Employers, Severance Agreements, and the Dodd-Frank Act

Texas Whistleblower Attorneys

A disheartening trend has emerged since the passage of the Dodd-Frank Act (2010) in regard to whistleblowers. A number of employers have attempted to insert language into severance and settlement agreements that prevent employees from disclosing certain kinds of company information or from financially benefiting from SEC whistleblower actions. The nature of the language used is contra-indicated by Section 922 of the Dodd-Frank Act, specifically Rule 21-F-17(a):

“No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement (other than agreements dealing with information covered by § 240.21F-4(b)(4)(i) and § 240.21F-4(b)(4)(ii) of this chapter related to the legal representation of a client) with respect to such communications.”

While it is far from obvious that employers can effectively prevent employees from acting as whistleblowers by contractually obligating them to either obstruct justice or refrain from exercising a legal right, the chilling and silencing effect of such language is clearly evident.

The Position of Whistleblowers: Complicating a Difficult Decision

Many whistleblowers face ostracization, stigmatization, and a taint that can adversely effect their career. While 17 CFR § 240.21F-17(a) is intended to cover instances where a company attempts to prevent a whistleblower from coming forward, misleading or intimidating language in a severance or settlement agreement can mislead would-be whistleblowers into saying nothing for fear of losing needed benefits.
To date, the SEC’s Office of the Whistleblower has made it clear it intends to enforce 17 CFR § 240.21F-17(a) with the complete power and force of law when it discovers an employer has tried to dissuade an employee from stepping forward as a whistleblower.

The Need for Reaching Out to and Educating Whistleblowers

Too often, would-be whistleblowers are left depending on what an employer tells them their legal options are in regard to severance or settlement agreements. As a result, some do not seek legal advice from experienced whistleblower attorneys who can assert and protect their rights.

In some respects, this is all the more unfortunate since, in whistleblower recoveries, any money paid to a whistleblower is compensation he or she receives from what the government recovers as a result of his or her testimony. As such, whistleblowers do not receive “compensation” from their employer as payment for damages.

However, when employers include language in employment contracts allegedly preventing employees from collecting financial compensation from whistleblower actions, it gives the false appearance that it is somehow the employer who would be responsible for paying him or her.

Contact Texas Whistleblower Attorneys at Bailey and Galyen

If you’re considering stepping forward as a whistleblower but are concerned by some of the language you’ve seen in your employment contract, contact Dallas whistleblower lawyers at Bailey and Galyen today. We can evaluate your case during a confidential consultation and discuss the legal options available to you and how we can protect your rights and interest when working with government investigators.

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