U.S. Supreme Court Finds Former Employee Must Only Prove Protected Activity Was a “Contributing Factor” in Sarbanes-Oxley Whistleblower Suit

April 3, 2024

On February 8, 2024, the United States Supreme Court issued a decision finding that former employees who filed a federal whistleblower retaliation claim under the Sarbanes-Oxley Act (“SOX”) must only show that the protected activity was a “contributing factor” to an employee’s adverse employment decision. The Court found that whistleblowers need not show “retaliatory intent,” in contrast to other federal anti-discrimination laws.    

Facts

The petitioner, Trevor Murray was employed as a research strategist at securities firm USB. In that role, Murray was responsible for reporting on commercial mortgage-backed securities (CMBS) to USB customers. This role required him to certify that his reports were produced independently, and accurately reflected his own views.

The case involves Murray’s claim that two leaders of the trading desk improperly pressured him to draft reports in a manner more favorable to UBS’ business strategies. Murray alleged that he was pressured to just “write what the business line wanted” in his reports. When Murray refused and reported his supervisors, his supervisor recommended that Murray either be transferred to a role that did not have Securities and Exchange Commission certification responsibilities or terminated from UBS entirely.

After UBS ultimately terminated Murray, he filed a complaint with the Department of Labor, alleging that his termination violated SOX because he was fired in response to his internal reporting about fraud on shareholders. Murray ultimately filed a whistleblower action in federal court, alleging that UBS violated SOX, which provides that employers may not “discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of protected whistleblowing activity.”

Lower Court Holdings

At the district court level, the court applied the burden shifting framework, which provides that the whistleblower bears the burden to show that his protected activity was a contributing factor in the unfavorable personnel action alleged in the complaint. If the whistleblower makes that showing, the burden shifts to the employer to show by clear and convincing evidence that it would have taken the same unfavorable personnel action in the absence of the protected activity. The district court found that Murray had met his burden of proof to show that his “protected activity was a contributing factor in the termination of his employment.” Murray was awarded damages, attorney fees and costs of nearly $2.8 million. UBS appealed to the Second Circuit, who overturned, finding that “retaliatory intent is an element of a section 1514A claim.”

U.S. Supreme Court Issues Unanimous Decision in Favor of Murray

The case was ultimately appealed to the U.S. Supreme Court, which unanimously found in favor of Murray.  The Court noted that the SOX whistleblower statute states that an employer may not discriminate against an employee because of protected whistleblower activity. In so analyzing, the Court determined that the term “to discriminate” under SOX does not require retaliatory intent. The Court held that, “when an employer treats a whistleblower differently, and worse, because of his protected activity, that is actionable discrimination, and the employer’s lack of animosity is irrelevant.” The Court went on to state that Congress decided that a whistleblower’s burden on intent is only to demonstrate the protected activity was a “contributing factor in the unfavorable personnel action.” Once the whistleblower meets that burden, then the employer must show that it would have taken the same action in the absence of the whistleblowing.

Bottom Line

The Supreme Court’s decision in Murray is significant as it confirms that the Sarbanes-Oxley Act has a lower burden for employees asserting a whistleblower claim. Employers weighing potential liability of a retaliation claim under SOX should continue to build a defense that is related to their work performance and ensure that any adverse employment action is wholly unrelated to the employee’s protected activity. In this context, it is important for employers to ensure that the reasons for taking adverse actions against employees are well documented, consistent with policy, and applied equally to all employees.

This article, slightly modified to note recent updates, was featured online in the Wisconsin Employment Law Letter and published by BLR®—Business & Legal Resources. Reproduced here with the permission of BLR®—Business & Legal Resources.