Today, the SEC announced that it that it has filed its "first enforcement action against a company for using improperly restrictive language in confidentiality agreements with the potential to stifle the whistleblowing process." The SEC filed today's settled administrative proceeding against KBR Inc., a technology and engineering firm.

 

The SEC has warned for some time now that it views companies' attempts to potentially intimidate employees from coming forward as whistleblowers through confidentiality agreements as a form of retaliation -- or “pre-taliation," as the SEC's Sean McKessy has dubbed it. McKessy, Chief of the SEC's Office of the Whistleblower, stated last year that the SEC viewed such conduct as unlawful under the Dodd-Frank’s whistleblower rules, and that his office was “actively looking for examples of confidentiality agreements, separation agreements, [and] employee agreements” that condition benefits on not reporting activities to regulators such as the SEC. 

 

According to the SEC, 

KBR required witnesses in certain internal investigations interviews to sign confidentiality statements with language warning that they could face discipline and even be fired if they discussed the matters with outside parties without the prior approval of KBR’s legal department.  

Under the settlement, KBR will pay a penalty of $130,000. The company also voluntarily amended its confidentiality statement to clarify that that employees are free to report possible violations to the SEC and other federal agencies without KBR approval or fear of retaliation. McKessy emphasized today that “[o]ther employers should similarly review and amend existing and historical agreements that in word or effect stop their employees from reporting potential violations to the SEC.”

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