Saturday, March 15, 2014

High Court Extends SOX Whistleblower Protection to Employees of Private Contractors and Subcontractors

Congress enacted the Sarbanes-Oxley Act of 2002 (SOX) to safeguard investors in public companies and restore trust in the financial markets following the collapse of Enron.

In a recent decision, the United States Supreme Court ruled that the whistleblower protection included in SOX protects not only the employees of public companies, but also the employees of privately-held contractors and subcontractors who render services to public companies.  See Lawson v. FMR LLC, No. 12-3 (March 4, 2014).  

Drawing on, among other things, the legislative record, the plain language of the statute and Congressional intent, the Court noted that to exclude employees of private contractors and subcontractors would leave them vulnerable to retaliation by their employers for blowing the whistle on schemes to defraud public company investors, even if the schemes were engineered entirely by the contractor or subcontractor.

Private contractors and subcontractors that do business with, or otherwise provide services to, public companies should ensure they implement policies prohibiting retaliation and train their managers to understand and enforce the policies.