When the U.S. Securities and Exchange Commission reached a $6 million settlement with Anheuser-Busch InBev last year, the accusations went beyond the bribes allegedly paid to Indian government officials. Securities enforcers accused the beverage giant of using a severance agreement to silence an employee who’d stopped communicating with the agency out of fear he would be forced to pay $250,000 for violating the contract’s nondisclosure terms.
The settlement came at the end of a two-month period in which the SEC reached a string of enforcement actions over severance agreements. The agency said then that it hoped to send a message about the consequences of stifling would-be whistleblowers.
A year later, the head of the SEC’s whistleblower office said the corporate world is getting the hint. “The good news is that I have seen some improvement in this area,” said Jane Norberg, head of the SEC whistleblower program. The “message is out there” that severance agreements cannot include terms preventing employees from contacting regulators, Norberg added.
Norberg said the SEC has brought nine enforcement actions so far over companies that allegedly took steps to impede whistleblowers. Referring to severance agreements that forced departing employees to waive their rights to a future whistleblower award, Norberg said, “In some instances, the language went right to the heart of the whistleblower program.”
Speaking at the annual Securities Enforcement Forum in Washington, D.C., Norberg said she has seen “great carve-outs in agreements” that make clear that any nondisclosure terms do not prevent communication with a government agency. But she still advised lawyers to review severance agreements for any language that could potentially prevent someone from contacting the SEC, in violation of the agency’s rule against preventing employees from tipping off regulators.
Her remarks came as the U.S. Supreme Court prepares to take up a key question concerning the scope of whistleblower protections under the Dodd-Frank Act, the financial reform law that gave birth to the SEC’s program for rewarding whistleblowers.
The language of Dodd-Frank states that whistleblowers must report misconduct “to the commission” to qualify for the law’s protections against retaliation. The SEC has taken the view that whistleblowers who only report misconduct internally also receive protection under Dodd-Frank.
That interpretation has divided federal appeals courts. Supporters of the SEC have questioned the wisdom of companies that argue for more limited whistleblower protections, which could discourage employees from reporting internally.
“For companies, there really are risks either way this case comes out,” said Covington & Burling partner David Kornblau, who appeared with Norberg at Thursday’s securities forum discussion.
Norberg has defended the SEC’s more expansive view of anti-retaliation protections, pointing to the law’s incentives for whistleblowers to first raise issues internally. Earlier this year, she said it was ironic that “some of the same companies that commented during the rule-making process about requiring internal reporting or incentivizing internal reporting are some of the very same companies who are in court now challenging an employee’s right to bring a whistleblower retaliation lawsuit for reporting the information internally.”
“So, in my view, this is a little bit of a thorny issue and a case of be careful of what you wish for.”