In an article published in The Anti-Corruption Report, Phillips & Cohen whistleblower attorney Erika Kelton discussed the implications of The Supreme Court’s February 2018 decision in Digital Realty Trust v. Somers. The ruling in the case changed the Dodd-Frank Act’s anti-retaliation measures for whistleblowers, stating that the protections only apply when whistleblowers report directly to the Securities and Exchange Committee. The Supreme Court interpreted the concept of “whistleblower” more literally than the SEC did:
“Deference should have been given to the SEC’s interpretation that Dodd-Frank’s anti-retaliation protections for whistleblowers extend to those who raise concerns of misconduct internally,” asserted Erika Kelton, a partner at Phillips & Cohen. The SEC whistleblower program’s rules “were carefully drafted to create incentives that would encourage individuals to report internally first – something that Wall Street and the U.S. Chamber of Commerce’s membership strongly supported during the rulemaking process,” she recalled.
The real-world implications of the Supreme Court’s decision are likely to be experienced both by employers and by employees. “The Digital Realty ruling creates real peril for individuals who report internally without first reporting to the SEC,” observed Kelton. “Employee reporting to internal compliance functions will likely fall – a result that should concern all regulated entities,” she predicted. In the minds of some, an employee with the best interests of the organization at heart – if she sees something, she says something to try and fix a corporate wrong – is taking something of a career risk in the post-Digital Realty Trust world because the protections of Dodd-Frank will not apply unless that employee proceeds to the SEC.