Dodd-Frank whistleblower case could favor employers

The U.S. Supreme Court seems poised to side with employers in how to interpret federal whistleblower laws.

Employers could face fewer whistleblower-related lawsuits if comments made by justices on the U.S. Supreme Court are anything to go by. While hearing arguments during a case that could restrict the definition of whistleblower under the Dodd-Frank Act, the justices from both ends of the ideological spectrum seemed to suggest that the law only protected employees who brought allegations of misconduct directly to the U.S. Securities and Exchange Commission (SEC). A ruling is expected by June and could lead to a decrease in employment-related litigation, especially for public companies.

Dodd-Frank Act and the SEC

The case before the U.S. Supreme Court hinges on what counts as a whistleblower under the Dodd-Frank Act. On the surface, the issue seems rather uncomplicated since the law itself clearly defines a whistleblower as an employee who provides information about alleged misconduct at a public company directly to the SEC.

However, an employee who was allegedly fired from his job for telling senior management about concerns that his supervisor was engaged in misconduct claims that he is still covered by the Dodd-Frank Act despite never bringing his information to the SEC. Two lower court rulings have gone in the employee's favor and the SEC itself adopted a rule in 2011 that indeed treats whistleblowers who bring their concerns forward within the company and not directly to the SEC as also being protected by Dodd-Frank.

The law "says what it says"

However, there is good reason to believe that the U.S. Supreme Court will rule in favor of the employer and ignore the SEC's own interpretation. The law itself, after all, very clearly says that a whistleblower is an employee who brings information to the SEC and not just to management within the company. As liberal justice Elena Kagan pointed out, even if Congress had meant to imply a broader definition of who counts as a whistleblower, at the end of the day the law "says what it says."

On the other side of the ideological spectrum, conservative justice Neil Gorsuch has previously showed skepticism of courts deferring to agencies' (such as the SEC) interpretations of the law. As Bloomberg points out, Gorsuch notes that the SEC had given no reason for why it interpreted the Dodd-Frank Act so broadly.

Finally, Stephen Breyer, a liberal justice on the court, pointed out that a separate law, the Sarbanes-Oxley Act, already protects internal whistleblowers, whereas Dodd-Frank appears to be clear that it applies only to those who assist the SEC.

Employment-related disputes

It's important to point out that the U.S. Supreme Court has not actually ruled on the above case yet. However, if, as expected, the court does rule for a more restricted interpretation of the Dodd-Frank Act then it could lead to fewer whistleblower lawsuits being brought against public companies. In any case, the above article should provide businesses with a reminder of how important it is to have qualified legal advice and representation on hand during a dispute. A business litigation law firm can assist companies with both ensuring disputes don't arise in the first place and with ending disputes that do arise quickly, either through negotiation or through the courts.