Retailer Settles SEC Charges for Using Agreements that Discourage Whistleblowing

A national retailer settled SEC charges for using employee separation agreements that required departing workers to give up their rights to whistleblower awards. 

According to the Order, during the relevant period, 148 departing employees of the company, including senior executives, directors and staff, were required to sign separation agreements containing an "Award Waiver Provision" before they could receive severance payments. The provision did not prevent the employee from filing a charge with or participating in a proceeding by a government agency including the SEC, but did require that the employee waived the right to receive any monetary award or other relief resulting from such a proceeding.

The SEC found that the provision violated SEA Rule 21F-17(a) (Staff communications with individuals reporting possible securities law violations) which prohibits any person from taking action to impede an individual from communicating directly with Commission staff about a possible securities law violation. The SEC said that, although it was unaware of any instance in which the company enforced the waiver or in which an affected individual declined to speak with SEC staff, the provision nonetheless raised impediments to participation in the whistleblower program by requiring employees to forgo possible awards in exchange for severance.

To settle the matter, the company agreed to cease and desist from future violations and to pay a civil money penalty in the amount of $148,000.