US Supreme Court Unanimously Rules in Favour of Whistleblower Protection in Murray v UBS Securities LLC: Landmark Decision Sets Precedent for Contributing Factor Test
Murray v UBS Securities LLC, 601 US 22 (2024)
Summary
This was an important case under American whistleblowing law. In the absence of much Australian jurisprudence on whistleblower protections, it provides helpful comparative insight.
This matter relates to a decision pursuant to §1514A(a) of the Sarbanes-Oxley Act of 2002 which allows whistleblower employees to seek relief against an employer that makes an adverse personnel decision against the employee because of their whistleblowing activity.
The United States Supreme Court unanimously held that a whistleblower who invokes §1514A must prove that their protected activity was a contributing factor in the employer’s unfavourable personnel action but need not prove that their employer acted with “retaliatory intent”.
Facts
The Plaintiff was employed by UBS as a research strategist who was responsible for producing and certifying independent reports to UBS customers regarding the firm’s securities business.
Recent performance reviews were positive and indicated the Plaintiff was a high performing employee.
The Plaintiff informed his supervisor that two leaders of the UBS trading desk were engaging in what he believed to be unethical and illegal efforts to skew his independent reporting.
The Plaintiff stated that the conduct of the internal trading desk was “unethical” and “illegal”, and described their conduct as “bad and getting worse”. He believed he was being left out of meetings and subjected to “constant efforts to skew [his] research”.
He was subsequently fired.
In the first instance the Plaintiff was successful at the District Court. The Jury awarded general damages of $1 million and costs of $1.769 million.
On appeal at the Second Circuit the matter was remanded for retrial. The Court deemed that “retaliatory intent” is an essential element of a §1514A claim required to be proven by the Plaintiff. The retrial was to occur with the jury being instructed on this element.
On application, the Supreme Court of the United States then granted Certiorari to resolve the disagreement.
Decision
Justice Sotomayor read the decision of a unanimous court.
Discussion of legislation
Title 18 United States Code §1514A(a) specifically provides that employers may not “discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of” protected whistleblowing activity.
§1514A(a) requires the Plaintiff to establish on the balance that “protected activity was a contributing factor in the termination of his employment.” App. 126–127. The burden then shifts to the Defendant to prove that termination would have occurred regardless of the protected activity.
The Court held that the word “discriminate” in the phrase “or in any other manner discriminate” in §1514A(a) should be read widely in order to capture other adverse actions not explicitly listed in the legislation as per Brogan v. United States, 522 U. S. 398, 403, n. 2 (1998) (“[W]hen a general term follows a specific one, the general term should be understood as a reference to subjects akin to the one with specific enumeration”).
This is important as the initial Whistleblower Protection Act of 1989 had more stringent requirements on the Plaintiff which were then amended by the Sarbanes-Oxley Act of 2002 (page 6). The “contributing factor” test were introduced to be easier to satisfy and to protect claimants from adverse action (135 Cong.Rec. 5032, 5033 (1989) (Explanatory Statement on S. 20, 101st Cong., 1st Sess. (1989)). The test does not require the Plaintiff to establish that the whistleblowing behaviour is a primary or significant factor (page 8).
Further, the Court adopted the normal definition of the word “discriminate” from Babb v. Wilkie, 589 U. S. 399, 405 which simply defines discrimination as “differential treatment”. The Court further relied on Bostock v Clayton County, 590 U. S. 644, 658, 663. Pp. 7–10 to state that when differential treatment occurs, the employer’s lack of “animosity” is “irrelevant”.
In the first instance, the District Court held that the jury “should consider” whether “anyone with th[e] knowledge of [Murray’s] protected activity, because of the protected activity, affect[ed] in any way the decision to terminate [Murray’s] employment” (at 180). Justices Alito and Barrett also separately wrote to confirm that the employer’s intent must be examined, but only to the extent that it is to prove the protected actions were a contributing factor.
Further, §42121(b) of title 49, United States Code has deliberate burden shifting frameworks which place the onus on employers to “come forward with some response” to the Plaintiff’s evidence as per St. Mary’s Honor Center v. Hicks, 509 U. S. 502, 510–511. The burden of the Defendant is also described by Justices Alito and Barrett as proving “by clear and convincing evidence that [it] would have taken the same unfavorable personnel action.”
It was held that the Second Circuit erred in determining that “retaliatory intent” is an element that must be established by the Plaintiff. The Plaintiff’s burden was discharged on the basis that he proved his protected actions were a contributing factor. This alone satisfies the requirements of the Act.
Discussion of policy
The judgment briefly discusses policy arguments put forth by the Respondent and also the Chamber of Commerce of the United States of America as Amicus Curiae. Their submission is that without the requirement of retaliatory intent, businesses can be punished for personnel decisions even where they are not based on the whistleblowers protected activity.
The example given is where, as a consequence of whistleblowing, a client leaves the business which means the whistleblower’s role is no longer viable.
The Court dismissed this argument, stating that the statute’s burden-shifting framework provides that an employer will not be held liable where it “demonstrates, by clear and convincing evidence, that [it] would have taken the same unfavourable personnel action in the absence of” the protected behaviour(Title 49 United States Code §42121(b)(2)(B)(ii)).
Commentary
The result of the decision is that the whistleblower action now has four defined elements:
that the employee engaged in whistleblowing activity protected by Sarbanes-Oxley;
that the employer knew that the employee engaged in the protected activity;
that the employee suffered an adverse employment action (i.e., was fired); and
that the employee’s “protected activity was a contributing factor in the termination of his employment.
The final element does not require any subjective element of retaliation or animus to be proven.
The burden-shifting legislation then requires the employer to prove that they would have taken the adverse employment action even if the employee had not engaged in whistleblowing activity.
The effect of this decision is a positive one for human rights in the United States. It reinforces the widely drafted protections for whistleblowers in corporate settings and does so in a manner that draws on both black letter law and the policy context at the time the law it interprets was drafted. It also proactively addresses policy arguments put forth by opponents of whistleblowing legislation.
It is encouraging for whistleblowers that the ‘contributing factor test’ was upheld unanimously by the Supreme Court in such a robust way. This test is less stringent on complainants compared to the ‘dominant factor test’ that came before it, and certainly less stringent than the very narrow test of ‘retaliatory intent’ proposed by the Defendant.
However, as with all judgments, it is vulnerable to any change in legislation made by congress subject to constitutional limitations.
The full case can be read here.
Credit: This summary was prepared by Liam Hart of Hall & Wilcox.