[ by Melanie Gretchen ] Whistleblowers at private firms are not protected by law like their counterparts at publicly-traded companies, a federal appeals court ruled last week.  In a case involving 2 former Fidelity Investments employees, the U.S. Court of Appeals for the 1st Circuit overturned a Boston federal judge's decision to apply the provisions of the Sarbanes-Oxley Act to private companies serving under contract as advisers to public companies.  The decision marks the first time an appeals court has weighed in on the issue. Sarbanes-Oxley Act. Congress adopted Sarb-Ox in 2002 after accounting problems led to the failure of energy company Enron Corp and communications provider WorldCom.  Mutual fund companies have argued they, too, should be exempt from the law because the funds themselves technically have no workers apart from their boards of directors and instead hire private management companies to invest their money. The Fidelity Case. Plaintiff Jackie Hosang Lawson, who had worked at Fidelity from 1993 until 2007, complained that, after she had alerted supervisors to problems - including alleged improper retention of $10 million of fees - she was passed over for a promotion and threatened with punishment for insubordination. Plaintiff, Jonathan Zang, who ran several mutual funds from 1998 to 2005, alleged Fidelity gave him poor reviews and fired him in retribution for his complaint that a new pay plan for Fidelity portfolio managers inaccurately and illegally described how pay was calculated. Both the SEC and the DOL supported Lawson and Zang by submitting briefs on appeal stating that whistleblower protections should be extended to mutual fund employees. Fidelity, however, countered that Ms. Lawson and Mr. Zang worked for affiliates - e.g., its Fidelity Management & Research arm, rather than a public company that Sarb-Ox was meant to cover. Appeals Court Ruling. The 1st Circuit Court found in favor of Fidelity, based on the text of the statute and its legislative history, and added that if Congress had intended for the term "employee" to have broader meaning it could amend the statute.  The court also noted that other whistleblower statutes in the Energy Reorganization Act and the Pipeline Safety Improvement Act specifically extend coverage to contractors, unlike Sarb-Ox. Writing for the majority, Chief Judge Sandra Lynch said that applying the act to employees of private contractors would be an "impermissible end run" around Congress's choice to limit whistleblower protection to employees of publicly traded companies. Judge Rogeriee Thompson dissented, noting that the majority ruling deprived a significant class of potential securities-fraud whistleblowers any legal protection. The appeal: Lawson et al v. FMR et al, U.S. Court of Appeals for the 1st Circuit, No. 10-2240. For more details, go to [Reuters, 2/3/12].