Supreme Court Allows SOX Retaliation Claims To Proceed Without Showing Of Retaliatory Intent

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The U.S. Supreme Court recently ruled that whistleblowers need not prove that their employer acted with retaliatory intent to maintain their retaliation claims under the Sarbanes-Oxley Act (SOX).
United States Employment and HR
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The U.S. Supreme Court recently ruled that whistleblowers need not prove that their employer acted with retaliatory intent to maintain their retaliation claims under the Sarbanes-Oxley Act (SOX). Although whistleblowers are required to prove that the protected activity was a contributing factor in the unfavorable employment action that their employer took against them, evidence of retaliatory intent is unnecessary under the plain terms of the SOX statute. The case is Murray v. UBS Securities, LLC.

Trevor Murray was employed as a research strategist at UBS Securities, LLC, where SEC regulations required him to certify that his reports were produced independently and contained his own views. Nonetheless, two leaders of the company's commercial-mortgage-backed securities (CMBS) trading desk instructed him to skew his reports to support their business strategies. Murray reported the incident to his supervisor on two occasions, who told him to report as the CMBS trading desk had instructed him. Shortly thereafter, UBS terminated Murray.

Murray sued his former employer, alleging that the company terminated his employment after he reported fraud and a violation of retaliation prohibitions in SOX. UBS claimed that market difficulties and a big financial loss resulted in the company eliminating certain positions.

The jury found in Murray's favor, and the court awarded him damages of close to $1 million, as well as $1.77 in attorney fees and costs. UBS appealed, and the U.S. Court of Appeals for the Second Circuit reversed the trial court's decision, holding that retaliation claims under SOX required proof of retaliatory intent.

Murray sought a writ of certiorari to the U.S. Supreme Court, seeking reinstatement of his damages award. The Court agreed with Murray, reversed the Second Circuit's holding, and remanded the case for proceedings consistent with its opinion.

UBS argued that Murray failed to prove retaliatory intent, and thus could not pursue his retaliation claim. The company claimed that absent a retaliatory intent requirement, innocent employers would face liability for legitimate employee terminations not based on retaliation. However, the Court disagreed, finding that SOX contains a burden-shifting framework. Therefore, once the whistleblower shows that protected activity contributed to the unfavorable employment action, the burden shifts to the employer. Under these circumstances, innocent employers will not be liable if they can prove by clear and convincing evidence that they would have taken the same unfavorable employment action had the employee not engaged in the protected activity.

The UBS Securities decision is a stark reminder of the importance of clearly documenting employee and workplace misconduct and related employment decisions. This documentation is necessary to avoid any inference of retaliation, particularly if the employees have engaged in any sort of protected activity during their employment. Moreover, employers covered by SOX should train their staff on the court's decision in UBS Securities and the statute's burden-shifting framework so that they are aware of its requirements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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