All viable whistleblower cases arise from allegations of wrongdoing serious enough to run afoul of some statute or rule. Common issues in every whistleblowing case include:

  • Who is subject to protection against retaliation as a whistleblower?
  • What types of conduct or speech are entitled to protection as whistleblowing?
  • What must a whistleblower do by way of exhaustion of administrative remedies or other effort to remediate wrongdoing in order to have a justiciable claim?
  • What remedies does the law afford to a whistleblower who successfully demonstrates at trial all elements of a viable claim?

The answers to these questions vary by state and are evolving at the federal level, even under federal statutory and regulatory frameworks applicable in closely related or virtually identical scenarios. For instance, the Sarbanes-Oxley Act of 2002 (SOX) prohibits retaliation against an employee for providing information regarding conduct the employee reasonably believes constitutes a violation of federal law relating to fraud against shareholders. 18 U.S.C. section 1514A. Similarly, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) prohibits retaliation against any individual, including employees, who provides information relating to a suspected violation of securities law to the Securities and Exchange Commission (SEC). 15 U.S.C. section 78u-6(a)(6). Both statutes provide for reinstatement of wrongfully terminated employees and reimbursement of litigation costs and fees. Dodd-Frank, however, provides an extra financial incentive (double back pay) to prevailing whistleblowers, plus a cash award of up to 30 percent of monetary sanctions the SEC collects in an enforcement action. Moreover, Dodd-Frank claimants enjoy a six-year limitations period, compared to SOX’s 180-day limitation, on the filing of an administrative complaint prior to filing suit in federal court.

The U.S. Supreme Court weighed in on these distinctions, reversing an expansive interpretation of Dodd-Frank and an interpretive Rule that incorporated relatively lenient SOX reporting standards. Digital Realty Trust, Inc. v. Somers, 138 S.Ct. 767 (2018). There, the plaintiff was fired shortly after reporting to senior management suspected securities law violations of the company for which he worked. He could not proceed under SOX’s anti-retaliation provisions because he had not exhausted administrative remedies by filing an administrative complaint within the required 180 days. The longer limitations period in Dodd-Frank allowed him to file suit, although he had not satisfied its requirement that the alleged securities law violation be reported directly to the SEC. A unanimous Court held that the plaintiff simply was not a “whistleblower” pursuant to Dodd-Frank and, therefore, was not protected from retaliation based on an internal allegation of securities fraud.

To reverse this outcome, on July 9, 2019, the House of Representatives passed a bill that would re-define Dodd-Frank’s definition of a “whistleblower” to include an employee who reports a securities law violation to “a person with supervisory authority over the whistleblower at the whistleblower’s employer,” in addition to a person who makes such a report to the SEC. H.R. 2515, amending 15 U.S.C. 78u-6. Similarly, Senate Bill 2529, dated September 23, 2019, would expand protection to employees reporting a securities law violation to “a person with supervisory authority over the whistleblower ….” S. 2529, amending 15 U.S.C. 78u-6.

Elected representatives are expected to take up these bills shortly and to join the SEC in expanding Dodd-Frank whistleblower protections to accord with the SOX’s threshold standards. This evolving landscape warrants attention from both employers and employees.