U.S. Supreme Court Majority Votes for Increased Protections to Whistleblower

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The United States Supreme Court just voted to increase protections to whistleblowers, who are important parties involved in stopping certain illegal employer activities that may lead to fraud, for example, to government programs, such as Medicare and Medicaid.

The Supreme Court just announced that the whistleblower protections will now apply to publicly traded company employees, as well as to sub-contractors conducting business with these firms, Reuters reports. The vote passed—6-3—, along what was described as non-ideological lines and will extend protection for whistleblowers to those businesses that work for public companies. This includes law and accounting firms, and investment advisors.

A whistleblower is an employee, a former employee, or a member of an organization—especially a business or government agency—who reports misconduct to those people or entities empowered and presumed willing to take corrective action. For the most part, the misconduct breaks a law, rule, or regulation, and/or presents a direct threat to public interest. This includes fraud, health or safety violations, and corruption.

The justices were interpreting a part of the Sarbanes-Oxley Act o 2002, a Wall Street reform law passed by Congress. The Law put in place standards for all U.S. publicly traded company boards, management, and public accounting firms, according to Reuters. Employer attorneys now warn that the new ruling expands the provision’s reach to several million companies, from about 5,000, including small businesses. The three dissenting justices stated that the ruling provides a “stunning reach” that might provide widespread protections that may potentially reach to household employees, such as babysitters, according to Reuters. The National Federation of Independent Business criticized the decision and issued a statement that the decision would enable plaintiffs’ attorneys with “additional incentives to pursue aggressive litigation” against their employers.

The majority of the justices disagreed and indicated that the decision was in accordance with the way in which the U.S. Department of Labor interpreted the law for nearly 10 years, Reuters reports. In fact, Justice Ruth Bader Ginsburg, who wrote for the majority, noted that Congress enacted Sarbanes-Oxley after accounting problems left both energy company, Enron Corp., and communications provider, WorldCom Inc. devastated. Justice Bader Ginsberg described these events as the “mischief to which Congress was responding.”

The Justice also asked if Congress, “prompted by the Enron debacle, would exclude from whistleblower protection countless professionals equipped to bring fraud on investors to a halt.” For example, reported Reuters, the Justice wrote, the staff at Arthur Anderson, Enron’s accounting firm, who suffered retaliation when they attempted to expose the fraud.

Justices Sonia Sotomayor, Anthony Kennedy and Samuel Alito, with Justice Sotomayor writing, represented the dissenting votes. According to Justice Sotomayor, the majority’s interpretation provided too broad of a reach, warning that, not just babysitters, but other small businesses that contract with public companies may be covered, according to Reuters.

Unfortunately, whistleblowers often face retaliation for revealing illegal acts. For example, employers may refuse a whistleblower pay increases or promotions and, in some cases, companies have fired whistleblowers. Whistleblower complaints are critical and look at conduct that is prohibited by a specific law and that may lead to damage to public safety, that may waste tax dollars, or that may violate public trust in its government. Consider the massive financial debacle seen in the historic Bernard Madoff Ponzi scam.