Supreme Court Rules ‘Retaliatory Intent’ Not Required for Securities Whistleblower Protection

Quick Hits

• The Supreme Court held that “retaliatory intent” is not required for Sarbanes-Oxley whistleblower protection.
• The decision confirms that protected whistleblower activity must be a “contributing factor” to an employer’s adverse employment decision, but not more.

The unanimous decision in Murray v. UBS Securities LLC held that employees alleging retaliation under the Sarbanes-Oxley Act (codified as 18 U.S.C. Section 1514A) need only prove that their protected activity was a “contributing factor” in an employer’s adverse action against the employee, not that the employer acted with “retaliatory intent.”

Notably, the decision by Justice Sonia Sotomayor distinguished the contributing factor requirement under the Sarbanes-Oxley’s burden-shifting framework as a lower burden than the “motivating factor” standard used in other contexts, most notably regarding employment discrimination under Title VII of the Civil Rights Act of 1964.

Background

Trevor Murray alleged UBS discharged him after he informed his supervisors that two leaders of the trading desk had pressured him to change his independent reporting. According to the decision, his role as a research strategist required him to certify that his reports were independently produced and reflected his own views in accordance with U.S. Securities and Exchange Commission regulations.

Murray filed a whistleblower action alleging his employer violated Section 1514A, 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.

The law directs courts to follow a burden-shifting framework whereby whistleblowers bear the burden of proving that their protected activity “was a contributing factor in the unfavorable personnel action alleged…” The employer then has the burden of showing “by clear and convincing evidence” that it “would have taken the same unfavorable personnel action in the absence of” the protected activity.

The Second Circuit Court of Appeals vacated the jury verdict for Murray, finding that the trial court had erred by not instructing the jury that retaliatory intent is an element of a Section 1514A whistleblower claim.

Retaliatory Intent

In its decision, the Supreme Court stated that the Second Circuit was “wrong” when it found that Section 1514A “imposes an additional requirement that the whistleblower plaintiff prove the employer’s ‘retaliatory intent’ or animus.”

According to the decision, the word “discriminate” in the statute does not include any intent inquiry other than whether the the employer had “the intent to take some adverse employment action against the whistleblowing employee ‘because of’ his protected whistleblowing activity.” The law is clear that whether an employer “discriminated” in that sense has to be resolved through the contributing-factor burden-shifting framework that applies to Sarbanes-Oxley whistleblower claims.”

The Supreme Court found that Congress purposefully included the burden-shifting framework as the way to analyze claims and that the framework merely requires whistleblowers to show that their protected activity was a “contributing factor” to an adverse employment action (in Murray’s case, being discharged as part of a reduction in force).

Contributing Factor

Notably, Justice Sotomayor, writing for the court, stated other statutes regarding employment discrimination “apply a higher bar” than Sarbanes-Oxley, “requiring the plaintiff to show that his protected activity was a motivating or substantial factor in the adverse action.”

The “contributing factor” requirement used in the Sarbanes-Oxley context is “not as protective of employers as a motivating-factor framework,” and “[t]hat is by design,” Justice Sotomayor stated, because Congress wanted to encourage whistleblowers in “contexts where the health, safety, or well-being of the public may well depend on whistleblowers feeling empowered to come forward [as with potential securities violations].”

Justice Sotomayor stated that “showing that an employer acted with retaliatory animus is one way of proving that the protected activity was a contributing factor in the adverse employment action, but it is not the only way.”

However, Justice Samuel Alito stated in a separate concurring opinion, joined by Justice Amy Coney Barrett, that while the law does not require a showing of “animus” in the sense that there is “prejudice” or “ill will,” some “proof of intent” is still required: “that is, the plaintiff must show that a reason for the adverse decision was the employee’s protected conduct.”

Key Takeaways

The Supreme Court’s decision in the Murray case, while perhaps not surprising, is significant in that it confirms that the Sarbanes-Oxley Act has a lesser intent burden for whistleblowers alleging that their employers took adverse action against them for protected whistleblower activity. Moreover, while the ruling was focused on Sarbanes-Oxley, the ruling could have broader impact on the interpretation of other federal whistleblower laws that contain similar “contributing factor” language.

Ogletree Deakins will continue to monitor developments and will provide updates on the Employment Law and Ethics / Whistleblower blogs.

Follow and Subscribe

LinkedIn | Instagram | Webinars | Podcasts