In Lawson v. FMR LLC, the U.S. Supreme Court held that the whistleblower protections found in the Sarbanes-Oxley Act (SOX) protect from retaliation employees of privately held contractors and subcontractors of publicly traded companies—and not just those employed directly by a public company.

In 2002, Congress passed SOX to safeguard investors in publicly traded companies and restore trust in the financial markets following the collapse of Enron and other high-profile accounting scandals. Among its many provisions, SOX empowered government regulators like the Securities and Exchange Commission to investigate and punish fraud in public companies. Congress found that “Enron had succeeded in perpetuating its massive shareholder fraud in large part due to a ‘corporate code of silence.’” To investigate fraud, the SEC and other law enforcement agencies obviously first need to know about it. So, Congress added whistleblower protections to SOX that prohibited “any officer, employee, contractor, subcontractor, or agent” of a publicly traded company from discharging, demoting, suspending, threatening, harassing, “or in any other manner discriminat[ing] against an employee in the terms and conditions of employment because” that employee provided information or otherwise assisted in an investigation of a fraud.

The issue in Lawson involved Fidelity’s mutual funds, which are publicly traded companies, but have no direct employees themselves as is common in the mutual fund industry. Instead, the mutual funds are often managed by private companies that contract with the funds. Two employees of the private companies that managed Fidelity’s mutual funds filed SOX whistleblower complaints with the Labor Department and the case eventually made its way to the U.S. Court of Appeals for the Second Circuit. There, the court of appeals relied on the heading of SOX’s whistleblower protection section (“Whistleblower Protection for Employees of Publicly Traded Companies”) and other aids in statutory interpretation to rule that SOX’s whistleblower protection provisions do not protect employees of privately held companies that are contractors or subcontractors of a publicly traded company. The Supreme Court rejected this interpretation.

Relying on the plain language of the statute, the Court held that SOX’s whistleblower protections do apply to employees of private entities that contract or subcontract with publicly traded companies. The decision in Lawson could have a potentially sweeping effect as any company that has a contract or subcontract with a publicly traded company, the employees of that contracting company now have SOX whistleblower protections. This could be lawyers, accountants, consultants, and other financial professionals—really anybody that works for an entity that has a contract or subcontract with a public company. The Court recognized the broad reach of its decision, but countered that it “would thwart Congress’ dominant aim if contractors were taken off the hook for retaliating against their whistle-blowing employees, just to avoid the unlikely prospect that babysitters, nannies, gardeners, and the like will” bring a flood of whistleblower complaints. Employers that have contracts or subcontracts with publicly traded companies should add SOX’s whistleblower protections to the list of protections afforded to employees and seek counsel should they receive a fraud claim involving a public company.