The U.S. Securities and Exchange Commission (SEC) recently settled charges alleging that a company’s employee separation agreements restricted former employees from receiving monetary awards for reporting securities law violations. The case is the SEC’s latest enforcement action alleging that certain employment agreements and related policies undermine the SEC’s whistleblower program.

Quick Hits

• The SEC settled charges against an employer, alleging it used separation agreements that required employees to waive their rights to monetary awards for reporting possible securities law violations to the SEC.
• The SEC levied fines even though it noted that it was “unaware of any instances” in which a separated employee failed to make a report because of such a separation agreement or the company attempted to enforce an agreement to prevent such a report.
• The enforcement action is the latest by the SEC alleging that employment agreements and policies have impeded reporting to the SEC.

Background

In September 2023, the SEC announced that it had settled charges against Monolith Resources, LLC, a privately held energy and technology company, alleging the company’s prior separation agreements required former employees to waive their rights to monetary awards for reporting securities law violations to the SEC or participating in SEC investigations.

According to the SEC’s order, Monolith Resources, without admitting or denying any of the SEC’s findings, agreed to cease and desist from...

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