Corporations include confidentiality agreements in their employee contracts for all sorts of reasons. However, with a recent government ruling, they can no longer use them to prevent whistleblower lawsuits.
Whistleblowers Received $435 Million
A whistleblower lawsuit involves an employee alleging significant illegal behavior by his or her employer. These individuals have legal rights to file a lawsuit, also known as a qui tam action, to stop the corporate malfeasance. Employees also enjoy protections against retaliation from their employers. Whistleblowers can receive as much as 30 percent of a settlement or verdict. In 2014, whistleblowers’ share of recoveries was $435 million.
In a recent whistleblower action, an engineering firm was being sued by an employee who claimed the company was overcharging the U.S. government for work in Iraq. During the investigation of the charges, it was discovered the company required its employees to sign a confidentially agreement requiring them to notify the company before contacting the Securities and Exchange Commission (SEC) for any reason. In essence, the company wanted to be tipped off to whistleblower attempts to go public with company fraud.
In an April 1 decision, the SEC ruled this confidentiality agreement violated whistleblower protections provided under the Dodd-Frank Act, which became federal law in 2010.
Illegal Corporate Roadblocks to Whistleblower Lawsuits
Shortly after this ruling, the SEC contacted several more U.S. companies, seeking their confidentiality agreements and other similar employee contracts. The organization reportedly wants this information to uncover further evidence of illegal corporate obstacles to whistleblower lawsuits. Types of provisions the organization is looking for includes those that:
• Forbid employee disclosures to any third parties except law enforcement and regulatory bodies
• Force employees to resolve securities-related issues with the company solely
• Require employees to forfeit their right to any financial compensation they receive in a whistleblower lawsuit
Even with reinforced protections, whistleblower lawsuits can be challenging for individuals to bring forward. If you have inside, first-hand knowledge of significant company fraud and want to rectify it, consult a whistleblower attorney to review your claims and plan your strategy.
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