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Supreme Court to Hear Case on Key Whistleblower Issue

2013-06-25 16:07:24 (GMT) ( - Personal Injury, Press Release)

06/12/2013 // Whistleblower Law Firm // Keller Grover, LLP // (press release)

By calling attention to fraud and other wrongdoing, whistleblowers serve an important societal function and, as lawmakers on both sides of the aisle agree, deserve to be protected. Yet while the gold standard of whistleblower statutes — the False Claims Act — provides clear protections to those who sound the alarm on wrongful behavior, the scope of other whistleblower legislation is unclear. On May 20, the U.S. Supreme Court took an important step in clarifying one such statute, the Sarbanes-Oxley Act.

Section 806 of Sarbanes-Oxley, or SOX, states that no company required to register under the Securities and Exchange Act, or their contractors, may “discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee” who reports what they reasonably believe to be a violation of securities laws.

That wording has raised an important — and so far unanswered — question: Do the whistleblower protections of SOX extend to employees of private contractors working for public companies? Two recent lawsuits — arguing that they do — have divided courts, and the issue will now be taken up by the nation’s highest judicial body. And, perhaps, not a minute too soon.

“It is crucial that SOX whistleblowers get clarification on this extremely important point,” says Jeffrey F. Keller, a founding partner at Keller Grover, a nationally recognized labor and employment law firm, and a veteran whistleblower lawyer who is not involved in the cases. “That the Supreme Court is taking this up is a very hopeful sign. Whistleblowers deserve protection. If it is unclear how far the protections in the SOX whistleblower provision reach, we need to make it clear.”

The two suits were brought independently by Jackie Lawson and Jonathan Zang, former employees of a private contractor that provided advising and management services to the publicly traded Fidelity family of mutual funds. Both Lawson and Zang claim that they were fired after raising concerns about potential securities fraud. In their suits, both sought whistleblower protection under Section 806.

After a federal judge in Boston declined to dismiss the former employees’ claims that SOX whistleblower provisions extend to employees of contractors of public companies, an appellate court disagreed — ruling that the SOX provision protected only employees of publicly traded companies. The ruling was not unanimous, however, with the dissenting judge in the 2-1 decision calling it “judicial overreaching of the highest order” and pointing out that Department of Labor regulations have adopted a broad reading of Section 806.

Whistleblower lawyers are hopeful that the high court will sign off on that broader interpretation, as well.

“Those who know about wrongdoing and can give evidence of it are an extremely important part of the war on fraud,” says Keller, whose firm has offices in Los Angeles and San Francisco. “We need them all to be protected against retaliation if we want them all to come forward; it should not turn on who employs them.”

Source: Whistleblower Law Firm of Keller Grover LLP

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Address: Los Angeles
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