In a decision that some predict will have a chilling effect, the 9th Circuit dealt a major blow to whistleblowers reporting violations of federal securities law last week, denying protection to those who take allegations of corporate misconduct to the press.
Commentators are concerned that the ruling will lead fewer workers to report wrongdoing and inhibit the government's ability to investigate misconduct.
Like many regulatory schemes, the Sarbanes-Oxley Act, which deals with securities reporting and auditing, includes a whistleblower protection provision. It bars employers from retaliating against employees who report potential wrongdoing under the Act to the appropriate authorities.
The plaintiffs in Tides v. The Boeing Company complained to management about potential auditing violations. Unhappy about the results, they then disclosed confidential information to a reporter from a Seattle newspaper.
After being fired for the media leak, they filed suit, alleging that Boeing violated the Sarbanes-Oxley whistleblower protection provision.
In order to take advantage of whistleblower protection, an employee must have engaged in protected activity.
The provision under which the men sued lists only reports made to federal agencies, Congress and in-house supervisors as protected actions. The 9th Circuit interpreted this narrowly, finding that media leaks are not protected activity under Sarbanes-Oxley.
What this means for the ordinary person is that, at this time, if you learn about corporate wrongdoing, it would be best to exercise caution by not discussing your knowledge with the press. Instead, to maximize your whistleblower protection, stick to reporting your suspicions to supervisors or regulators.
- Whistleblowers Not Protected for Media Leaks, Federal Court Rules (Reuters)
- Whistleblower Protections (FindLaw)
- Whistleblower Protections in Qui Tam Actions (FindLaw)
- No Protection for CFO Whistleblower Says Supreme Court (FindLaw's Free Enterprise)