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Gunster's labor & employment law practice

The U.S. Securities and Exchange Commission took administrative action recently against two companies in separate matters involving severance agreements.

Employers are urged to act now to ensure the severance agreements they use are appropriate for their needs. Contact any member of Gunster’s labor and employment law practice for more information.

The two provisions under fire by the SEC can be found in many typical employment-severance agreements:

Confidentiality clause

In the first matter, a building-products distributor based in Atlanta asked employees accepting severance pay to sign an agreement with a confidentiality clause requiring notice to the company if the employee becomes required by law to disclose confidential company information.

The SEC found this infringed upon federal whistleblower protections. On Aug. 10, 2016, the SEC ordered cease-and-desist proceedings and imposed $265,000 in sanctions. Additionally, the employer was required to amend its severance agreements to include a section titled “Protected Rights” containing broadly worded language regarding the receipt of compensation for information from any government agency for a report of suspected law violations.

Waiver of rights

The waiver of rights clause used in both matters prohibited employees from receiving monetary compensation for reporting or participating in the investigation of a potential law violation.

Again, the SEC found this infringed upon federal whistleblower protections – and was in conflict with the aims of the Dodd-Frank Act, which specifically allows financial incentives to encourage whistleblowers to report potential law violations to the SEC. On Aug. 16, 2016, the SEC ordered cease-and-desist proceedings and imposed a financial penalty of $340,000 against the California-based health insurance provider.

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Read the entire client alert now: SEC attacks standard severance agreements – companies would be well advised to take notice and adjust accordingly (TheSecuritiesEdge.com, 8/26/16)

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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.

About Gunster

Gunster, Florida’s law firm for business, provides full-service legal counsel to leading organizations and individuals from its 12 offices statewide. Established in 1925, the firm has expanded, diversified and evolved, but always with a singular focus: Florida and its clients’ stake in it. A magnet for business-savvy attorneys who embrace collaboration for the greatest advantage of clients, Gunster’s growth has not been at the expense of personalized service but because of it. The firm serves clients from its offices in Boca Raton, Fort Lauderdale, Jacksonville, Miami, Orlando, Palm Beach, Stuart, Tallahassee, Tampa, The Florida Keys, Vero Beach, and its headquarters in West Palm Beach. With nearly 200 attorneys and 200 committed support staff, Gunster is ranked among the National Law Journal’s list of the 500 largest law firms and has been recognized as one of the Top 100 Diverse Law Firms by Law360. More information about its practice areas, offices and insider’s view newsletters is available at www.gunster.com.

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