Jane Accomando and Lincoln Bisbee are attorneys at Morgan, Lewis & Bockius.
The U.S. Supreme Court on Feb. 8 held in Murray v. UBS Securities that Section 1514A of the Sarbanes-Oxley Act of 2002, or SOX, does not require a whistleblower to prove that an employer acted with retaliatory intent in order to sustain a claim of retaliation under the statute.
This decision is relevant to the nuclear industry because, as the U.S. Supreme Court noted in Murray, the same whistleblower protection framework utilized by SOX — which prohibits retaliation against employees for reporting certain categories of criminal fraud and/or fraud against shareholders — is incorporated into statutes with antiretaliation provisions that protect “employees in industries where whistleblowing plays an especially important role in protecting the public welfare.” This includes the Energy Reorganization Act, or ERA, which makes it unlawful for an employer to retaliate against an employee for reporting a nuclear safety concern.
Murray v. UBS Securities
The complainant in Murray, Trevor Murray, was employed as a research strategist at securities firm UBS Securities. One of his responsibilities was to prepare certain reports that Securities and Exchange Commission regulations required him to certify were produced independently and accurately reflected his own views. According to Murray, despite the requirement of independence, two leaders at a UBS trading desk unduly pressured him to skew his reports to be more supportive of their business strategies. Murray reported the issue to his supervisor on two occasions, and his supervisor responded that he should do what the business line wanted. UBS fired Murray shortly thereafter at the supervisor’s recommendation.
At the district court level, a jury found that UBS had violated SOX’s anti-retaliation provision and issued an advisory verdict on damages, recommending that Murray receive nearly $1 million. The district court adopted the jury’s advisory verdict and awarded an additional $1.769 million in attorney’s fees and costs.
On appeal, the U.S. Court of Appeals for the Second Circuit vacated the jury’s verdict and remanded the case for a new trial. The Second Circuit identified the central question as “whether the Sarbanes-Oxley Act’s anti-retaliation provision requires a whistleblower-employee to prove retaliatory intent,” and, contrary to the trial court, it concluded that the answer was yes. The Second Circuit’s opinion requiring whistleblowers to prove retaliatory intent placed that court in direct conflict with the Fifth and Ninth Circuit Courts of Appeal, which had previously rejected any such requirement for SOX claims. The U.S. Supreme Court granted certiori to resolve the disagreement.
The Supreme Court concluded that the Second Circuit was “wrong when it held that the word ‘discriminate’ in the statute’s catchall provision imposes an additional requirement that the whistleblower plaintiff prove the employer’s ‘retaliatory intent’ or animus.” In particular, the court held that:
An animus-like “retaliatory intent” requirement is simply absent from the definition of the word “discriminate.” When an employer treats someone worse — whether by firing them, demoting them or imposing some other unfavorable change in the terms and conditions of employment — “because of” the employee’s protected whistleblowing activity, the employer violates §1514A. It does not matter whether the employer was motivated by retaliatory animus or was motivated, for example, by the belief that the employee might be happier in a position that did not have SEC reporting requirements.
Application to the ERA and practical considerations
The U.S. Supreme Court’s ruling in Murray is consistent with precedent in ERA Section 211 cases. Under the ERA’s burden-shifting framework, a claimant must show that their protected activity was a contributing factor in the decision to take an adverse action. If the claimant meets those requirements, then the burden shifts to the employer to show by clear and convincing evidence that it would have taken the same unfavorable personnel action in the absence of the protected activity. There is no requirement for the complainant to prove retaliatory animus to make a prima facie case of retaliation. In other words: “Showing that an employer acted with retaliatory animus is one way of proving that the protected activity was a contributing factor in the adverse employment action, but it is not the only way,” the court ruled.
It is important for nuclear industry leaders to understand the absence of an intent requirement in these cases. Even if a decision is made with good intentions, a company could still be liable under the ERA if an employee’s protected activity was a contributing factor to the decision to take an adverse action. In such a situation, an employer will only avoid liability by a show of clear and convincing evidence that it would have taken the same adverse action regardless of the protected activity — a high burden. Because of the risks inherent in this scenario, we recommend ensuring that processes are in place to prevent decision-making that is influenced by protected activity.
Prior to making any personnel decisions, even those that are not intended to be disciplinary decisions, decisionmakers should ask:
- Is there a legitimate and demonstrable business reason to take this action?
- Is this action consistent with all applicable company policies and procedures?
- Am I treating this individual the same as other personnel in a similar situation, now and in the past?
- Would I be taking the same action even if the individual had not raised a concern?
If the answer to any of these questions is “no” — or if a decisionmaker is unsure — they should stop and contact their company’s human resources or legal department for advice.
Several companies in the nuclear industry have built this inquiry into their procedures, for example, by establishing an employment review board that evaluates planned employment actions that meet a pre-established significance threshold to ensure that the actions are not motivated in any way by protected activity.
In addition, we recommend that internal policies and procedures prohibiting retaliation clearly define the elements for a finding of retaliation under the policies and procedures, including making clear that retaliatory animus is unnecessary for a finding of retaliation (even though such animus may be relevant for purposes of determining any disciplinary action stemming from a finding of retaliation). In our experience, an additional level of detail in internal policies and procedures can provide clarity for internal investigators and prevent disagreements concerning investigation findings and conclusions.
Ultimately, the U.S. Supreme Court’s recent decision in Murray v. UBS Securities not only provides a reminder of the risks posed by ERA whistleblower claims, but also presents an opportunity for employers in the nuclear industry to review their practices and take practical steps to minimize their potential exposure under the ERA.
