- First, the decision does not affect existing Sarbanes-Oxley prohibitions on whistleblower retaliation. Employers should continue to avoid conduct that may be interpreted as retaliation against individuals alleging securities violations.
- Second, the decision may encourage whistleblowers to report concerns directly to the Commission earlier, before reporting concerns internally. Because internal reports allow companies to address any concerns, and prepare for any SEC investigation proactively, clients should consider ways to encourage internal reporting.
Responding to Incentives
Employers may face an unintended consequence of the Court’s decision. Given the difference in forum and remedies, whistleblowers could elect to report to the SEC before reporting concerns internally. If so, the employer could lose a valuable opportunity to investigate and remedy any misconduct. This internal review often allows a company to prepare for any resulting inquiry and manage the response to the allegations.
For this reason, employers may want to consider steps that encourage internal reporting. For example, the company could reemphasize a commitment under an existing policy not to retaliate against whistleblowers and to investigate claims thoroughly. Such actions can raise concerns under employment law, and we advise any company to consult with counsel before making more significant policy changes.
For more information about managing SEC whistleblower actions and related employment law concerns, please contact the author or your regular McDermott Will & Emery lawyer.