Supreme Court limits Dodd-Frank protections for whistleblowers

The Supreme Court ruled Wednesday that anti-retaliation protections under the Dodd-Frank Act only kick in when a whistleblower has reported the stock and investment fraud to the Securities and Exchange Commission (SEC).

In a unanimous decision, the court said the text of the law written by Congress following the financial crisis in 2011 defines a “whistleblower” as someone who provides information relating to a violation of the securities law to the commission.

The case centered on Paul Somers, a former employee for Digital Realty Trust Inc. who was fired after he reported alleged securities violations to his senior management, but not the SEC.

Somers and his attorney argued his employment should have been protected under the Dodd-Frank rule.

But in delivering the opinion of the court, Justice Ruth Bader Ginsburg said the core of Dodd-Frank’s whistleblower program is to aid the SEC’s enforcement work by “motivating people who know of securities law violations to tell the SEC.”

“The definition section of the statute supplies an unequivocal answer: A ‘whistleblower’ is ‘any individual who provides … information relating to a violation of the securities laws to the Commission,’” she wrote.

And while Dodd-Frank provides whistleblowers with monetary rewards when they provide actionable information about financial fraud, Ginsburg said Congress recognized that might not be enough of an incentive to encourage employees who are fearful of employer retaliation to come forward to report that information to the government. 

“Congress therefore complemented the Dodd-Frank monetary incentives for SEC reporting by heightening protection against retaliation,” she wrote.

Justice Clarence Thomas filed an opinion concurring in part and concurring with the judgement, which Justices Samuel Alito and Neil Gorsuch joined.

While Thomas agreed with relying on the statutory definition to resolve the case, he said the court incorrectly went further and relied on a Senate report to discuss the supposed “purpose” of the law.

“Even assuming a majority of the Congress read the Senate report, agreed with it and voted for Dodd-Frank with the same intent, ‘we are a government of laws, not of men and are governed by what Congress enacted rather than by what it intended,'” he wrote. 

– This story was updated at 11:18 a.m.