Severance Agreements Cannot Interfere with Whistleblower Protections

The Securities and Exchange Commission (“SEC” or the “Commission”) protects whistleblowers through Rule 21F-17, enacted under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which states that “[n]o person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation.”

Prior cases have highlighted that certain language in confidentiality agreements can violate whistleblower protection.  This is also an issue with severance agreements governing an employee’s departure. A recent case involving Blue Linx discussed in a related article exemplifies the types of restrictions the SEC has deemed improper with regard to severance agreements and provides SEC approved guidance regarding language that explicitly acknowledges a whistleblower’s rights.

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