Eighth Circuit Ruling Favors Whistleblowers in Reporting Securities Violations

Under the Sarbanes-Oxley Act of 2002, publicly traded companies cannot discharge an employee in retaliation for reporting misconduct that violates federal securities laws. The Eighth Circuit recently joined three other courts of appeal and adopted the definition of “reasonable belief,” holding that “the employee must simply prove that a reasonable person in the same factual circumstances with the same training and experience would believe that the employer violated securities laws,” whether or not the employee is factually correct. Beacom v. Oracle America, Inc., No. 15-1729 (June 6, 2016).

Objective and Subjective “Reasonable Belief”
What if you think your employer violated securities laws but you don’t know for certain? Are you protected from retaliation if you report misconduct? The court has adopted a more lenient standard of proof in its ruling giving whistleblowers more protection. A whistleblower claim under Sarbanes-Oxley requires an employee hold a “reasonable belief” the employer committed a violation of securities law or fraud against shareholders.

The reasonable belief standard has both a subjective and objective component. The court addressed the objective component, which previously required a higher degree of knowledge and expertise in securities law and required a complaint to definitively and specifically relate to violation under the Act. Under previous interpretations, an employee could be denied protection if there was not an actual violation of the law.

What does a whistleblower need to prove?
An employee-whistleblower who reports misconduct needs only to show that he or she had a “reasonable belief” that the company was in violation of securities laws. The court will look at whether under the same facts and with the same training and experience, a reasonable employee would believe that the company or individual violated securities laws or committed fraud. Importantly, this means that an employee is protected, even if he or she was mistaken in fact. Under the new interpretation, because a mistaken belief could be objectively reasonable, the employee could be protected against retaliation.

How does the new interpretation protect employees?
Employees are on the front lines of witnessing and being exposed to securities laws violations and fraudulent activity. The Sarbanes-Oxley Act aims to protect employees and promote whistleblowing where a company has committed fraud. The new interpretation is helpful to employees and serves the primary purpose of the law because whistleblowers are no longer required to have specific or detailed knowledge of securities law to report misconduct. As long as an employee has a reasonable belief a violation of law occurred, he or she will be protected against retaliation.

Am I entitled to whistleblower protections?
Wanta Thome PLC represents employees who have suffered retaliation for reporting securities violations and other employer misconduct. We are dedicated to helping all employees and whistleblowers in Minnesota protect their rights and pursue all available remedies. Please call 612-252-3570 to discuss your case with our Minneapolis and St. Paul employment law attorneys.