In a unanimous decision issued on February 20, 2108, the United States Supreme Court held that employees seeking to sue under the whistleblower anti-retaliation protection of the Dodd-Frank Act, must first report the alleged misconduct to the Securities and Exchange Commission (SEC). Digital Realty Trust, Inc. v. Somers, Case No. 15-1276. For a history of the proceedings, please see our previous posts, which are available here and here. The Supreme Court’s decision resolved a split among the Circuits by determining that an individual who had not reported a violation of the securities laws to the SEC is not protected under the Dodd-Frank Act’s anti-retaliation provision.

The facts of the case are fairly straightforward. An employee reported a suspected securities violation internally, but did not report the violation to the SEC. Shortly thereafter, the company terminated the employee. The employee filed suit seeking protection under the anti-retaliation provisions of the Dodd-Frank Act. The Supreme Court analyzed the Act’s statutory language, which defines “whistleblower” as a person who provides “information relating to a violation of the securities laws to the Commission.” 15 U.S.C. §78u-6(a)(6). Noting that Dodd-Frank was established to motivate people who know of securities law violations to tell the SEC, the Court concluded that the Act’s “whistleblower” protections do not extend to an individual who had not reported a securities law violation to the SEC.

There are several practical implications of the Supreme Court’s ruling for our clients. On the one hand, the holding creates an additional hurdle for employees– reporting the alleged violation to the SEC – before a former employee may file a wrongful termination action and seek the anti-retaliation protections under Dodd Frank. This will have the practical effect of narrowing the availability of the anti-retaliation protections. On the other hand, employees (and the plaintiff’s bar) now are incentivized to file a complaint of alleged wrongdoing by an employer with the SEC. It is foreseeable that the employer then will be required to respond to both the SEC and the employee.