Whistleblower Risks: United States Supreme Court Clarifies Burden of Proof

Poyner Spruill LLP

Poyner Spruill LLP

In Murray v. UBS Securities, LLC the United States Supreme Court resolved a circuit split, holding that whistleblowers asserting retaliation claims under Sarbanes-Oxley must prove protected activity was a contributing factor in the unfavorable personnel action.  The Supreme Court’s holding rejects the standard previously applied by the Second Circuit that an employee must prove that an employer had retaliatory intent to discriminate against an employee because they engaged in protected activity.

Sarbanes-Oxley prohibits retaliation against employees of publicly traded companies who report violations of federal securities laws and regulations.  The burden of proof adopted by the Supreme Court is lower and more employee friendly than the one previously applied in the Second Circuit.  It means that an employee only needs to show that the protected activity “alone or in combination with other factors tended to affect in any way” the adverse decision.[1]

Once an employee meets this burden, the employer then has the burden to demonstrate it “would have taken the same unfavorable personnel action in the absence of the [protected activity].”[2]  Stated another way, courts will ask whether the employer would have taken the same action against an identical employee who had not engaged in protected activity.

The recent holding from the Supreme Court underscores the importance of strong documentation demonstrating legitimate business reasons for adverse employment actions (terminations, demotions, decreases in pay, etc.).  Where an employer has limited documentation predating an employee’s legally protected complaint or an employee is terminated close in time to engaging in activity protected under Sarbanes-Oxley, an employer will face an uphill battle establishing the protected activity was not a factor in the termination decision.

[1] Murray v. UBS Sec., LLC, 144 S. Ct. 445, 451 (2024).

[2] 49 U. S. C. § 42121(b)(2)(B)(ii)

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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