In Lawson v. FMR LLC, 571 U. S. ____ (2014) , the United States Supreme Court held that the Sarbanes-Oxley Act of 2002, which was enacted in the wake of the infamous Enron scandal, protects employees of contractors for public companies from retaliation for whistleblowing.

The Court was interpreting 18 U. S. C. §1514A, which prevents publicly traded companies and related entities from taking adverse action against employees for whistleblowing. At the time, the act covered public companies and “any officer, employee, contractor, subcontractor, or agent of such company.” Id. The question in Lawson was whether the statute protected employees of privately held contractors or only the employees of the public companies. Specifically, the question in Lawson was whether “employees of private companies that contract to advise or manage mutual funds,” which are public companies without any employees, were protected under the Act. Id.

The majority opinion grounded its conclusion in what it said was the ordinary meaning of the statute. Borrowing from the dissent in the court below, the majority agreed that “‘boiling [§1514A(a)] down to its relevant syntactic elements, it provides that “no . . . contractor . . . may discharge . . . an employee.”’” Id. (quoting 670 F. 3d 61, 84 (2012) (quoting §1514A(a)).) The court recognized that under this plain-language construction, the term “employee” must refer to the contractor’s own employee. 571 U. S. ____.

The Court also recognized that an interpretation that constrained the term “employee” to refer to only the public company would not effectuate the purpose of the Act—to encourage people with information about corporate fraud to report that information to others. As the Court recognized, contractors rarely have authority to take adverse action against the employees of the public companies they work for. The Court also recognized that other language in §1514A clearly connected the “employee” referenced in the statute to his or her employer. Additionally, the equitable remedy provided for in the statute—reinstatement—would make little sense if the statute was limited to the employees of the public company. A contractor cannot reinstate an employee of the company it works for, like it can for its own employee.

The dissenting opinion predicted that interpreting “employee” as broadly as the majority opinion will open the floodgates to retaliation claims by employees of private companies whose work is unrelated to the public companies covered by the Act. Unlike the majority, the three dissenting judges found the statute to be ambiguous. “Rely[ing] on other markers of intent,” id., the dissenters concluded that the statute was only intended to cover employees of public companies.

 As it stands, however, the broader interpretation has prevailed, meaning that far more employees are now covered by Sarbanes-Oxley’s whistleblower protections, and far more private companies, including law and accounting firms, are now subject to the protections afforded to those whistleblowers. Coupled with the whistleblower provisions in the Dodd-Frank Act, the broader protections available under Sarbanes-Oxley will probably encourage more employees with knowledge of possible improprieties to step forward, which was the objective.