The health system general counsel may wish to take note of recent SEC enforcement actions with respect to severance agreements that were interpreted by the Commission as limiting the ability of outgoing employees to file applications for SEC whistleblower awards. The general counsel may wish to coordinate her response with the SVP/Human Resources, and with the Chief Compliance Officer.
In orders announced August 10 and August 16, respectively, the SEC announced that two separate companies had agreed to pay monetary penalties and to implement other remedial action for (allegedly) illegally using severance agreements as a means of placing barriers to accessing the SEC's whistleblower program. In one order, the cited conduct was a waiver and release of claims that was interpreted by the SEC as prohibiting the outgoing employee from filing an application for, or accepting, a whistleblower award from the SEC. In the second order, the cited conduct was a confidentiality provision in the severance agreement that (allegedly) prohibited the ability of the outgoing employee from sharing with anyone (presumably including the SEC) confidential information the outgoing employee had learned about the company during the period of employment
This enforcement action is relevant to both publicly traded and nonprofit health systems. Whistleblower activity is generally considered to be an important element of an organization's overall compliance program. The general counsel may wish to coordinate with HR and compliance colleagues to make sure that severance agreements achieve their intended goals without placing problematic barriers on certain types of protected whistleblower activity.
Severance Agreement Challenges
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