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5th Circuit says whistleblowers not protected from retaliation if they report internally

The court reads Dodd-Frank to say whistleblowers must report to the SEC if they want protection

Employers in the 5th Circuit may have felt a chill up their spines on Wednesday, even if they didn't know why.

That's because the 5th Circuit that day issued a ruling that is sure to be unpopular among employers with internal reporting systems. The court said that whistleblowers are only protected from retaliation if they report their employer's wrongdoing to the Securities and Exchange Commission (SEC), in opposition to almost every other court to rule on the issue and the SEC itself.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, employees who report violations internally first, as many employers have been encouraging them to do, are not protected if their employer then fires them, the court said. The case centered on former G.E. Energy employee Khalid Asadi, who told his supervisor about an alleged violation of the Foreign Corrupt Practices Act and was subsequently fired.

"We hold that the plain language of the Dodd-Frank whistleblower protection provision creates a private cause of action only for individuals who provide information relating to a violation of the securities laws to the SEC," the court wrote.

Read more at the National Law Journal.

For more InsideCounsel coverage of whistleblowers, see below:

Litigation: Investigating whistleblower complaints

Regulatory: Companies should take action on employee tips in light of the SEC whistleblower program

Litigation: To the tune of $3 billion, whistleblower claims are on the rise

Medicare/Medicaid fraud whistleblowers could earn nearly $10 million under proposed rule

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