This morning, the Supreme Court unanimously found that proof of retaliatory intent is not necessary to prevail on a claim for wrongful discharge brought under §1514A(a) of the Sarbanes-Oxley Act of 2002, and the employee must prove that the protected activity was merely a contributing factor to his or her employment termination. Murray v. UBS Securities, LLC, No. 22-660 (U.S. 2-8-24). “Under the whistleblower-protection provision of the Sarbanes-Oxley Act of 2002, no covered employer [publicly-traded companies] may ‘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. 18 U. S. C. §1514A(a).” The protected activity includes reports by employees “what they reasonably believe to be instances of criminal fraud or securities law violations.” “When a whistleblower invokes this provision, he bears the initial burden of showing that his protected activity ‘was a contributing factor in the unfavorable personnel action alleged in the complaint.’ 49 U. S. C. §42121(b)(2)(B)(iii). The burden then shifts to the employer to show that it ‘would have taken the same unfavorable personnel action in the absence of ‘ the protected activity. §42121(b)(2)(B)(iv).” The statutory language prohibiting discrimination against the employee does not require proof of retaliatory intent.
According to the Court’s opinion, the plaintiff was employed
as a research strategist who was required by SEC regulations to certify to his
employer’s current and prospective customers that his reports were prepared
independently and reflected his own views.
He alleged that he was fired after internally reporting in December 2011
and January 2012 that the leaders of two trading desks were improperly
pressuring him to skew his reports to support their business strategies and to “clear”
his articles with them before publication. He found their conduct to be both unethical
and illegal. His supervisor, while sympathetic,
urged him to not alienate those two individuals and was not helpful when the
plaintiff reported that he was improperly being left out/excluded from
meetings. Despite having just given the
plaintiff a strong performance evaluation, the manager then recommended him for
layoff or to be transferred to a trading desk analyst position where he would
not have SEC-certification responsibilities.
When the trading desk rejected him, he was fired in March 2012. At trial, the employer argued that “market-wide
difficulties and a $2-billion loss on a [its] trading desk in London had required
the elimination of certain positions,” including his.
At trial, the judge instructed the jury that he was “not
required to prove that his protected activity was the primary motivating factor
in his termination, or that . . . UBS’s articulated reason for his termination
was a pretext.” When the jury sought
clarification, the judge instructed that they ““should consider” whether
“anyone with th[e] knowledge of [the plaintiff’s] protected activity, because
of the protected activity, affect[ed] in any way the decision to terminate [his]
employment.” Recommending a $1M verdict,
the “jury found that [the plaintiff] had established his §1514A claim and that [the
employer] had failed to prove, by clear and convincing evidence, that it would
have fired [him] even if he had not engaged in protected activity.” The court added $1.7M in attorneys fees and
costs to the jury’s recommendation. On
appeal, the Second Circuit concluded that the plaintiff was required to show
that the employer possessed a retaliatory intent. Today, the Supreme Court reversed.
Unlike most federal employment statutes, SOX adopts the “burdens
of proof set forth in section 42121(b) of title 49, United States Code”—a
provision of the Wendell H. Ford Aviation Investment and Reform Act for the
21st Century (AIR 21).” Under that statute, “the whistleblower bears the burden
to prove that his protected activity “was a contributing factor in the
unfavorable personnel action alleged in the complaint.” 49 U. S. C.
§42121(b)(2)(B)(i). If the whistleblower makes 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. §42121(b)(2)(B)(ii).” This
framework
originated in the Whistleblower Protection Act of 1989 (WPA), 5 U. S. C. §1221(e), which provides legal protection for whistleblowers within the civil service. The framework was meant to relieve whistleblowing employees of the “excessively heavy burden” under then-existing law of showing that their protected activity was a “‘significant’, ‘motivating’, ‘substantial’, or ‘predominant’” factor in the adverse personnel action, and it reflected a determination that “[w]histleblowing should never be a factor that contributes in any way to an adverse personnel action.” Congress then incorporated the easier-to-satisfy “contributing factor” framework into a series of similar whistleblower statutes that protect non[1]civil-service employees in industries where whistleblowing plays an especially important role in protecting the public welfare—including, as noted above, the airline industry (AIR 21) and the securities industry (Sarbanes-Oxley).
The Court then explained that
Section 1514A’s text does not reference or include a “retaliatory intent” requirement, and the provision’s mandatory burden-shifting framework cannot be squared with such a requirement. While a whistleblower bringing a §1514A claim must prove that his protected activity was a contributing factor in the unfavorable personnel action, he need not also prove that his employer acted with “retaliatory intent.”
. . . .
An animus-like “retaliatory intent” requirement is simply absent from the definition of the word “discriminate.” When an employer treats someone worse—whether by firing them, demoting them, or imposing some other un[1]favorable change in the terms and conditions of employment—“because of ” the employee’s protected whistleblowing activity, the employer violates §1514A. It does not matter whether the employer was motivated by retaliatory animus or was motivated, for example, by the belief that the employee might be happier in a position that did not have SEC reporting requirements.
The Court rejected the employer’s argument that innocent
employers will be held liable for adverse employment actions which were not
motivated by retaliation or the protected conduct, such as when the employee’s
protected conduct results in the biggest client to leave and the employee
without any work to do:
The statute’s burden-shifting framework provides that an employer will not be held liable where it “demonstrates, by clear and convincing evidence, that [it] would have taken the same unfavorable personnel action in the absence of ” the protected behavior. 49 U. S. C. §42121(b)(2)(B)(ii). The right way to think about that kind of same-action causation analysis is to “change one thing at a time and see if the out[1]come changes.” Bostock, 590 U. S., at 656. The question is whether the employer would have “retain[ed] an otherwise identical employee” who had not engaged in the protected activity. Id., at 660. As the Federal Circuit has explained in the WPA context, the same-action analysis “does not require . . . that the adverse personnel action be based on facts ‘completely separate and distinct from protected whistleblowing disclosures.’” . . . In that case, the correct inquiry was whether the employer would have taken the same action if it had learned of the contents of the employee’s protected disclosure through other means. . . .. In UBS’s hypothetical, the relevant inquiry would be whether the employer still would have fired the employee if the client had left for some other reason. If so, it will have no trouble prevailing under the statute.
To be sure, the contributing-factor framework that Congress chose here is not as protective of employers as a motivating-factor framework. That is by design. Congress has employed the contributing-factor framework in contexts where the health, safety, or well-being of the public may well depend on whistleblowers feeling empowered to come forward. This Court cannot override that policy choice by giving employers more protection than the statute itself provides.
NOTICE: This summary is designed merely to inform and alert
you of recent legal developments. It does not constitute legal advice and does
not apply to any particular situation because different facts could lead to
different results. Information here can change or be amended without notice.
Readers should not act upon this information without legal advice. If you have
any questions about anything you have read, you should consult with or retain
an employment attorney.
