LEGAL ALERT
February 21, 2012
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First Circuit Ruling Limits Whistleblower Protection Under Section 1514A(a)
of the Sarbanes-Oxley Act to Employees of Public Companies
As a matter of first impression, the United States Court of Appeals for the First Circuit recently considered
whether § 1514A(a) of the Sarbanes-Oxley Act (SOX) applies to those employed by a contractor or
subcontractor of a public company. In Lawson v. FMR LLC, the First Circuit concluded that “only the
employees of the defined public companies are covered by these whistleblower provisions…” – and not
the employees of a contractor or subcontractor of that public company.1 Click here for the opinion.
In Lawson, the plaintiffs sued their former employers, which were private companies that provided
advisory or management services by contract to a publicly traded company. Plaintiff Zang was
discharged after raising concerns about inaccuracies in a registration statement for certain Fidelity funds.
As a result, Zang filed a complaint with the Occupational Safety and Health Administration (OSHA)
alleging unlawful retaliation under § 1514A(a) of SOX. OSHA dismissed Zang’s complaint finding that he
was a covered employee within the meaning of § 1514A(a) and was “covered” by the whistleblower
protections, but that he had not engaged in protected activity under that subsection. On appeal, the
Administrative Law Judge (ALJ) dismissed the action finding that Zang was not a covered employee
under § 1514A(a). Zang appealed the ALJ’s decision in federal court.
Plaintiff Lawson filed a similar complaint with OSHA while she was still employed and alleged that she
was retaliated against for raising concerns about cost accounting methodologies. Thereafter, she
resigned and claimed that she was constructively discharged. Before OSHA could rule on her claims,
Lawson informed OSHA that she would seek review of her SOX claim in federal court. Although both
plaintiffs filed separate complaints with OSHA and in federal court, the district court addressed both cases
in a single order because the two claims shared a common defendant and raised the same question of
law under § 1514A(a).
In district court, the defendants filed motions to dismiss arguing that plaintiffs were not covered
employees, and in the alternative, that plaintiffs had not engaged in protected activity. The district court
denied the motion to the dismiss, reasoning that § 1514A(a) extended coverage to employees of private
agents, contractors and subcontractors to public companies, and plaintiffs had adequately plead facts in
support of their retaliation claims.2 The defendants moved for an interlocutory appeal on the issue of
whether § 1514A(a) was applicable to plaintiffs.
In a 2-1 decision, the First Circuit reversed the district court’s decision and remanded the case to the
district court with instructions to dismiss the actions. In reversing the ruling, the court concluded that §
1514A(a) was enacted “to ensure an employee of a public company is covered under the provision if he
or she were harassed by officers, other employees, or contractors or subcontractors to the public
company for reporting fraud in that public company.”3 In arriving at this conclusion, the court first
examined the statutory construction of the § 1514A(a). Specifically the court looked to the title of § 806,
1 No. 10-2240, 2012 WL 335647, at * 5 (1st Cir. February 3, 2012).
2 Lawson, 724 F. Supp.2d 141, 163-65, rev’d in part, 2012 WL 335647, at * 5.
3 2012 WL 335647, at * 6.
