SUMMER 2018 TODAY’S GENER AL COUNSEL
Labor & Employment
Ruling Limits Whistleblowers to Nuclear Option By James Hockin and Meriel Schindler
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n February, the Supreme Court threw out an anti-retaliation suit brought against a real estate trust by a former employee who was fired after internally reporting alleged securities violations. The case has overturned understanding of the test for employees to gain whistleblower status. In Digital Realty Trust, Inc. v Somers, the Court ruled that because the employee reported the alleged wrongdoing internally instead of directly to the Securities and Exchange Commission (SEC), he was not protected. The SEC created rules to enforce the Dodd-Frank Act, which allowed for internal reporting. Those rules no longer obtain.
While the decision strips DoddFrank back to the literal language of the text, there is concern that it undermines whistleblowing laws. Some commentaries view it as running contrary to many other United States laws containing anti-retaliation provisions that protect employees and individuals from a much broader spectrum of complaints, including (under certain circumstances) informal complaints. SUPREME COURT UNDERCUTS SEC
The Dodd-Frank Act provides protection and incentives to those who blow the whistle on possible securities and commodities violations. The headline
grabber when Dodd-Frank was signed into law in 2010 was that whistleblowers might be financially rewarded for a tip that resulted in a successful enforcement action in which more than $1 million was collected. The Supreme Court decision does not touch on that provision, but rather addresses those protections afforded to individuals who blow the whistle and suffer retaliation by their employer as a result. It means that, for the purposes of Dodd-Frank, an individual will not gain “whistleblower” status unless and until they have reported to the SEC. This flies in the face of SEC rules and guidance, which is that Dodd-Frank’s