Arti Sahajpal

Associate Editor

Loyola University Chicago School of Law, JD 2025

Reporting on your employer’s questionable conduct has become easier than ever with the Supreme Court’s recent decision in Murray v. UBS Securities, LLC. The case resolved a circuit split surrounding the proper interpretation of “retaliatory intent” for claims involving alleged violations of the Sarbanes-Oxley Act’s whistleblower protection provision. In a unanimous decision, the Supreme Court held that a plaintiff does not need to prove retaliatory intent to prevail on such a claim. Although proof of intent is still required, the decision substantially lowers the burden for wronged employees while assuring that companies are not on the hook for nonretaliatory punishment.

Whistleblower claims under the Sarbanes-Oxley Act

The Sarbanes-Oxley Act (SOX) was enacted in 2002 to combat fraudulent financial practices. The regulation, enacted in response to corporate scandals like those involving Enron and WorldCom, aimed to enhance corporate governance and financial transparency. To do so, SOX requires executives to certify financial accuracy, imposes harsh penalties for fraud, and strengthens oversight by boards and auditors. SOX also established the Public Company Accounting Oversight Board, the administrative agency responsible for oversight and regulation of accounting firms as auditors of public companies. Despite debates as to its impact on promoting competition versus its benefits in bolstering investor confidence, the law has influenced similar regulations worldwide.

Section 1514(a) protects employees of public companies who report suspected fraud or securities law violations from retaliation by their employer. If a “whistleblower” is fired, demoted, or otherwise punished, they have the right to sue the company for reinstatement, backpay, or another remedy. To win their case, the employee must show that it is more likely than not that the “protected activity,” (i.e., the reporting) was a contributing factor in the employee’s termination, demotion, or punishment. If they are successful, the burden then shifts to the employer to prove that they would have taken the same action regardless of the whistleblowing.

A story of David and Goliath

Mr. Trevor Murray, the petitioner, was a research strategist at UBS, who found himself at the center of this important legal battle. Within UBS’s commercial mortgage-backed securities (CMBS) division, Murray was responsible for providing objective market information to current and prospective clients. Murray was subject to strict mandates set forth by the Securities and Exchange Commission that required analysts to certify that their reports solely reflected their own professional judgment. However, he claimed that others in the CMBS division regularly pressured Murray to “skew his reports to be more supportive of their business strategies,” constituting a direct violation of SEC regulations and ethical professional norms. After bringing these concerns to his supervisor, Murray was effectively advised to sacrifice his professional judgment for the sake of the bottom line. Instead, Murray continued to report his concerns to his supervisor, ultimately culminating in his dismissal just months after receiving a glowing performance review.

Shortly after his termination, Murray filed a § 1514 complaint with the Department of Labor, arguing that he was fired for reporting on UBS’s fraud against shareholders. The Department failed to issue a final decision in 180 days, so Murray filed a suit in federal court. Murray prevailed before the district court, causing UBS to appeal to the Second Circuit. Challenging the jury instructions, UBS argued that the district court erred by failing to instruct the jury that § 1514 requires proof of the employer’s retaliatory intent. Relying on its previous interpretation of similar language in Tompkins v. Metro-North Commuter R. Co., the Second Circuit agreed and vacated the lower court’s decision.

Significantly easing the burden

In a unanimous opinion, the Supreme Court reversed and remanded, holding that the statute merely requires evidence of the employer’s intent to take some adverse action in response to the whistleblowing, and a showing that the protected activity was a contributing factor in the punishment, nothing more. Rejecting UBS’s argument that “innocent employers will face liability for legitimate, nonretaliatory personnel decisions,” Justice Sotomayor explained that SOX’s burden-shifting provides sufficient protection to avoid such pitfalls.

It bears emphasizing that this interpretation goes far beyond the scope of SOX and impacts many other federal whistleblower protection statutes. Accordingly, many share UBS’s concern that employers will regularly fall victim to whistleblower retaliation claims. However, an employer will not be held liable if it can show “that [it] would have taken the same unfavorable personnel action in the absence of the protected behavior.” Moreover, as underscored by Justice Sotomayor in the majority opinion, this does not mean whistleblowing conduct preempts adverse action by the employer. In other words, if the employer would have acted the same even if the employee never reported any suspicious internal activity, the employer would prevail in the § 1514 claim.

All in all, the Court’s interpretation achieves a commendable balance, upholding employees’ rights without comprising legitimate interests. Although the decision impacts legislation beyond the Sarbanes-Oxley Act, the ruling preserves the law’s crucial goal of fostering integrity, accountability, and responsible management.