Supreme Court Rules Whistleblowers Need Not Prove Retaliatory Intent Under SOX
Government/Regulatory Enforcement
This links to the home page
  • Supreme Court Rules Whistleblowers Need Not Prove Retaliatory Intent Under SOX


    On February 8, 2024, the Supreme Court of the United States unanimously held that whistleblower-plaintiffs need not prove that adverse employment actions were motivated by their employer’s retaliatory intent to obtain protection under the anti-retaliation provisions of the Sarbanes-Oxley Act (“SOX”).  Murray v. UBS Securities, LLC, No. 22-660 (Feb. 8, 2024).  This decision resolved a Circuit split and clarified the whistleblower’s burden under SOX is to prove that the protected activity was merely a contributing factor to the retaliatory act.

    As previously reported, the purported whistleblower in the case before the Court was hired in 2011 as a research analyst in a financial firm’s commercial mortgage-backed securities business.  A federal jury awarded the purported whistleblower $903,300 in 2017 after finding that he had been unlawfully terminated for reporting that two trading desk managers were attempting to impact the independence of his research reports related to commercial mortgage-backed securities in violation of the securities laws.  On appeal by the financial institution employer, the Second Circuit overturned the jury’s verdict, holding that whistleblower-plaintiffs must show under SOX that their employer acted with retaliatory intent in taking the alleged employment action.  In particular, the Second Circuit interpreted the word “discriminate” in 18 U.S.C § 1514(A), which reads that no publicly traded company “may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment” because of an employee’s protected activity, to impose a “retaliatory intent” requirement.

    After granting cert, the Court disagreed, holding that a whistleblower claiming retaliation under SOX need only prove that the protected activity was a contributing factor in the employer’s adverse action—not that the employer acted with “retaliatory intent.”  In its opinion, the Court noted that SOX’s text does not support a requirement to show retaliatory intent, reasoning that the term “discriminate” in SOX’s catchall provision does not impose a “retaliatory intent” requirement for whistleblower-plaintiffs because of the word’s placement and ordinary meaning.  Rather, the Court held that SOX only requires proof of intent to “take some adverse employment action against the whistleblowing employee ‘because of’ his protected whistleblowing activity.”

    Second, the Court determined that the statutory context also precludes the requirement of retaliatory intent, as such a requirement would ignore SOX’s intended burden-shifting framework.  The Court held that Congress intended that a plaintiff need only show that the protected activity was a contributing factor in the personnel action to prove intent.  Once established, it is up to the employer to show by clear and convincing evidence that it would have taken the same employment action even in the absence of the employee’s protected activity.

    Finally, the Court rejected the financial institution’s argument that a requirement of retaliatory intent prevents innocent employers from facing liability for legitimate personnel decisions, holding that this concern is unwarranted given the same-action causation analysis, which asks whether “the employer would have taken the same action against an otherwise identical employee who had not been engaged in protected activity.”  The Court also noted that it is not up to the Court to override Congress’s choice to enact the less-employer-friendly contributing-factor framework over a motivating-factor framework.

    In resolving the Circuit split and establishing a lower burden for whistleblowers to prove retaliation under SOX, the Court’s decision suggests employees must tread carefully and adequately document an appropriate rationale for taking employment action against employees who have previously engaged in protected whistleblower conduct.

Links & Downloads