U.S. Supreme Court Endorses Low Burden Of Proof For Whistleblowers - Whistleblowing - United States

[Gunnar Larson]

https://www.mondaq.com/unitedstates/whistleblowing/1428262/us-supreme-court-endorses-low-burden-of-proof-for-whistleblowers


In a landmark unanimous ruling late last week, Murray v. UBS Securities,
LLC, et al. 601 U. S. ____ (2024), the U.S. Supreme Court held that
whistleblowers do not need to prove their employer acted with "retaliatory
intent" to be protected under the Sarbanes-Oxley Act. Instead, all
whistleblower plaintiffs need to prove is that their protected activity was
a "contributing factor" in the employer's unfavorable personnel action.

Background
The Sarbanes-Oxley Act is a federal law that was passed in 2002 with the
goal of improving auditing and public disclosure in response to several
accounting scandals which shook financial markets.

In recognition of the role whistleblowers played in exposing the accounting
scandals of the early-2000s, Congress passed Section 806, codified at 18
U.S.C. § 1514A, which prohibits publicly-traded companies from retaliating
against whistleblowing employees. The U.S. Supreme Court in Lawson v. FMR,
571 U.S. 429 (2014), thereafter extended the whistleblower protections in §
1514A to employees of non-public contractors and subcontractors of a public
company.

The language of the Sarbanes-Oxley Act at issue in the Murray v. UBS
Securities, LLC case was no employer subject to Sarbanes-Oxley "may
discharge, demote, suspend, threaten, harass, or in any other manner
discriminate against an employee in the terms and conditions of employment
because of" the employee's protected whistleblowing.

Many statutes dealing with employment discrimination and retaliation apply
a relatively high bar for employee-plaintiffs, requiring the plaintiff to
show that the protected activity was a substantial factor in, or the
"but-for cause" of the adverse employment action.

Ruling
The case involved the termination, in 2012, of a research strategist
working for a New York securities firm, UBS Securities, LLC ("UBS"). After
his termination, the research analyst filed a lawsuit against his former
employer claiming his termination was retaliatory. The case went to trial
and the jury found in favor of the plaintiff and issued an advisory verdict
on damages, recommending that the plaintiff receive nearly $1 million. The
court then adopted the jury's advisory verdict on damages and awarded an
additional $1.769 million in attorney's fees. UBS appealed the decision to
the Second Circuit, which vacated the jury's verdict and remanded for a new
trial. The appellate court identified the central question as whether the
Sarbanes-Oxley Act's antiretaliation provision requires a
whistleblower-employee to prove retaliatory intent, and concluded that the
answer was yes.

The Second Circuit's opinion, requiring whistleblowers to prove retaliatory
intent, placed that Circuit in conflict with the Fifth and Ninth Circuits,
which had rejected such requirement; therefore, the U.S. Supreme Court
decided to "resolve the disagreement."

In a 9-0 decision, the U.S. Supreme Court reversed the decision of the
Second Circuit and remanded, holding that a plaintiff does not need to
prove retaliatory intent to prevail on a retaliation claim under the Act. A
whistleblower who invokes 18 U.S.C. §1514A only bears the burden to prove
that his protected activity "was a contributing factor in the unfavorable
personnel action alleged in the complaint." If a plaintiff makes this
showing, the burden then shifts to the defendant to show, by clear and
convincing evidence, that it "would have taken the same unfavorable
personnel action in the absence of " the protected activity.

The U.S. Supreme Court left no doubt as to the employee-friendly nature of
its decision. Justice Sotomayor, who authored the Opinion of the Court,
wrote: "To be sure, the contributing-factor framework that Congress chose
here is not as protective of employers as a motivating-factor framework.
That is by design. Congress has employed the contributing-factor framework
in contexts where the health, safety, or well-being of the public may well
depend on whistleblowers feeling empowered to come forward. This Court
cannot override that policy choice by giving employers more protection than
the statute itself."

While the decision relieves plaintiffs of having to show retaliatory
intent, the Court nonetheless asserted that Sarbanes-Oxley's
burden-shifting framework does serve as a "mechanism for getting at intent"
by allowing an employer to respond to an employee's circumstantial evidence
with its own. This, says the Court, provides the "full picture" that allows
the factfinder to make the ultimate determination as to whether
differential treatment was intentional and based on protected activity.

Why Is This Important?
After this decision, there is no longer any doubt as to the burden of proof
in whistleblower lawsuits under the Sarbanes-Oxley Act.

While the burden for employees is to prove that their whistleblowing
contributed, even tangentially, to the unfavorable personnel decision
(which includes termination, demotion, transfer, etc.), in order to defend
against such claims, an employer must prove by clear and convincing
evidence, that it would have taken the same unfavorable personnel action in
the absence of the protected behavior. In a nutshell, this is a high bar
for employers to meet.

In practice, employers should act with caution in considering personnel
decisions if they are aware of a complaint or report that might qualify as
a protected activity under the Sarbanes-Oxley Act (or other
anti-retaliation statutes). Employers should also review their policies and
practices regarding internal reporting mechanisms to ensure visibility into
such complaints or report. This decision further serves to remind employers
of the importance of documenting legitimate workplace performance issues.
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