No Retaliatory Intent Required? Despite the Headlines, Nothing New for Employers
An Early Analysis and Summary of Murray v. UBS Securities, LLC
- The U.S. Supreme Court decided Murray v. UBS Securities, LLC on Feb. 8, 2024, holding that "whistleblower" retaliation claims under the Sarbanes-Oxley Act of 2002 do not require proof of an employer's "retaliatory intent," defined as "animus," or hostility toward the protected conduct.
- The Court's opinion is most significant for confirming that the Sarbanes-Oxley Act and other similarly structured federal employee-protection statutes prohibit the same kind of intentional discrimination proscribed by Title VII and other federal anti-discrimination statutes.
- This Holland & Knight alert provides an analysis of Murray, drawing distinctions between "retaliatory intent" or animus and "discriminatory intent" and discusses how the high court's opinion will likely affect future "whistleblower" claims under the Sarbanes-Oxley Act and other statutes with employee-protection provisions.
In Murray v. UBS Securities, LLC, 1 the case arose after Trevor Murray, a research strategist for UBS, was fired shortly after reporting to his direct supervisor that he had been "improperly pressured" to "skew" business reports and, consequently, commit fraud on the company's shareholders. Murray sued UBS, claiming that it violated Section 1514A of the Sarbanes-Oxley Act when it discharged him for reporting the asserted fraud to his supervisor. After a jury found in favor of Murray, UBS appealed the case to the U.S. Court of Appeals for the Second Circuit. The Second Circuit overturned the jury's verdict, opining that the Sarbanes-Oxley Act required whistleblowers to prove "retaliatory intent." Murray sought and obtained Supreme Court review of that holding.
The Sarbanes-Oxley Act prohibits employers from taking adverse action against employees who report "criminal fraud or securities violations" by providing that employers may not "discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee... because of" protected activity.2 To establish such a claim, the employee must follow a burden-shifting framework set forth in 49 U.S.C. § 42121(b)(2)(B) (often called AIR21). That framework requires the employee to prove that engaging in protected activity "was a contributing factor" to adverse employment action against the employee.3 Even if the employee does so, the employer can still win if it proves "by clear and convincing evidence that [it] would have taken the same unfavorable personnel action" against an employee who had not engaged in protected behavior.4
According to the Supreme Court, the Second Circuit held that for an employee to show that engaging in protected activity was a "contributing factor" to an adverse employment action, the employee needed to prove "retaliatory intent" defined as "prejudice" or "animus" – hostility, animosity or ill will by the employer toward the employee's protected conduct. In a unanimous opinion written by Justice Sonia Sotomayor, the Supreme Court reversed. The Court held that the employee-protection provision of the Sarbanes-Oxley Act prohibits the same kind of "discrimination" prohibited by, for example, Title VII of the Civil Rights Act of 1964. "Prohibited discrimination occurs when an employer 'intentionally treats a person worse because of'" protected activity.5 The Court noted that it had long held that "discrimination" could be intentional even if it was not motivated by animosity toward a protected characteristic. It cited its 1991 holding in Automotive Workers v. Johnson Controls, Inc., where the intentionally different treatment was motivated by concerns for female employees' health.6 The Court found nothing in the text or structure of the Sarbanes-Oxley employee-protection provision that suggested a different meaning of the word "discriminate" in that context. Thus, proof of a "malevolent motive" is no more necessary to a claim of discrimination under the Sarbanes-Oxley Act than it is to a claim of discrimination under Title VII.
Despite the Court's decision to reinstate a jury verdict against an employer – and various headlines pronouncing otherwise – the reasoning in Murray is actually a victory for employers on the applicable legal standard. A dozen or so other federal statutes contain employee-protection provisions similar to the one in the Sarbanes-Oxley Act. A dispute long simmering in the lower courts and the U.S. Department of Labor's Administrative Review Board about those provisions has been whether they adopt the nondiscrimination approach to protecting employees or a different, more employee-friendly approach drawn from the law protecting federal-employee whistleblowers. Murray squarely answers that question. The provisions prohibit intentional discrimination, a prohibition that employers are familiar with and understand.
In fact, most employers have not argued that the Sarbanes-Oxley Act (or any of the other similar statutory provisions) requires proof of animus in the sense of hostility, ill will or a malevolent motive. They argued that the standard – despite some earlier Administrative Review Board rulings otherwise allowing for essentially presumptive or unintentional causation – requires proof that the employer's decision-makers consciously considered and acted based on protected activity. The Supreme Court's ruling supports that position.
Still, it bears repeating that under the Sarbanes-Oxley Act and the other similar laws, intentional discrimination need only be a "contributing" factor to an adverse action for the employer to be liable. Under Title VII, intentional discrimination must have been a "motivating" factor. That difference means it is easier for an employee to prove a violation of the Sarbanes-Oxley Act (and the similar provisions) than it is to prove a violation of Title VII. But under all of the laws that prohibit "discrimination," the focus is where it has always been: on the state of mind of the employer's decision-makers.
1 Murray v. UBS Sec., LLC, No. 22-660, 2024 WL 478566 (U.S. Feb. 8, 2024).
2 18 U.S.C. § 1514A(a).
3 49 U.S.C. § 42121(b)(2)(B).
4 49 U.S.C. § 42121(b)(2)(B)(ii).
5 2024 WL 478566 at *6.
6 499 U.S. 187 (1991).
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