SEC Fines Tech Company for Violating Whistleblower Protection Rule
The Securities and Exchange Commission (SEC) announced today that a Virginia based technology company, NeuStar, Inc. has agreed to pay $180,000 to settle charges that it used severance agreements that prevented employees from communicating with the SEC.
The SEC found that NeuStar violated a whistleblower protection rule in the federal securities laws by routinely using severance agreements that contained a broad non-disparagement clause forbidding former employees from engaging with the SEC and other regulators “in any communication that disparages, denigrates, maligns or impugns” the company. Former employees could be compelled to forfeit all but $100 of their severance pay for breaching the clause. These severance agreements were used with at least 246 departing employees from Aug. 12, 2011 to May 21, 2015.
The company voluntarily revised its severance agreements after the SEC began investigating and agreed to make reasonable efforts to inform those who signed the severance agreements that NeuStar does not prohibit former employees from communicating any concerns about potential violations of law or regulation to the SEC.
“Public companies cannot use severance agreements to impede whistleblowers from communicating with the SEC about a possible securities law violation,” said Antonia Chion, Associate Director of the SEC’s Enforcement Division. “NeuStar’s severance agreements broadly prohibited former employees from communicating any disparaging information about the company to the SEC, and unsurprisingly at least one former NeuStar employee was chilled by such language.”
The agency issued its first enforcement action for gaging employees in 2015. In that case the agency acted against KBR Inc., for its past conduct of silencing potential whistleblowers by using confidentiality agreements that threatened to terminate employees for reporting wrongdoing to anyone outside of the company.
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