Employers Ignore the SEC’s Commitment to its Whistleblower Program at their Peril
Posted in Employee Rights, Whistleblowers on September 12, 2016
Severance agreements have once again drawn the ire of the U.S Securities and Exchange Commission. This time, the SEC fined an Atlanta –based company, BlueLinx Holdings, Inc., $265,000 for maintaining unlawful severance agreement provisions. It seems that many companies are having a hard time complying with the SEC rule that makes it unlawful for an employer to discourage or prevent employees from sharing confidential information with government regulators.
The BlueLinx case is a great illustration. There, the company ran afoul of the SEC regulations in several respects. Initially, the company’s severance agreements contained a blanket ban on the sharing of confidential information. Later, the company revised the agreements to make clear that sharing information with government regulators was permissible. However, the agreements continued to retain provisions in which employees waived their right to collect any whistleblower reward they might receive from the SEC. They also continued to require employees to inform the company’s legal department before disclosing information to government regulators.
According to the SEC, requiring former employees to tell BlueLinx’s legal department before going to a regulator “forced those employees to choose between identifying themselves to the company as whistleblowers or potentially losing their severance pay and benefits.” And requiring employees to waive their rights to a whistleblower award was an impermissible roadblock to the whistleblower program because it removed the “critically important financial incentives” necessary to the success of the program.
In addition to paying $265,000 to settle the agency’s charges, the company agreed to modify its severance agreements by eliminating the award waiver provision and incorporating express language that employees may contact regulators without notifying the company in advance.
