Employer Scare Tactics May Chill SEC Whistleblower Program

May 10, 2013

Jordan A. Thomas comments on companies that attempt to silence potential whistleblowers through unfair employment agreements

But an issue has emerged that could stanch the flow of tips. Despite an anti-retaliation provision in the Dodd-Frank Act, the law that created the whistleblower office, some plaintiffs attorneys complain that companies are using language in severance, confidentiality and other employment agreements that threatens employees with termination if they communicate directly with the SEC.

If the SEC discovers that a company violated securities laws and later learns that the firm used such tactics, it may need to send a message by launching an enforcement action, attorneys say.

"I wouldn't want to be that company. They're likely to pay a very heavy price," said Labaton Sucharow LLP partner Jordan Thomas, who chairs the firm's whistleblower practice and previously served in a leadership role for the SEC in developing the whistleblower program.

The SEC may also be wise to inform corporations about what kinds of language can and cannot be used in employment agreements, Thomas said.

"It's not black and white. There are gray areas," he said. "There is a genuine need and desire by responsible organizations for guidance."