Executive Summary: The U.S. Supreme Court recently held that a whistleblower under the Sarbanes Oxley Act of 2002 (SOX) is not required to prove the employer acted with retaliatory intent to prevail on a whistleblower claim. See Murray v. UBS Sec., LLC, 2024 WL 478566 (Feb. 8, 2024). The Court held that the burden-shifting framework in SOX, which requires an employee to show that the protected activity “was a contributing factor in the unfavorable personnel action alleged in the complaint,” does not include a retaliatory intent requirement. Because the burden-shifting framework in SOX is also used in numerous other whistleblower laws, including the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR 21), the Court’s decision in Murray could make it more difficult for employers in a variety of industries to defend whistleblower claims.
Background: SOX was enacted in 2002 to “root out corporate fraud” and shield whistleblowers from retaliation. The anti-retaliation provision of SOX, Section 806, is codified at 18 U.S.C. § 1514A. SOX applies to publicly traded companies and pertains to criminal fraud and securities laws violations. It protects employees who report misconduct to the SEC, any other federal agency, Congress, or an internal supervisor. The SOX whistleblower provision prohibits covered employers from discharging, demoting, suspending, threatening, harassing, or in any other manner discriminating against an employee “because of” protected whistleblowing activity. Here, Trevor Murray filed a whistleblower alleging that his former employer violated 18 U.S.C. § 1514A by terminating his employment after he claimed UBS leaders were engaged in illegal and unethical conduct. At trial, the jury was instructed that to prove a claim under SOX, Murray was required to show his protected activity was a contributing factor in his termination. Then the burden would shift to UBS to establish it would have terminated Murray regardless of whether he had reported the alleged conduct. The jury found in Murray’s favor. On appeal, the Second Circuit remanded for a new trial, holding “[r]etaliatory intent is an element of a section 1514A claim,” and the trial court erred by not instructing the jury on Murray’s requirement to prove UBS’s retaliatory intent.
The Court’s Holding: In Murray, the Supreme Court held that the phrase “discriminate against an employee ... because of” in the SOX whistleblower provision does not require the whistleblower additionally to prove the employer acted with “retaliatory intent” because the mandatory burden-shifting framework cannot be squared with a retaliatory intent requirement. The Court treated retaliatory intent as “something akin to animus.” The Court noted that when an employer treats someone worse (whether by firing, demoting, or imposing other unfavorable terms or conditions of employment on them) “because of” the employee’s protected whistleblowing activity, the employer violates § 1514A. Therefore, it does not matter whether the employer was motivated by retaliatory animus or, for example, “by the belief that the employee might be happier in a position that did not have SEC reporting requirements.” According to the Court, the statute is clear that whether an employer discriminated in the sense that it took adverse action “because of” the protected whistleblowing activity is to be resolved through the contributing-factor burden-shifting framework that applies to SOX whistleblower claims. “Burden-shifting frameworks have long provided a mechanism for getting at intent in employment discrimination cases, and the contributing-factor burden-shifting framework is meant to be more lenient than most.” The Court determined the incorporation of the contributing-factor standard for SOX retaliation cases, like many other whistleblower statutes, reflects a judgment that “‘personnel actions against employees should quite simply not be based on protected [whistleblowing] activities’—not even a little bit.”