A Victory for Whistleblowers

Back in 2002, Time Magazine celebrated three women whistleblowers—Coleen Rowley of the FBI, Sherron Watkins of Enron, and Cynthia Cooper of Worldcom—as Persons of the Year. Rowley disclosed that the FBI failed to investigate one of the masterminds of September 11. Watkins informed Enron Chairman Kenneth Lay that the company’s accounting methods were improper. Cooper notified Worldcom’s Board of Directors that the company had fraudulently concealed $3.8 billion in losses. The women were celebrated for their courage in part because the law did little to protect whistleblowers from retaliation by their employers.

In reaction to the financial scandals, and in order to safeguard investors in public companies and restore trust in the financial markets, Congress passed the Sarbanes-Oxley Act of 2002 (SOX). SOX included a provision protecting whistleblowers from retaliation, stating in relevant part:

“No [public] company …, or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of [whistleblowing or other protected activity].”

On March 4, in Lawson v. FMR LLC, the Supreme Court gave a broad reading to the statute in order to protect two whistleblowers who worked for private, not public, companies in the mutual funds industry.

Fidelity Funds is a public company that, like most mutual funds companies, has no employees. Instead, Fidelity employs private companies to provide advising and management services about those mutual funds. The petitioners in the Supreme Court case, Jackie Hosang Lawson and Jonathan M. Zang, were both employees of such private companies. Lawson alleged that her employer retaliated against her after she raised questions about the cost accounting methods. Zang alleged that he was fired after identifying inaccuracies in a registration statement that violated federal securities laws.

The defendant companies had successfully argued in the First Circuit Court of Appeals that SOX protected only employees of public companies and not the employees of the public companies’ contractors and subcontractors. The Supreme Court, however, in an opinion by Justice Ruth Bader Ginsburg, ruled that employees of a public company’s private contractors and subcontractors enjoy whistleblower protection. Ginsburg wrote that this interpretation was the best reading of the statute, rejecting the defendants’ and the dissenting justices’ contention that her reading would, absurdly, extend whistleblower protection to housekeepers and gardeners who work for the companies’ officers.

The defendants’ victory in the Second Circuit and Justice Sotomayor’s dissent in the Supreme Court (which was joined by Justices Kennedy and Alito) should send a warning signal to legislators to draft carefully when they decide to protect whistleblowers from retaliation.

Lawson’s focus on whistleblowers also reminds us that, back in 2002, as Enron unfolded, the Boston Globe began its Pulitzer-Prize-winning coverage of the sexual abuse scandal. Sadly, however, some church whistleblowers were denied their day in court due to the courts’ creation of a ministerial exception to the employment laws, which prohibits ministerial employees from suing their employers. Michigan elementary school teacher Madeline Weishuhn, for example, was fired by a Catholic school principal for reporting possible sexual abuse of a student’s friend to state authorities. Even though Weishuhn was a required reporter of abuse under state law, Michigan state courts dismissed her whistleblower lawsuit under the ministerial exception.

Unfortunately, when it denied certiorari in Weishuhn, the Supreme Court missed the opportunity to declare that, in order to safeguard children, religious whistleblowers deserve legal protection. The Court hinted at that result in Hosanna-Tabor, when Chief Justice Roberts wrote that the Court “express[ed] no view on whether the exception bars other types of suits, including actions by employees alleging breach of contract or tortious conduct by their religious employers.”

Lawson, however, confirms that hints are not enough, and that strong, clear language is necessary to protect whistleblowers even after scandals like Enron. I await and encourage the day when the courts and legislatures protect whistleblower employees of religious corporations as well as those of private financial companies.

Leslie C. Griffin

Leslie C. Griffin

Dr. Leslie C. Griffin is the William S. Boyd Professor of Law at the University of Nevada, Las Vegas, William S. Boyd School of Law. Professor Griffin, who teaches constitutional law, is known for her interdisciplinary work in law and religion. She holds a Ph.D. in Religious Studies from Yale University and a J.D. from Stanford Law School.