On July 18, 2014, a coalition of plaintiff-side lawyers and government watchdog groups proposed ways to strengthen the SEC whistleblower program in two petitions filed with the SEC.  The groups urged the SEC to update Rule 21F-17, which prohibits any action that would “impede” an individual from communicating with the SEC about securities law violations, by expanding its rules governing the use of nondisclosure agreements and increasing the scope of protections for whistleblowers.

The first petition addresses concerns that employers (and their attorneys) have attempted to use internal mechanisms to prevent employees from providing whistleblower tips to the SEC.  The petitioners noted that they had seen repeated examples of employment, severance, and confidentiality agreements that attempt to limit the extent to which employees or former employees can participate in the whistleblower program.  Examples of such restraints include provisions in employment contracts that prohibit employees from consulting independent legal counsel and agreements that require employees to waive any right to receive compensation or relief arising from their submissions.  These types of provisions, according to the petitioners, impede whistleblowing and undermine Dodd-Frank by effectively putting employees in the same position they would have been in had the law never been passed.  As a result, petitioners seek to have Rule 21F-17 revised to preclude the use of private agreements that hinder participation in the whistleblower program.

The first petition also addressed the need for a policy statement regarding the extent to which anti-retaliation employment protections offered by Dodd-Frank and SEC whistleblower rules extend to employees who have reported possible securities law violations to their employers but have not filed complaints with the SEC.  Citing to the split among courts concerning whether making internal reports constitutes protected conduct, petitioners requested that the SEC issue a policy statement that is in accord with those courts that have taken the expansive pro-plaintiff view.

The second petition, filed by a coalition of organizations including plaintiff-side law firms, nonprofits and community activist groups, asked the SEC to launch a series of public hearings to discuss the problem of workplace retaliation and ways to increase reporting.  First, the petition urges the SEC to strengthen whistleblower protections by making clear that whistleblowers who report internally are eligible for protection and by clarifying that any actions made in effort to block the flow of whistleblowing evidence is illegal.  Second, petitioners asked the SEC to launch a series of field hearings around the country to discuss workplace retaliation and explore ways to increase reporting.  Third, the petition asked the SEC to create an Advisory Committee on Whistleblower Reporting and Protection that would serve as a vehicle for the Commission to gather advice, best practices and recommendations related to whistleblower reporting and protection.

These petitions demonstrate that there are vocal groups seeking to expand employee rights under the Dodd-Frank anti-retaliation provisions.  Based on earlier SEC comments, these petitions are likely to meet a receptive audience.  Whether adopted or not, employers must take care to avoid language in nondisclosure or other employment agreements or from otherwise seeking to impede employees from reporting concerns to the SEC.

 

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Lloyd B. Chinn Lloyd B. Chinn

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative…

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative agencies in New York and across the country. Lloyd’s practice ranges from litigating compensation disputes to defending whistleblower, discrimination and sexual harassment claims. Although he represents employers in a wide range of industries, including law, insurance, health care, consulting, media, education and technology, he focuses a substantial portion of his practice on the financial services sector. He has tried to final verdict or arbitration award substantial disputes in this area.

Due to Lloyd’s litigation experience, clients regularly turn to him for advice regarding the full range of employment matters, including terminations, whistleblower policy and procedure, reductions in force, employment agreements, and employment policies. For example, in the wake of the financial crisis, he has counseled a number of firms through reductions in force and related bonus and deferred compensation disputes. Lloyd has also been retained to conduct internal investigations of allegations of workplace misconduct, including claims leveled against senior executives.

Lloyd has represented global businesses in matters involving Sarbanes-Oxley and Dodd-Frank whistleblower claims. He has taken an active role in the American Bar Association on these issues, currently serving as Co-Chair of the Whistleblower subcommittee of the ABA Employee Rights and Responsibilities Committee. Lloyd has spoken on whistleblowing topics before a numerous organizations, including the American Bar Association, ALI-ABA, Association of the Bar of the City of New York, and New York University School of Law. He has testified twice before Congressional subcommittees regarding whistleblower legislation and has also published blog postings, articles and client alerts on a variety of topics in this area, including the Dodd-Frank Act’s whistleblower provisions. Lloyd is a co-editor of Proskauer’s Whistleblower Defense Blog, and he has been widely quoted by on whistleblower topics by a number of publications, including the New York Times, the Wall Street Journal, the National Law Journal and Law 360.

Lloyd has also become active in the International Bar Association, presenting on a variety of subjects, including: the #MeToo movement, the COVID-19 pandemic and employment law, and cross-border harmonization of employment provisions in transactions. Lloyd also hosts a quarterly roundtable discussion among financial services industry in-house employment lawyers. He has also published articles and given speeches on a variety of other employment-law topics, including non-solicitation provisions, FINRA arbitration rules, cross-border discovery, e-discovery, and the use of experts.

Photo of Rachel Fischer Rachel Fischer

Rachel S. Fischer is a senior counsel in the Labor & Employment Law Department.

Rachel represents employers in all types of employment-related disputes, including defending clients against claims of discrimination, harassment, retaliation, wrongful discharge, whistleblowing, breach of contract, and in wage and hour…

Rachel S. Fischer is a senior counsel in the Labor & Employment Law Department.

Rachel represents employers in all types of employment-related disputes, including defending clients against claims of discrimination, harassment, retaliation, wrongful discharge, whistleblowing, breach of contract, and in wage and hour matters. She represents employers in federal and state courts, arbitration tribunals, and before administrative agencies, and has litigated both single plaintiff and class action lawsuits. As an experienced trial lawyer, Rachel has successfully litigated numerous cases from complaint through jury verdict or arbitral award.

Rachel represents employers across a wide variety of industries, including banking and finance, law firms, media and entertainment, sports, and higher education.

Rachel also counsels clients on a broad range of employment law matters, including investigations, employee terminations and discipline, and employment policies and procedures.