The Department of Labor’s Occupational Safety and Health Administration recently published new policy guidelines that could make it more difficult for companies to get OSHA to approve settlement agreements in whistleblower cases.
OSHA administers whistleblower provisions across 22 federal statutes. As part of that oversight, it regularly reviews settlement agreements between employees and employers reached during the investigative stage to ensure, as OSHA stated, that they are “fair, adequate, reasonable, and in the public interest.”
Sometimes, these settlement agreements contain provisions that prohibit, restrict, or otherwise discourage employees from participating in protected activity—such as filing a complaint with a government agency, participating in an investigation, testifying in proceedings, or otherwise providing information to the government. In an effort to enhance whistleblower protections, OSHA last month issued new policy guidelines stating that it will not approve such “gag” provisions.
The new guidelines, which take effect immediately, update the criteria OSHA will use to evaluate whether a settlement restricts or discourages protected activity. This guidance supersedes Chapter 6, paragraphs XII.E.2 and 3, of the OSHA Whistleblower Investigations Manual.
“OSHA’s memo is indicative of a trend toward government agencies seeking to protect employees from any language that could be viewed by an average person as impeding their ability to make a report of alleged wrongdoing to a government agency,” says Renee Phillips, co-head of the whistleblower task force at law firm Orrick. “This is OSHA’s way of complementing those efforts.”
The Securities and Exchange Commission has been especially active in bringing enforcement actions against companies that attempt to chill whistleblower rights. For example, Belgium-based Anheuser-Busch InBev on Sept. 28 reached a $6 million settlement with the SEC, in part, for entering into a separation agreement that prevented an employee from communicating with the SEC about potential FCPA violations by threatening to impose a substantial financial penalty for violating strict non-disclosure terms.
“OSHA’s memo is indicative of a trend toward government agencies seeking to protect employees from any language that could be viewed by an average person as impeding their ability to make a report of alleged wrongdoing to a government agency.”
Renee Phillips, Co-Head, Whistleblower Task Force, Orrick
“Threat of financial punishment for whistleblowing is unacceptable,” Jane Norberg, acting chief of the SEC’s Office of the Whistleblower, said in a statement. “We will continue to take a hard look at these types of provisions and fact patterns.”
Just one month earlier, on Aug. 10, building products distributor BlueLinx Holdings agreed to pay a $265,000 penalty to the SEC for violating securities laws when it entered into severance agreements that required outgoing employees to waive potential whistleblower awards or risk losing their severance payments and other post-employment benefits.
Different from the SEC’s enforcement activity, however, is that OSHA’s policy guidance applies only to the review of settlement agreements in whistleblower cases. “All OSHA can do if presented with a proposed settlement agreement is that it can either approve it or not approve it,” says Edward Ellis, co-chair of the whistleblowing and corporate ethics practice group at law firm Littler.
Companies shouldn’t make the mistake, however, of minimizing the importance of the change in guidelines. “Some clients I’ve talked to have said, ‘We don’t have that many OSHA matters. We never had an OSHA whistleblower complaint, so we’re not that concerned about it,’” says Mike Hanna, a partner in the labor and employment practice at law firm Squire Patton Boggs. Keep in mind, however, that OSHA’s regulatory reach extends far beyond publicly traded companies, potentially applying all companies that comply with any of the 22 federal statutes under which OSHA administers whistleblower provisions, he says.
Thus, even companies that are not regulated by the SEC should review their severance agreements, settlement agreements, employment agreements, and confidentiality agreements to make sure that nothing in those agreements could be viewed as impeding employees or others from going to government regulators to report potential violations of law.
Prohibited language
Under its revised policy guidelines, OSHA lists the following four types of provisions that it deems as restricting protected activity and, thus, could result in OSHA rejecting a settlement agreement:
OSHA POLICY GUIDELINES
If any “offending provisions” are present In settlement agreements, OSHA said it will require their removal and/or will require the addition of the following language “prominently positioned” within the settlement:
“Nothing in this agreement is intended to or shall prevent, impede, or interfere with complainant’s non-waivable right, without prior notice to respondent, to provide information to the government, participate in investigations, file a complaint, testify in proceedings regarding respondent’s past or future conduct, or engage in any future activities protected under the whistleblower statutes administered by OSHA, or to receive and fully retain a monetary award from a government-administered whistleblower award program for providing information directly to a government agency.”
Source: OSHA
A provision restricting an employee’s right to provide information to the government, to participate in investigations, file a complaint, or testify in proceedings based on future conduct. For example, OSHA will not approve a provision that restricts a complainant's right to provide information to the government related to an occupational injury or exposure.
A provision requiring employees to notify the employer before filing a complaint or voluntarily communicating with the government.
A provision requiring employees to waive rights to receive a monetary award for participating in government-administered whistleblower programs. For example, OSHA will not approve a provision that requires employees to waive their right to receive a monetary award from the SEC under Section 21F of the Securities Exchange Act for providing information to the government related to a potential violation of securities laws.
A provision requiring employees to confirm they have not provided information to the government or engaged in other protected activity, or disclaimed any knowledge the employer has violated the law.
It’s that last provision that has many companies feeling uneasy. According to OSHA, asking employees to disclaim any knowledge of any legal violations committed by the company may “discourage” employees from engaging in protected activity, the guidance states.
“The reality, however, is companies include acknowledgements in their release agreements in an effort to understand whether an employee is aware of any violations of the code of conduct or illegal activity. These types of acknowledgements are not designed to quell people from going to the government,” says Sarah Bouchard, an employment law partner at law firm Morgan Lewis. “Rather, such language can serve an important internal compliance purpose as it helps to flush out issues that the employee may not have felt comfortable raising during employment.”
Prohibiting such language could prove especially problematic for a company that is trying, in good faith, to conduct an internal investigation and uncover wrongful activity in the company, says Tracy Cole, a partner with law firm BakerHostetler. Companies walk a fine line between their legitimate interest in encouraging internal reporting and conducting effective and thorough internal investigations and the government’s interest in protecting whistleblowers. “OSHA seems to be moving the line further away from the employer,” she says.
In addition, OSHA said it also will closely scrutinize any potential liquidated damages imposed for breaches of a settlement agreement. OSHA said it reserves the right to reject a settlement “where the liquidated damages are clearly disproportionate to the anticipated loss” to the employer of a breach, the guidance states.
Broad confidentiality and non-disparagement clauses that include “except as provided by law” clauses will not suffice either, OSHA said. If any of these “offending provisions” are present, OSHA will require their removal or will require the addition of the following language “prominently positioned” within the settlement:
“Nothing in this agreement is intended to or shall prevent, impede, or interfere with complainant’s non-waivable right, without prior notice to respondent, to provide information to the government, participate in investigations, file a complaint, testify in proceedings regarding respondent’s past or future conduct, or engage in any future activities protected under the whistleblower statutes administered by OSHA, or to receive and fully retain a monetary award from a government-administered whistleblower award program for providing information directly to a government agency.”
In light of these changes, employers can no longer rely on language that has always been standard in their agreements. Companies should consider carefully whether it is in their best interest to modify the language in their agreements, as well as in their policies and procedures, to reduce the risk of any challenges by either the SEC or OSHA moving forward.
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