A recent decision by the Second Circuit Court of Appeals (Bergman v Neo@Ogilvy LLC) held that the Dodd-Frank Act protects employee whistleblowers who report wrongdoing internally to their employer, in addition to employees who report wrongdoing to the Securities and Exchange Commission ("SEC"). The court's decision creates a split with the Fifth Circuit, which previously held that the same provision applied only to whistleblowers who reported wrongdoing to the SEC. The employer plans to file a petition for certiorari with the U.S. Supreme Court to resolve the circuit split.
The litigation arose from a potential ambiguity in the Dodd-Frank Act: the statute defines "whistleblower" as an individual who provides information relating to violations of securities laws to the SEC, but the provision protecting employee whistleblowers from employer retaliation applies both to employees who report to the SEC and employees who report wrongdoing internally to their employers.
The court held that the "arguable tension" between these two provisions created an ambiguity, and deferred to the SEC's interpretation of the statute, under which internal whistleblowers were protected from employer retaliation. The court noted that a strictly textual reading of the retaliation provision would only protect employees who simultaneously reported wrongdoing to the SEC and to their employer, and reasoned that Congress likely did not intend to create such a limited protection, especially because employees such as attorneys and auditors cannot report wrongdoing to the SEC until after reporting it to their employer.
The Second Circuit's decision is in conflict with the Fifth Circuit's decision in Asadi v. G.E. Energy that the statutory definition of "whistleblower" means that the statute only protects internal whistleblowers who simultaneously report wrongdoing to the SEC.
In light of the circuit split, the employer has informed the Second Circuit that it plans to file a certiorari petition with the U.S. Supreme Court, and the Second Circuit has stayed its mandate pending the resolution of that petition.
Impact for employers
Employers located within the Second Circuit's jurisdiction should be sure that the language of their employment policies is consistent with the Second Circuit's ruling with regard to internal reporting. In addition, employers should monitor the status of the case before the Supreme Court.