In a first-of-its-kind decision, the United States Securities and Exchange Commission (SEC) challenged the validity of a severance agreement clause that companies have used to prevent employees from collecting severance pay in situations where the employees notified Federal agencies of rule violations at their former employers’ firms as the employees were leaving those businesses. As the result of that decision, Atlanta building supply company BlueLinx Holdings will pay a fine for attempting to prevent departing employees from blowing the whistle on violations as they departed from employment with the enterprise.
In 2013, BlueLinx started requiring workers who were leaving the company to sign severance agreements in which they promised to waive their rights to any awards that they might win if they were to bring a federal whistleblower case and prevail. Theoretically, the employees who signed the agreements were still free to report violations, but the forfeiture of any award that would come from a victory against the company would discourage employees from reporting. Employees did not have a meaningful choice about whether or not to sign the agreements because any employee who did not sign it would not receive severance pay or other benefits.
The SEC ruled that since the severance agreement requirement was designed to prevent former employees from blowing the whistle on their former employers, it was not valid because it violates the purpose of the SEC whistleblower program. The case involving BlueLinx does not involve any would-be whistleblowers but is instead based solely upon the existence of the severance agreement policy. The company claims that it never intended to discourage whistleblower lawsuits, but the existence of the severance agreement policy would certainly deter such suits regardless of the intent behind the policy’s existence.
To make the situation right, BlueLinx will pay a penalty of $265,00.00 and, perhaps even more importantly, discontinue use of the old severance agreement. A new severance agreement has been adopted that contains language that indicates that the former employee may not sue the company but that they may file whistleblower complaints with government agencies.
Reddy said the company has since re-tooled language in the severance agreement to make clear that employees agree not to sue the company, not foregoing compensation that may flow from whistleblower complaints to government agencies. What’s more, former employees who signed the old severance agreements within the past five years will not have to forfeit any awards that may come to them if they disclose possible violations to the SEC.
Barrett Law PLLC: Supporting Mississippi Whistleblowers
If you feel as though you were not treated fairly by your employer or former employer after you exposed violations of Federal law, the Mississippi Whistleblower Attorneys at Barrett Law PLLC are here to help you. We will support you throughout the entire whistleblower claims process and help you pursue financial recovery for any losses and damages that you have experienced as a result of your actions. Please call the Mississippi Whistleblower attorneys at Barrett Law PLLC today at 1 (800) 707-9577 to schedule your free, initial consultation.