Home » Sarbanes-Oxley » Private Companies Must Pay Attention to Sarbanes-Oxley Whistleblower Provision

Private Companies Must Pay Attention to Sarbanes-Oxley Whistleblower Provision

On March 4, 2014, the United States Supreme Court released an opinion with potentially significant ramifications for many private companies. In Lawson v. FMR LLC, the Supreme Court radically transformed the whistleblower provisions of the Sarbanes-Oxley Act, extending anti-retaliation protection beyond public companies to those private companies that are “contractors”, “subcontractors” or “agents” of a public company. This extension to encompass private employers is significant.

Originally, Congress passed the Sarbanes-Oxley Act “[t]o safeguard investors in public companies and restore trust in the financial markets following the collapse of Enron Corporation.” Along with a variety of obligations imposed on public companies, the statute also included a provision protecting whistleblowers.

No [public] company . . . or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of [whistleblowing].

18 U.S.C. 1514A(a). In other words, public companies cannot retaliate against their employees for reporting certain improprieties (i.e., fraud whistleblowing). And, now, the Supreme Court has announced that “the provision shelters employees of private contractors and subcontractors, just as it shelters employees of the public company served by the contractors and subcontractors.”

In light of Lawson, private companies should be cautious in their dealing with employees, keeping in mind that SOX may provide a remedy for employees who suffer adverse employment for reporting fraud. Employers should train management and human resources personnel to keep an eye out for issues that may arise or that may trigger SOX provisions before things progress to costly litigation.

Lawson v. FMR LLC, 134 S. Ct. 1158 (March 4, 2014).


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