BlueLinx to Pay $265K to Settle Whistle-Blower Violation

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By Cameron Finch

Aug. 10 — Atlanta-based building products distributor BlueLinx Holdings Inc. agreed to pay $265,000 to settle Securities and Exchange Commission allegations that its severance agreements violated whistle-blower protection rules ( In re BlueLinx Holdings Inc., SEC, Admin. Proc. File No. 3-17371, 8/10/16 ).

As part of its settlement, the company, without admitting or denying wrongdoing, agreed to amend its severance agreements. BlueLinx also agreed to contact former employees to notify them that they aren't prohibited from accepting SEC whistle-blower awards.

“The settlement represents another significant step forward in the commission's efforts to protect the rights of individuals to participate freely in the SEC Whistleblower Program,” David Marshall, a partner at Katz, Marshall & Banks LLP, Washington said in a release.

Waived Rights

Securities Exchange Act Rule 21F-17, enacted in August 2011, specifically prohibits confidentiality agreements designed to prevent an individual from communicating with the commission about potential securities violations (113 SLD, 6/13/11).

BlueLinx required employees leaving the company to waive their rights to possible whistle-blower awards or lose post-employment benefits, the SEC said. Since at least 2011, approximately 178 BlueLinx employees signed the agreement. BlueLinx also revised its severance agreements on two occasions to include confidentiality provisions and a waiver of monetary recovery from administrative agencies, the SEC said.

“The order the SEC issued today sends a resounding message to employers and their agents nationwide: the Commission will not tolerate employer-imposed agreements that are intended to deter would-be whistle-blowers from reporting securities violations to the SEC, however indirect and however craftily worded,” Marshall said.

Whistle-Blower Suit

In related developments, in 2013, a former BlueLinx compliance official claimed he was fired from BlueLinx for reporting possible corporate misconduct to the SEC. BlueLinx counterclaimed that the plaintiff violated a provision in his separation agreement that waived his rights under Dodd-Frank. The case settled before the U.S. District Court for the Northern District of Georgia could rule.

BlueLinx is represented by Jessica Corley of Alston & Bird LLP, Atlanta, who didn't immediately respond to an e-mailed request for comment.

To contact the reporter on this story: Cameron Finch in Washington at cfinch@bna.com.

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com.

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