Over the years, the Securities and Exchange Commission has taken aim at common language in settlement and severance agreements regarding nondisclosure and confidentiality. It has been relatively commonplace for such agreements to include language that requires, for example, the settling or departing employee to agree not to disclose the employer’s confidential information or trade secrets, and/or that, when disclosures are required by the employee by law, the employee will notify the company’s legal department in writing. This is no longer permitted.

The SEC also forecloses language in the agreements that permit the filing of a charge with the federal agency, but attached to that a waiver by the employee of a right to any monetary recovery in connection with such a complaint or charge.

Rule 21F-17, which followed the passage of the Dodd- Frank Wall Street Reform and Consumer Protection Act, provides the SEC with its rationale. The Rule states that “[n]o person may take any action to impede an individual from communicating directly with commission staff about possible securities law violations, including enforcing, or threatening to enforce, a confidentiality agreement … with respect to such communications.” Both the NLRB and EEOC have taken similar stances. Language such as that cited above can be and in some cases have been viewed as an illegal impediment to the right of individuals to communicate with these regulatory agencies.

The SEC assessed a monetary penalty of...

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