Monday, February 12, 2024

SOX whistleblowers need not prove retaliatory intent

By Anne Sherry, J.D.

Sarbanes-Oxley’s anti-retaliation provision requires whistleblowers to prove that protected activity was a factor in their termination, but they do not have to prove that the employer acted with retaliatory intent. A unanimous Supreme Court reasoned that there is no “retaliatory intent” requirement in the statute and that such a requirement could not be reconciled with the law’s mandatory burden-shifting framework. Justice Alito, joined by Justice Barrett, wrote a separate concurrence to clarify his understanding of the Court’s opinion (Murray v. UBS Securities, LLC, February 8, 2024, Sotomayor, S.).

Background. The Court granted certiorari in May 2023 on the question whether a SOX whistleblower must prove retaliatory intent as part of his case in chief, or whether the employer bears the burden of proving the lack of retaliatory intent as an affirmative defense. The Second Circuit had split with other circuits in holding that the burden was on the employee.

The Second Circuit’s reasoning was that the statute’s prohibition of retaliation “because of whistleblowing” required proof of the employer’s retaliatory intent. But the whistleblower argued that the burden-shifting framework incorporated by reference in the SOX provision only requires a prima facie showing that the protected conduct was a contributing factor in the termination. The case was watched closely, with the U.S. government supporting the petitioner as amicus curiae and participating in oral argument and some industry groups, including SIFMA and the U.S. Chamber of Commerce, filing amicus briefs on the side of the employer.

Whistleblower prevails. Writing for the unanimous Court, Justice Sotomayor began with a brief history of the Sarbanes-Oxley Act and specifically the burden-shifting framework incorporated by reference into its anti-retaliation provision. This framework requires the whistleblower to prove that the protected activity was a “contributing factor” in the adverse personnel decision. At that point, the burden shifts to the employer to show by clear and convincing evidence that it would have taken the action anyway.

The burden-shifting framework originated in the Whistleblower Protection Act of 1989 and was meant to relieve employees of the “excessively heavy burden” under then-existing law. Congress incorporated the “contributing factor” framework into a series of statutes protecting employees in industries where whistleblowing is especially important to protecting public welfare.

The Court’s opinion observes that the text of SOX does not reference or include any “retaliatory intent” requirement, and such a requirement would be inconsistent with the burden-shifting framework that it does include. The Second Circuit relied heavily on the statute’s use of the word “discriminate,” which it interpreted to mean animus, but the Court found that the word could not bear the weight of the appeals court holding.

First, the placement of the word in the statute’s catchall provision, following a list of other adverse employment actions, suggested that “discriminate” was meant to capture other actions not specifically listed. Because the petitioner was “discharged,” a specifically listed action, it wasn’t obvious that the “or in any other manner discriminate” clause had any relevance to his claim. But even if it did apply, the word “discriminate” does not inherently require retaliatory intent. “When an employer treats someone worse … 'because of’ the employee’s protected whistleblowing activity, the employer violates §1514A. It does not matter whether the employer was motivated by retaliatory animus or was motivated, for example, by the belief that the employee might be happier in a position that did not have SEC reporting requirements,” Justice Sotomayor wrote.

Furthermore, requiring a plaintiff to show retaliatory intent would ignore the statute’s mandatory burden-shifting framework. Such frameworks have long provided a way of getting at intent in employment discrimination cases, and the contributing-factor framework at work in SOX is intended to be more lenient than some other frameworks, like the motivating-factor framework of Title VII. In this case, the framework operated as intended by sharpening the inquiry so the jury could consider both sides.

Finally, the Court rejected the argument put forth by UBS and its amici that without a retaliatory intent requirement, employers will be liable for legitimate, nonretaliatory personnel decisions. The statute accounts for this by providing that an employer will not be liable if it can demonstrate that it would have taken the same action in the absence of the whistleblowing activity. The Court agreed that the contributing-factor framework is not as protective of employers as a motivating-factor framework but said this is by design. “Congress has employed the contributing-factor framework in contexts where the health, safety, or well-being of the public may well depend on whistleblowers feeling empowered to come forward. This Court cannot override that policy choice by giving employers more protection than the statute itself provides,” Justice Sotomayor concluded.

Concurrence. Writing separately, Justice Alito (joined by Justice Barrett) clarified that the Court’s rejection of an “animus” requirement does not read intent out of the statute. A whistleblower must still show the employer’s intent to discriminate. (Here, the Justice seems to differ with Justice Sotomayor’s suggestion that the word “discriminate” may not even apply to the petitioner’s claim: compare “The phrase ‘in any other manner discriminate’ suggests that the adverse action—here, petitioner’s discharge—must be a form of discrimination” (Alito) with “Here, there is no dispute that Murray was ‘discharge[d],’ and so it is not obvious that the ‘or in any other manner discriminate’ clause has any relevance to his claim” (Sotomayor)).

Justice Alito described the statute as requiring that the employee show that the protected activity was a reason—not the reason, or even the main reason—for the adverse employment decision. Then, the statute’s intent requirement is met, and the only remaining question is causation, which is the employer’s burden. On the understanding that this is the Court’s interpretation, the concurring Justices join the opinion of the Court.

The case is No. 22-660.