Court limits whistleblower protections
Justices rule those who don’t inform SEC first can be fired
WASHINGTON The Supreme Court sharply limited the legal protections for corporate whistleblowers Wednesday, ruling they are not shielded from being fired under a federal law unless they have reported a potential fraud to the Securities and Exchange Commission.
The justices conceded their ruling might gut the whistleblower protections that were adopted after the Wall Street collapse in 2008.
Lawmakers had said they wanted to break the “corporate code of silence” that prevented employees from revealing wrongdoing inside their companies.
But the court, in a unanimous decision, said the Dodd-Frank Act of 2010 defined a protected whistleblower as someone who reported a potential fraud commission,” referring SEC.
Justice Ruth Bader Ginsburg said Congress may have wanted to broadly protect whistleblowers, including those who only reveal problems internally to the company’s top executives or its corporate board. But “Dodd-Frank delineates a more circumscribed class” when it defined who was protected from retaliation, she said. “to the to the
The court’s decision in Digital Realty Trust v. Somers throws out most of a lawsuit brought by a San Francisco executive who says he was fired as a vice president of a real estate investment trust after he filed a complaint with top executives about hidden cost overruns in an Asian branch office. He did not take his complaint to the SEC before he was fired.
While the decision is a victory for employers, legal experts said it may backfire on them.
Companies often urge their auditors, lawyers and other employees to report problems internally if they see signs of wrongdoing. “Yet, today’s ruling confirms that whistleblowers who report internally are not protected from retaliation. What is now abundantly clear is that employees should get a lawyer and go straight to the SEC,” said Chicago attorney James Barz.
Washington attorney Sean McKessy, who headed the SEC whistleblower office for five years, said “this is a case where corpo-