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Employment LawFeaturesGeneral Counsel and In House CounselRegulationThe Corporate Counselor

Government Agencies Take Aim at Employment-Related Agreements

By Eve I. Klein, Jonathan A. Segal, Christopher D. Durham and Eric W. Ruden

Take a look at the most recent severance agreement your company used. Strict confidentiality clause with requirement to notify the company of any third-party request for confidential information? Check. Waiver of right to monetary recovery in an agency investigation? Check. It would be no surprise to see a severance agreement with such provisions as they have been standard for years. However, following August 2016 cease-and-desist orders entered by the U.S. Securities and Exchange Commission (SEC), such provisions are now unlawful. Specifically, the SEC has sanctioned companies with severance agreements that contain a waiver or release by the former employee of any right to monetary recovery arising from a governmental investigation (such as an SEC whistleblower action) and that require former employees to notify the company if they were required by law to disclose confidential information.

In the same month as these orders, the U.S. Department of Labor (DOL) issued an internal memo to its regional administrators that foreshadows DOL attacks on severance agreements. The SEC's and DOL's scrutiny of severance agreements follow earlier scrutiny by the Equal Employment Opportunity Commission (EEOC) and other government agencies. These developments provide an urgency for company counsel to bring their employment agreements and policies into compliance.

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