Contributors

Jennifer Woo Burns

Of Counsel

The Sarbanes-Oxley Act of 2002 relating to whistleblower retaliation

Congress enacted the whistleblower protections of the Sarbanes-Oxley Act of 2002 (“Act”) to prohibit publicly traded companies from retaliating against employees who report what they reasonably believe to be instances of criminal fraud or securities law violations. Title 18 U. S. C. section 1514A(a) specifically 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.

The question before the United States Supreme Court (“SCOTUS”) in the case Murray v. UBS (Whistleblower under SOA) was whether the phrase “discriminate against an employee . . . because of” in section 1514A(a) requires a whistleblower additionally to prove that his employer acted with “retaliatory intent.” In a 9-0 Opinion, SCOTUS answered this question in the negative: an employee need not prove retaliatory intent in a whistleblower action under the Act.

Relevant facts and procedural background

Plaintiff Trevor Murray had worked for UBS as a research strategist. UBS terminated Murray shortly after he informed his supervisor that two leaders of the UBS trading desk were engaging in what he believed to be unethical and illegal efforts to skew his independent reporting.

The District Court jury found that Murray had established his section 1514A claim and that UBS had failed to prove, by clear and convincing evidence, that it would have fired Murray even if he had not engaged in protected activity. The Court of Appeals vacated the jury’s verdict, finding that the District Court’s jury instruction that Murray must prove that his complaint was a contributing factor in his termination was wrong as a matter of law.

In a unanimous opinion by the Justices, SCOTUS reversed the Court of Appeals decision, reasoning that 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 section 1514A claim must prove that their protected activity was a contributing factor in the unfavorable personnel action, they need not also prove that the employer acted with “retaliatory intent.”

Although it held that “retaliatory intent” is not required in a whistleblower action under the Act, SCOTUS explained what that term means. Adopting the Court of Appeal’s definition, SCOTUS held that “retaliatory intent” is akin to animus, i.e. an employer acts with “retaliatory intent” . . . “where the employer act[s] out of prejudice, animus, or comparable hostile or culpable intent”.

Key takeaways

The Murray opinion is limited to whistleblower retaliation claims under the Act. It is unclear whether the same standard (no need to show retaliatory intent) applies to whistleblower actions brought pursuant to other federal statutes. However, for California employers who are not covered by the Act, the primary whistleblower statute is Labor Code section 1102.5, which provides that if a plaintiff proves that the retaliatory reason was a contributing factor to the adverse employment action, the burden shifts to the employer to prove by clear and convincing evidence that it would have made the same decision anyway for a legitimate reason. (Lab. Code, § 1102.6.) As with the Act, there is no requirement in the California statute that the employer acted with “retaliatory intent”. So although the Murray opinion does not directly apply to claims under the California Whistleblower statute, SCOTUS’ reasoning may prove instructive since California’s statute also requires an employer to prove that retaliation was a “contributing factor.”