On February 8, 2024, the Supreme Court of the United States (SCOTUS) found that former employees who filed a federal whistleblower retaliation claim under the Sarbanes-Oxley Act (SOX) must only show the protected activity was a “contributing factor” to the employer’s adverse employment decision. Significantly, the Court found whistleblowers need not show “retaliatory intent”—in contrast to other federal antidiscrimination laws.
Facts
Trevor Murray was employed as a research strategist at securities firm USB. In that role, he was responsible for reporting on commercial mortgage-backed securities (CMBS) to USB customers. The role required him to certify his reports were produced independently and accurately reflected his own views.
Murray claimed two leaders of the trading desk improperly pressured him to draft reports in a manner more favorable to UBS’s business strategies. He alleged he was pressured to just “write what the business line wanted” in his reports.
When Murray refused and reported the leaders, his supervisor recommended he either be transferred to a role that didn’t have Securities and Exchange Commission certification responsibilities or discharged from UBS entirely.
After UBS ultimately fired Murray, he filed a complaint with the Department of Labor (DOL), alleging his discharge violated SOX because he was fired in response to his internal reporting about fraud on shareholders.
He ultimately filed a whistleblower suit in federal court, alleging UBS violated SOX, which provides that employers may not “discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of protected whistleblowing activity.”
Lower Court Holdings
The district court applied the burden-shifting framework, which provides that whistleblowers bear the burden to show their protected activity was a contributing factor in the unfavorable personnel action alleged in the complaint. If the whistleblowers make that showing, the burden shifts to the employer to show by clear and convincing evidence that it would have taken the same unfavorable personnel action in the absence of the protected activity.
The district court found Murray had met his burden of proof to show his “protected activity was a contributing factor in the termination of his employment.” He was therefore awarded damages, attorneys’ fees, and costs of nearly $2.8 million. UBS appealed to the U.S. 2nd Circuit Court of Appeals, which overturned the lower court decision and found that “retaliatory intent is an element of a [SOX] claim.”
SCOTUS Issues Unanimous Decision in Favor of Murray
The case was ultimately appealed to SCOTUS, which unanimously found in favor of Murray. The Court noted that the SOX whistleblower statute says an employer may not discriminate against an employee because of protected whistleblower activity. In so analyzing, the Court determined “to discriminate” under SOX doesn’t require retaliatory intent.
The Court held that “when an employer treats a whistleblower differently, and worse, because of his protected activity, that is actionable discrimination, and the employer’s lack of animosity is irrelevant.” The Court went on to state that Congress decided a whistleblower’s burden on intent is only to demonstrate the protected activity was a “contributing factor in the unfavorable personnel action.” Once the whistleblower meets that burden, the employer must show it would have taken the same action in the absence of the whistleblowing.
Bottom Line
The Supreme Court’s decision in Murray is significant because it confirms that SOX has a lower burden for employees asserting a whistleblower claim. If you are weighing potential liability of a retaliation claim under SOX, you should continue to build a defense that’s related to your work performance and ensure any adverse employment action is wholly unrelated to the employees’ protected activity.
Retaliation claims can be difficult to defend when protected activity is close in time to an adverse employment action. In this context, it’s important you ensure the reasons for taking adverse actions against employees are well-documented, consistent with policy, and applied equally to all employees.
Chris Toner is a partner with Axley Brynelson, LLP, in Madison, Wisconsin. He can be reached at ctoner@axley.com.