The U.S. Supreme Court has indicated it will limit whistleblower protections under the Dodd-Frank Act.
Employment-related litigation, especially lawsuits brought forward by employees who allege they were retaliated against for being whistleblowers, can be extremely expensive and time-consuming for companies. Many whistleblower lawsuits are brought forward under the Dodd-Frank Act, which the Securities and Exchange Commission (SEC) has interpreted as covering both whistleblowers who report their concerns to management within the company or to the SEC itself. However, as Reuters reports, that broad definition could soon be curtailed by the U.S. Supreme Court, which in turn could lead to a decrease in employment-related claims brought against public companies.
Former employee alleges retaliation
The case involves an employee who worked at a real estate investment trust company in San Francisco from 2010 to 2014. While there, the employee became concerned that his supervisor was hiding cost overruns, eliminating internal controls, and was granting friends unsubstantiated payments. The employee brought those concerns to senior management and, he claims, he was fired soon afterwards in retaliation for bringing those allegations forward.
The former employee then brought forward a claim against the company, alleging that the Dodd-Frank Act protected him as a whistleblower against retaliation from his employer. The case is currently before the U.S. Supreme Court. He points to an SEC rule adopted in 2011 that interpreted the Dodd-Frank Act as protecting whistleblowers from retaliation if they report allegations within the company.
Supreme Court skeptical of SEC rule
However, the problem with that SEC rule is that it is not what the Dodd-Frank law itself says. Instead, the Dodd-Frank Act is very clear that a whistleblower is somebody who reports their allegations directly to the SEC. Those who only report their concerns internally are covered by a separate law, the Sarbanes-Oxley Act, which provides for a shorter timeframe for when complaints must be filed.
Judges on both sides of the Supreme Court seem to be leaning towards a more restrictive interpretation of the Dodd-Frank protections. As Bloomberg reports, conservative justice Neil Gorsuch appeared reluctant to defer to the SEC's interpretation of the law, while liberal justice Elena Kagan pointed out that the text of the Dodd-Frank Act clearly only defines whistleblowers as those who report to the SEC.
The court is expected to deliver its ruling in the case by June.
Helping companies with disputes
If the Supreme Cou rt does limit Dodd-Frank protections for whistleblowers, it could be good news for public companies that have had to deal with anti-retaliation lawsuits. However, no matter which way the case goes, it is a reminder that businesses need experienced legal advice on hand when dealing with disputes. A commercial litigation law firm can help business clients with various types of disputes, including employee disputes, and help resolve them in a satisfactory manner.