Client Alert: Companies Should Review Confidentiality, Severance and Other Agreements in View of New SEC Whistleblower Case
It was no joke when the Securities and Exchange Commission (SEC) on April Fools’ Day announced its first enforcement action against a company for using improperly restrictive language in confidentiality agreements. SEC RELEASE 2015-54. The SEC was concerned that language requiring an employee to maintain the confidentiality of certain information could have the potential to stifle the whistleblowing process. The authors, Stephen L. Ascher
, Thomas C. Newkirk
and Howard S. Suskin
, note that this action, with the promise of similar cases to come, should encourage all companies to review their existing confidentiality, severance and other employee agreements to ensure full compliance with the SEC’s whistleblower rules as expansively applied by the SEC. The SEC has suggested curative language to explicitly provide that a whistleblower may go directly to the SEC or other agency without notification to or fear of retaliation from the company.