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“Trust key to keeping whistleblower complaints in-house”

Phillips & Cohen partner Sean McKessy was quoted in a Law360 article about the implications of the Supreme Court’s ruling in Digital Realty Trust Inc. v Paul Somers, which states that whistleblowers are not eligible for the Dodd-Frank Act’s protections unless they report their concerns directly to the Securities and Exchange Commission. The ruling has potential consequences for the relationship between employers and whistleblowers:

Sean McKessy, a whistleblower attorney and partner with Phillips & Cohen LLP who was the founding chief of the SEC’s Whistleblower Office, said the ruling makes it difficult for companies to persuade their employees to report internally.

Most companies, McKessy said, have a code of conduct that urges employees to report issues internally. Before the Digital ruling, most employees would have likely viewed that policy as “reasonable,” according to McKessy. But after learning that an employee at Digital Realty did just that and the company fired him and then litigated the case to the Supreme Court to prevent him from receiving protections against retaliation, those same workers might take a different approach, he said.

“Every company in America now faces the same challenge of saying to their workers, ‘We want you to come forward, but at the same time we’re not going to waive our right to maybe sue you or bring a lawsuit that says you’re not protected with the broad protections of Dodd-Frank because our colleagues at Digital Realty got the Supreme Court to sign off on a decision that says you have to report to the SEC to get your retaliation protections,” McKessy said

McKessy suggested that a “theoretical” solution would be for companies to include in their codes of conduct a promise that the company won’t retaliate against employees for issuing complaints and won’t sue them like Digital Realty did. “If I’m an employee, it’s the only thing that would give me at least some feeling of comfort to report internally,” he said.

However, McKessy said he’s deeply skeptical companies will start including such provisions in their codes of conduct.

Read the full article on Law360’s website (subscription required).

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