Stay informed and ready to meet both everyday challenges and long-term planning and policy-making goals, with focused news, practical information, and strategic insights on all HR-related developments.
The U.S. Supreme Court May 20 agreed to review whether the Sarbanes-Oxley Act provides whistleblower protection to employees who work for a publicly owned company's contractors or subcontractors, rather than for the public firm itself (Lawson v. FMR LLC, U.S., No. 12-3, cert. granted 5/20/13).
The U.S. Court of Appeals for the First Circuit held 2-1 that while SOX applied to publicly owned Fidelity mutual funds, the act did not provide the same protection to employees of an investment advisory firm that managed the funds ( 670 F.3d 61, 33 IER Cases 457 (1st Cir. 2012); 30 HRR 159, 2/13/12).
Former employees Jackie Hosang Lawson and Jonathan M. Zang filed a petition for high court review in June 2012. FMR LLC, the parent corporation of a group of companies that provided advisory services to the mutual funds, opposed the petition.
Solicitor General Donald B. Verrilli filed an amicus brief on behalf of the United States, also opposing the employees' petition. The solicitor general argued that while the First Circuit erred in its interpretation of Sarbanes-Oxley, Supreme Court review of the SOX issue would be premature and should await further “percolation” in the appellate courts.
According to the First Circuit decision, Lawson and Zang filed separate SOX whistleblower complaints with the Labor Department against their former employers, which provided investment advisory services to Fidelity mutual funds.
Lawson filed her lawsuit against FMR LLC and its subsidiary Fidelity Brokerage Services LLC doing business under the name Fidelity Investments. Zang named FMR LLC and another subsidiary, Fidelity Management & Research Co.
Lawson alleged she was harassed and ultimately forced to quit because she provided Fidelity managers with information on inappropriate expense reporting, retention of investment company fees, and methodologies for reporting or accounting for mutual fund expenses and operations. Zang contended he was fired for informing Fidelity management that disclosures that were being prepared for submission to the Securities and Exchange Commission did not accurately reflect the details of some fund managers' compensation.
The two former employees eventually filed a SOX action in the U.S. District Court for the District of Massachusetts. The trial court denied a motion to dismiss ( 724 F. Supp. 2d 141, 30 IER Cases 966 (D. Mass. 2010); 28 HRR 386, 4/12/10) and later decided to certify an immediate appeal of its order to the First Circuit (28 HRR 861, 8/9/10).
The appeals court 2-1 reversed the district court and directed it on remand to dismiss the whistleblower claims, concluding Section 806 of SOX does not cover the employees of private companies that contract with the defined public companies covered by the federal statute.
In their petition for Supreme Court review, Lawson and Zang cited a conflict between the First Circuit decision and the DOL Administrative Review Board's decision in Spinner v. David Landau and Associates, DOL ARB, No. 10-111, 5/31/12 (30 HRR 637, 6/11/12).
In Spinner, Lawson and Zang wrote, a three-member panel of the administrative board found that SOX did protect employees of contractors and subcontractors of a public company.
Unless the conflict between ARB and the First Circuit is resolved, the employees argued, “[a]n employer will as a practical matter be subject to different standards depending on where an employee worked or resided at the time of the alleged retaliation, a difference that is particularly problematic because many of the affected firms are national employers.”
Opposing the petition for Supreme Court review, FMR argued “courts of appeals are in agreement that the text of Section 806 limits the private cause of action to employees of public companies.”
FMR wrote that “petitioners have not cited a single case in which this Court has granted certiorari to review a conflict between a court of appeals decision and a decision of an administrative tribunal like the ARB, and we are aware of none.”
Contending that extending SOX coverage to the employees of private contractors would expose businesses to a “particularly expensive and potentially destructive form of civil liability,” FMR urged the justices to deny the petition for Supreme Court review.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)