- The U.S. Securities and Exchange Commission announced in 2015 that an employment contract’s language could violate SEC rules, reports Above the Law. Language violations stem from agreements that overtly or covertly bar employees from reporting securities-related misdeeds.
- The SEC seldom gets involved in employment-related issues, but has made exceptions in several cases because of a Dodd-Frank provision protecting whistleblowers, says Above the Law.
- In 2015, the SEC found that a company’s employment agreement violated the law by stating that an employee would be fired for sharing proprietary information. The agreement didn’t explicitly state that the employee couldn’t report malfeasance, but the agency declared the company in violation of the law and fined it $130,000. In 2016, the SEC fined two companies $265,000 and $340,000 respectively for violations related to language used in severance, separation and settlement agreements.
The SEC has settled several cases, but none quite as hair-splitting as the 2015 case. The outcome should put employers on notice that they need to review their employment agreements and use the judgments in each case to remove or rewrite the language.
The SEC’s fines are high, given the ease with which an employer could make a similar mistake. Again, just as employers must review employee handbooks and other policy documents, they also need to review any agreements employees sign to ensure the language can’t be viewed as restricting would-be whistleblowers. HR professionals haven't typically monitored SEC enforcement trends with the same diligence that they would watch the Department of Labor or the Equal Employment Opportunity Commission, but that might be changing. With whistleblowers taking a high profile, and high priority, role in company governance for the time being, the compliance picture for employers will be more complicated.
Employment issues might not be the SEC's area of expertise, but the sweeping reforms of the Dodd-Frank Wall Street Reform Act extended protections to encourage whistleblowers to come forward and put the agency squarely in line to affect policies that the agency sees as having a cooling effect on such activities. Whistleblower-related cases continue to crop up in a number of areas, making this something employers in all industries should continue to watch.