Employment Law Lookout

Seyfarth’s Labor and Employment Department Named “Team of the Year”

Posted in Uncategorized

By: The Employment Law Lookout Editorial Team

Earlier this week, Seyfarth learned that it’s Labor and Employment Law Department had been named “Team of The Year” in 2015 by Chambers USA.  This is a huge honor and it’s all because of YOU our clients and fans. Thank you!

Here are some of the reasons why this award has us so excited:

  • The award was based on feedback from our clients and others in the legal profession. The Chambers Awards honor the achievements of leading law firms and lawyers across the country for preeminence in key practice areas and notable achievements during the past 12 months, including outstanding work, impressive strategic growth, and excellence in client service.
  • In selecting us from a shortlist of four other highly respected firms, Chambers cited Seyfarth’s “successful, cutting-edge defenses to employment discrimination class actions, bet-the-company EEOC lawsuits, and complex, high-stakes wage & hour litigation,” and cited client feedback on “incredible responsiveness and providing pragmatic, value-add legal advice.”
  • The Chambers report also included client quotes about Seyfarth’s work that included: “Aside from being legal experts in their fields, the firm’s attorneys are incredibly responsive and provide pragmatic, value-add legal advice,” and “I’ve had several occasions when they’ve given advice contrary to that of other firms – in every instance the lawyers at Seyfarth have been correct.”

Wow! Thank you! We couldn’t have achieved this award without the support of clients like you. Thank you for putting your trust in us and we look forward to continuing to help you and your organizations thrive and succeed. Have a safe and happy Memorial Day Weekend.

Don’t Tweet On Me!

Posted in Hiring, Testing & Selection, Privacy & Social Media, Social Media, Workplace Policies and Processes

By Adam Vergne and Chuck Walters

Following a national trend, Montana and Virginia have become the nineteenth and twentieth states to enact laws restricting employer access to the social media accounts of applicants and employees.[1]

Virginia’s law, which takes effect on July 1, 2015, prohibits requesting (or requiring) the disclosure of usernames and/or passwords to an individual’s social media account.  In addition, the law prohibits any requirement to change privacy settings or add a manager to the “friend” or contact list associated with a particular social media account.  In addition to prohibiting the disclosure of usernames and passwords, under Montana’s new law, which took effect April 23, 2015, an employer is prohibited from requiring the disclosure of any information associated with a social media account or requesting an employee or applicant access a social media account in the presence of the employer.  As is common with such legislation, both statutes contain an anti-retaliation provision that prohibits an employer from taking any adverse actions against individual that exercise his or her rights under the law.

Notably, these statutes apply only to personal social media accounts meaning accounts opened on behalf or at the request of the employer are not protected. Employers are also still free to view information contained in personal social media accounts that is publically available.  Virginia’s law also includes an exception that permits employers to request login information if the employer has a “reasonable belief” the account is “relevant” to a “formal investigation or related proceeding” concerning the violation of a federal, state, or local law.

As the legal landscape associated with social media accounts continues to evolve, employers should review their policies and procedures to ensure compliance with all relevant statutory provisions.

For more information on social media in the workplace, please contact the authors, a member of the firm’s Social Media Team or your Seyfarth attorney.

[1]     In 2012, Maryland became the first state to enact social media privacy legislation.  Since that time, Arkansas, California, Colorado, Illinois, Louisiana, Michigan, Nevada, New Hampshire, New Jersey, New Mexico, Oklahoma, Oregon, Rhode Island, Tennessee, Utah, Washington, and Wisconsin have enacted similar legislation.

OSHA Final Rule for Confined Spaces in the Construction Industry

Posted in Alternative Work Forces & Independent Contractors, Environmental, Safety, & Toxic Tort, OSHA Compliance, Workplace Arbitration

By Mark A. Lies, II, James L. Curtis, and Craig B. Simonsen

Three engineers

Last week the Occupational Safety and Health Administration announced and issued a 161 page final rule to increase protections for construction workers in confined spaces. 80 Fed. Reg. 25366 (May 4, 2015), which is effective on August 3, 2015.

Confined spaces can be loosely defined as manholes, crawl spaces, tanks, and other places that are not intended for continuous occupancy. Confined spaces are also, because of their calculated design for other purposes, difficult to exit in an emergency. People working in confined spaces, without taking proper precautions, can face life-threatening hazards such as toxic substances, electrocutions, explosions, and asphyxiation.

The Secretary of Labor Thomas E. Perez said of the rule that “in the construction industry, entering confined spaces is often necessary, but fatalities like these don’t have to happen.” “This new rule will significantly improve the safety of construction workers who enter confined spaces. In fact, we estimate that it will prevent about 780 serious injuries every year.” OSHA Administrator, Dr. David Michaels, said “this rule emphasizes training, continuous worksite evaluation and communication requirements to further protect workers’ safety and health.”

The OSHA final rule adds a new subpart to 29 CFR Part 1926 to provide protections to employees working in confined spaces in construction. The new subpart replaces OSHA’s one training requirement for confined space work with a “comprehensive standard that includes a permit program designed to protect employees from exposure to many hazards associated with work in confined spaces, including atmospheric and physical hazards.” According to the Agency, the final rule is similar in content and organization to the general industry confined spaces standard, but it also incorporates several provisions from the proposed rule to address construction-specific hazards, to account for advancements in technology, and to improve the “enforceability of the requirements.”

Members of the regulated community, that is property owners, construction contractors, and sub-contractors, need to timely review this expansive rule, in order to meet the compliance date of August 3, 2015 and avoid OSHA citations. There are now new obligations on the various employers who may have their employees involved with construction site confined spaces.

One important requirement added to the rules relates to the responsibilities of the host employer (the owner of the site containing the confined space), the controlling contractor (who has primary control over the construction project), and the entry employer (whose employees will enter the confined space). The regulation makes the controlling contractor, rather than the host employer, the primary point of contact for information about the permit confined spaces at the worksite. The host employer must provide information it has to the controlling contractor who in turn passes the information to the entry employer.

In addition, the controlling contractor is responsible for making sure that employers outside of the confined space do not create hazards in the confined space, and that multiple entry employers working in a confined space at the same time do not create hazards for each other’s employees.

With such a complex and immense rule, employers are encouraged now to review their construction confined space policies, procedures, and training programs to ensure compliance with the new standard.

 

Same-Sex Marriage Bans As Sex Discrimination: The Potential Impact On Plan Sponsors And Employers

Posted in Background Screening, Class Action Avoidance, Diversity, Retention & Pay Equity, EEOC, Hiring, Testing & Selection, Workplace Arbitration, Workplace Policies and Processes

By Sam Schwartz-Fenwick and Amanda Sonneborn

In last week’s oral argument on the constitutionality of same-sex marriage bans, Chief Justice Roberts asked the following question:

Counsel, I’m not sure it’s necessary to get into sexual orientation to resolve the case. I mean, if Sue loves Joe and Tom loves Joe, Sue can marry him and Tom can’t. And the difference is based upon their different sex. Why isn’t that a straightforward question of sexual discrimination?

Whether the Court addresses this rationale in its decision is an open question that will not be known until the Court issues its decision. Nevertheless, it is worth considering the impact that a sex-discrimination rationale would have on employers and plan-sponsors.

Under Federal law, claims of sex discrimination against employers and plan sponsors arise under Title VII, not the Fourteenth Amendment of the Constitution. Title VII was passed pursuant to the Commerce Clause of Article 1, Section 8, Clause 3 of the U.S. Constitution.

Nonetheless, a ruling by the Court that in certain instances sexual orientation discrimination constitutes sex discrimination under the Constitution would likely lead many courts to employ this reasoning in analyzing claims under Title VII. Indeed, this rationale is already the official position of the EEOC and the Obama administration. The EEOC believes that LGBT employment discrimination is sex discrimination, because it sees both sexual orientation and transgender discrimination as impermissible forms of sex-stereotyping. Similarly, the EEOC argues that ERISA governed health plans that only provide spousal coverage to opposite sex spouses to be engaging in sex-discrimination.

A ruling that same-sex marriage bans constitute sex-discrimination could buoy these arguments. Courts might be more willing to view claims of Title VII discrimination by LGBT individuals, not as a new type of discrimination (i.e. sexual orientation or gender identity discrimination), but rather as sex discrimination.

While a sex-discrimination rationale could encourage certain courts to extend Title VII to LGBT individuals, a dispute would surely remain between jurists as to whether such a broad reading of Title VII is appropriate. After all, courts are much less willing to interpret the terms of a statute in the same broad manner in which they interpret the Constitution. Indeed, Title VII on its face does not reference LGBT discrimination, and it is clear that when this Act was passed in 1964, Congress did not intend to extend its protection to LGBT individuals. In addition, since the early 1990s every Congress has considered passing an LGBT non-discrimination law (ENDA). Each and every Congress has failed to pass ENDA. For Courts to extend protections to LGBT individuals when Congress has refused to do so would for many jurists constitute a grave overstep in the limited role of courts to interpret (not make) the law.

As is clear, the Supreme Court’s ruling in the upcoming gay-marriage decision may have a significant impact on employers and plan sponsors. Stay tuned for our update on this analysis once the opinion is issued, which will likely come near the end of June.

Lawfully Present And Protected

Posted in Background Screening, EEOC, Hiring, Testing & Selection, Immigration, Title III Access, Wage & Hour Compliance, Workplace Arbitration, Workplace Policies and Processes

By Brian A. Wadsworth

Employers are well aware that the protections provided by 42 U.S.C. § 1981 extend to both United States citizens and permanent residents, colloquially referred to as “green card holders.”

Some employers, however, may be unaware that lawfully present aliens who are not green card holders may also be protected by § 1981. In Ruben Juarez v. the Northwestern Mutual Life Ins. Co., Inc., Civ. No. 14-cv-5107, Judge Katherine Forrest of the Southern District of New York recently held that a lawfully resident alien had a cognizable cause of action against a potential employer for its “US citizen and green card holder only” employment policy.

Plaintiff Ruben Juarez (“Juarez”), an alien legally authorized to work in the US, applied for a position with Defendant Northwestern Mutual Life Ins. Co. Inc. (“Northwestern Mutual”). During his interview, Juarez explained his status and noted that “he could legally work for Northwestern Mutual regardless of whether he was a citizen or had a visa.” Northwestern Mutual disagreed and informed Juarez after the interview that in order to be hired by Northwestern Mutual, a candidate had “to be a US citizen or have a green card.” Six months after his interview, Juarez filed a putative class action against Northwestern Mutual, alleging alienage discrimination in violation of § 1981.

Northwestern Mutual promptly filed a motion to dismiss for failure to state a claim. On November 14, 2014, Judge Forrest denied this motion. Northwestern Mutual argued that Juarez was denied employment because he did not possess a green card, not due to his citizenship. Thus, it could not have discriminated against him on the basis of alienage.

In rejecting this argument, Judge Forrest reasoned that the protection afforded by § 1981 extends to “all lawfully present aliens.” This conclusion was based on the statutory language. Namely, “[a]ll persons within the jurisdiction of the United States shall have the same right . . . .” Judge Forest also relied on “a long line of precedent interpreting the Equal Protection Clause.” This bevy of case law, as noted by Judge Forrest disallows discrimination on the basis of alienage.

Displeased with the finding, Northwestern Mutual sought to certify the Judge Forrest’s opinion for interlocutory appeal. On December 30, 2014, the Court granted Northwestern Mutual’s motion to certify the Court’s Opinion & Order for interlocutory appeal pursuant to 28 U.S.C. § 1292(b) because the opinion “addresses a pure legal question of first impression and significant practical importance: whether a policy that expressly denies employment to lawfully present aliens without green cards runs afoul of § 1981.” On March 17, 2015, the Second Circuit determined that it would review the District Court’s interlocutory order.

The implications of Juarez, depending on its outcome, could be significant for employers. It is likely that many employers are not cognizant that a “US citizen or green card holder only” policy may be in violation of § 1981. If the Second Circuit uphold this decision, it could require employers to reanalyze their employment policies to ensure they are complying with the Juarez holding.

This decision may also place a burden on employers to remain current on immigration and work permit laws. To avoid improper hiring practices, an employer will need a thorough understanding of whether lawfully present aliens are indeed legally authorized to work in the US. It may also require employers to bolster their applicant review process.

Should the Second Circuit uphold Juarez, employers should review their employment application and hiring processes and policies. Employers should also be cognizant that providing employment exclusively to US citizens and green card holders may generate liability under § 1982.

If you have questions regarding this topic, please contact the author, or your Seyfarth attorney.

 

Boston Breakfast Briefing – You’re invited!

Posted in Workplace Policies and Processes

With the issuance of the proposed regulations on the Earned Sick Time Law and other recent changes to various leave laws in Massachusetts, leave and accommodation issues remain of particular concern to employers.

Please join Seyfarth Shaw’s Boston Labor & Employment team and Mike Firestone, co-author of the proposed regulations and the Director of Strategic Initiatives & Assistant Attorney General, for a careful review of the most recent changes in the laws and guidance towards compliance.   Get a sneak peak at the topics.  The event is scheduled for Wednesday, May 13, 2015.  Registration begins at 8:00 a.m., presentation at 8:30 a.m..

Please contact Events@seyfarth.com to register and for further information.

Send in the Drones: Transforming the Workplace through the Use of Drone Surveillance

Posted in Alternative Work Forces & Independent Contractors, Environmental, Safety, & Toxic Tort, Privacy & Social Media, Reductions-in-Force and Business Restructuring, Workplace Arbitration, Workplace Policies and Processes

By Johanna T. Wise and Andrew J. Masak

Every day new stories about the uses (and misuses) of drones surface in the media.

They have been used to: photograph the 2015 Winter X Games, assist in firefighting operations, monitor agricultural drought, monitor pipelines in remote areas of the world, and take pictures for realtors.  One drone even famously crashed on the White House lawn.  Clearly drones are opening up the world to a whole new set of technological possibilities – perhaps the most widely-published future use being Amazon’s stated position that within four to five years, it could have a fleet of octocopters delivering orders at customers’ doorsteps.  The sky’s the limit to what drones could conceivably be used for, and that includes the workplace.

The president of the Association for Unmanned Vehicle Systems – Michael Toscano estimates that drones could become an $82 billion, 100,000-job industry by 2025.  Indeed, one of the leading commercial drone manufacturers in the world is currently seeking investors for a $10 billion valuation according to media sources.

The Legal Landscape and Regulatory Framework

As with so many areas where law and technology find themselves uncomfortably intersecting, the legal landscape has yet to catch up with a robust legal framework.  A patchwork of state law has emerged, and at least 16 states have approved some form of legislation. Most of these laws focus on law enforcement and prevent the police from using a drone to collect information about an individual without first obtaining a warrant. A few states, however, have adopted privacy-related restrictions which prohibit using a drone to intentionally conduct surveillance on a person or private property in certain situations.

Outside the individual states, the Federal Aviation Administration (FAA) has attempted to flex its regulatory muscle by applying old rules and proposing new ones to better fit the rise of drones.  Currently, anyone in the U.S. who wants to fly an aircraft — either manned or unmanned — must obtain FAA authorization, and failure to do so may result in fines of ten thousand or more dollars.   With this in mind, several companies have already successfully navigated the existing FAA framework (oil companies, real estate companies, and even CNN have applied for authorization).  Thus, while the dust continues to settle, it’s not unlikely that businesses may turn increasingly to drones in the workplace.

Surveillance in the Workplace

The rise of drones has opened the door to countless possibilities.  Society as a whole, and the business community in particular, have barely scratched the surface in unleashing their capabilities.  Some ways employers specifically could harness the power of drones include:

General Monitoring for Discipline or Safety - Perhaps the greatest potential for drones in the workplace involves using drones instead of traditional video cameras as surveillance devices.  Drones can access places where stationary cameras can’t.  What’s more, they can follow an employee and get a more complete picture of an incident. In this way, drone surveillance can aid an employer in disciplining an employee and reviewing accidents and safety issues.

Monitoring Employees Claiming Leave Status -Video surveillance of employees outside the workplace claiming workers’ compensation or disability benefits already occurs.  Indeed “watching” an employee claiming a benefit under false pretenses is a powerful tool employers and disability insurers alike use.  Drones may help facilitate greater monitoring of employees who are claiming leave status under false pretenses.

Non-Compete, Non-Solicit, and Trade Secrets Monitoring – Will employers be able to use drones in unique ways monitoring their trade secrets?  Is it possible for employers to program drones to help monitor whether employees are soliciting customers or other employees? Or are these uses still a bridge too far?

Several concerns and potential pitfalls remain.  Although current Federal law does not generally require an employer to provide notice to an employee and obtain consent to video surveillance in public areas in the workplace, state and local laws may impose additional requirements or limitations. Moreover, it remains a best practice to provide advance notice and warning to employees of video surveillance, drone or otherwise. Thus, as a threshold matter, employers considering using drones in the future to provide surveillance of their workers should strongly consider obtaining consent from employees before implementing any drone program.  Employers facing a unionized workforce should be especially cognizant of consent issues as drone usage would likely constitute a material change to the terms and conditions of employment that is subject to collective bargaining.

The use of drones to monitor employees and any resulting discipline could open employers up to potential discrimination claims. Just as the use of drivecams in vehicles or other tracking technologies must be applied in a non-discriminatory manner, so too should employers consider their use and application of drone surveillance.  Any selection decision or resulting disparate impact based on a protected category could arguably be found to violate the law. In this regard, employers considering using drones would be well advised to maintain policies and procedures describing how they use drones and a neutral process for selecting who will be monitored and under what circumstances.

For more information on the use of drones in the workplace, please contact the authors or your Seyfarth attorney.

The Supreme Court Weighs The Constitutionality Of Restricting Marriage To Opposite Sex Couples, And The Impact Their Decision May Have For Employers

Posted in Diversity, Retention & Pay Equity, EEOC, Hiring, Testing & Selection, Workplace Policies and Processes

By Lynn Kappelman, Laura Maechtlen, Sam Schwartz-Fenwick and Michael Stevens

Background

Today, the U.S. Supreme Court heard oral argument on two questions regarding the Constitutionality of state laws limiting marriage to opposite-sex couples. In 2013, the Supreme Court side-stepped the issue when it dismissed Perry v Hollingsworth on standing grounds. In 2013, the Court also ruled in United States v. Windsor that the Federal government must extend Federal rights and benefits to legally married same-sex couples. The Windsor decision set in motion a sea-change in the law, and presently thirty-seven states and the District of Columbia recognize marriage equality.

Today, the Court heard arguments on four consolidated cases presenting two questions: first, whether the Constitution requires the states banning same-sex marriage to issue marriage licenses to same-sex couples; and second, whether those states must recognize same-sex marriages performed elsewhere. If the Court decides the first question and recognizes a constitutional right to marry, same-sex marriage will be legal in all 50 states, and the Court will not need to decide the second question.

A more complicated scenario could emerge if the Court finds that the Constitution does not guarantee all same-sex couples the right to marry and upholds these state bans, but requires the states to recognize same-sex marriages performed elsewhere. Under those circumstances, the legal status of a same-sex couple’s marriage would depend on where the marriage was performed. Further, a holding that the Constitution does not guarantee same-sex couples the right to marry may permit states, whose marriage bans were struck down by lower courts, to argue that those bans should be given full effect on a prospective basis. In other words, the current patchwork of laws would persist (and perhaps become even more inconsistent) if the Court does not find a constitutional right to marry.

Impact on Employers

Presently, multi-state employers are faced with a non-uniform mixture of state and federal law that impacts how they provide same-sex couples benefits and employee protections, and is necessarily based on whether their employees’ same-sex marriages are legally recognized (and in certain cases where their employees reside). If the Supreme Court finds a constitutional right to marry, the remaining marriage bans will be nullified, and employers will be able to conform certain employment policies to cover same-sex spouses. For employees in newly-recognized marriages, these benefits and policies may include those governed by the following laws:

  • The Employee Retirement Income Security Act (“ERISA”), which provides certain protections to spouses (e.g., a spouse is a beneficiary under retirement plans unless the spouse consents to another beneficiary);
  • The Family Medical Leave Act, which provides leave to care for a spouse with a serious health condition;
  • Federal and State tax laws implicating health benefits provided by employers to their employees (generally exempt from the Internal Revenue Code for spousal coverage);
  • COBRA continuation coverage.

Even if the Court recognizes a constitutional right to marry, a curious result will occur in states that do not extend anti-discrimination protections to LGBT individuals: gay individuals will be able to lawfully wed, but their employers will still be able to fire them because their LGBT status is not protected under state or federal law. While the instant decision will not resolve this issue, the language the Court uses in its opinion may signal whether the Court is willing to open the door to the argument that Federal anti-discrimination laws protect LGBT individuals.

If the Court decides the issue narrowly (e.g., by finding that marriage bans fail rational basis scrutiny as an impermissible form of animus), then the impact of the decision may be limited to marriage equality. However, if the Court finds that laws targeting LGBT people are subject to heightened scrutiny, then the impact could be wider. Such an expansive ruling from the Court could buttress that position (increasingly argued by the Plaintiffs’ bar and the EEOC) that LGBT discrimination is a form of sex discrimination, and is thus barred under Title VII.

If the Court does not recognize a right to marry, but requires states to recognize same-sex marriages performed elsewhere, employers may then have to examine the wedding licenses for their same-sex employees to ensure that the marriage took place in a state where the marriage was legal. This administrative burden is likely de minimis, given that most employers already require proof of marriage before extending spousal benefits to an employee’s spouse. The greater burden is on employees who may lack the resources necessary to travel out of state to marry.

Because there are two separate questions before the Court, and the Court could decide the issue in a number of different ways, it is difficult to project the precise impact of the decision (on both same-sex couples and employers) before it is rendered. Stay tuned because Seyfarth will update this analysis once the opinion is issued, and we anticipate that will happen at the end of the Court’s term in June.

The Supreme Court Grants Certiorari In Spokeo – No Harm, No Standing?

Posted in Workplace Arbitration, Workplace Policies and Processes

By Pamela Q. Devata, Gerald L. Maatman, Jr., and Robert T. Szyba

blogYesterday the U.S. Supreme Court granted the petition for writ of certiorari filed in Spokeo, Inc. v. Robins, No. 13-1339 (U.S. Apr. 27, 2015).

As we previously reported, the Spokeo petition poses a question with a significant impact on the future scope of consumer and workplace-related class actions: whether Congress can confer standing on a plaintiff who suffers no concrete harm, but who instead alleges only a statutory violation?

 

Supreme Court Grants Review Despite Government’s Opposition

The Supreme Court rejected the Solicitor General’s recommendation to deny certiorari or simply avoid the broader question of Congressional power and instead focus on the specifically alleged injury in Spokeo (the public dissemination of inaccurate personal information) and the specific statute at issue (the Fair Credit Reporting Act or “FCRA”), and granted certiorari regarding the broader question of congressional power.

Implications For Employers

The Supreme Court’s ultimate decision in this case is likely to have a significant impact on congressional power as well as the future of consumer, workplace, and other class actions.  Although rooted in the complex arena of separation of powers between the Congress and the federal judiciary under Article III of the Constitution, the Supreme Court’s future decision is likely to have a practical impact on the viability of claims under a variety of federal statutes, including the FCRA.  Ultimately, the Supreme Court’s determination is likely to answer a simpler question than the one presented:  Can plaintiffs sue for the violation of a statute when they can show no actual injury or harm that they have suffered?

The Supreme Court may limit Congress’ power to create private causes of action based solely on statutory violations, and require plaintiffs to plead and establish actual injury — not just a violation of the underlying statute.  Congressional power and the number of viable class actions under the FCRA and other federal statutes may be limited.  This decision would likely discourage the current wave of consumer, workplace, and other class actions seeking millions in statutory damages.  On the other hand, a decision allowing individual and class claims to go forward alleging only statutory damages without injury in fact would likely have the opposite outcome, resulting in claims based on alleged violations of statutory requirements, brought by individuals who suffered no adverse consequence of the identified possible violation.

Stay tuned as we monitor the developments in this case.

Aggressive Enforcement Efforts Will Continue After KBR, Per SEC Whistleblower Chief

Posted in Whistleblower, Workplace Policies and Processes

By Ada W. Dolph

In a post-script to the SEC’s April 1 cease and desist order penalizing KBR, Inc. for a confidentiality statement that failed to carve out protected federal whistleblower complaints (our alert on it here), SEC Office of the Whistleblower Chief Sean McKessy today made additional comments that suggest public companies as well as private companies that contract with public companies should immediately review their agreements for compliance.

In a webinar sponsored by the American Bar Association titled “New Developments in Whistleblower Claims and the SEC,” McKessy commented on the recent KBR Order. Here are the key takeaways:

SEC Rule 21F-17 is “Very Broad

McKessy stated that he views the SEC Rule 21F-17 as “very broad,” and “intentionally so.” The Rule provides in relevant part:

(a)       No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications.

McKessy said that he reads the Rule as stating that “no person shall take any action” to impede an individual from communicating directly with the SEC.

Agreement Review a Continued High Priority for the SEC

McKessy stated that this initiative remains a “priority” for him and his office. “To the extent that we have come across this language [restricting whistleblowers] in a Code of Conduct” or other agreements, the SEC has taken the position that it “falls within our jurisdiction and we have the ability to enforce it.”

He noted that “KBR is a concrete case to demonstrate what I have been saying,” referencing public remarks he has made in the past regarding SEC scrutiny of employment agreements. He stated that the agency is continuing to take affirmative steps to identify agreements that violate the Rule, including soliciting individuals to provide agreements for the SEC to review. Additionally, he reported that the SEC is reviewing executive severance agreements filed with Forms 8-K for any potential violations of the Rule.

The KBR Language is Not a “Safe Harbor”

When asked whether the language required as part of the KBR Order constituted a “safe harbor,” McKessy stated that he would “not go that far,” and that each agreement will be viewed in context. He described the language in the KBR Order as “certainly instructive” but “not restrictive” and not insulating a company from further scrutiny by the SEC. He also stated that it is “really not appropriate for me to bless any language,” and suggested that the same language could be acceptable in one context but not in another depending on the company’s approach to encouraging employees to come forward to report alleged securities fraud.

KBR Could Be Applied to Private Companies

McKessy was also asked whether the SEC would apply the KBR Order to private companies under the U.S. Supreme Court’s 2014 ruling in Lawson v. FMR LLC, 134 S.Ct. 1158 (2014), which expanded Sarbanes-Oxley’s whistleblower protections to employees of private companies who contract with public companies.

McKessy stated that the SEC has not officially taken a position on this issue, but in his personal opinion he can “certainly can see a logical thread behind the logic of the Lawson decision” to be “expanded into this space [private companies],” and that “anyone who has read the Lawson decision can extrapolate from it the broader application.”

SEC Not Bound By Agreements Precluding Production of Company Documents

McKessy was asked regarding the SEC’s position regarding the disclosure of company documents by whistleblowers in their complaints to the agency. He said that it will “surprise no one that companies have a 100% record” of preferring that company documents not be provided to the SEC. But, “[a]t the end of the day” he stated that any kind of agreement restricting an employee from providing company documents to the SEC is not enforceable against the SEC and companies should not “bank on the fact” that the SEC would “feel bound” by that agreement in any way.

McKessy took a more measured approach with regard to privileged company documents, however. McKessy stated that the SEC is “not interested in getting privileged information” and that the SEC discourages whistleblowers and their counsel from providing privileged information as part of their complaints. He noted that while there are “certain exceptions to privilege,” he would “hate to leave the impression that [the agency] is looking to create to create an army of lawyers who can ignore their confidentiality requirements because of the possibility of being paid under our [Dodd-Frank bounty] program.”

Next Steps for Companies

McKessy concluded his remarks on this issue by stating that “[t]his is the time for the company to take a look at standard, standing severance and confidentiality agreements.”

In short, it is clear that we can expect further SEC enforcement actions in this area. Public companies and private companies that contract with public companies should consult with counsel to review their employment agreements to be sure they will not be the next to be caught in the SEC’s crosshairs.

Ada W. Dolph is Team Co-Lead of the National Whistleblower Team. If you would like further information on this topic, please contact a member of the Whistleblower Team, your Seyfarth attorney or Ada W. Dolph at adolph@seyfarth.com.