Federal Courts Endorse an Expanded Definition of a “Whistleblower” – Companies Should Carefully Consider the Who and How When Claims Are Made

by Snell & Wilmer

[author:  Joseph G. Adams]

Federal courts are following the lead of the Securities and Exchange Commission (SEC) in adopting an expansive view of who can be a “whistleblower” under The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Recent decisions are treating employees as whistleblowers even if they raise issues that do not necessarily constitute a violation of the securities laws and even if they do not follow the formal processes set forth by the SEC.

Dodd-Frank was signed into law in 2010. Among other things, Section 922 of Dodd-Frank established a whistleblower program, with payments of cash bounties to whistleblowers who voluntarily provide information to the SEC if the information leads to a monetary sanction that exceeds $1 million. The amount of the bounty ranges from 10 to 30 percent of the overall sanction.

Section 922 of Dodd-Frank also protects whistleblowers from retaliation by their employers, and permits whistleblowers to sue their employers under Dodd-Frank to seek redress for negative actions taken against them for “any lawful act done by the whistleblower,” including any action to directly or indirectly “discharge, demote, suspend, threaten, harass,” or otherwise discriminate a whistleblower. 15 U.S.C. § 78u-6(h)(1)(A).

Since Dodd-Frank was enacted, there has been an open question as to whether the anti-retaliation provisions of Section 922 are broad or narrow. Many employers have contended that the anti-retaliation provisions only apply to whistleblowers who meet the specific definition in Section 922, which defines whistleblowers as individuals who provide “information relating to a violation of the securities laws to the [SEC], in a manner established by rule or regulation.” 15 U.S.C. § 78u-6(a)(6). Under the final rules adopted by the SEC to implement Section 922, whistleblowers must submit information through the SEC’s website or by submitting a Form TCR (Tip, Complaint or Referral) by mail or fax. 17 C.F.R. § 240.21F-9(a).

On the other hand, employees have contended that the anti-retaliation provisions of Section 922 are more expansive and apply to a broader group of employees. In particular, would-be whistleblowers assert that their claims need not constitute a “violation of the securities laws” and that they need not submit their information in the specific ways required by the SEC. In its final rules, the SEC has endorsed a broader construction of the anti-retaliation provisions of Section 922.

To date, the federal courts have followed the SEC and have allowed a broader class of employees to assert claims of retaliation under Section 922. Most recently, a federal district court in Connecticut allowed a claim of retaliation under Dodd-Frank to proceed and rejected the employer’s argument that the employee was not a whistleblower under Section 922. See Kramer v. Trans-Lux Corp., No. 3:11cv1424 (SRU) (D. Conn. Sept. 25, 2012). In Kramer, the plaintiff was a former vice president of human resources who asserted that the company was not following its pension plan. He initially reported his concerns to management, then to the audit committee of the board of directors and finally to the SEC. Following these events, the company allegedly stripped him of his responsibilities and eventually terminated his employment. He later sued and asserted, among other things, a violation of the anti-retaliation provisions of Section 922 of Dodd-Frank.

The employer sought to dismiss the Dodd-Frank claim on the grounds that the plaintiff did not report his concern to the SEC in the required manner (he sent a letter but did not use the required form), and that the conduct at issue did not actually constitute a violation of SEC rules or regulations. The court rejected these arguments and followed the SEC’s regulations, which provide that a whistleblower need only “possess a reasonable belief” that the information “relates to a possible securities law violation.”  17 C.F.R. § 240.21F-2(b). The court also noted that only two other courts had considered this issue and both had adopted the broader definition. The court concluded that the claims asserted by the plaintiff met this broader standard.

In light of these cases, companies should be cautious about relying on a narrow view of which employees can be considered whistleblowers under Dodd-Frank or other federal laws.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Snell & Wilmer | Attorney Advertising

Written by:

Snell & Wilmer

Snell & Wilmer on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.