Whistleblower Protections Ruled Unavailable Outside US

Takeaway: The decision establishes a precedent that the whistleblower anti-retaliation provisions of the Sarbanes-Oxley Act and Dodd-Frank Act do not apply outside the U.S., unless there is a permissible domestic application based on the primary location of an employee’s work and the terms of an employment contract.

The 9th U.S. Circuit Court of Appeals ruled that the whistleblower anti-retaliation provisions in the Sarbanes-Oxley Act and Dodd-Frank Act did not apply to conduct outside the U.S. The 9th Circuit rejected the plaintiff’s argument that accessing a former employer’s U.S. computer servers constituted domestic conduct.

The plaintiff, a Canadian citizen and former employee of Oracle Canada, claimed retaliation after reporting suspected fraud related to Oracle’s “Campus Store Solution” software service. The plaintiff alleged violations of the Sarbanes-Oxley Act, the Dodd-Frank Act and California labor laws. Under these laws, an employer may not discharge, demote, suspend, threaten, harass or otherwise discriminate against an employee in the terms and conditions of employment because of the employee’s protected whistleblowing activities.  

The district court addressed two key questions: whether the whistleblower protection provisions applied outside the U.S., and even if not, whether a narrow permissible domestic application existed in this case.

The plaintiff, residing in Canada, worked remotely for Oracle Canada, a wholly owned subsidiary of Oracle Corp., a California-based company. He reported suspected fraud and possible violations of securities laws regarding the Campus Store Solution to Oracle America and the U.S. Securities and Exchange Commission, after which he was removed as a project manager. He rejected his supervisor’s offer to work on another Campus Store Solution project on the same grounds as his initial reporting, and his job performance was thereafter downgraded. Allegedly facing retaliation, the plaintiff resigned and filed a lawsuit against Oracle America.

The central issue before the court was the extraterritorial—outside the U.S.—application of Sarbanes-Oxley and Dodd-Frank. The court applied the “presumption against extraterritoriality,” emphasizing that legislation of Congress generally applies only within the territorial jurisdiction of the U.S.

The court concluded that because Congress, in drafting the anti-retaliation provisions in Sarbanes-Oxley and Dodd-Frank, did not affirmatively and unmistakably instruct that they should apply to foreign conduct, the presumption against extraterritoriality stands.

The court employed a two-step framework. At step one, it determined whether the provisions were extraterritorial, and at step two, it assessed whether the case involved a narrow permissible domestic application.

The appeals court affirmed, finding that the plaintiff’s employment relationship, primarily based in Canada with a Canadian employer under an employment contract governed by that country, made the application of Sarbanes-Oxley and Dodd-Frank whistleblower provisions extraterritorial. The same reasoning disposed of the plaintiff’s state law claims. Notable cases in other circuits supported this conclusion, limiting the reach of these whistleblower protections outside U.S. jurisdiction.

Emphasizing that the bulk of relevant conduct was extraterritorial, the court upheld the dismissal of the plaintiff’s Dodd-Frank and Sarbanes-Oxley claims.

The 9th Circuit’s decision sets a precedent regarding the extraterritorial application of whistleblower protections. The ruling underscores the need for a plaintiff to demonstrate a domestic nexus in cases involving foreign employees and subsidiaries, to be determined on a context-specific basis.

Daramola v. Oracle America Inc., 9th Cir., No. 22-15959 (Feb. 6, 2024).

Anne Woodworth, J.D., is a freelance writer in Laurel, Md.