The Supreme Court unanimously ruled in Murray v. UBS Securities, LLC that whistleblowers need not prove that an employer acted with “retaliatory intent” to establish a claim under the Sarbanes-Oxley Act. Instead, the Court held that a Sarbanes-Oxley whistleblower only needs to prove that “the protected activity was a contributing factor” to an adverse employment action.
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The Sarbanes-Oxley Act of 2002 bars publicly traded companies from retaliating against employees who report violations of federal securities laws and regulations. More specifically, § 1514A of the Act establishes that no covered employer may “discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of” protected whistleblowing activity. If an employee believes that their employer has violated § 1514A, they can file a complaint with the Department of Labor seeking a number of remedies—including reinstatement, back pay, and compensation. If the Department of Labor fails to issue a final decision within 180 days, the whistleblower can also file suit in federal court. Relief then turns on the court’s application of the burden-shifting framework mandated by Sarbanes-Oxley. First, the employee bears the initial burden of showing that his protected activity “was a contributing factor in the unfavorable personnel action.” Once the whistleblower makes that showing, the burden shifts to the employer to show by “clear and convincing evidence” that it “would have taken the same unfavorable personnel action in the absence of” the employee’s protected activity.
Trevor Murray, a research strategist, filed a Sarbanes-Oxley whistleblower lawsuit against UBS in the United States District Court for the Southern District of New York. He alleged that he was terminated after he reported that he had been pressured to skew his research to support the firm’s business strategies, in violation of SEC regulations. At trial, the district court instructed the jury that Murray needed to show that his whistleblowing activity was “a contributing factor” in the firm’s decision to fire him. The district court elaborated that Murray was “not required to prove that” his whistleblowing “was the primary motivating factor” behind the adverse action. Instead, a contributing factor was one that “alone or in combination with other factors tended to affect in any way” the decision to terminate him. The jury ultimately found Murray met this burden and that the firm failed to prove that it would have fired Murray even in the absence of his whistleblowing.
The Second Circuit vacated the jury’s ruling and remanded the case for a new a trial, holding that the district court erred in instructing the jury on the contributing-factor element. Focusing on the text of § 1514A, the Second Circuit held that a whistleblowing employee “must prove that the employer took the adverse employment action” with “retaliatory intent”—i.e., intent to “discriminate against an employee . . . because of” lawful whistleblowing activity—to satisfy the initial step of the burden-shifting framework. The Second Circuit’s decision put it in conflict with the Fifth and Ninth Circuits, both of which had rejected a “retaliatory intent” requirement for whistleblower retaliation claims brought under Sarbanes-Oxley. The Supreme Court granted certiorari to resolve the circuit split.
The Supreme Court unanimously reversed the Second Circuit, holding that neither the text of § 1514A nor the structure of the burden-shifting framework squared with a “retaliatory intent” requirement. The Court began with the text of the statute, focusing on § 1514A’s instruction that no covered employer “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 activity. Characterizing the word “discriminate” as a catch-all provision meant to capture forms of adverse employment actions not specifically listed in § 1514A, the Court questioned whether the word “discriminate” was even relevant to Murray’s suit. The Court reasoned that Murray was “discharged,” so the catchall phrase “in any other manner discriminate” had little relevance, if any, to his claim. Then, assuming for the sake of argument that the word “discriminate” did latch onto and provide additional meaning to § 1514A’s other terms, the Court held that the word did not inherently require retaliatory intent. Explaining that the normal definition of discrimination is “differential treatment,” the Court concluded that an “animus-like ‘retaliatory intent’ requirement is simply absent” from the meaning of the word discriminate. In the Court’s view, this meant that as long as an employer treats someone worse—be it by “firing them, demoting them, or imposing some other unfavorable change”—“because of” whistleblowing activity, it violates § 1514A.
The Court next turned to statutory context, finding that the structure of Sarbanes-Oxley’s whistleblower provision confirmed that the word “discriminate does not import a retaliatory intent requirement.” To hold otherwise, it reasoned, “would ignore” the “statute’s mandatory burden-shifting framework.” These frameworks, the Court explained, have “long provided a mechanism for getting at intent in employment discrimination cases.” And Congress, by mandating a burden-shifting framework “more lenient than most,” decided that a “plaintiff’s burden on intent is simply to show” that the whistleblowing activity was a “contributing factor in the unfavorable personnel action.” This showing, the Court concluded—and “not some separate, heavier burden on the plaintiff to show ‘retaliatory intent’”—is all that Sarbanes-Oxley requires.
Justice Alito, joined by Justice Barrett, concurred in the Court’s opinion. He wrote to “reiterate” that the Court’s “rejection of an ‘animus’ requirement does not read intent out of the statute.” In his view, the phrase “in any other manner discriminate” suggests that the employer’s adverse action—whether a discharge or demotion—must be a form of discrimination, which “necessarily involves an intentional choice” on the part of the employer. Thus, Justice Alito emphasized, the “contributing factor” burden requires proof of intent: “[T]he plaintiff must show that a reason for the adverse decision was the employee’s protected conduct.”
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Although the burden-shifting framework set forth in the Murray decision is less “protective of employers” than other whistleblowing regimes, the Supreme Court emphasized that this “easier-to-satisfy” showing does not obviate a whistleblower plaintiff’s burden of proof. Plaintiffs must still show that the adverse employment action occurred “because of” their whistleblowing activity. To defend against such claims, the employer will need to establish via clear and convincing evidence that it would have taken the same disciplinary action in the absence of the whistleblowing. Accordingly, the Murray decision further underscores the importance of documenting the legitimate reasons for adverse employee actions.