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Employment LawFeaturesGeneral Counsel and In House CounselLaw Firm ManagementLitigationEmployment Law Strategist

Restrictive Covenants and Whistleblowing

By Joshua Sohn and Shauneida Navarrete

In two recent orders, the U.S. Securities and Exchange Commission (SEC) signaled that it is paying particular attention to attempts by companies to prevent former employees from whistleblowing through restrictive covenants contained in severance agreements.

Section 21F was added to the Dodd-Frank Wall Street Reform and Consumer Protection Act to “encourage whistleblowers to report potential violations of the securities laws by providing financial incentives, prohibiting employment-related retaliation, and providing various confidentiality guarantees.” In re BlueLinx Holdings, Exchange Act Release No. 78528, Order Instituting Cease-And-Desist Proceedings Pursuant to Section 21C of the Securities and Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Cease-And-Desist Order, Aug. 10, 2016, available at http://bit.ly/2bwWtWt. (BlueLinx Order).

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