U.S. SC hears arguments in case over whistleblower protections

WASHINGTON (Legal Newsline) -- The U.S. Supreme Court on Tuesday heard arguments in a case questioning who is protected from retaliation after reporting a company's wrongdoing.

In Lawson v. FMR LLC, the court is presented with the question of whether the scope of the Sarbanes-Oxley Act's whistleblower protection includes employees of contractors of public companies.

The act, signed into law in 2002 in response to the Enron scandal, set new or enhanced standards for all U.S. public company boards, management and public accounting firms.

In particular, section 806 of the act forbids a publicly traded company, a mutual fund or "any contractor [or] subcontractor... of such company [to]... discriminate against an employee in the terms and conditions of employment because of" certain protected activity.

The U.S. Court of Appeals for the First Circuit held that under section 1514A such contractors and subcontractors, if privately-held, may retaliate against their own employees, and are prohibited only from retaliating against employees of the public companies with which they work.

The exact question presented to the nation's high court:

"Is an employee of a privately-held contractor or subcontractor of a public company protected from retaliation by section 1514A?"

The petitioners in the case, Jackie Lawson and Jonathan Zang, who represent two mutual fund industry whistleblowers, argued this week that the court should overrule the First Circuit and extend protections to employees of contractors of publicly-held companies.

The workers claimed they were retaliated against after reporting allegations of fraud affecting Fidelity funds.

The respondents, on the other hand, argued that the limitation is needed.

To read a full transcript of the oral arguments, click here.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.