Will The Court Of Appeals’ Recent Decision Have A Chilling Effect On Compliance Officers?

It just got tougher for compliance officers to do their jobs in New York. 

In a 5-2 decision, the Court of Appeals held on May 8, 2012 that a hedge fund compliance officer who was fired shortly after confronting his boss about allegedly improper trades is an at-will employee with no common law protection against wrongful termination.  Sullivan v. Harnisch (link to decision attached).

In its 5-2 decision the court refused to extend to compliance officers an exception to the at-will doctrine previously recognized for an attorney who was fired after reporting unethical conduct of another associate at his firm.  See Wieder v. Skala, 80 NY.2d 628 (1992).

Chief Judge Jonathan Lippman vigorously dissented, writing that the majority decision that the company has “every right to fire its compliance officer, simply for doing his job, flies in the face of what we have learned from the Madoff debacle, runs counter to the letter and spirit of this Court’s precedent, and facilitates the perpetration of frauds on the public.”

The Sullivan v. Harnisch  decision can be found here:

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