By RACHEL LOUISE ENSIGN
A pro-whistleblower coalition is pressing the Securities and Exchange Commission to clarify the protections afforded to employees who raise concerns about suspected wrongdoing in their workplaces.
The group, which includes non-profits the Government Accountability Project and the Project on Government Oversight, plaintiff-side law firm Labaton Sucharow LLP and others, sent the agency a letter Friday, saying the move comes out of “concern for the widespread and growing problem of retaliatory conduct against corporate whistleblowers.”
The SEC’s whistleblower program was established by the 2010 Dodd-Frank financial reform act and offers qualified tipsters between 10% and 30% of the money authorities recover if their information leads to an enforcement action. Some law firms like Labaton have begun to represent these tipsters.
Labaton and the Government Accountability Project in an accompanying petition asked the SEC to strengthen prohibitions on certain employment agreements and make a public statement specifying how protection from retaliation works for whistleblowers.
The petition is a reaction to some of the “egregious and aggressive” tactics firms have taken in recent years in response to the program, said Jordan Thomas, co-author of the petition and partner and chair of the whistleblower representation practice at Labaton.
The petition said whistleblower lawyers had seen repeated examples of employment, severance and confidentiality agreements that claim to limit the extent to which employees can participate in the SEC’s whistleblower program.
They suggested the agency revise its rules to prohibit the use of such agreements in a more detailed way.
Lawmakers are probing claims that KBR Inc. had employees sign statements prohibiting them from reporting fraud allegations to anyone, including the government. A KBR spokesman has said the firm “does not prevent its employees from reporting perceived misconduct.”
The two also proposed that the SEC release a policy statement that would explain to the public how exactly the protections against whistleblower retaliation work, in particular for employees who raise concerns internally but don’t go to the SEC.
Companies have argued in court that these individuals who only report internally are not protected from retaliation. Last year, the fifth circuit court of appeals agreed with this interpretation, ruling in General Electric Co.’s favor in a whistleblower retaliation case.
The SEC has laid out its position in a court filing on the topic, saying that whistleblowers who report internally should be protected.
Such a policy statement would let whistleblowers come forward “with their eyes wide open to the legal consequences of their actions and would ensure that whistleblowers do not follow the incentives offered for internal reporting without understanding the attendant risks,” the petition said.