The SEC is not alone in scrutinizing employment severance agreements to make sure they don’t deter whistle-blowing.
The Occupational Safety and Health Administration in mid-September amended its whistle-blower investigations manual to include, among other changes, a reference to the Securities and Exchange Commission’s bounty program. In that memorandum, OSHA said it won’t approve a settlement of its whistle-blower cases that includes a “gag” provision requiring an employee to forgo his or her right to a reward from the SEC or other federal regulators.
In addition to the Securities Exchange Act, OSHA also named the Foreign Corrupt Practices Act and the Commodity Exchange Act as examples of statutes that establish award programs.
The workplace safety agency oversees government investigations for 22 other statutes that include whistle-blower requirements, including the Sarbanes-Oxley Act and the Occupational Safety and Health Act. Before the revisions, OSHA’s investigations manual provided that the agency won’t approve a settlement between an employer and a whistle-blower employee that restricts the worker’s ability to participate in probes, offer testimony or file subsequent complaints.
The amendments expand the types of settlement provisions that OSHA frowns upon, including ones that require the employee to:
What does this mean for companies?
It’s no secret that the SEC continues to monitor severance agreements and other types of employment pacts. In August, the commission settled two cases alleging that severance agreements by California-based health insurance provider Health Net Inc. and Atlanta-based building products distributor BlueLinx Holdings Inc. required employees to waive their right to whistle-blower awards.
The developments at OSHA make it even more important for companies to review their employment agreements. At a minimum, these agreements should make clear that they don’t bar the employee from communicating with the SEC and other federal agencies about possible violations.
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