The U.S. Supreme Court recently resolved a split between three U.S. circuit courts of appeals and held that an employee bringing a whistleblower claim under the Sarbanes-Oxley Act (SOX) need not prove their employer acted with “retaliatory intent.” Instead, the employee must only show that their whistleblowing activity was a “contributing factor” in the employer’s decision to take an adverse employment action. The court’s decision could hold implications for claims brought under other federal whistleblowing statutes.
The employee in Murray v. UBS Securities, LLC worked as a research strategist. Securities and Exchanges Commission regulations required them to certify that his reports to UBS customers regarding the company’s securities business reflected his own views and were produced independently. The employee was terminated shortly after complaining to their supervisor about actions by other employees that they believed were unethical and illegal attempts influence his reports. The employee sued under SOX’s whistleblowing provisions and prevailed at trial, obtaining a judgment in excess of $1 million.
The U.S. Court of Appeals for the Second Circuit reversed, holding that the employee was required to prove UBS acted specifically with retaliatory intent, rather than proving only that their whistleblowing was a contributing factor in the decision to terminate them, as the trial court had instructed the jury. The employee appealed to the Supreme Court, which accepted the case to resolve a split between the Second Circuit and the Courts of Appeals for the Fifth and Ninth Circuits, which previously held that retaliatory intent was not a requirement of a SOX whistleblower claim.
In reversing the Second Circuit, the Supreme Court analyzed the burden-shifting framework applicable to SOX whistleblower claims, which requires only that the employee’s whistleblowing was a contributing factor in the employer’s decision to take an adverse action. This is a lower standard than is applicable to some other anti-discrimination or anti-retaliation statutes, which require the employee to show the protected activity was a motivating or substantial factor in the employer’s decision. Under SOX, Once the employee shows that whistleblowing was contributing factor in the employment decision, the employer must show by clear and convincing evidence that it would have taken the adverse employment action in the absence of the whistleblowing activity.
The Murray decision clarifies, but does not change, the analysis to be applied to whistleblowing claims under SOX. But it could have broader implications. The burden-shifting framework discussed in Murray is derived from the federal Whistleblower Protection Act. Sixteen federal laws incorporate that framework. Thus, Murray’s holding may be extended to claims brought under those laws as well.
The potential upshot of Murray is that whistleblower claims under SOX may turn more frequently on whether the employer can prove by clear and convincing evidence that it would have taken the adverse employment action regardless of the employee’s complaints than on whether the whistleblowing contributed to the employer’s decision. Employers subject to SOX and other whistleblower laws should review their policies to ensure they are handling whistleblower complaints properly and avoid taking action that could constitute unlawful discrimination under such laws.
For more information on this, please reach out to Michael Pacewicz or any member of the Labor & Employment Practice Group.