A U.S.federal district court has issued a ruling strengthening corporate whistleblower protections. The court held that under the Dodd-Frank Financial Reform Act, protection will be provided to employees of subsidiaries as well as those who work directly for the parent companies.
U.S. District Judge J. Paul Oetken also ruled that the protection applies retroactively to cases that predated Dodd-Frank, on the terms that the amendment was just “a clarification of Congress’s intent concerning whistleblowers”. Under the Sarbanes-Oxley Act of 2002, adopted in the wake of the collapse of Enron, retaliation was prohibited by publicly-traded employers against employee whistleblowers. The Dodd-Frank act has expanded that protection to employees of subsidiaries.
Judge Oetken stated that Congress considered it important to protect whistleblowers in order to root out financial fraud within “large, complexly structured” companies. He also noted that, “[i]n light of the fact that corporate malfeasance can — and often does — occur within subsidiaries of a public company, and that such malfeasance was precisely what precipitated the passage of Sarbanes-Oxley, it is certainly reasonable to infer that, in enacting whistleblower protections, Congress intended to protect the employees of a corporation’s subsidiaries in addition to employees of the parent itself”.
