Key Takeaways From Supreme Court Decision in SOX Whistleblowing Case: Murray v. UBS Securities, LLC

Introduction

On February 8, 2024, the Supreme Court decided Murray v. UBS Securities, LLC, No. 22-660, holding that a whistleblower must prove that his or her protected activity was a contributing factor in the unfavorable personnel action but does not need to prove that his or her employer acted with “retaliatory intent.”

Background

At issue in the case was an August 2022 ruling by the Second Circuit in favor of UBS Securities, which found that a whistleblower who invokes section 1514A of the Sarbanes Oxley Act must prove that the employer acted with “retaliatory intent.” This Second Circuit decision created a circuit split, with both the Fifth Circuit and Ninth Circuit having previously found that retaliatory intent was not required.

As background, section 1514A prohibits publicly-traded companies from taking adverse employment actions against employees who “provide information, cause information to be provided, or otherwise assist in an investigation” or “file, cause to be filed, testify participate in, otherwise assist in a proceeding” regarding any conduct which the employee “reasonably believes” constitute a violation of any SEC rule or regulation, as well as sections 1341, 1343, 1344 and 1348 of Title 18 of the United States Code. The provision establishes 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 the employee has engaged in a protected whistleblowing activity.

The central question in Murray is whether that provision requires a whistleblower to prove by a preponderance of the evidence that the employer committed the adverse employment action with retaliatory intent, in order for the plaintiff to establish the required causal connection between the protected activity and alleged adverse employment action.

Supreme Court Opinion

Justice Sotomayor delivered the Opinion of the Court. Justice Alito filed a concurring opinion, which Justice Barrett joined.

The Supreme Court unanimously reversed the Second Circuit’s decision, finding that section 1514A does not reference any additional “retaliatory intent” requirement and that the provision’s mandatory burden-shifting framework “cannot be squared with such a requirement.” Further, consistent with the Second Circuit’s opinion, the Supreme Court treats “retaliatory intent” as “something akin to animus.”

The Court asserts that section 1514A’s use of the word “discriminate” is a catchall provision, suggesting that it is meant to capture other adverse employment actions that are not expressly listed, not as a condition to establishing causation. Therefore, “discriminate” does not require retaliatory intent as an additional factor. The Court found that requiring retaliatory intent would conflict with employment discrimination cases’ longstanding burden-shifting framework. Justice Sotomayor states: “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.”

The Supreme Court’s decision sets an important precedent, reinforcing the Sarbanes Oxley Act as a way to protect and encourage whistleblowing activity.

Recommendations

In light of this recent decision, employers should take measures to establish whistleblower policies, or to evaluate their current policies, to ensure employee complaints are handled properly.  These measures may include:

• establishing and updating whistleblower hotlines and response protocols;
• testing and inspecting all employee reporting procedures;
• encouraging open reporting by including reporting protocols, and explicit non-retaliation provisions, in employee handbooks;
• implementing training for managers and supervisors on the proper handling of employee complaints;
• actively monitoring named and anonymous complaints; and
• establishing policies to ensure that, when employees are disciplined or terminated, the reasons for the discipline – and any necessary investigation – are well documented.