In a recent development, the Securities and Exchange Commission (SEC), US’s top financial watchdog, has targeted employee separation agreements. This follows a settlement with Monolith Resources, LLC, a Nebraska-based energy and technology company, that the SEC had charged with an inappropriate policy.
The SEC alleged that Monolith employed separation agreements from February 2020 until March 2023 which extraneously mandated departing employees to renounce their rights to financial whistleblower awards. These rewards are typically given in return for filing claims with or participating in investigations led by government agencies, notably the SEC itself. Consequently, this requirement was deemed improper.
The recent case involving Monolith sends a clear message that companies need to be vigilant in ensuring that their separation agreements don’t breach whistleblowing laws. This is particularly so given the SEC’s broad mandate to enforce whistleblower protections.
It’s also important to note that this case isn’t an isolated incident. In the past, the SEC has made several noteworthy actions against corporations with separation agreements that could potentially impair a departing employee’s ability to communicate or cooperate with the agency.
This move highlights the ongoing tension between companies seeking to protect their interests through separation agreements and regulatory bodies that aim to safeguard whistleblowing practices. As such, corporations and law firms should take a close look at their contractual agreements to ensure they don’t inappropriately prevent employees from exercising their rights.
For more information on this case, please visit
JD Supra and
SEC News.