On February 3, 2012, the US Court of Appeals for the First Circuit issued an opinion in Lawson v. FMR LLC. The key issue was whether the whistleblower protection provision in Section 806 of the Sarbanes-Oxley Act of 2002 (SOX) applies to an employee of a private contractor or subcontractor to a public company.

Plaintiffs Jackie Hosang Lawson and Jonathan M. Zang each filed OSHA complaints alleging unlawful retaliation under Section 806 of SOX, which prohibits retaliation against covered employees who engage in protected whistleblowing activities and work for publicly traded companies subject to the registration or reporting requirements of the Securities Exchange Act of 1934. Although both plaintiffs worked for private employers, they argued they were protected by the whistleblower provisions in Section 806 of SOX because their respective employers contracted to advise and manage Fidelity mutual funds, which are public companies covered by Section 806 of SOX.

Both plaintiffs later asserted their claims in federal court. The defendants in both cases filed motions to dismiss, arguing that the plaintiffs were not covered employees under Section 806 of SOX and, in the alternative, that they had not engaged in protected activity. The district court addressed both cases in a single order and held that the Section 806 whistleblower protection covered not only employees of public companies, but employees of private companies that are contractors or subcontractors of those public companies.

The defendants petitioned the First Circuit for interlocutory review.

In a case of first impression, the First Circuit held that the whistleblower provision in Section 806 of SOX only covers employees of public companies, and does not protect employees of private companies that are contractors or subcontractors to covered public companies. Although Section 806 of SOX includes language referring to contractors, subcontractors or agents of public companies, the court held this language only relates to the entities that are prohibited from retaliating against employees of public companies, and not the definition of a covered employee. According to the court:

Although the SEC and the DOL filed amicus briefs arguing the plaintiffs were covered employees, the court gave them no deference, stating Congress did not give authority to either agency to interpret the term employee in Section 806. The court reversed and remanded the cases with instructions to dismiss both actions.

Circuit Judge Thompson dissented, stating the plain language of Section 806 includes employees of contractors of publicly traded companies.

This decision clarifies that in the First Circuit the whistleblower provision in Section 806 of SOX does not apply to employees of non-public companies, even if they work for a contractor or subcontractor to a public company. This case is particularly noteworthy because it is a case of first impression in the First Circuit and it remains to be seen whether other courts of appeal will follow suit.