Whistleblower Employment Agreement

Following a disagreement or problem in the workplace, a solution for employers and employees who wish to end a employment relationship is to propose a transaction contract. “Nothing in this agreement should or will be used in any way to restrict the rights of staff to communicate with a government authority, as intended, protected by existing legislation or justified by existing legislation.” The Securities and Exchange Commission has adopted a rule prohibiting agreements prohibiting the disclosure of data by a staff member to the Agency. SEC Rule 21F-17 prohibits taking steps to enforce or participate in the application of a confidentiality agreement to prevent a person from discussing with the Commission a possible violation of securities law. The only exception is an agreement to protect the information covered by the privilege of the client lawyer. In 2015 and 2016, the SEC began taking tough action against companies that have entered into exercise contracts against former employees to dethrone their compensation when they report violations of the law to federal authorities. The language of these agreements was drafted in such a way that it appears that the worker would waive, as a preventive measure, any right to a whistleblower bonus as a condition for the award of severance pay, but the SEC found that such provisions would essentially amount to retaliation. As a result, companies such as Health Net, KBR and BlueLinx were fined hundreds of thousands of dollars for having to include the language that required employees to waive their rights to alert. The two most recent cases were brought by the same SEC enforcement group, indicating a more complete review of the severance agreements by the SEC. According to media reports, the applicants` lawyers are reviewing the severance agreements of several state-owned enterprises. As a result, employers should carefully review their current agreements and, in the circumstances described below, inform signatories of more restrictive agreements that these restrictions will now be lifted.

The SEC asserted that these agreements violated Rule 21F-17 by eliminating financial incentives to encourage individuals to contact the SEC about possible violations of securities laws. Sean McKessy, head of the SEC`s whistleblower office, warned companies against possible sanctions because of banned labor contracts. Similarly, the lawyers who design them may be conditional on the exercise before the Commission. The company may also provide in the agreement a cross-reference to a business directive that contains the information contained in the paragraph above. Companies should continue to have guidelines and agreements to protect the disclosure of trade secrets and confidential information to all others, except in the circumstances covered by the SDR.