Whistle-blowers' Read the Fine Print

There is a new probe that the Securities and Exchange Commission (SEC) that is conducting among companies with whistle-blowers. In a Wall Street Journal article, companies are now trying to find ways to block whistle-blowers from contacting the government about wrongful doing. The SEC has sent letters out to companies in order to obtain years’ worth of non-disclosure agreements and employment contracts.

Why is the SEC seeking such documents? Essentially, many documents have been reported to have closures and clauses related to whistle-blowing. These closures and clauses intend to impede whistle-blowers from informing the government about wrongful doing and violations to securities law. There are some cases that have even gone as far as forbidding employees to agree to the incentives that the government provides to whistle-blowers who report those violations. It should be noted that the Dodd-Frank Act prohibits companies from interfering with employees reporting violations.

Currently, whistle-blowers can collect 10% to 30% of the penalties that the government receives as an incentive. However, the whistle-blower can only receive the said percentage amount only if the penalties are above $1 million. Since the government whistle-blower program has been initiated along with the Dodd-Frank Act, there has been an increase of 21% whistle-blowers from 2010 to the current time period. Furthermore, states are starting a similar program. One state, New York, is going to establish a bounty program as well, that is if it gets through legislation.

Regardless, this probe is something new to companies. The SEC has not mentioned how many companies have been notified or which companies. The SEC has requested that the companies to hand over every non-disclosure agreement, confidentiality agreement, severance agreement, and settlement agreement that the company and the employee have entered into since the Dodd-Frank Act. The SEC has taken things a step further by requesting any and all documents that relate or refer whistle-blowing and employees that have been terminated as well.

It can go without saying that companies have an opposing view about this. One company, defense contractor KBR Inc, states that it is completely false of blocking whistle-blowers from reporting violations. KBR states that they have even gone as far as changing their forms that allows employees to report to any government entity.

Fellow monkey’s, share your thoughts on this matter. Do you think that companies are adding in clauses that would prevent whistle-blowers from reporting to any government agency? Have any of you actually read through your agreements and have seen anything related to whistle-blowing?

Reference:
WSJ, Thursday, February 26, 2015, Money & Investing Section.