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SEC, Congress Take Steps to Protect Whistleblowers by Targeting Severance Agreements

A pair of recent enforcement actions by the SEC describe ways in which severance agreements could violate whistleblower protections as outlined in federal securities laws.

When employers provide severance packages, there are usually agreements waiving the employee’s right to receive any future payments, sometimes including payments from third parties, including government bodies like the SEC. However, in these two recent cases (specifically focusing on BlueLinx and Health Net), the SEC determined the broad language of many severance agreements violates the SEC’s whistleblower protection laws.

Both companies had severance agreements that prohibited employees from accepting any sorts of whistleblower awards from government entities. In the case of BlueLinx, the company also prohibited employees from disclosing trade secrets or confidential information unless required by law, so long as the employee notified the company he or she was going to be doing so.

The SEC determined these rules violated its Rule 21F-17, as they removed financial incentives that would encourage people with important information about potential securities laws violations to come forward to the SEC. The SEC also discovered violations of these rules going back to August 12, 2011, the date on which the whistleblower protections were established.

Serving as a whistleblower

If you discover your company is engaged in any sort of corporate wrongdoing, you can come forward to the SEC without fear of retaliation or punishment. Under federal law, whistleblowers are protected from retaliation or termination for providing such information.

Additionally, if your separation agreement contains anything that would potentially limit your ability to go to the SEC with this important information, you should report this to prevent the company from illegally preventing would-be whistleblowers from seeking awards.

For more information and guidance on how to proceed with your whistleblower claim, contact a knowledgeable Dallas attorney at Whistleblower Law for Managers.

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  • "Never thought my career would end like it did after 30 years of service. I was part of the first round of the so called reduction of force. I asked myself how can I be part of this with 30 years of seniority. How did they pick these 90 plus employees? Now, the culture of this organization made you question every decision they made. It wasn’t what you knew it’s was a culture of who you know. Nonetheless, I did not accept their severance package. I immediately starting looking for an attorney who would take on my case. After the initial call to Steve I had hope again. He was open and honest about everything and reassured me he would do his best for me, and he did. I had an awesome outcome. Thanks Steve you’re the best."  -S.S.

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