Companies Made Deals That Could Run Afoul of U.S. Whistleblower Rules

Reuters, The New York Times
August 25, 2016

Jordan A. Thomas comments on employment language that seeks to muzzle whistleblowers

Wells Fargo, Advanced Micro Devices, and Fifth Third Bank have in recent years agreed to settlement deals that seek to muzzle former employees in ways that some lawyers said could violate U.S. whistleblower protection laws. Five lawyers, including three who represent whistleblowers, said that the settlements appear aimed at blocking workers from airing their concerns and contain similarities to those used by other companies that ran afoul of government rules. The deals by Wells Fargo, AMD, and Fifth Third Bank were among a dozen such corporate settlements reached between 2012 and 2015.

The companies each struck deals with departing workers that limit the employees' ability to receive money arising from any government investigations into their former employers. Some language in the settlements could run afoul of rules adopted by the U.S. Securities and Exchange Commission (SEC) in 2011 that generally bar corporate attempts to muzzle whistleblowers, said the lawyers. Since 2015, the SEC has brought four cases targeting specific types of so-called whistleblower gag orders, such as confidentiality agreements that bar employees from discussing internal wrongdoing.

This month, the agency announced civil charges against two companies that required outgoing employees to waive their rights to recover government whistleblower awards in severance agreements. Those companies, Health Net, now part of Centene Corporation, and BlueLinx Holdings settled without admitting or denying liability and each paid six-figure fines. 

Jordan A. Thomas, Chair of Labaton Sucharow’s Whistleblower Practice said that the language used in the Fifth Third, Wells Fargo, and Advanced Micro Devices settlements is designed to discourage whistleblowers from reporting corporate misbehavior. 

As in the Health Net and BlueLinx cases, all three settlements contain language restricting the employees from collecting any money resulting from a government investigation or legal proceeding. 

"I believe the SEC would be troubled by this," Thomas added.