We recently wrote about an SEC enforcement action targeting KBR, Inc.’s confidentiality agreements. By preventing employees from discussing internal investigations without the legal department’s approval, KBR ran afoul of Dodd-Frank Rule 21F-17 prohibiting “any action to impede” contacting the SEC.
Since then, SEC Office of the Whistleblower Chief Sean McKessy shared more insight regarding the SEC’s enforcement of this rule. According to McKessy, the Commission is continuing to scrutinize agreements potentially implicating the rule, even going so far as reviewing executive separation agreements and asking employees to provide agreements for review. He stressed that the SEC considers Rule 21F-17’s whistleblower protections “very broad.” And while the language in KBR’s amended agreement (quoted in our post below) is still useful guidance, McKessy cautioned that wording is not necessarily a “safe harbor.” The SEC will likely review language in context with an employer’s overall policies and practices. Without taking an official position, McKessy also suggested scrutiny might stretch beyond publicly traded companies to include private employers who contract with public companies.
If there were any doubt before, now is the best time for employers to review their confidentiality policies, severance agreements, and other similar documents to ensure compliance with Dodd-Frank. While KBR’s amended language is a good start, compliance will also require a careful look at overall practices and procedures with whistleblowers in mind.