Can Severance Agreements Prohibit Whistleblowing?
Severance agreements are routinely used to amicably “sever” an employee’s relationship with an employer. They typically include provisions that are mutually beneficial, and employees should always negotiate the best possible agreement. But can severance agreements prohibit whistleblowing?
A severance agreement commonly trades some form of extended compensation and employee benefits for a release from claims about back pay, wrongful termination, or other protections for the company. However, any prohibition against whistleblowing is illegal and should be reported. An Employment Law Attorney at The Crone Law Firm can explain your rights and offer guidance.
Severance Agreements, Whistleblowing, and the Law
Federal law prohibits retaliation against employees who report their employers to the proper authorities for illegal activities. In 2010, Congress amended the Dodd-Frank Wall Street Reform and Consumer Protection Act by adding Section 21F to bolster the provisions protecting whistleblowers from employee retaliation and providing some financial incentives for reporting violations to the Securities and Exchange Commission.
Rule 21F-17(a) states that “[n]o 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 … with respect to such communications.”
In 2016, the SEC released a memo further explaining severance agreement provisions and other official policy documents relating to whistleblowing that are prohibited. Such provisions include:
- Requiring an employee to represent that he or she has not assisted in any investigation involving the registrant
- Prohibiting disclosures of confidential information, without any exception for voluntary communications with the SEC concerning possible securities law violations
- Requiring an employee to notify and/or obtain consent from the registrant prior to disclosing confidential information, without any exception for voluntary communications with the SEC concerning possible securities laws violations
- Purporting to permit disclosures of confidential information only as required by law, without any exception for voluntary communications with the SEC concerning possible securities law violations
Employees should know that they have serious legal protections for speaking out about illegal activities by their employer. In fact, since 2011, the SEC has awarded more than $1 billion to whistleblowers whose information has resulted in actions against employers. And at least five companies have been charged with illegal activities due to the actions of whistleblowers in 2023.
More Federal Protections for Whistleblowers
Several government entities provide avenues for reporting illegal activities in various industries, government offices and contractors, and more. Get more information about reporting violations in different areas below.
- The Federal Trade Commission (federal employees, non-government workers – contractors)
- The Department of Justice (DOJ / FBI employees)
- The Department of Labor:
Each entity has specific prohibitions regarding anti-whistleblowing provisions in severance agreements and other company documents. An Employment Law Attorney can help you research and understand your protections and how to act if you suspect or have evidence of violations.
Never Tolerate Whistleblower Retaliation
You do not have to tolerate retaliatory tactics in severance agreements or other forms that restrict your rights as an employee to report illegal activities at work. Even large corporations cannot get by with breaking the law and defrauding consumers, employees, stockholders, the government, or others. The corporate landscape of America is strengthened when honest people refuse to allow nefarious activities in the workplace.
It is critical to understand how specific laws protect you. You must follow the law’s requirements for reporting illegal activity in order to be protected. The Crone Law Firm Whistleblower Attorneys know the law and how to help you with reporting and protecting your rights. The various whistleblower statues can be complicated, so getting competent legal help is always recommended.
We hope we were able to answer the question, can severance agreements prohibit whistleblowing? Contact The Crone Law Firm in Tennessee, Missouri, or Illinois for more information or assistance.