Compensation and Benefits Insights – September 2016 #2

by King & Spalding

Hardly Water Under the Bridge: NLRB, SEC, OSHA Mount Offensive Against Confidentiality Agreements

Authors, Ryan Gorman, Atlanta, +1 404 572 4609,, Scott Mario, Atlanta, +1 404 572 4865,, Ellenor Stone, Atlanta, +1 404 572 3582,

A recent New York Times story shed light on complaints by an employee of Bridgewater Associates, a $154 billion hedge fund headquartered in Westport, Connecticut. Bridgewater, which manages assets of some of the biggest pension funds in the world, faces a challenge by the National Labor Relations Board (“NLRB”) to confidentiality language in its form employment agreement that the NLRB contends violates the National Labor Relations Act (“NLRA”).

Elsewhere, in a pair of administrative enforcement actions filed in August, the United States Securities and Exchange Commission (“SEC”) challenged confidentiality provisions and issued large fines against two companies for including provisions in their form separation agreements that the SEC views as deterring whistleblowers from reporting securities law violations.

The United States Department of Labor’s Occupational Safety and Health Administration (“OSHA”) is the latest government agency to join in the offensive against confidentiality agreements, issuing updated criteria earlier this month specifying that OSHA will not approve private settlement agreements containing confidentiality or other provisions that it views as restricting or discouraging whistleblowing activity.

Employers should be aware of this increased enforcement activity by government agencies, which targets companies for using confidentiality provisions that many employers would regard as standard elements of employment agreements, separation agreements, confidentiality agreements and other agreements containing restrictions on the ability of employees to disclose confidential information.

NLRB Complaint

According to a New York Times story published in July, in which seven former Bridgewater employees were interviewed, Bridgewater operates like a “cauldron of fear and intimidation.” The firm is governed by operating “principles” established by founder Ray Dalio that reflect this alleged culture of surveillance. Among the firm’s practices is that it requires that all employees enter into employment agreements with binding arbitration provisions and confidentiality provisions.

A Bridgewater financial adviser, Christopher Tarui, filed an unfair labor practice charge with the NLRB regarding his treatment by Bridgewater executives. Thereafter, the NLRB’s Regional Director issued a complaint alleging that certain provisions of Bridgewater’s form employment agreement have the effect of “interfering with, restraining and coercing” Tarui and others from exercising their rights under Section 7 of the NLRA. Section 7 of the NLRA––which applies to nonunionized employers as well as unionized employers––grants non-supervisory employees the right to self-organize, form, join or assist labor organizations and to engage in concerted activities for the purpose of mutual aid or protection of employees.

The provisions of the agreement challenged by the NLRB include:

  • Confidentiality of Terms of Employment: “You agree that the terms of your employment with Bridgewater are confidential.”
  • Scope of Confidential and Proprietary Information: Bridgewater’s definition of “Confidential Information,” which includes “any non-public information . . . relating to the business or affairs of Bridgewater or its affiliates, or any existing or former officer, director, employee or shareholder of Bridgewater” and prohibits the distribution of “employee lists and employees’ compensation and management’s compensation” and information regarding “Bridgewater’s organizational structure (including the allocation of responsibilities and general construction of Bridgewater’s departments, businesses, subsidiaries and employees assigned to them).”
  • Non-Publicity: Employees cannot disclose Confidential Information to “any media business, outlets, or other endeavors that publish, broadcast, distribute, or otherwise disseminate information in any format, including but not limited to books, newspapers, magazines, journals, websites, blogs, social media outlets, television and radio stations, and streaming media outlets.”
  • Non-Disparagement: Employees “may not disparage Bridgewater and/or its present or former affiliates, directors, officers, shareholders, employees or clients, whether directly or indirectly, in any manner whatsoever . . . except as required by law.”

Bridgewater has responded to the NLRB complaint indicating that its employment agreements are tailored specifically to protect legitimate business concerns, including confidentiality issues unique to the financial sector. In its response, Bridgewater also pointed out that certain laws and regulations require confidential treatment of proprietary information in the financial services industry. A hearing on the NLRB complaint is scheduled to take place in October.

SEC Enforcement

In a pair of recent administrative enforcement actions against BlueLinx Holdings Inc. and Health Net, Inc., the SEC issued large fines against the two companies for including provisions in their form separation agreements that the SEC views as deterring whistleblowers from reporting securities law violations. The provisions in question are common features in many separation agreements and non-disclosure agreements: (1) a provision requiring the employee to notify the company’s legal department prior to disclosing any confidential information to third parties (included in the BlueLinx agreements), and (2) a provision requiring the employee to waive any right to monetary recovery in connection with any complaint or charge that the employee might file with a government agency (included in both the BlueLinx and Health Net agreements). 

The SEC maintains that such provisions violate SEC Rule 21F-17, which prohibits employers from taking any action to impede an individual from communicating directly with the SEC about possible securities law violations, “including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications.”   According to the SEC, requiring employees to notify the company prior to disclosing confidential information forces those employees to choose between outing themselves as whistleblowers or potentially losing their severance pay and benefits. Similarly, the SEC contends that requiring employees to waive their rights to a whistleblower award removes financial incentives intended to encourage employees to alert the SEC of possible securities law violations.

As part of the settlement in the BlueLinx matter, the company agreed to include the following disclaimer in all of its severance agreements and other agreements containing prohibitions on the use or disclosure of confidential information:

Protected Rights.  Employee understands that nothing contained in this Agreement limits Employee’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”).  Employee further understands that this Agreement does not limit Employee’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company.  This Agreement does not limit Employee’s right to receive an award for information provided to any Government Agencies.

The SEC’s enforcement actions against BlueLinx and Health Net are the latest examples of the agency’s determination to crack down on employers for using confidentiality agreements that may run afoul of Rule 21F-17. Last year, the SEC fined another employer for requiring witnesses in internal investigations to sign confidentiality agreements acknowledging that they would be subject to disciplinary action if they disclosed information about the interview or the subject matter of the investigation without approval from the company’s legal department.

OSHA Guidelines

On September 15, 2016, OSHA published new policy guidelines setting forth updated criteria OSHA will use when reviewing private settlement agreements for approval. Noting that it “sometimes encounters provisions that prohibit, restrict, or otherwise discourage a complainant from participating in protected activity related to matters that arose during his or her employment,” OSHA stated that it “must ensure that such clauses are removed or clarified so that the agreements are lawful and consistent with the underlying purposes of the whistleblower protection statutes.”

OSHA takes particular aim at broad confidentiality and non-disparagement clauses: in OSHA’s view, constraints against protected activity in a settlement agreement often arise from such broad provisions because they may lead a complainant to believe he or she is restricted from engaging in protected activity. Accordingly, OSHA will not approve broad confidentiality and non-disparagement clauses even if such clauses are qualified by the phrase “except as provided by law” or similarly non-specific language.  Rather, OSHA may ask the parties to strike the offending language and to add and prominently display the following language:

Nothing in this Agreement is intended to or shall prevent, impede or interfere with complainant’s non-waivable right, without prior notice to Respondent, to provide information to the government, participate in investigations, file a complaint, testify in proceedings regarding Respondent’s past or future conduct, or engage in any future activities protected under the whistleblower statutes administered by OSHA, or to receive and fully retain a monetary award from a government-administered whistleblower award program for providing information directly to a government agency.

In its guidelines, OSHA also makes clear that it will not approve “gag” provisions that may similarly prohibit or discourage protected activity, such as: (1) prohibiting a complainant from providing information to the government related to a workplace injury or exposure; (2) requiring a complainant to notify the employer before filing a complaint or voluntarily communicating with the government; (3) requiring a complainant to disclaim any knowledge that the employer has violated the law or affirm that he or she has not previously provided information to the government or engaged in other protected activity; or (4) requiring a complainant to waive his or her right to receive a whistleblower bounty award from the government.

Insight for Employers

Many commentators have noted that the provisions cited by the NLRB in its complaint against Bridgewater are commonplace language, and in certain contexts, required by law to protect client confidentiality. Additionally, the financial sector, particularly hedge funds and private equity firms, has not seen challenges of this type as it relates to its confidentiality practices. For those two reasons, the Bridgewater complaint is a noteworthy challenge by the NLRB and employers in all sectors should carefully review and structure any confidentiality provisions contained in employment agreements, separation agreements, confidentiality agreements and other agreements to avoid potential enforceability issues. 

As it relates to the SEC’s and OSHA’s enforcement, the SEC continues to aggressively target employers whose separation agreements and confidentiality agreements contain provisions that the SEC believes may deter employees from reporting securities law violations. OSHA’s recent guidelines build off of the SEC’s enforcement efforts in the BlueLinx and Health Net actions by prohibiting waivers of the right to receive whistleblower bounty awards and imposing additional criteria. Employers are well-advised to review their form agreements and revise them to ensure that they do not require employees to waive the right to receive whistleblower bounty awards and that their confidentiality provisions do not impede individuals from communicating or cooperating with the NLRB, the SEC or OSHA.

King & Spalding is happy to assist with a review of any such employment agreements, confidentiality agreements and separation agreements in light of the increased enforcement activity and will continue to monitor these developments.

Certain State Sponsored Auto-Enroll IRAs will not be subject to ERISA

Author, James P. Cowles*, Atlanta, +1 404 572 3455,

On August 25, 2016, the Department of Labor (“DOL”) issued final regulations  (following up on proposed regulations issued in November of 2015) providing details on how States may sponsor auto-enroll IRA programs for private sector employees without such programs being subject to ERISA.


The DOL estimates that one-third of the U. S. workforce does not have access to a retirement plan at their workplace.  To address the problem, States are drafting (and in some cases enacting) legislation requiring private-sector employers to offer employees the opportunity to contribute to a State sponsored Individual Retirement Account program via payroll deduction.  Many of these State programs will require employers to automatically enroll employees with a minimum payroll deferral amount, unless the employee affirmatively elects otherwise (“Auto-Enroll IRA”). 

The Employee Retirement Income Security Act (“ERISA”) generally excludes from coverage payroll practices that permit employees to voluntarily elect to make IRA contributions via payroll deduction.  Several State sponsored IRA programs are Auto-Enroll IRA programs.  For example, the California Secure Choice program will require certain employers to automatically enroll employees in a state sponsored IRA program with a 3% deduction rate, unless the employee makes an affirmative election to opt out.  Prior to the DOL final regulations, it was not clear if an Auto-Enroll IRA program like the one in California would be covered by ERISA.

New Regulations:

The new regulations provide that the DOL will not treat a State sponsored Auto-Enroll IRA program as an employee benefit plan subject to ERISA if such program meets the following conditions: 

  • Automatic enrollment into the IRA program is required by State law.
INSIGHT: Employers must be sure that only employees required to be enrolled by State law are automatically enrolled in a State sponsored IRA program. If an employee not otherwise required to be enrolled is enrolled, the IRA program may be considered an employee benefit plan that is subject to ERISA. 
  • Employee must have an opportunity to opt-out of the automatic enrollment feature.
  • The State must be responsible for:
(i) investing the IRA contributions or selecting the investment options available for investment direction by employees;
(ii) the security of the contributions; and
(iii) communication and enforcement of individual rights under the arrangement.
  • Employers are prohibited from making contributions to the IRA.
  • Employers may perform only administrative functions, such as payroll withholding and forwarding, maintaining records of payroll deductions and remittances, providing program information to employees for the State and providing information to the State necessary to facilitate the operation of the program.

Other General Requirements:

States are permitted to incentivize employers to participate in an Auto-Enroll IRA program by offering tax credits or tax incentives as long as the credits or incentives reasonably approximate the cost of the employers participation in the program.

The IRA arrangements themselves may include certain restrictions on employee withdrawals, for example an age restriction, to encourage individuals to use the arrangements for long term asset accumulation.

Effective Date

The final regulations are effective October 31, 2016.

King & Spalding LLP would be delighted to assist you with questions that may arise in connection with the application of any State run IRA program.

*Non-lawyer Employee Benefits Consultant

October and November 2016 Filing and Notice Deadlines for Qualified Retirement and Health and Welfare Plans

Author, Ryan Gorman, Atlanta, +1 404 572 4609,

Employers and plan sponsors must comply with numerous filing and notice deadlines for their retirement and health and welfare plans. Failure to comply with these deadlines can result in costly penalties.  To avoid such penalties, employers should remain informed with respect to the filing and notice deadlines associated with their plans.

The filing and notice deadline table below provides key filing and notice deadlines common to calendar year plans for the next two months. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is generally delayed until the next business day.  Please note that the deadlines will generally be different if your plan year is not the calendar year. Please also note that the table is not a complete list of all applicable filing and notice deadlines (including any available exceptions and/or extensions), just the most common ones. King & Spalding is happy to assist you with any questions you may have regarding compliance with the filing and notice requirements for your employee benefit plans. 




Affected Plans

October 15

Medicare Part D Creditable Coverage Notice to Individuals

Deadline for employers that provide prescription drug coverage to Medicare Part D eligible individuals to provide a written disclosure notice to Medicare eligible individuals and their dependents covered under the plan indicating whether their prescription drug coverage is creditable coverage.

Health and Welfare Plans that provide prescription drug coverage to Medicare Part D eligible individuals

October 15
(2 ½ months after extension granted)

DOL Form 5500

Deadline for plan administrator to file Form 5500 for prior year if deadline was extended by filing a Form 5558.

Retirement Plans

Health and Welfare Plans

IRS Form 8955-SSA

Deadline for plan administrator to File Form 8955-SSA if deadline was extended by filing a Form 5558.

Retirement Plans

October 15
(9 ½ months after the previous plan year)

PBGC Premium Filing

Deadline for plan administrator of large plans (500 or more participants) to pay flat-rate or variable PBGC premium for current plan year.

Defined Benefit Plans with 500 or more participants

November 1 (by the first day of open enrollment)

Summary of Benefits and Coverage for Health Plans that Require Reapplication

Deadline for group health plan administrator (for self-insured plans) or group health plan administrator or insurer (for fully insured plans) to provide a Summary of Benefits Coverage (SBC) if written application materials are required for renewal.

Group Health Plans and Health Insurance Issuers

November 14
(within 45 days after the close of the third quarter)

Benefit Statements for Participant-Directed Plans

Deadline for plan administrator to send benefit statement for the third quarter of the plan year to participants in participant-directed defined contribution plans.


Defined Contribution Plans with participant-directed investments

Quarterly Fee Disclosure

Deadline for plan administrator to disclose fees and administrative expenses deducted from participant accounts during the third quarter of the plan year. Note that the quarterly fee disclosure may be included in the quarterly benefit statement or as a stand-alone document.

November 15
(the 15th day of the 11th month after the end of the plan year)

IRS Forms 990 and 990-EZ

Deadline for tax-exempt trusts associated with qualified retirement plans and voluntary employee beneficiary associations (VEBAs) to file Forms 990 or 990-EZ with the IRS for prior year if the trustee obtained a second 3-month extension by filing a Form 8868.

Qualified Retirement Plans*

Voluntary Employee Beneficiary Associations

November 15

Transitional Reinsurance Report and Second Installment Fee (if applicable)

Deadline for sponsors of self-insured health plans (including retiree plans)  to report the number of “covered lives” under the plan. 

If the entity chose to pay the 2015 fee in installments, it must pay the remaining $11.00 for each covered life by this date.

Self-insured Group Health Plans (including retiree plans)

In the Matter of BlueLinx Holdings Inc., File No. 3-17371 (Aug. 10, 2016).

In the Matter of Health Net, Inc., File No. 3-17396 (Aug. 16, 2016)

17 C.F.R. § 240.21F-17(a).

In the Matter of KBR, Inc., File No. 3-16466 (Apr. 1, 2015).

* Qualified Retirement Plans include all defined benefit and defined contribution plans that are intended to satisfy Internal Revenue Code §401(a). 


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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