Supreme Court Confirms Retaliatory Intent Is Irrelevant in Proving SOX Retaliation

Vinson & Elkins LLP

Vinson & Elkins LLP

On February 8, 2024, in its Murray v. UBS Securities, LLC1 opinion, the U.S. Supreme Court unanimously held that a whistleblower pursuing a claim for retaliation under the Sarbanes-Oxley Act of 2002 (“SOX”) does not need to show that the employer acted with “retaliatory intent.” The holding, which resolves a circuit split between the Second Circuit and the Fifth and Ninth Circuits, aligns with Supreme Court precedent analyzing other employment discrimination statutes with “contributing factor” causation standards.2 The opinion makes clear that an employer who treats a SOX whistleblower in a different and adverse manner “because of” the whistleblowing activity has engaged in unlawful discrimination, regardless of the employer’s lack of animosity.

SOX provides that a publicly traded company (and other covered employers) cannot “discharge, demote, suspend, threaten, harass, or in any other manner discriminate” against an employee because of the employee’s protected whistleblowing activity.3 In order to establish retaliation under SOX, generally an employee must demonstrate that (1) he engaged in “protected activity,” (2) the employer knew of such protected activity and subjected the employee to an adverse employment action, and (3) the protected activity was a contributing factor with respect to the adverse employment action. In Murray, the Supreme Court analyzed the contributing factor element.

At the lower level, in interpreting SOX’s anti-retaliation language, the Second Circuit held that the word “discriminate” requires an aggrieved employee to prove separately that the employer took adverse action with “retaliatory intent.”4 The Supreme Court rejected this reading of the statute, reasoning that “[a]n animus-like ‘retaliatory intent’ requirement is simply absent from the definition of the word ‘discriminate.’”5 The opinion made clear that to hold otherwise “would ignore [SOX’s] burden-shifting framework.”6 Instead, the employee is required to meet a less rigorous standard — namely, that the protected activity was a “contributing factor” in the employer’s adverse action (i.e., that it tended to affect the outcome of the action in any fashion).7 If the employee meets his burden, the burden then shifts to the employer to show it would have taken the same action regardless of whether the protected activity occurred.8

The Supreme Court acknowledged that many statutes dealing with employment discrimination apply the higher “motivating factor” standard, and the use of the “contributing factor” standard in SOX reflects the intention that personnel actions should have no relationship whatsoever to protected activity. The Supreme Court plainly stated, “When an employer treats someone worse — whether by firing them, demoting them, or imposing some other unfavorable change in the terms and conditions of employment — ‘because of’ the employee’s protected whistleblowing activity, the employer violates § 1514A. It does not matter whether the employer was motivated, for example, by the belief that the employee might be happier in a position that did not have SEC reporting requirements.”9

In light of Murray, employers should review their policies regarding reporting complaints and anti-retaliation and ensure that such policies are distributed and understood by managers and supervisors. Further, employers should exercise caution before taking any adverse action against an employee who has recently filed a complaint, including by ensuring that any legitimate reasons for the adverse action are well-documented and the action is consistent with past precedent, as applicable.

The Murray opinion serves as a vital reminder to public companies to exercise caution when making employment decisions that impact employees who have engaged in protected whistleblower conduct. In short, adverse employment actions “‘should quite simply not be based on protected [whistleblowing] activities’ — not even a little bit.”10

1 No. 22-660, 2024 WL 478566 (U.S. Feb. 8, 2024).

2 See, e.g., Automotive Workers v. Johnson Controls, Inc., 499 U.S. 187, 199 (1991).

3 18 U.S.C. § 1514A.

4 Murray, 2024 WL 478566, at *5.

5 Id. at *6.

6 Id. at *7.

7 49 U.S.C. § 4212(b)(2)(B)(i).

8 Id. § 4212(b)(2)(B)(ii).

9 Murray, 2024 WL 478566, at *6.

10 Id. at *7 (quoting Marano v. Department of Justice, 2 F. 3d 1137, 1141 (Fed. Cir. 1993)).

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.

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