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EMPLOYERS CANNOT GAG WHISTLEBLOWERS WITH CONFIDENTIALITY AGREEMENTS

Employers have been trying to use confidentiality clauses to prevent employees from reporting violations of Illinois and federal laws to government authorities. Employers use these confidentiality clauses to gag whistleblowers by threatening discipline, termination, and/or legal action. Most of these confidentiality clauses prevent employees from reporting suspected violations to outside parties without employer approval. No employer is ever going to give an employee approval to report suspected violations of the law to governmental authorities. Use of a confidentiality clause to gag whistleblowers violates the law and is against public policy.

On April 1, 2015, the Securities Exchange Commission announced its first enforcement action against a company for using restrictive language in confidentiality agreements to improperly prevent employees from whistleblowing. The SEC charged KBR, Inc., with violating whistleblower protection Rule 21F-17 enacted under the Dodd-Frank Act. KBR required its employees in certain internal investigations to sign confidentiality statements with language warning that they would face discipline and even be fired if they discussed the matter with outside persons without approval of KBR’s legal department. The SEC found that since these investigations included allegations of possible securities law violations, the terms violated Rule 21F-17 which prohibits companies from taking any action to impede whistleblowers from reporting possible securities violations to the SEC. KBR agreed to pay a $130,000.00 penalty to settle the SEC’s charges and adding language to its confidentiality agreements making it clear that employees are free to report possible violations to the SEC and other federal agencies without KBR’s approval or fear of retaliation.

Employees in Illinois may have stronger protections from improper confidentiality clauses restricting whistleblowing activities. The Whistleblower Act, 740 ILCS 174/10 states: “An employer may not make, adopt, or enforce any rule, regulation, or policy preventing an employee from disclosing information to a government or law enforcement agency if the employee has reasonable cause to believe that the information discloses a violation of a State or federal law, rule, or regulation.” Based on the Whistleblower Act, 749 ILCS 174/10, it appears that any confidentiality clause preventing an employee from whistleblowing by reporting a suspected violation of law to the government would be unenforceable and in violation of Illinois public policy.

If you believe that your employer is improperly using a confidentiality clause to prevent you from reporting violations of Illinois or federal law to governmental authorities, contact Brian J. Graber, Ltd., at (312) 291-4648 to learn more about your rights.