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Mass. federal court holds that financial planning firm may not retaliate against whistleblower

Last week, a U.S. District Court in Massachusetts rejected New England Investment and Retirement Group’s (NEINV) argument that it could lawfully fire an employee who reported to NEINV’s compliance officer that NEINV was violating securities laws. Specifically, the whistleblower, a financial planner who worked in NEINV’s North Andover, Mass. office, reported that NEINV was distributing misleading investment reports to its customers in violation of the federal Sarbanes-Oxley Act. NEINV fired the whistleblower before he could bring his concerns to the U.S. Securities and Exchange Commission (SEC) but the SEC did ultimately find that NEINV violated securities laws and fined it $200,000.

NEINV argued that because it fired the whistleblower before he brought his concerns to the SEC, the Dodd-Frank Act’s whistleblower protections did not apply to him. The court rejected this argument and, instead, adopted the SEC’s interpretation of Dodd-Frank’s whistleblower provision. According to the court, “[i]t is apparent from the wording and positioning of [Dodd-Frank’s whistleblower protection provision] that Congress intended that an employee terminated for reporting Sarbanes-Oxley violations to a supervisor or an outside compliance officer, and ultimately to the SEC, have a private right of action under Dodd-Frank whether or not the employer wins the race to the SECĀ’s door with a termination notice.”

Dodd-Frank’s whistleblower protections are one of many whistleblower protections that exist under federal law. Rather than a single unified whistleblower law that protects employees who oppose unlawful activity from retaliation, federal law has many different whistleblower laws. As this case from Mass. demonstrates, the question of whether federal law protects a whistleblower is sometimes complicated. In Maine, there is a single unified whistleblower law called the Maine Whistleblower Protection Act (MWPA) but figuring out whether an employee is protected under the MWPA is also sometimes complicated. For instance, under a decision from Maine’s Supreme Judicial Court, a whistleblower who opposes the unlawful activity of someone other than their own employer may not have protection under the MWPA. So, if you are thinking about blowing the whistle on unlawful activity or you have already blown the whistle, you should contact an experienced employment lawyer to learn more about your rights.