SEC Announces First Ever Whistleblower Protection Case Involving Illegal Restrictive Language in Employee Agreement
2nd April 2015

In a very significant move for whistleblowers, the U.S. Securities and Exchange Commission has, for the first time, charged a company, KBR, a global engineering, logistics and U.S. military contractor, with violating whistleblower protection Rule 21F-17 enacted under the Dodd-Frank Act for using improperly restrictive language in confidentiality agreements with the potential to stifle the whistleblowing process.

KBR required witnesses in certain internal investigations interviews to sign confidentiality statements with language warning that they could face discipline and even be fired if they discussed the matters with outside parties without the prior approval of KBR’s legal department. Since these investigations included allegations of possible securities law violations, the SEC found that these terms violated Rule 21F-17, which prohibits companies from taking any action to impede whistleblowers from reporting possible securities violations to the SEC.

The company has agreed to pay a $130,000 penalty to settle the SEC’s charges and edited its confidentiality statement by adding language clarifying that employees are free to report possible violations to the SEC and other federal agencies without the company’s approval or fear of retaliation.
 
“By requiring its employees and former employees to sign confidentiality agreements imposing pre-notification requirements before contacting the SEC, KBR potentially discouraged employees from reporting securities violations to us,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement. “SEC rules prohibit employers from taking measures through confidentiality, employment, severance, or other type of agreements that may silence potential whistleblowers before they can reach out to the SEC. We will vigorously enforce this provision.”
 
By: Ray Moss In: False Claims & Whistle Blower

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