US ruling may 'discourage' foreign whistleblowers

Foreign whistleblowers could be put off reporting on their organisations after a US district court ruled that anti-retaliation provisions of the Dodd-Frank Act do not cover conduct outside the US.

The employment protections were designed to safeguard people from retaliation for going to the Securities and Exchange Commission (SEC) to report violations of securities laws. The statute covers reports on violations that have occurred, ongoing violations and possible violations.

“The impact of the decision more broadly is that this is going to discourage some whistleblowers from coming forward – particularly whistleblowers overseas who are working for the entity which the misconduct is alleged,” Jordan Thomas, partner at Labaton Sucharow and chair of the firm's whistleblower representation practice, told PE Manager.

Jordan Thomas

The case, filed by Khaled Asadi on former employer General Electric (GE), voiced concerns that the company had violated the Foreign Corrupt Practices Act but it was unclear if he had filed with the SEC.

That is a critical point, said Jordan, who believes the interpretation that you are not an SEC whistleblower unless you file with the SEC formally is going to be the law of the land.

Among other things GE argued that Dodd-Frank’s anti-retaliation provision doesn’t apply to conduct in foreign countries. The court agreed citing the Supreme Court’s decision in Morrison v. National Australia Bank. This case ruled that there are limits to the exterritorial reach of US employment laws unless exclusively stated otherwise.

One way for foreign whistleblowers to steer clear of this predicament is to report anonymously.

“I think what has changed is that people overseas working for the [accused] entity are going to be more reluctant to report if they fear retaliation, or they will report anonymously. Many whistleblowers today are reporting anonymously to avoid this problem,” said Jordan.