SEC cracks down on severance agreements

Blog Post

Reuters reported on Tuesday that the SEC – for the second time in less than a week – has filed civil charges against a company for including language in its severance agreements that would preclude former employees from receiving any financial benefit arising from being a company whistleblower. Specifically, the language at issue required employees to waive "any right to any individual monetary recovery" arising from a government proceeding.

In the past year, the SEC has also cracked down on employers who have: (1) used restrictive confidentiality agreements that muzzled employees who had been interviewed in connection with internal investigations; and (2) used agreements that barred employees from reporting to the SEC without first alerting the company attorneys. It appears that more cases could be in store; one company reported receiving a subpoena from the SEC in connection with employment agreements, and one defense attorney reported the SEC has been working on similar cases and some settlements have been pending for months.