Separation Agreements Should Not Prohibit Whistleblowing Activity or Recovery

In many cases, employers enter into separation agreements with employees to bring full closure to the relationship and cut off any further issues. However, a recent Securities and Exchange Commission Order highlights the fact that employees should not be required to waive certain rights in such agreements – including the right to engage in certain whistleblowing activity.

In the underlying matter, a company’s standard separation agreement provided that, while employees retained the right to participate in a governmental investigation, they waived the right to receive any money damages or legal or equitable relief awarded by the investigating agency. The SEC found that this provision illegally impeded participation in the SEC’s whistleblowing program by removing financial incentives intended to encourage the reporting of possible securities laws violations.

Although many employers are not subject to the jurisdiction of the SEC, all employers are subject to the Occupational Safety and Health Administration’s Whistleblower Protection Program. This program enforces the anti-retaliation provisions of more than 20 federal laws, many of which may apply to private employers. Beyond the Occupational Safety and Health Act, these include the Sarbanes-Oxley Act, the Affordable Care Act, and the Consumer Financial Protection Act. And in its Whistleblower Investigations Manual, OSHA specifically asserts that employees cannot be required to waive their rights to participate in – and benefit from – whistleblowing activity. Thus, employers should ensure that their standard separation agreements do not include such language.