SCOTUS: Retaliatory Intent Not an Element of SOX Retaliation Claim

  • Supreme Court decision clarifies framework for whistleblowers filing claims under the Sarbanes-Oxley Act.
  • Plaintiffs need to prove only that their whistleblower activity was a contributing factor in their termination, but still must ultimately show causation.

The Supreme Court resolved a circuit split on February 8, 2024, when it issued its opinion in Murray v. UBS Securities, LLC, holding that a whistleblower need not prove that the employer acted with “retaliatory intent” in order to obtain the protections of the Sarbanes-Oxley Act of 2002 (“SOX”).  Rather, the plaintiff in a SOX case has the benefit of a favorable statutory framework, in which the plaintiff need prove only that their protected whistleblowing activity was a “contributing factor” in their termination, after which the defendant has the heavier burden of proving that it would have terminated the plaintiff even absent the protected activity.

SOX Whistleblower Protections

SOX prohibits publicly traded companies from retaliating against employees who report what they reasonably believe to be instances of criminal fraud or securities law violations. The statute specifically provides that employers may not “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. See 18 U. S. C. §1514A(a). The Murray decision focused on what “discriminate” and “because of” meant within the framework of the statute.

Factual and Procedural Background

In Murray, the employee appellant worked for the employer appellee “as a research strategist in a role that required him to certify—in accordance with applicable Securities and Exchange Commission regulations—that his reports to the employer’s customers on the firm’s securities business were independently produced and reflected his own views.” The employee informed his supervisor “that two leaders of the Appellee trading desk were engaging in what he believed to be unethical and illegal efforts to skew his independent reporting,” and the employer terminated his employment shortly thereafter. The employee then filed suit under section 1514A, alleging his termination was in retaliation for expressing concerns about efforts to skew his reporting.

The matter proceeded to trial, and the employer moved for judgment as a matter of law on the basis “that Appellant had ‘failed to produce any evidence that [his supervisor] possessed any sort of retaliatory animus toward him,’” and asserting that he had been terminated in a workforce reduction. The trial court denied the employer’s motion, and then instructed the jury that the employee needed only to establish by a preponderance of the evidence that his “protected activity was a contributing factor in the termination of his employment” in order to prevail on his retaliation claim. If the employee did so, the burden would shift to the employer to “demonstrate by clear and convincing evidence that it would have terminated [Appellant’s] employment even if he had not engaged in protected activity.” The jury found in the employee’s favor, deciding he established his protected activity was a contributing factor in the termination of his employment, and ultimately did not believe that he would have been had he not engaged in protected activity.

The employer appealed, and the Second Circuit vacated the jury’s verdict. The Second Circuit held that “[r]etaliatory intent is an element of a section 1514A claim,” and the trial court erred by not instructing the jury on the employee’s burden to prove the employer’s retaliatory intent.  The Second Circuit remanded the case for a new trial, and the employee appealed to the Supreme Court.

Holding and Legal Analysis

In reversing the Second Circuit, the Supreme Court considered the plain language of the statute, as well as what it deemed to be the underlying intent of SOX.  It held that the statute laid out the evidentiary burden for both the plaintiff and the defendant in terms of intent and causation:

  • The plaintiff must prove by the preponderance of the evidence the employer’s intent by showing that the protected conduct was at least one factor in the adverse employment action.
  • If the plaintiff succeeds, then the burden shifts to the employer to prove by the higher burden of clear and convincing evidence that the protected conduct did not factor in at all into the adverse employment action.

The Second Circuit and the employer both relied on the word “discriminate” in section 1514(A)(a) to impose a “retaliatory intent” requirement for whistleblowers to establish a retaliation claim.  The Supreme Court rejected that interpretation, however, explaining that the “placement of the word ‘discriminate’ in the section’s catchall provision suggests that it is meant to capture other adverse employment actions that are not specifically listed, drawing meaning from the terms ‘discharge, demote, suspend, threaten, [and] harass’ rather than imbuing those terms with a new or different meaning.”  Instead, if an employer takes any adverse action because of his whistleblowing activity, such action constitutes “actionable discrimination,” and the employer’s lack of retaliatory intent is irrelevant.  In other words, discrimination does not necessarily require retaliatory intent.

Based on that placement of the word “discriminate” and the statute’s clear use of the “contributing factor” standard, the Court found that Section 1514A(a)’s text does not reference or include a “retaliatory intent” requirement, and the provision’s mandatory burden-shifting framework “cannot be squared with one.”  The Court reiterated that Congress intentionally made the plaintiff’s burden under SOX the “easier-to-satisfy ‘contributing factor’ framework” that it had included in other public-safety and public-welfare whistleblower statutes, like the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (“AIR21”) and the Food, Drug, and Cosmetic Act, and doing so was “by design.”  Reading into the statute an intent requirement would be contrary to the plain language and Congress’s intent. 

Practical Implications for Employers

The opinion should be seen as clarifying the language of the statute as it has always been written, rather than a sea-change in some broad or disparate interpretation of the statute.  While Section 1514A(a) is consistently touted as an “antiretaliation” statute, the statute explicitly prohibits “discrimination against” an employee in the terms and conditions of employment because of protected whistleblowing activity. The Court’s focus on this intentional anti-discrimination language indicates the Court was interpreting the statutory language more consistently with the language in Title VII’s discrimination framework, which also does not require a showing of “retaliatory intent,” but only the creation of an inference of unlawful discrimination to satisfy the prima facie standard.  Importantly, the concurrence by Justices Alito and Barrett reiterates that the Court’s opinion does not remove the plaintiff’s obligation to prove causation.  Justice Alito wrote, “[a]s the Court puts it, the plaintiff must prove that the employer ‘intentionally treat[ed the plaintiff] worse because of ’ the protected conduct.”

From a practical standpoint, this is done by presenting the same kind of evidence that employers routinely see in discrimination and retaliation lawsuits, i.e., the use of comments, temporal proximity, conduct, and other circumstantial (and sometimes direct) evidence to show unlawful intent. The Court noted that in Murray’s case, the plaintiff satisfied his causation burden by pointing to his previous “very strong” performance review, comments from his supervisor after he complained, and then the close temporal proximity between the time of his complaint and the decision to terminate. Ultimately, the jury did not believe that the employer proved its lawful reason for terminating the employee by clear and convincing evidence, and thus found for the employee.

In light of the holding in the Murray case and the early enthusiasm with which whistleblower attorneys appear to be championing the same, employers should take care to ensure that any adverse actions taken against employees who have expressed concerns that would be considered protected conduct under section 1514(A) are taken only where the risks of doing so are weighed against other factors such as temporal proximity to employee-expressed concerns, prior performance, and comparators (or the lack thereof).

Employers should further consider buttressing such practical considerations with the following:

  • implementing or revising, as needed, reporting procedures for would-be whistleblowers to ensure concerns are properly fielded, investigated, and rectified or closed out;
  • engaging a third-party investigator, where necessitated by circumstances of the employee or company, to ensure any whistleblower investigations are handled appropriately;
  • instituting and advertising a strict anti-retaliation policy, including reporting procedures for employees who feel they have been retaliated against to relay concerns;
  • setting up, advertising, and utilizing non-policy tools, such as compliance hotlines; and/or
  • updating managerial and human-resources training materials to ensure disciplinary or termination checklists properly consider prior or pending complaints under, e.g., SOX, and take a thoughtful approach to how such complaints should impact the adverse action, if at all.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.