SCOTUS Expands Sarbanes-Oxley Whistleblowing Protections to Private Contractors of Publicly Traded Companies

by Miller Canfield

Corporate whistleblower protections provided to employees of publicly traded companies by the Sarbanes-Oxley Act also extend to employees of the companies’ private contractors, the U.S. Supreme Court ruled on March 4, 2014. The decision exposes private companies that provide services to public companies, such as law firms, accounting firms, and investment advisors, to liability for retaliation allegedly arising from whistleblowing or other protected activity by any employee of the contractor.

The whistleblowing provision of the Sarbanes-Oxley Act prohibits publicly traded companies as well as their contractors, subcontractors, officers, employees, and agents from discriminating against an employee who has provided information or assisted in investigation of mail fraud, wire fraud, bank fraud, securities or commodities fraud, or a violation of any SEC rule or regulation or any provision of Federal law relating to fraud against shareholders. 18 U.S.C. § 1514A. The Act does not clearly state whether the protection afforded to employees of publicly traded companies extends to employees of the listed entities. 

In Lawson v. FMR LLC, two former employees of privately held companies providing advisory and management services to the Fidelity family of mutual funds filed suit against their employers claiming that they were unlawfully discharged for engaging in activities protected by Sarbanes-Oxley. FMR sought dismissal of the suit, arguing that §1514 applies only to employees of publicly traded companies and, therefore, does not provide a cause of action for employees of private contractors. The Supreme Court ruled in favor of the employees, concluding that §1514 “shelters employees of private contractors and subcontractors, just as it shelters employees of the public company served by the contractors and subcontractors.” 

The Court majority noted that Congress enacted Sarbanes-Oxley in the aftermath of Enron and was therefore keenly aware of the role of outside contractors in facilitating fraud. Given “the mischief to which Congress was responding,” the majority concluded that Congress was as focused on protecting lawyers, accountants, and other employees of private contractors from retaliation as it was on protecting employees within a publicly traded company. It further noted that its broad construction of the Sarbanes-Oxley whistleblower provision was necessary to “avoid[] insulating the entire mutual fund industry” from its protections given that most mutual funds are structured so that they have no employees of their own but are instead managed by independent contractors.

The dissent argued that the majority’s interpretation of § 1514A would open the door to lawsuits by any employee of a private business that contracts to perform work for a public company, including cleaning staff and other employees with no connection to the shareholder fraud at which Sarbanes-Oxley is aimed, as well as the nannies, gardeners, and other personal employees of public company officers and employees. The majority expressed doubt that these fears would materialize but declined to determine the bounds of § 1514A because the employees’ actions in this case were so clearly within the scope of the Act’s protections. Nevertheless, the majority indicated that the whistleblower provision would likely protect contractor employees only to the extent that they are acting within the scope of their duties as a contractor to a public company. This issue will certainly be addressed by the lower federal courts as these types of claims likely increase. 

What does this case mean for employers?

Private companies that provide services to publicly traded companies are subject to the whistleblower protections of Sarbanes-Oxley. Given the broad range of conduct protected by Sarbanes-Oxley, both publicly traded and private companies must be cognizant of the increased threat of litigation associated with employees’ conduct relating to any of these activities.

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.

© Miller Canfield | Attorney Advertising

Written by:

Miller Canfield

Miller Canfield 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 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:

- 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.