SEC to Company: You Can’t Force Whistleblowers to Give Up Awards

The SEC reached an agreement today with a company whose severance agreements included a provision that waived employees’ rights to any whistleblower awards based on their reporting to the SEC or other federal agencies.  The company, Bluelinx Holdings Inc., has agreed to pay a $265,000 penalty, amend all of its severance agreements, and attempt to notify former employees of the changes.  The SEC’s Deputy Director of Enforcement emphasized that the SEC is “continuing to stand up for whistleblowers and clear away impediments that may chill them from coming forward with information about potential securities law violations.”

According to the SEC’s Order, although Employees were not prevented from filing a “charge….if applicable law requires that the Employee be permitted to do so,”  the BlueLinx severance agreement provided that Employees “waiv[e] the right to any monetary recovery in connection with any such complaint or charge that Employee may file with an administrative agency.”

In announcing the agreement and order, the Acting Chief of the SEC Whistleblower Office made absolutely clear that “Companies simply cannot undercut a key tenet of our whistleblower program by requiring employees to forego potential whistleblower awards in order to receive their severance payments.”

Read the SEC press release