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SEC Launches Investigation into Employment Contracts that Prevent Whistleblowing

A February 25 article in the Wall Street Journal reports that the U.S. Securities and Exchange Commission (SEC) will begin investigating the kinds of agreements that certain companies make with their employees. The article states that the agency has already sent out several requests to different companies for years’ worth of employment contracts, nondisclosure agreements and other similar types of documents to investigate the kinds of confidentiality clauses they include.

The major concern behind the investigation is that there are companies that are using their confidentiality agreements as a way to prevent whistleblowers from being able to report wrongdoing to the appropriate authorities. In 2014, the Office of the Whistleblower issued a statement that it would begin paying more attention to these types of whistleblower-discouraging contracts, and that they would punish those companies that had drafted such agreements.

While these contracts have been subject to scrutiny in hearings in front of the SEC in recent years, this investigation marks a shift from the SEC waiting for such contracts to be revealed to them to actually going out and actively searching for them. It is just the latest step in the heightened attention that the federal government has afforded to whistleblowers and employee rights in recent years.

As the SEC pores over these documents, it will search not only for portions that explicitly prohibit employees from reporting information about wrongdoing to regulatory agencies, but also any types of language that could simply discourage these communications.

For more information on this SEC investigation and related issues, contact the experienced Dallas lawyers at Whistleblower Law for Managers as soon as possible.

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