Since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, a number of federal courts have grappled with the scope of the Act’s new protections for employee “whistleblowers.” Until recently, however, no federal court of appeals had addressed the issue. In Asadi v. G.E. Energy (USA), L.L.C.,1 the U.S. Court of Appeals for the Fifth Circuit entered the fray — and rejected the conclusion reached by every other court that had previously considered the question.
The plaintiff in Asadi alleged that his former employer had fired him for reporting his concerns about a potential violation of the securities laws to his supervisor and a company ombudsperson. The plaintiff thus claimed that he had been fired for engaging in protected activity under the Dodd-Frank Act, which, in part, prohibits employers from discharging, demoting, suspending, threatening, harassing, or otherwise discriminating against a “whistleblower” for assisting or sharing information with the U.S. Securities and Exchange Commission (SEC) — or for “making disclosures that are required or protected” under the securities laws.2
Although the district court had dismissed the plaintiff’s claim on jurisdictional grounds,3 the Fifth Circuit took a different tack by focusing on the statutory definition of “whistleblower”: “any individual who provides, or 2 or more individuals acting jointly who provide, information relating to a violation of the securities laws to the [SEC], in a manner established, by rule or regulation, by the [SEC].”4 Because the plaintiff conceded that he had made his report internally, and had not provided any information to the SEC, the Fifth Circuit held that he did not qualify as a “whistleblower” eligible for protection from retaliation.
In reaching this conclusion, the Fifth Circuit explicitly rejected the contrary interpretations of the Dodd-Frank Act adopted by the SEC and previous courts. Both the SEC and those other courts had concluded that because the Dodd-Frank Act was designed to expand federal whistleblower protection, employees who made “disclosures that are required or protected” under the securities laws5 were entitled to statutory protection regardless of whether they shared any information with the SEC.
In the Fifth Circuit’s view, however, the Dodd-Frank Act’s “plain language and structure” permitted “only one category of whistleblowers: individuals who provide information relating to a securities law violation to the SEC.”7 Regardless of the fact that an employee could engage in otherwise-protected activities by “making disclosures that are required or protected” under the securities laws,8 the Fifth Circuit held that those activities “do not . . . define which individuals qualify as whistleblowers” for the purposes of the Dodd-Frank Act’s retaliation provisions.9
The Fifth Circuit’s decision thus calls into question the trend among federal district courts toward a more expansive interpretation of the Dodd-Frank Act with respect to employee whistleblowers. Although this development bodes well for employers concerned about potential retaliation claims from internal whistleblowers, given the uncertainty in this area, companies may wish to consult with counsel before taking adverse employment action against an employee who has expressed concerns about compliance with the securities laws.