On February 21, 2018, Justice Ginsburg sent shock waves through the employment bar—specifically those practicing whistleblower law—with the Court’s decision in Digital Realty Trust, Inc. v. Somers, No. 16-1276 (February 21, 2018). This decision significantly limits whistleblower protections under the Dodd-Frank Act. However, it is not the proverbial slippery slope.
Justice Ginsburg wrote the opinion and was joined by Justices Roberts, Kennedy, Breyer, Sotomayor, and Kagan. Justice Sotomayor wrote a concurring opinion and Justice Thomas penned an opinion concurring in part, and Justices Alito and Gorsuch joined with Justice Thomas.
Dodd-Frank’s whistleblower definition was squarely at issue before the Court. It defines a whistleblower as any individual who provides . . . information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission.” §78u–6(a)(6). The Ninth Circuit Court of Appeals held below that this whistleblower definition included employees that reported internally and that an external report to the Securities and Exchange Commission was not necessary to be afforded Dodd-Frank’s protections.
The Court disagreed. Specifically, it focused on the definition’s “to the Commission” language and held that it means exactly that and nothing more. That is, to be protected by the law, a reporting employee must make a complaint to the Commission. Nothing short of that will do. The Court pointed to congressional intent behind Dodd-Frank which sought an increase in external reports to the SEC, but based its ruling explicitly on the clear language of the statute itself—thereby sidelining any role for the SEC’s contrary regulation play in the analysis.
This decision has some truly odd consequences that undercut the Court’s position that Congress truly intended this result. As worded, Dodd-Frank provides that an employer may not retaliate against an employee for taking the following acts:
- (i) in providing information to the Commission in accordance with this section;
- (ii) in initiating, testifying in, or assisting in any investigation or judicial or administrative action of the Commission based upon or related to such information; or
- (iii) in making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 (15 U. S. C. §7201 et seq.), this chapter, including section 78j–l(m) of this title, section 1513(e) of title 18, and any other law, rule, or regulation subject to the jurisdiction of the Commission.” 78u–6(h)(1)(A).
The so-called whistleblower in Somers (and the prevailing party at the 9th Circuit) argued that limiting whistleblower status to those who complain to the SEC obliterates the third clause. That is, Somers argued that the third clause only has real value if it can be applied to internal complaints; otherwise it is duplicative of section (i).
The Court disputed this and, in so doing, delineated a strange group of protected individuals—namely, those whose external complaints to the SEC remain unknown to the company and who also complain internally and face retaliation for that internal complaint. This group is still protected by Dodd-Frank post-Somers. According to the Court, an individual who—unbeknownst to the employer—reports something to the SEC today, but is terminated months or years from now for raising securities violations internally is protected by Dodd-Frank. However, an employee who makes the same exact internal report without the other (and possibly unrelated) external report to the SEC is out of luck.
The Court’s decision severely limits who qualifies as a whistleblower under Dodd-Frank since the SEC’s regulation purports to allow internal reporters to qualify for anti-retaliation protection (but not for the bounty aspect of the law). This regulation is now overruled. Internal reporters can still proceed under The Sarbanes-Oxley Act of 2002 (“SOX”), but only if they file a claim with the Department of Labor within 180 days of the retaliation. Even if such employees preserve their SOX claim in this way, Somers still stings since it deprives them of Dodd-Frank’s superior remedies, such as double damages. But the decision stops at Dodd-Frank and does not affect the SOX remedy.
Locally, this decision should have no impact whatsoever on North Carolina’s Retaliatory Employment Discrimination Act (“REDA”), which protects employees from retaliation for reporting workplace safety and wage and hour issues and prohibits retaliation and discrimination against those seeking, or viewed as potentially seeking, workers’ compensation benefits. REDA protects those who “[f]ile a claim or complaint, initiate any inquiry, investigation, inspection, proceeding or other action, or testify or provide information to any person with respect to” the various protected conduct. N.C.G.S. § 95-241.
Somers turned on the “to the Commission” language. Not only is this language absent from REDA, but REDA is incredibly broader—i.e., REDA says “to any person.” Indeed, as recently as February 2, 2018, the United States District Court for the Western District of North Carolina confirmed that internal complaints qualify for protection under this state law. Driskell v. Summit Contracting Group, Inc., 3:16-cv-819 (W.D.N.C. Feb. 2, 2018) (Whitney, C.J.). There, the Court held that an employee engages in activity protected by REDA when he or she complains internally about safety issues to the employer’s CEO. (Id.) (allowing such claim to go to the jury and entering judgment for Plaintiff following Plaintiff’s verdict over Defendant’s repeated Rule 50 motions); see also Jurrissen v. Keystone Foods, LLC, No. 1:08-CV-128, 2008 WL 3925086, at *5 (M.D.N.C. Aug. 20, 2008) (stating that “[b]y its plain language, it is clear that REDA does not limit protected activities to the sole act of filing a formal claim under OSHANC” and holding that a report an internal auditor was protected under REDA); Pierce v. Atl. Grp., Inc., 219 N.C. App. 19, 28, 724 S.E.2d 568, 575 (2012) (finding that a call to a company-provided ethics hotline would count as REDA-protected activity if it were about safety—rather than about retaliation).
The Somers decision is unquestionably bad news for employees, especially for those who did not file a claim within 180 days of termination. However, the Court stuck tightly to Dodd-Frank’s statutory language and the decision does not impact those proceeding under SOX or any other statute without language akin to Dodd-Frank’s “to the Commission” language. This decision stings, but its consequences should be limited.