When the average worker blows the whistle on unethical or illegal behavior by their employer, retaliation is a real concern. There are a number of laws that make retaliation against a whistleblower illegal. When someone makes a good faith complaint about discrimination, for example, their employer is prohibited from retaliating in any way. This is the case whether the person raised their concerns directly with the employer or filed a complaint with the government.
The rules are somewhat more complex in the securities field, as it turns out. As we discussed in December, the U.S. Supreme Court took up the case of a whistleblower in the financial services industry who was fired after reporting violations of the Sarbanes-Oxley Act to his employer, but who did not go further and report the alleged violations to the Securities and Exchange Commission.
There is clear protection for internal whistleblowers under the Sarbanes-Oxley Act. However, its statute of limitations is quite short and had run out. However, the Dodd-Frank Act has a longer statute of limitations and also covers people who report Sarbanes-Oxley Act violations, and the whistleblower was seeking protection under that law.
The SEC had interpreted the Dodd-Frank Act as protecting internal whistleblowers, and the 9th Circuit Court of Appeals deferred to that interpretation. It had also argued that protecting whistleblowers only when they go to the SEC would be bad public policy.
His employer, however, argued that Dodd-Frank requires whistleblowers to report their concerns to the SEC in order to claim protection from retaliation.
The Supreme Court has just released its opinion in Digital Realty Trust v. Somers. Unfortunately for this whistleblower, the court ruled that he was not protected from his employer's retaliation because he did not take his complaint to the SEC.
The justices appeared to recognize that failing to protect internal whistleblowers might be bad public policy. However, they pointed out that the requirement that whistleblowers go to the SEC was clear in the language of the Dodd-Frank Act.
Won't SEC whistleblowers face retaliation if they make an internal report before going to the SEC, as would be good public policy? The court considered this irrelevant because Congress seemed not to have been concerned about that issue when it passed Dodd-Frank. The court is not meant to rewrite laws so they will be better, but to interpret them as they were intended by Congress.
If you work in the financial services field and are considering blowing the whistle on securities violations, we urge you to contact a lawyer before you make any report. An attorney can help you navigate these laws to protect yourself as much as possible from retaliation.