Supreme Court Encourages “Whistleblowers” To Go Directly To The SEC

In a new decision with significant impact, the Supreme Court narrowly defined the word “whistleblower” and ruled that employees who want to report wrongdoing need to go to the government in order to secure anti-retaliation protections. Reporting the problem internally will not provide employees with protection under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The case of Digital Realty Trust Inc. v. Somers focused on whether employees can bring whistleblower claims under Dodd-Frank’s anti-retaliation provision even if they didn’t report their concerns to the SEC.  The Court said that based on the statute’s language, an employee who has a securities law complaint against their employer must first take their allegations to the Securities and Exchange Commission to be protected by the law’s anti-retaliation measures.

As the Court explained:  “Dodd-Frank’s anti-retaliation provision does not extend to an individual, like Somers, who has not reported a violation of the securities laws to the SEC.”

The Dodd-Frank law was passed in 2010 and expanded whistleblower incentives and protections first created under the 2002 Sarbanes-Oxley Act. This case involved the wording of the term “whistleblower,” which Dodd-Frank defined as employees who provide “information relating to a violation of the securities laws to the Commission.”

By focusing and narrowing the definition of the word to whistleblowers who take their allegations “to the Commission,” the Supreme Court excludes from Dodd-Frank’s protections those employees who report their concerns internally.

According to the Court’s opinion: “The Court’s understanding is corroborated by Dodd-Frank’s purpose and design. The core objective of Dodd-Frank’s whistleblower program is to aid the Commission’s enforcement efforts by ‘motivat[ing] people who know of securities law violations to tell the SEC’.”

A copy of the Court’s opinion can be found here.