U.S. Supreme Court Hears Arguments in Whistleblower Retaliation Case

The U.S. Supreme Court recently heard arguments in Murray v. UBS Securities, a whistleblower retaliation case. In this case, the Court is considering whether whistleblowers alleging retaliation by their employers must prove that they acted with retaliatory intent.

Murray worked for UBS as a strategist in its mortgage strategy group. UBS laid him off in 2008 due to a reduction in force due to the financial crisis and rehired him in 2011, only to lay him off again in 2012. According to Murray, UBS targeted him for layoff because he reported to his supervisors that his colleagues had made illegal efforts to skew his independent research analysis. In response, UBS argued that Murray did not qualify as a whistleblower under the Dodd-Frank Act because he did not report the alleged misconduct to the U.S. Securities and Exchange Commission (SEC) and could not have reasonably believed that the conduct he reported violated any law.

A jury disagreed, awarding Murray $653,000 in back pay and $250,000 in noneconomic compensatory damages. However, on appeal, the U.S. Court of Appeals for the Second Circuit reversed the trial court’s decision, finding that a whistleblower must prove that an employer acted with retaliatory intent to prevail on a whistleblower retaliation claim.

Whistleblowers generally must prove that their whistleblowing activity contributed to their adverse employment action, such as a demotion or firing. Evidence that whistleblowing contributes to the adverse employment action includes the employer’s knowledge of the whistleblowing and the proximity in time of the whistleblowing and adverse action. The burden of proof then shifts to the employer, who must show that it had valid and legal grounds to take the same adverse action against the employee absent the whistleblowing.

The U.S. Department of Justice, arguing on behalf of Murray, stated that Congress did not intend whistleblowers to have the burden of proving what was in the employer’s mind when it took adverse action against them. Discrimination is based on an employer treating one employee differently than others based on a protected characteristic or action that results in injury to that employee, not on the employer’s intent or maliciousness in harming the employee.

In response, the attorney for UBS alleged that Congress did not eliminate the element of intent in enacting the Sarbanes-Oxley Act (SOX) when it added the contributing factor test. UBS also claimed that intent was a necessary part of the analysis of a discrimination case, in addition to the causation of the adverse employment action.

Nonetheless, several justices – including those who typically do not agree on many issues – expressed skepticism about UBS’s position. These justices opined that the retaliatory intent concept is already part of the burden-shifting legal standard in whistleblower retaliation cases. At least one justice further reasoned that the statute requires a showing of discrimination, not intent.

This decision will be critical for public companies and those that contract with public companies. SOX prohibits discrimination against individuals who engage in certain types of whistleblower activities. If the Court finds that employers must disprove retaliatory intent in whistleblower cases, companies will likely have a much more challenging time successfully litigating these cases.

As a result, employers should be aware that firing employees soon after their engagement in whistleblower activities is likely to result in a presumption of illegal retaliation. Therefore, employers who terminate an employee under these circumstances should have a legally valid, well-documented reason. Likewise, employers should carefully investigate and document all whistleblower claims. To avoid any appearance of retaliation, employers should encourage good-faith retaliation and reward employees who report such behaviors.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.


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Hall Benefits Law, LLC

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