Governement Agency Scruntizes Confidentiality Agreements

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The Securities and Exchange Commission ("SEC") recently announced that it had opened an enforcement action against a company based on a confidentiality agreement that the SEC claimed interfered with the rights of would-be whistleblowers.  According to the SEC, the confidentiality agreement was presented to employees during workplace investigations, and prohibited the employees from speaking about the investigation with anyone unless the company granted permission.  The SEC claimed that such a provision violated the whistleblower protections of Rule 21F-17 of the Securities Exchange Act of 1934, which prohibits actions that impede whistleblowers from reporting possible securities law violations to the SEC.  Our colleague Morgan Curry has offered a solid analysis of the SEC's action here. 

As a result, businesses are well advised to take a look at their confidentiality provisions, especially those in employment and severance agreements, to consider whether an update of their terms is in order.

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