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Section 806 of the Sarbanes-Oxley Act, codified at 18 U.SC. §1514A provides in part that:

“No [public] company . . . , or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of [whistleblowing or other protected activity].”

The US Supreme Court recently held that the foregoing provision shelters employees of private contractors and subcontractors working for a public company, just as it shelters employees of the public company served by the contractors and subcontractors.

The obvious questions is “where might this end?” The dissent states:

“As interpreted today, the Sarbanes-Oxley Act authorizes a babysitter to bring a federal case against his employer—a parent who happens to work at the local Walmart (a public company)—if the parent stops employing the babysitter after he expresses concern that the parent’s teenage son may have participated in an Internet purchase fraud. And it opens the door to a cause of action against a small business that contracts to clean the local Starbucks (a public company) if an employee is demoted after reporting that another nonpublic company client has mailed the cleaning company a fraudulent invoice.”

As usual, the majority does not really believe the dissent, but does not draw concrete limiting principles, and bandies about ideas in briefs and statements in oral arguments:

“Plaintiffs and the Solicitor General observe that overbreadth problems may be resolved by various limiting principles. They point specifically to the word “contractor.” Plaintiffs note that in “common parlance,” “contractor” does not extend to every fleeting business relationship. Instead, the word “refers to a party whose performance of a contract will take place over a significant period of time.” . . . (“Nothing in §1514A implies that, if [a privately held business] buys a box of rubber bands from Wal-Mart, acompany with traded securities, the [business] becomes covered by §1514A.”).


“The Solicitor General further maintains that §1514A protects contractor employees only to the extent that their whistleblowing relates to “the contractor . . . fulfilling it srole as a contractor for the public company, not the contractor in some other capacity.” . . . (“[I]t has to be a person who is in a position to detect and report the types of fraud and securities violations that are included in the statute. . . . [W]e think that ‘the contractor of such company’ refers to the contractor in that role, working for the public company.’”).”

In the end, the court leaves the question for another day.  The Court stated “Finally, the Solicitor General suggests that we need not determine the bounds of §1514A today, because plaintiffs seek only a “mainstream application” of the provision’s protections. . . .We agree.”


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