On Friday, June 26, 2020, Philadelphia Mayor Jim Kenney signed the Essential Workers Protection Act, providing protections to workers who speak out about unsafe workplace conditions during the COVID-19 pandemic. The ordinance, which is touted as the first of its kind in the United States, was supported by more than two dozen labor, advocacy and nonprofit organizations in Philadelphia.
State and local governments are increasingly regulating the workplace. In the first and second quarters of 2020 alone, legislatures were particularly active in passing laws addressing sexual harassment training, discrimination including hair discrimination, criminal background inquiries, salary history, and a variety of unpaid and paid leaves. Although it is not possible to discuss all state and local laws, this update provides an overview of recent and upcoming legislative developments to help you and your organization stay in compliance. (Please note that developments specifically related to COVID-19 are not included in this update.)
The Securities and Exchange Commission (SEC or Commission) Office of Compliance Inspections and Examination (OCIE) issued a Risk Alert on October 24, 2016, titled “Examining Whistleblower Rule Compliance.” This recent Risk Alert continues the SEC’s aggressive efforts to compel Rule 21F-17 compliance and puts the investment management and broker-dealer industries on formal notice that OCIE intends to scrutinize registrants’ compliance with the whistleblower provisions of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank). By way of background, Dodd–Frank established a whistleblower protection program to encourage individuals to report possible violations of securities laws. Importantly, in addition to providing whistleblowers with financial incentives, Rule 21F-17 provides that no person may take action to impede a whistleblower from communicating directly with the SEC about potential securities law violations, including by enforcing or threatening to enforce a severance agreement or a confidentiality agreement related to such communications. As discussed in our prior publications, the SEC’s Division of Enforcement (Enforcement) has instituted several settled actions against public companies for violating the “chilling effect” provisions of Rule 21F-17. During the past two months, the SEC has filed two additional settled enforcement actions, as summarized below. Thus, as the SEC embarks on the start of its 2017 fiscal year (FY2017), Rule 21F-17 remains an agency-wide priority, and issuers, investment management firms, and broker-dealers—if they have not done so already—need to take heed and proactively remediate any vulnerabilities that they may have regarding their Rule 21F-17 compliance.
The SEC announced on Wednesday that BlueLinx Holdings Inc. has agreed to pay a $265,000 penalty for including a provision in its severance agreements that required outgoing employees to waive their rights to monetary recovery if they filed a charge or complaint with the SEC or other federal agencies. Press Rel. No. 2016-157. According to the SEC’s order, approximately 160 BlueLinx employees have signed severance agreements that contained the provision since it was added to all of BlueLinx’s severance agreements in or about June 2013.
The provision violates Rule 21F-17 of the Exchange Act, which became effective on August 12, 2011, and prohibits any action to impede an individual from communicating with the SEC about a possible securities law violation. The purpose of the adoption of Rule 21F-17 was “to encourage whistleblowers to report possible violations of the securities laws by providing financial incentives, prohibiting employment-related retaliation, and providing various confidentiality guarantees.” See In the Matter of BlueLinx Holdings Inc., Release No. 78528. Because the severance agreement required employees leaving the company to waive potential whistleblower awards or risk losing payments and other benefits under the agreement, it ran afoul of Rule 21F-17.
Does an employee have an unfettered right to take confidential documents from her employer to use in her discrimination and retaliation lawsuit against the employer? Not in New Jersey. The New Jersey Supreme Court recently ruled in State v. Ivonne Saavedra that the theft of a company’s confidential documents for self-help in an employment lawsuit can result in jail time.
Florham Park partner Lynne Anderson recently published an article in Law360 discussing the decision and its ramifications for employers and would-be whistleblowers.
Whistleblower and Retaliation claims continue to rise and general counsel of companies large and small are increasingly budgeting for the prevention and defense of these claims. The multitude of regulations governing industries including pharma, life sciences healthcare, insurance and financial services, present employees with numerous opportunities, sometimes even incentives, to threaten and file whistleblower and retaliation claims. Launch the brief video below to hear how Labor and Employment Group partners Tom Barton and Lynne Anderson are helping employers achieve a culture of compliance to minimize risk, as well as the Labor & Employment group’s proven track record of success in helping employers handle and defend against these claims.