Second Circuit Rules that Whistleblower Need Not Go to SEC for Protection
The Second Circuit Court of Appeals has ruled that a whistleblower is entitled to protection from job retaliation when the whistleblower reports wrongdoing internally or to the SEC. The Court reversed a lower court’s dismissal of the whistleblower’s Dodd-Frank retaliation claim arising from termination after he internally reported alleged financial reporting wrongdoing. The District Court interpreted the Dodd-Frank Act to require SEC reporting in order to benefit from the anti-retaliation provisions. The circuits have split on the issue.
OUR TAKE: This is the right answer even though legally incorrect. The statute is pretty clear that the anti-retaliation provisions only apply if the whistleblower goes to the SEC. However, we agree with the Second Circuit that Congress probably did not intend this result because the anti-retaliation provisions were tacked on to Dodd-Frank at the last minute. Given the split in the courts, Congress should consider a clarification. As a practice point, firms should refrain from retaliatory job action whether or not the purported whistleblower reported internally or to the SEC.