WASHINGTON — The Supreme Court ruled Wednesday that whistleblower protections passed by Congress after the 2008 financial crisis only apply to people who report problems to the U.S. Securities and Exchange Commission, not more broadly.
The justices said that a part of the Dodd-Frank Act that protects whistleblowers from being fired, demoted or harassed only applies to people who report legal violations to the SEC. They said employees who report problems to their company’s management but not the commission don’t qualify.
People who report issues to their company’s management, to another federal agency or to Congress are still protected against retaliation but under an older law, the 2002 Sarbanes-Oxley Act. But the two laws differ in a number of ways, including how long people have to bring a lawsuit and how much money they can get in compensation. A person who wins a lawsuit under the Dodd-Frank Act’s whistleblower protection provision can get more money than someone who wins under the Sarbanes-Oxley Act’s provision.
The justices were unanimous in agreeing that the whistleblower protection in the Dodd-Frank Act only covers people who report to the SEC. Writing for the court, Justice Ruth Bader Ginsburg said “Dodd-Frank’s text and purpose leave no doubt” about who the term “whistleblower” applies to.
“The definition section of the statute supplies an unequivocal answer: A ‘whistleblower’ is ‘any individual who provides … information relating to a violation of the securities laws to the Commission,'” she wrote.
The SEC had interpreted the whistleblower protection in the Dodd-Frank Act more broadly, an interpretation the Supreme Court rejected.
The court’s ruling comes at a time when the Trump administration has already laid out changes it wants to make to the 2010 Dodd-Frank Act, which the administration believes went too far and has hurt economic growth. President Donald Trump has repeatedly attacked the law as a “disaster” and has promised to do “a big number” on it. The Trump administration had nonetheless argued that the law did provide broad protection. Businesses had opposed that reading of the law.
The case the court ruled in involves Paul Somers, who worked for San Francisco-based Digital Realty Trust Inc., a real-estate investment trust that owns data centers worldwide. Somers was the company’s second in command in Singapore when he made accusations to senior managers that his boss had hidden millions of dollars in cost overruns, granted no-bid contracts and made payments to friends, among other things. Somers was fired in 2014 after making the allegations. He sued, saying his firing was a retaliation that violated the Dodd-Frank Act. He also alleged he had been discriminated against for being gay.
Lower courts had sided with Somers, saying he was entitled to whistleblower protections even though he didn’t disclose his allegations to the Securities and Exchange Commission.
The case is 16-1276, Digital Realty Trust Inc. v. Somers.