I understand that in order to protect the integrity of this review, I am prohibited from discussing any particulars regarding this interview and the subject matter discussed during the interview, without the prior authorization of the Law Department. I understand that the unauthorized disclosure of information may be grounds for disciplinary action up to and including termination of employment.
The SEC charged KBR with violating Rule 21F-17, a whistleblower protection rule enacted under the Dodd-Frank Act, by requiring employees to sign the confidentiality agreement in internal investigations. That rule prohibits a company from “tak[ing] any action to impede an individual from communicating directly with the [SEC] about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications.”
Without admitting or denying the charges, KBR consented to entry of the cease and desist order. The order states that KBR has amended its confidentiality agreement to say that it does not prohibit employees from reporting possible violations of federal law or regulation to any governmental agency or entity, without prior authorization. KBR also agreed to pay a civil money penalty of $130,000 to the SEC.
This is a significant action by the SEC, further signaling its intent to crack down on agreements that could be construed as restricting whistleblowing behavior. This crackdown comes on the heels of actions by the EEOC and NLRB challenging confidentiality and non-disparagement provisions in severance agreements that, according to the government entities, improperly prohibit employees from engaging in protected activities.
In light of these actions, entities should review their agreements with employees that contain confidentiality and non-disparagement provisions. Government entities are making clear that they intend to crack down on provisions that they deem to restrict or prohibited protected activity – including whistleblowing and certain other communications or cooperation with government agencies. As a result, entities should ensure that the confidentiality and non-disparagement provisions in their agreements with employees contain appropriate carve-outs for protected activity.
If you have any questions regarding this Sidley Update, please contact the Sidley lawyer with whom you usually work, or
|John P. Kelsh
|Scott D. Stein
Sidley White Collar: Government Litigation & Investigations Practices
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