Companies Should Review Employee Agreements Following SEC's Renewed Focus on Confidentiality Provisions That May Be Considered Impediments to Whistleblowing

Wilson Sonsini Goodrich & Rosati
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Wilson Sonsini Goodrich & Rosati

From 2015 to 2017, the U.S. Securities and Exchange Commission (SEC) announced a series of settlements with employers in which the SEC adopted a strict interpretation of the whistleblower protections afforded under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).1 As discussed in Wilson Sonsini’s September 2016 Client Alert, the SEC imposed monetary sanctions on companies for including confidentiality provisions and other provisions in employment-related agreements that it asserted deterred employees from reporting securities law violations to the SEC's Office of the Whistleblower (and other agencies).

On June 22, 2022, the SEC issued an order In the Matter of The Brink’s Company, confirming its continued aggressive enforcement stance regarding whistleblowing protections. From 2015 to 2019, The Brink’s Company (Brink) required new U.S. employees to execute a confidentiality agreement during the onboarding process. The confidentiality agreement prohibited employees from divulging confidential information to third parties without Brink’s permission, and it defined confidential information to include "financial information … set forth in internal records, files and ledgers or incorporated in profit and loss statements, financial reports and business plans."2 It imposed $75,000 in liquidated damages, together with payment of Brink’s attorney’s fees and costs, on any employee found to have violated the confidentiality agreement. Brink also included similar prohibitions in the severance or settlement agreements it entered into with its employees, prohibiting employees from "divulging confidential corporate information to any third parties, unless compelled by law or legal process or expressly authorized by Brinks to do so."3

The SEC determined that these prohibitions in Brink’s employment agreements violated Rule 21F-17(a), which was adopted as part of the SEC’s Whistleblower Program. Act of 1934 provides, in relevant part:

No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement... with respect to such communications.

The SEC reasoned that the financial information required to be maintained as confidential was "the kind of information and documents that often are components of whistleblower complaints."4 Although Brink made changes to some of its agreements from 2015 to 2019, it still required approximately 2,000 to 3,000 employees "to notify the company prior to disclosing any financial or business information to any third parties, and threaten[ed] them with liquidated damages and legal fees if they did not do so."5 Brink did this despite having received emails, "general client bulletins, legal alerts, and case summaries from various private law firms discussing the Commission’s enforcement actions" related to comparable language in other employers’ employment agreements.6

Pursuant to the settlement between Brink and the SEC, Brink is required to pay a $400,000 penalty, amend its employment agreements to comply with Rule 21F-17(a), and notify current and former employees of the whistleblowing protections to which they are entitled.

This recent decision confirms that the SEC continues to aggressively pursue companies that include provisions in agreements or policies that arguably discourage whistleblowers from volunteering information about possible securities law violations. Companies should carefully review their forms of employee agreements, separation agreements, confidentiality agreements, as well as employee codes, policies, and other documents that include restrictions on employees’ disclosure of company information. Any revisions to such documents should be made thoughtfully to maintain the maximum protection of company confidential information while complying with the SEC’s mandates. Even those companies not subject to the SEC's jurisdiction may wish to undertake such measures, as the SEC's stance is similar to that taken by the National Labor Relations Board (NLRB) and the Equal Employment Opportunity Commission (EEOC) in their respective efforts to ensure that employers do not deter employees from contacting or cooperating with those agencies.

Wilson Sonsini will be actively monitoring any further developments relating to the SEC's interpretation and enforcement of Dodd-Frank. Our attorneys are available to work with clients to review and make necessary modifications to employment-related agreements and relevant policies to address this recent settled enforcement action. 


[1] See In the Matter of KBR, Inc., Exchange Act Rel. No. 74619 (April 1, 2015) (settled cease and desist proceeding); In the Matter of Merrill Lynch, Peirce, Fenner and Smith, Inc., Exchange Act Rel. No. 78141 (June 23, 2016); In the Matter of BlueLinx Holdings, Inc., Exchange Act Rel. No. 78528 (Aug. 10, 2016); In the Matter of HealthNet, Inc., Exchange Act Rel. No. 78590 (Aug. 16, 2016); In the Matter of Anheuser-Busch InBev SA/NV, Exchange Act Rel. No. 78957 (Sept. 28, 2016); In the Matter of NeuStar, Inc., Exchange Act Rel. No. 79593 (Dec. 19, 2016); In the Matter of SandRidge Energy, Inc., Exchange Act Rel. No. 79607 (Dec. 20, 2016); In the Matter of BlackRock, Inc., Exchange Act Rel. No. 79804 (Jan. 17, 2017); In the Matter of Homestreet, Inc., et al., Exchange Act Rel. No. 79844 (Jan. 19, 2017).

[2] In the Matter of The Brink’s Company, Exchange Act Rel. No. 95138, at 3 (June 22, 2022), available at https://www.sec.gov/litigation/admin/2022/34-95138.pdf.

[3] Id.

[4] Id.

[5] Id. at 5.

[6] Id. at 4, 5.

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