The U.S. Supreme Court’s 9-0 ruling this week, Digital Realty v. Somers, holds that to state a retaliation claim under Dodd-Frank, employees must report to the Securities and Exchange Commission (SEC)—internal reporting alone is not enough.  The ruling narrows legal protections against workplace retaliation, but employees may still have claims under Sarbanes-Oxley and California state law.

By way of background, financial scandals at Enron, WorldCom and Tyco that cost investors billions of dollars prompted Congress to pass the Sarbanes-Oxley Act in 2002 (SOX). Congress recognized that Enron had perpetrated its massive shareholder fraud thanks to a “corporate code of silence” that kept employees from reporting to law enforcement, or to their supervisors. SOX gives a private right of action to an employee who reports securities fraud, only to be retaliated against by their employer. SOX explicitly protects employees whether they report externally to the government, or internally to the company.