February Tip of the Month: SEC Targets Whistleblower Restrictions in Employment-Related Agreements
The U.S. Securities and Exchange Commission (SEC) has signaled that it will take aggressive action against employers who, by way of employment-related agreements, restrict, prohibit, or otherwise discourage employees from reporting suspected securities law violations. For example, in September 2023, an employer agreed to pay $10 million to settle claims that it had (1) utilized confidentiality agreements prohibiting employee disclosure of confidential company information to third parties, without an exception for SEC whistleblowers; and (2) similarly required employees to sign releases stating that they had not filed complaints with any government agency in order to receive deferred compensation. Given the SEC's escalated enforcement efforts and attention to this issue, employers should carefully review their employment-related agreements to ensure that the language accounts for, and does not run afoul of, the foregoing considerations. In particular, employers should closely assess confidentiality, nondisclosure, and standard release agreements to confirm that appropriate carveouts have been drafted regarding employee reporting to the SEC.
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Before proceeding, please note: If you are not a current client of Perkins Coie, please do not include any information in this e-mail that you or someone else considers to be of a confidential or secret nature. Perkins Coie has no duty to keep confidential any of the information you provide. Neither the transmission nor receipt of your information is considered a request for legal advice, securing or retaining a lawyer. An attorney-client relationship with Perkins Coie or any lawyer at Perkins Coie is not established until and unless Perkins Coie agrees to such a relationship as memorialized in a separate writing.