When the U.S. Securities and Exchange Commission’s new whistleblower protections took effect in 2011, lawyers in the white-collar defense bar wondered about a potential workaround: Using separation agreements to require a departing employee to waive the right to any award, the National Law Journal reported today. The thinking went that such contract language, while not expressly standing between a tipster and the SEC, would take away the carrot for contacting a federal agency. But it was unclear how securities regulators would receive that contract language. The SEC on Wednesday reached a $265,000 settlement with an Atlanta-based building products distributor charged with unlawfully requiring outgoing employees to waive their right to any whistleblower bounty. According to the SEC, BlueLinx Holdings Inc. added the contract language to its severance agreements in mid-2013, nearly two years after the agency adopted a rule prohibiting companies from preventing someone from tipping off securities regulators. BlueLinx’s agreements also threatened to cut off severance payments and other post-employment benefits, according to the SEC’s order.
