Remember Enron? Me neither. That was one stock I somehow failed to buy. And it was before the iPad .Anyway, those of you who do remember know that Enron resulted in a big financial mess. There were Enron employees who attempted to uncover the fraud the management was perpetrated. They suffered retaliation by Enron's management. Allegedly. Employees of Enron's auditors and lawyers who tried to blow the whistle on corrupt Enron managers. But these employees experienced retaliation by their employers as well. (Allegedly).
So, after the Enron debacle, Congress passed the Sarbanes-Oxley Act which, in part, protects whistleblowers from retaliation for reporting fraud by public companies.
As it turns out, mutual funds are public companies and, therefore, covered by SOX. But they typically have no employees. Mutual funds hire private companies to act as "investment advisers." The advisers have the employees. The funds just hold the stocks, bonds, etc.
So, Lawson worked for an "adviser" to a mutual fund, which was a privately held company. She allegedly complained about certain mutual fund accounting practices she believed were illegal.
The question for the Supreme Court in Lawson v. FMR LLC was whether the SOX anti-retaliation provision applies only to the employees of the publicly traded company (the mutual fund itself). Or, did the anti-retaliation protections also apply to employees of non-publcly traded companies who blow the whistle on public corporation fraud (Lawson's employer, the investment advisor).
The Supreme Court decided to extend protections to non-public companies.
The prohibited retaliatory measures enumerated in §1514A(a)—discharge, demotion, suspension, threats, harassment, or discrimination in the terms and conditions of employment—are commonly actions an employer takes against its own employees. Contractors are not ordinarily positioned to take adverse actions against employees of the public company with whom they contract. FMR’s interpretation of §1514A, therefore, would shrink to insignificance the provision’s ban on retaliation by contractors.The dissent embraces FMR’s “narrower” construction. See post, at 2, 3, 4, 7.The dissent (Sotomayor, Kennedy, and Alito) opined that the whistleblower protections apply only to the employees of the public employer, not to employees of the private companies who may "contract" with the public company.
This is Lawson v. FMR LLC and the opinion is here.
