The U.S. Court of Appeals for the Third Circuit recently held that that an employee is entitled to whistleblower protection under the Sarbanes-Oxley Act (“SOX”) if the employee has an objective “reasonable belief” that his or her employer is committing fraud or securities violations.  In Wiest v. Lynch, the court explained that the statute’s whistleblower protections apply where an employee demonstrates (1) “a subjective, good-faith belief that his or her employer violated a provision listed in SOX” and (2) that such belief is “objectively reasonable.”

The Third Circuit’s decision departs from prior opinions by the First, Fifth, and Ninth Circuits, which apply a higher standard of proof that requires employees to “definitively and specifically” articulate the existence of a violation of law.  In light of the Third Circuit’s less stringent standard for whistleblower claims, employers should continue to take employee complaints regarding potential fraud or other securities violations seriously and conduct appropriate investigations into such allegations.