Finally, We Know What's Worse Between an Ax-Wielding George Clooney and a Litigious Nanny

10 March 2014 Labor & Employment Law Perspectives Blog

After much anticipation, the Supreme Court has settled the debate over which is more dangerous – an “ax-wielding” George Clooney or litigious “nannies, housekeepers and caretakers.” Seriously. In a recent ruling addressing the proper scope of whistleblower retaliation protections under the Sarbanes-Oxley Act (“SOX”), these odd caricatures loomed large in the Court’s decision to recognize expanded whistleblower protections under SOX to employees of privately held companies who perform services for publicly held companies.

The ruling is perhaps best understood in Enron terms because Congress passed SOX with the goal of preventing ‘another Enron’: an employee of the now defunct Arthur Anderson accounting firm, which allegedly helped Enron carry out its fraud, should be protected for blowing the whistle on ‘an Enron’ regardless of whether the retaliation is carried out by Enron or Arthur Anderson. After all, many publicly held mutual funds employ no one but instead rely on contractors to perform investment advisory services.

Against that backdrop, the majority of the Court’s justices agreed that expanded SOX protection was necessary to prevent public companies from evading SOX by contracting with “ax-wielding specialists” to do their dirty work similar to the character played by Clooney in Up in the Air. Worried by that majority belief that SOX needed to protect against ax-wielding George Clooneys, the Court’s dissenting minority justices expressed concerned about the flood of litigation that they believe will ensue as a result of the ruling. Arguing that the Court’s decision will mean SOX whistleblower lawsuits will no longer be limited to white-collar professionals providing investor-related services to public companies, they claimed “nannies, housekeepers, and caretakers” will file a flood of lawsuits merely because their employers work for public companies. For example, a babysitter may file a SOX claim if his employer happens to work at a public company and fires the babysitter for expressing concern that a household member “participated in an Internet purchase fraud.”

Notwithstanding such colorful rhetoric, the Court’s decision was clear: whistleblowers are now protected from retaliation under SOX regardless of whether they complain of a company’s alleged dirty work as an employee of either a public company or of a private company providing services to the public company. Privately held companies accordingly can no longer assume they are immune from liability for retaliating against an employee or contractor who blows the whistle on a publicly held company for which it provides services.

Time will tell whether the expansion of SOX whistleblower protections will unleash a flood of new lawsuits from non-traditional whistleblowers. In the meantime, as we recently pointed out, employers should remain cautious in making personnel decisions (e.g., change of title, office move, disallowing attendance at a conference) when an employee has otherwise raised complaints about company activity or the activity of a company for which the employer provides services. Employers must be able to show definitively, and with good reasons, why adverse personnel moves are made, and be prepared to show the same decision would have been made even absent the employee’s complaint.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Related Services

Insights