US Whistleblower Developments for Multinational Employers

There is no one-size-fits-all approach to whistleblower liability exposure in the United States, principally for two reasons. First, jurisdiction matters. Where employees engage in protected activity or suffer an adverse action may determine whether they have a viable whistleblower claim for retaliation. Second, the priorities of the presidential administration can drastically alter the whistleblower landscape. By way of example, after a four-year hiatus, President Biden’s Securities and Exchange Commission (SEC) has returned to aggressive enforcement of prohibitions on impeding whistleblower complaints, striking down relatively common personnel policies and contractual provisions and fining employers for maintaining them. This article discusses these developments and their impact on multinational employers operating in the US.

Recent developments

Two recent circuit splits demonstrate the importance of jurisdiction in whistleblower cases

Each year, the US Supreme Court hears only one to two per cent of the cases parties ask it to review. Consequently, the 12 US Courts of Appeals, each of which covers a geographic region known as a ‘circuit’, are the ‘final word’ on most issues of federal law. The resulting patchwork of case law requires companies to know the law of the circuits where they operate and determine which circuit’s law applies to a given situation. As two recent developments demonstrate, making that determination can be critical to avoiding a potential retaliation claim.

Earlier in 2022, the Supreme Court refused to resolve a disagreement among two circuits as to the scope of the False Claims Act’s (FCA) antiretaliation provision. The FCA protects ‘any employee, contractor, or agent’ against retaliation for bringing a private suit (known as a qui tam action) to enforce the FCA or otherwise attempting to prevent an FCA violation. In 2018, the Tenth Circuit decided Potts v Center for Excellence in Higher Education, 908 F 3d 610 (10th Cir 2018), and held that this provision did not extend to an employer’s post-employment actions against a former employee. In 2021, however, the Sixth Circuit issued a contrary opinion in United States ex rel Felten v William Beaumont Hospital, 993 F 3d 428 (6th Cir 2021), finding that the FCA banned retaliation against former employees. Although the employer in Felten asked the Supreme Court to bring nationwide uniformity to this area of the law, the Court denied that request and left the circuit split intact.

More recently, the Second Circuit created a circuit split regarding the elements of a Sarbanes-Oxley Act (SOX) whistleblower retaliation claim. SOX bans employers from taking adverse actions against employees because they reported or assisted in an investigation into mail, wire, bank, or securities fraud; a violation of SEC rules or regulations; or a violation of any ‘[f]ederal law relating to fraud against shareholders.’ To establish a causal link between their protected activity and adverse action, employees need only demonstrate that their protected activity was a ‘contributing factor’ in the employer’s decision to take an adverse action against them.

Courts have defined a ‘contributing factor’ as ‘any factor which alone or in combination with other factors, tends to affect the outcome of the decision.’ Because this is a low bar for employees to satisfy, two federal appellate courts – namely, the Ninth Circuit in Coppinger-Martin v Solis, 627 F 3d 745 (9th Cir 2010), and the Fifth Circuit in Halliburton, Inc v Administrative Review Board, 771 F 3d 254 (5th Cir 2014) – rejected the argument that employees must expressly demonstrate that their employer’s motive for disciplining them was their whistleblowing activity. However, the Second Circuit disagreed with these cases in 2022 Murray v UBS Securities, LLC, – F 4th –, Nos 20-4202 & 21-56 (2d Cir 2022), when it held that SOX whistleblowers must show that their employer subjected them to adverse action with a ‘retaliatory intent’. Unless the Supreme Court decides this issue, this circuit split (which other circuits may join) will remain intact.