Supreme Court Ruling A Game-Changer For Whistleblower Protections
On February 21, the U.S. Supreme Court narrowed the path to legal protections for corporate whistleblowers. The Court announced in Digital Realty Trust, Inc. v. Somers that unless an employee reports corporate wrongdoing to the SEC, Dodd -Frank’s anti-retaliation protections do not apply. That means that employees who are fired for raising concerns to their supervisors before having a chance to raise the issue with the SEC have no claim under Dodd-Frank. The good news is that in some circumstances they may still have a retaliation claim under Sarbanes-Oxley, although that law covers fewer employees and gives the ones it does cover much less time to file a claim than Dodd-Frank did. Whistleblower advocates argue that the Court’s decision is bad for employees and employers: encouraging employees to report internally gives companies an opportunity to proactively address and cure the problem without facing reputational harm and costly legal exposure. Corporate whistleblowers concerned about compliance will now have to proceed very carefully and much more quickly before reporting corporate wrongdoing.
Agencies Ramp Up Enforcement
Many federal and state statutes allow whistleblowers to file retaliation claims directly in court, but this year, government agencies are poised to be far more involved in protecting whistleblowers. By way of example, on January 1, 2018, new California laws went into effect increasing the state labor commissioner’s power to investigate and penalize employers that retaliate against their employees for speaking out.
On the federal level, this is the first full year that the Commodity Futures Trading Commission will be operating under new regulations that reinterpret the scope of the Commission’s anti-retaliation authority. Although the Dodd-Frank Act gave the CFTC a bounty program to reward whistleblowers, the CFTC did not initially interpret the law as allowing it to protect whistleblowers from retaliation. The new regulations clarify that the CFTC can bring enforcement actions against employers who retaliate against employees who report wrongdoing to the CFTC, or internally.
On the global stage, the coming year brings far greater whistleblower protections in jurisdictions across the world. As of January 1, 2018, for example, French employers with more than 50 employees are required to implement whistleblower protection plans. The policies must protect any individual (not just an employee) who reports a crime, a serious breach of law or regulation, or a serious threat to the public interest, among other things. The whistleblower must disclose internally first, and only then may disclose to a government agent. This year, Australia may join France in increasing whistleblower protections. In December 2017, after Jordan Thomas made several technical assistance visits and provided testimony before the Australian Parliament, the government introduced a bill to create stronger corporate whistleblower protections.
American protections for whistleblowers abroad have recently strengthened, too. In general, authority is mixed over whether Sarbanes-Oxley shields from retaliation employees working outside of the country for companies that are publicly traded in the US. A recent administrative decision suggests that in 2018, overseas employees will be better protected. These developments help level the playing field for truthtellers across the world.