INTRODUCTION -

Employers routinely incorporate confidentiality provisions into a variety of agreements, including employment, proprietary information, separation and settlement agreements. In an era when many companies’ most valuable asset is intangible knowledge, broad confidentiality provisions have become as standard in the workplace as the morning coffee break. Now, however, where employers see a tool to protect their intellectual property, the Securities and Exchange Commission (SEC) and other regulators see a nefarious device designed to chill whistleblowing. On April 1, 2015, the SEC announced a $130,000 settlement with Kellogg Brown & Root, known as KBR, which resulted from the SEC’s first enforcement action for allegedly using improperly restrictive language in confidentiality agreements with the potential to stifle the whistleblowing process.

Background:

The Sarbanes-Oxley and Dodd-Frank Wall Street Reform and Consumer Protection Acts -

The collapse of corporations like Enron and WorldCom prompted Congress to pass the Sarbanes-Oxley Act (“Sarbanes-Oxley,” or SOX) on July 30, 2002. As part of its design to restore investor confidence, SOX created provisions protecting whistleblowers, specifically, employees who raise concerns about fraud and accounting issues or other potential violations of enumerated laws and rules. Then, on July 21, 2010, in response to the mortgage and banking financial crises that contributed to the Great Recession of 2007–2009, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). As part of its sweeping overhaul of the financial regulatory scheme, Dodd-Frank amended the whistleblower provisions of SOX in several significant respects, both substantively and procedurally.