Dodd-Frank Whistleblower Rules Do Not Apply Outside of US, Federal Court Rules
Author: Marta Moakley, XpertHR Legal Editor
October 22, 2013
The Dodd-Frank Act's retaliation protections do not apply to activities outside of the United States, a federal district court has ruled, dismissing a case against German multinational corporation Siemens AG. Liu v. Siemens A.G., 2013 U.S. Dist. LEXIS 151005 (S.D.N.Y. Oct. 21, 2013). The case against Siemens involved an employee's disclosures of alleged violations of the Foreign Corrupt Practices Act (FCPA). An employer with multinational offices or subsidiaries should take note of this latest limitation of the applicability of US protections to non-US employees.
Meng-Lin Liu was hired by Siemens China Ltd., a subsidiary of Siemens AG, as a compliance officer in the company's healthcare division and was later promoted to Division Compliance Officer. The employee raised concerns regarding a deal with North Korea that he believed to involve kickbacks and to circumvent internal compliance controls. Two months later, the employee received a negative performance appraisal.
Five months later, the employee attempted to implement a new internal procedure to help eliminate corruption risks. However, he was stripped of his authority to implement any such changes and was subsequently told not to report to work for the time remaining on his employment contract. Shortly after his contract expired, the employee reported his concerns regarding Siemens' FCPA compliance to the Securities and Exchange Commission (SEC). He also filed a federal lawsuit.
The US lawsuit involved a resident of Taiwan and a Chinese subsidiary of the German corporation. The employee argued that because Siemens AG is listed on the New York Stock Exchange, it is subject to US securities laws.
However, the court relied on the 2010 Supreme Court ruling Morrison v. Nat'l Austl. Bank Ltd., 130 S. Ct. 2869 (2010), in limiting Dodd-Frank's applicability outside the US. In that case, the Supreme Court explained that unless Congress clearly expresses its intention that a law be applied outside of the US, a court should presume that it should only be applied domestically. The Liu court also cited another district court's opinion in the Asadi case, the only other case in which a district court considered whether the anti-retaliation provision applies extraterritorially.
Although the Liu court ruled that the anti-retaliation provisions of Dodd-Frank do not apply outside the US, other provisions of Dodd-Frank do. However, the court reasoned that if one provision explicitly applies to conduct outside of the US, then the rest of the provisions in the Act do not.
The court also rejected the employee's request for protection under the anti-retaliation provisions of the Sarbanes-Oxley Act (SOX), ruling that those protections do not apply to employees overseas. Moreover, the court ruled that SOX's anti-retaliation provision does not require or protect disclosure of FCPA violations.
Employers should keep abreast of legal interpretations of SOX's anti-retaliation protections as the law rapidly develops in this area. For example, the Supreme Court will soon hear arguments in a SOX whistleblower case concerning whether SOX retaliation protections apply to employees of private companies that contract with public companies.