U.S. Supreme Court Ruling Takes Employee-Friendly View of Whistleblower Law

When a business engages in fraudulent, unlawful, or criminal activities, employees with inside knowledge of those activities are often the best source of information and evidence. Employees who object to their employers’ conduct might not want to come forward, though, if they could lose their jobs or suffer other employment consequences as a result. New Jersey employment laws at the state and federal levels work to protect these employees, commonly known as “whistleblowers,” by holding employers liable for retaliation. The U.S. Supreme Court recently ruled in Murray v. UBS Securities, a whistleblower case brought under the Sarbanes-Oxley Act of 2002 (“SOX”). This is a federal statute that applies to the financial sector. The court affirmed a trial court’s ruling in the employee’s favor and clarified the burden of proof under the statute.

Congress enacted SOX in response to a series of corporate scandals. The statute addresses recordkeeping and financial disclosure by publicly-traded corporations. It imposes civil and criminal penalties for violations and provides whistleblower protections to encourage employees to report concerns. It prohibits retaliation against employees who engage in certain activities, including:
– Assisting or participating in an internal investigation of suspected wrongdoing under federal fraud statutes or securities regulations;
– Assisting or participating in an investigation by the Securities and Exchange Commission (SEC), Congress, or another federal agency involving alleged fraud or securities violations; and
– Filing a complaint with the SEC.

An employee who alleges unlawful retaliation may bring a lawsuit against their employer after filing a complaint with the Secretary of Labor. The plaintiff has the burden of making “a prima facie showing that [their protected conduct] was a contributing factor in the unfavorable personnel action.” The defendant can obtain dismissal of the lawsuit if it can “demonstrate[], by clear and convincing evidence, that [it] would have taken the same unfavorable personnel action in the absence of that behavior.” This burden of proof was a significant part of the dispute before the Supreme Court in Murray.

The plaintiff in Murray worked as a research strategist at a securities firm. He prepared reports on commercial mortgage-backed securities (CMBS) markets for the firm’s current and prospective clients. SEC regulations required him to certify that “all of the views expressed in the research report accurately reflect [his] personal views.” He alleged that two CMBS traders “improperly pressured him to skew his reports to be more supportive of their business strategies.” He reported this to his supervisor, who allegedly declined to take meaningful action. The company fired the plaintiff soon afterward.

A jury found that the plaintiff had shown that his whistleblowing was a “contributing factor” in the decision to fire him, and that the defendant had not met its burden of proving that it would still have fired him without the whistleblowing. The defendant appealed, arguing that the trial court erred by not instructing the jury that the plaintiff must also establish that it had “retaliatory intent.” The Second Circuit Court of Appeals reversed the verdict.

The Supreme Court reversed the Second Circuit and reinstated the verdict. It found no support in the statute for a requirement of proving retaliatory intent. All a plaintiff must do is prove that retaliation was a factor in the adverse decision.

The knowledgeable and skilled employment lawyers at the Resnick Law Group advocate for the rights of workers who have experienced discrimination and other unlawful employment practices in New Jersey and New York. Please contact us today at 973-781-1204, at 646-867-7997, or online to schedule a confidential consultation with a member of our team.

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