Second Circuit: Dodd-Frank Protects Internal Whistleblowers From Retaliation

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Ever since the 5th Circuit held that Dodd-Frank whistleblower retaliation protections do not extend to internal reporters within a company, the SEC has been filing amicus briefs in internal retaliation cases arguing in favor of its position that the SEC whistleblower program rules against retaliation by employers cover internal whistleblowers as well as those filing a Form TCR with the securities regulator.

Today, the Second Circuit agreed with the SEC’s position, overturning a decision to dismiss the lawsuit of a whistleblower reporting accounting irregularities within Neo@Ogilvy. The media has raised the possibility that the Supreme Court may need to step in to address this issue if the circuit split continues.

The dispute arises from the potential ambiguity within the Dodd-Frank’s meaning of the term whistleblower. Corporations have argued that the term is defined by the statute and applies only to individuals filing a Form TCR pursuant to the SEC procedures. The SEC argues that the meaning is ambiguous in the context of the anti-retaliation protections. Previously, the 5th Circuit ruled that internal reports were not sufficient to gain the protections of the law. The Second Circuit was asked to decide the issue in Liu last year but dismissed the case on other grounds, reaching only the extraterritoriality issue.

The CFTC whistleblower rules, however, do not go as far as the protections offered by the SEC, limiting employee protections to adverse employment actions after the filing of a Form TCR.

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