• SEC - Severance Agreements
  • September 16, 2016
  • Law Firm: Shawe Rosenthal LLP - Baltimore Office
  • The Securities and Exchange Commission is cracking down on severance agreement provisions that could possibly deter an employee from communicating with the SEC. The SEC recently announced that it imposed a $265,000 penalty on a company that included a provision in its severance agreement stating “employee understands and agrees that employee is waiving the right to any monetary recovery in connection with any such complaint or charge that employee may file with an administrative agency.” The SEC also found unlawful a provision that required the employee to notify the company if the disclosure of confidential information was required by law. In the SEC’s order, the company was required to amend its agreement and any confidentiality policies to include the following language:

    Protected Rights. Employee understands that nothing contained in this Agreement limits Employee’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”). Employee further understands that this Agreement does not limit Employee’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. This Agreement does not limit Employee’s right to receive an award for information provided to any Government Agencies.

    We note that an “award for information” is an un-waivable whistleblower award, which can be distinguished from an award of individualized relief, which an employee can legally waive, and which should therefore also be added to the language quoted above. We suggest that you do not simply adopt the language above, but that you consult with your attorney to ensure that your separation agreements, confidentiality agreements, and other such documents contain the appropriately tailored language.