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Whistleblowers Silenced by Non-Disclosure Agreements – Focus on SEC

POGO – “On July 25, the Project On Government Oversight, along with more than 50 other organizations, sent a letter to the Securities and Exchange Commission (SEC) expressing concern over the growing problem of silencing whistleblowers. Many companies regulated by the SEC are now requiring employees reporting misconduct to sign non-disclosure agreements (NDAs) that undermine the force and efficacy of the SEC Whistleblower Program. Retaliation against whistleblowers is a growing problem. A 2012 Ethics Resource Center (ERC) survey found that that 22 percent of corporate employees who reported misconduct faced retaliation, up from 12 percent in 2007. Most alarming, increases in the incidence of retaliation are outpacing the overall rate of increases in whistleblowing disclosures. Our letter to the SEC summarizes a key finding of the report, saying, “While there is a low incidence of whistleblower retaliation in companies with strong ethical program [sic], the ERC survey found that these organizations also represent the greatest uptick in reports of retaliation. In other words, even strong ethics programs alone are an inadequate deterrent.” POGO is extremely concerned that SEC-regulated companies are infringing on current and former employees’ right to blow the whistle. The letter and a separate petition for rulemaking urge the SEC to issue a policy statement regarding the scope of employment protections available to SEC whistleblowers, and the intent to prosecute companies that violate these protections. The letter also asks the SEC to engage in appropriate rulemaking to clarify and strengthen whistleblower protections; hold public hearings to discuss the problem of workplace retaliation and ways to increase reporting; and create an Advisory Committee on Whistleblower Reporting and Protection. Whistleblower attorneys say they are seeing a dramatic increase in the use of potentially illegal NDAs since the Dodd-Frank Wall Street Reform and Consumer Protection Act, which established the Office of the Whistleblower at the SEC, went into effect in 2010. Dodd-Frank created a program to reward whistleblowers, which many corporate executives complain discourages employees from reporting problems to their companies in order to “cash in” on a potential reward. However, employment lawyers say this is unfounded speculation by companies who likely have something to hide.”

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