securities law violations and was terminated before he could report the issues to the SEC. He sued under the Dodd- Frank whistleblower protection provisions and the lower court ruled he was a protected whistleblower even for an internal complaint. The Ninth Circuit agreed that he was entitled to that protection and affirmed the lower court’s refusal to dismiss his case.

Now what?

Where does this split leave employers? Overall, whistleblowers, no matter the context, are usually sympathetic parties to both judges and juries. Common sense would hopefully guide most companies to encourage their employees to report any possible illegal acts that are occurring among their ranks. Despite the Fifth Circuit’s narrow interpretation, the safest course is to avoid even the appearance of retaliation against an employee who is reporting a possible securities law violation. In the event that happens, the employer may have bigger issues to address than the reporting party’s status as an employee.