On March 4, 2014 in Lawson v. FMR LLC, the US Supreme Court held in a 6-3 decision that the protections in Section 1514A of Section 806 of the Sarbanes-Oxley Act of 2002 (SOX), which protects whistleblowing employees of public companies from retaliation, also protects employees of private contractors and subcontractors to public companies (No. 12-3, (U.S. Mar. 4, 2014).

In light of this decision, private employers who work with public companies should determine whether they would be considered contractors or subcontractors subject to coverage under SOX's whistleblower provisions and, if so, review their policies and practices, including internal complaint procedures, to minimize any potential liability under SOX.

The plaintiffs, former employees of private companies that contracted to advise and manage publicly traded mutual funds with no employees, alleged that they suffered adverse employment consequences in retaliation for engaging in protected whistleblowing activity.

Section 1514A states that no publicly traded company subject to the registration or reporting requirements of the Securities Exchange Act of 1934 or "any officer, employee, contractor, subcontractor, or agent of such company or nationally recognized statistical rating organization, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment" because the employee engaged in protected activity (18 U.S.C. § 1514A(a)).

The funds asserted that the plaintiffs could not state a claim under Section 1514A because they are employees of private companies and the provision only protects employees of publicly traded companies. In a prior, unrelated case, the US Department of Labor's Administrative Review Board held in Spinner v. David Landau & Assoc. that SOX provides whistleblower protections to employees of private contractors that render services to public companies (see Legal Update, DOL Rules SOX Whistleblower Provision Protects Employees of Private Contractors to Public Companies, Rejecting First Circuit Decision).

For more detailed information on this case, see Practical Law Labor & Employment's Legal Update, Supreme Court: SOX Whistleblower Provision Protects Employees of Private Contractors to Public Companies.

For more information on the whistleblower provisions under SOX and the Dodd-Frank Act, see Practice Note, Whistleblower Protections under Sarbanes-Oxley and the Dodd-Frank Act.