Monthly Archive: April 2015

Whistleblower and Confidentiality Agreements

April 19,2015–Reprinted from The National Law Review

Last week, the Securities and Exchange Commission (“SEC”) announced its first enforcement action1 against a company for using language in confidentiality agreements that the SEC concluded had the potential to stifle the whistleblower process established under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”). Under the Dodd-Frank Act and subsequent SEC rulemaking, the SEC’s whistleblower program provides monetary incentives for individuals who report possible violations of the federal securities laws that result in successful SEC actions against companies with monetary sanctions exceeding $1 million. As a result of the recent SEC action, companies should review confidentiality restrictions in employment and other agreements to assess whether revisions may be advisable to conform with language deemed acceptable by the SEC.

In the action, the SEC targeted Houston-based global technology and engineering firm KBR, Inc., which it claimed violated an SEC whistleblower protection rule (Rule 21F-17 under the Securities Exchange Act of 1934, as amended), which prohibits persons from taking any action to impede whistleblowers from reporting possible securities law violations to the SEC, including enforcing, or threatening to enforce, a confidentiality agreement regarding such communications. KBR used a form confidentiality statement during internal investigations which contained language warning employees that they could face disciplinary action or termination if they discussed the internal investigation with outside parties without first obtaining approval from KBR’s legal department.

Even though the SEC noted that it was not aware of any instances in which (i) a KBR employee was in fact prevented from communicating directly with the SEC about potential securities laws violations or (ii) KBR took any action to enforce the confidentiality agreement’s restrictions, the SEC nonetheless determined that the language impedes employee communications by prohibiting discussing the interviews without pre-clearance from the KBR law department and because of the threat of disciplinary action or termination. Without admitting or denying the SEC’s findings, KBR agreed to amend its confidentiality statements to provide that nothing in the statement prohibits an employee from reporting possible violations of federal law or regulation to the SEC or any governmental agency or entity and to clarify that the employee does not need the prior authorization of KBR’s legal department before making any such disclosures. As part of its settlement with the SEC, KBR also agreed to pay a $130,000 penalty.

In light of the KBR action, companies should consider whether their confidentiality, employment, severance or other types of agreements contain restrictive language that would be objectionable. In the SEC press release announcing the action, SEC representatives warned that the SEC will “vigorously enforce” Rule 21F-17 and that “[o]ther employers should similarly review and amend existing and historical agreements that in word or effect stop their employees from reporting potential violations to the SEC.”


Assoc. Press on Employees & Social Media

April 17, 2015 – Here is an article from AP on Social Media and Employee rights


NEW YORK – Bosses can get mad when staffers vent on social media about their jobs, but they might not be able to get even.

When one of Bert Martinez’ employees posted gripes about her job and the boss on Facebook last year, the publicist consulted his lawyer, who said the staffer couldn’t be fired.

“The first lesson I learned is, employees are allowed to vent,” said Martinez, owner of Bert Martinez Communications in Phoenix. “If they’re saying, ‘Hey, it’s hard working here and I find this environment unpleasant,’ you can’t fire them for that.”

The employee quit a week after Martinez learned about the post.

The government protects workers’ right to say what they want about where they work, even if it’s in a vitriolic and insulting tweet or post. It’s illegal for an employee to be fired for a post about working conditions, whether it’s pay, hours, assignments, difficult supervisors, dress code or any other issue.

So employers shouldn’t try to restrict workers’ freedom of speech or retaliate if there’s a post they don’t like.

It’s an issue that companies of all sizes have to deal with, but it’s often more challenging for smaller companies because they typically don’t have large human resources departments or lawyers on staff to advise them.

Workers who complain about employers on social media can’t be fired if they’re involved in what’s called concerted activity, or joining with fellow staffers to improve working conditions, according to the U.S. National Labor Relations Board, the government agency responsible for upholding workers’ rights.

“The NLRB is effectively taking the position that commentary about working conditions on social media is completely protected,” said Henry Perlowski, an employment law lawyer with Arnall Golden Gregory in Atlanta.

A 2014 NLRB decision shows how broadly the agency views employees’ rights to make such critical posts, Perlowski said. The NLRB said a restaurant illegally fired two workers for taking part in a Facebook discussion of problems in how income tax was withheld from paychecks. The discussion mentioned a meeting about the issue. One employee was fired for a comment that contained an expletive describing one owner, and the other was dismissed for “liking” a post.

Because the posts were related to working conditions, and the employees were discussing concerted activity, or jointly seeking a resolution of their problems, the posts were protected. The NLRB reversed the firings.

Owners also can’t resort to other disciplinary measures, Perlowski said. That rules out suspensions, reprimands, pay cuts and promotion denials.

However, the NLRB will uphold firings based on posts that damage a company, disparage its products or services or reveal trade secrets or financial information, said Paula Lopez, an employment law lawyer with Allyn & Fortuna in New York. But there can be gray area, for example, when a post is critical of a company’s or services but is also related to working conditions.

Posts encouraging insubordination aren’t protected, Lopez said, citing a 2014 case that upheld an employers’ decision not to rehire workers who had posted plans to show up at the job and not do work.

Employees also can be fired for posting information about clients or customers.

If their posts are racist, homophobic, sexist or discriminate against a religion, companies should fire workers rather than be seen as tolerating or condoning the employees’ views.

The NLRB has also said griping or insults by one employee and that have no connection to working conditions are not protected. For example, one that ridicules the way the boss looks, dresses or speaks.

Three steps can help companies address social media-related problems:

Companies should have a written social media policy spelling out what employees can post. It should be specific, with examples of what’s acceptable.
The policy should be reviewer with a lawyer or human resources specialist to be sure it wouldn’t violate federal, state or local laws.
If a staffer has made a negative post about the company, get advice from an employment law attorney or human resources provider before taking disciplinary action.