In Sullivan v. Harnisch, the New York Court of Appeals ruled that there is no legal protection for a compliance officer at a hedge fund who alleges he was fired because he complained that the CEO was illegally trading company stock.
In New York there are state constitutional and statutory exceptions which protect against firing because of race, age, gender, religion or sexual orientation. But since, New York, like most states, is an “at-will” employment state, absent a violation of a constitutional requirement, statute or contract, an employer may fire an employee at any time and for any reason.
Reacting to financial crimes such as Enron and Madoff, Congress enacted The Sarbanes Oxley Act (“SOX”) whistleblower statute, which protects those who are fired in retaliation for blowing the whistle on corporation practices, which violate the securities laws.
The Sullivan v. Harnisch case involved a compliance officer in a securities firm who alleged he was fired because of his objections to certain sales of stock by the majority owner, CEO and President as violative of the securities laws. The 4 to 2 majority, ruled that “Important as regulatory compliance is, it cannot be said of [the compliance officer], as we said of the plaintiff in Wieder, that his regulatory and ethical obligations and his duties as an employee ‘were so closely linked as to be incapable of separation'” (quoting Wieder, 80 NY2d at 635).
The Court acknowledged that Congress has passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which gives employees a private right of action for double back pay to employees who are fired for furnishing information about violations of the securities laws to the SEC. But, the Court acknowledged that Dodd-Frank did not protect the plaintiff in Sullivan because (i) the events complained of occurred before Dodd-Frank, and (ii) the plaintiff never brought the alleged securities violation to the SEC’s attention, complaining only internally.
The whistleblower protection laws passed in the SOX legislation in 2002 and Dodd-Frank in 2010 protect some rights. However, many, if not most employees fall outside these laws’ protective shield because since these two enactments do not protect employees of privately held companies which are not regulated by the SEC or the Bureau of Consumer Financial Protection.
The national protections and the New York whistleblower laws can be confusing but the experienced lawyers at the Harman Firm are available to answer all your questions and legal concerns for victims of retaliation.