Supreme Court Extends Whistleblower Protections

Legal Compliance Resource
March 12, 2014 — 880 views  

The Supreme Court has ruled that subcontractors who transact with public firms could also have whistleblower protection, thus broadening the scope of protection. The court struck down mutual fund firm FMR’s stand that only the staff of public firms should be protected.  

The court said the whistleblowers who expressed concerns over management of certain mutual funds to their employer, FMR, which is the parent concern of Fidelity Investments had legal protection. Two former employees of Boston region, Jonathan Zang and Jackie Lawson, came under retaliation after they said that the company followed some bad practices. The justices of the Supreme Court said they were keeping in mind the Sarbanes-Oxley Act of 2002. The majority of the court said its decision was in keeping with the interpretation of the law by the Department of Labor. The Sarbanes-Oxley Act was enacted by the Congress after Enron Corp and WorldCom Inc were brought down by accounting issues.

Broad reach

The Supreme Court ruling extends protection to investment advisers, accounting companies and legal firms, and could have a wide reach, even extending to domestic employees. However, it has come under much flak, some from within the fraternity saying that the law had a reach that was way too broad. Justice Sonia Sotomayor cited the hypothetical example of a nanny being asked to leave because she said the employer’s son was involved in some fraud, after which she sues the employer. The Justice said the court majority had actually allowed for law suits to be filed for fraud that had nothing to do with governing corporations.

Good for whistleblowers

A lawyer who is a representative of the two whistleblowers said the ruling was a shot in the arm for those who want to point out a company’s bad practices, because they would be protected from attacks. Lawson, one of the whistleblowers, had worked with Fidelity between 1993 and 2007, while Zang ran many mutual funds between ’98 and ’05. Lawson said she had brought irregularities in accounting to the notice of her supervisors, but was in return not considered for promotion. In fact, she was even warned that she would be punished for being an insubordinate employee. Zang, on his part, had complained that a Fidelity pay scheme was wrong about the process of pay calculation. In return, he was given bad reviews and fired. A Boston court had taken the side of Fidelity in a ruling back in 2012. A Fidelity spokesperson claimed that the company had provided its employees many platforms where they could report such issues.

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