Court of Appeals rules overseas workers not protected by whistleblower law

A U.S. appeals court on Tuesday ruled that U.S. employees who work overseas for companies based in the U.S. are not protected by a federal law prohibiting retaliation against workers who report securities violations.

The three-judge panel of the U.S. Court of Appeals for the D.C. Circuit unanimously rejected a bid by former top Asia-based lawyer for Morgan Stanley, Christopher Garvey.

Garvey aimed to revive claims that he was forced to resign in 2016 after working with the company since 2006 when he reported alleged illegal activities that predominantly occurred outside the U.S.

He argued that the Sarbanes–Oxley Act of 2002 (SOX), which protects workers who report concerns about violations of securities laws, applies to securities fraud that occurs overseas but affects U.S. markets.

However, the court of appeals argued that SOX’s whistleblower protections do not bar securities fraud, arguing that it instead “protects employees from retaliation by making it unlawful for a company to ‘discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of [the employee’s protected activity.]’”

Two other circuit courts in Boston and New York reached the same agreement.

Morgan Stanley denied retaliating against Garvey, who filed complaints with the U.S. Department of Labor.

The former executive director of a legal and compliance division for Morgan Stanley subsidiaries, based in Japan and Hong Kong, claims that he was forced out of his job after he reported alleged corporate corruption and other illegal activities to his superiors.

However, an administrative law judge ruled that SOX did not apply to overseas workers, which led Garvey to appeal with the D.C. Circuit.