Tech Company Fined for Separation Agreements that Impede Whistleblowers

A clean technology company settled charges with the SEC for including in its separation agreements with employees provisions that discouraged whistleblowing.

The SEC found that the company included in its employee separation agreement a provision that a departing employee "retain[s] the right to participate in any such [whistleblower] action, but not the right to recover money damages." The SEC asserted that the purpose of the whistleblower was to encourage employees "to report possible violations of the securities laws by providing financial incentives." As a result, the SEC concluded that the company violated Exchange Act Rule 21F-17 ("Staff communications with individuals reporting possible securities law violations").

To settle the charges, the company agreed to (i) cease and desist from further regulatory violations and (ii) pay a civil money penalty of $225,000.