SOX Whistleblowers Not Required to Prove Retaliatory Intent

A recent U.S. Supreme Court decision now makes it harder for employers to defend against retaliation claims filed under the whistleblower provisions of the Sarbanes-Oxley Act (SOX) 18 U.S.C. § 1514A(a).

SOX prohibits employers from discharging, demoting, suspending, threatening, harassing, or otherwise discriminating against an employee in the terms and conditions of employment because of protected whistleblowing activity.

Historically, circuit courts were divided on whether SOX also required whistleblowers to show that their employer acted with retaliatory intent in discriminating against them. The unanimous Supreme Court ruling makes clear, however, that such animus is not required for a SOX plaintiff to prevail.

U.S. Supreme Court Rules in Favor of SOX Whistleblower

In Murray v. UBS Securities LLC, et al., No. 22-660, 2024 WL 478566 (U.S. Feb. 8, 2024), the plaintiff argued that he was terminated in retaliation for reporting alleged fraud to his employer. The plaintiff prevailed at the trial court, in part, by showing that his protected activity was a contributing factor in his termination. The employer appealed to the Second Circuit, which imposed a higher burden on the plaintiff to prove his employer acted with “retaliatory intent.”  The Supreme Court, in its review of the statutory text, held that SOX imposes a contributing-factor burden-shifting framework that precludes the requirement to show retaliatory intent. Instead, so long as the employee demonstrates that his protected activity was a contributing factor in his termination, the burden shifts to the employer to show that it would have made the same decision even without the protected activity.

Implications for Employers

This plaintiff-friendly ruling could have ripple effects as other whistleblower laws requiring proof of retaliation come under fire. Employers should consider reviewing and updating current whistleblower policies to ensure reporting procedures are clearly outlined. Employers should promptly respond to reports of suspected fraud or similar misconduct so employees do not feel the need to report complaints directly to enforcement agencies. If you have questions about defending whistleblower claims, contact Buchanan’s team of labor & employment attorneys for assistance.