Corporate Confidentiality Agreements Restrict Whistleblowing: Are they Legal?

KBR Corporation recently demanded that its employees not discuss pending investigations with outside parties such as government agencies or attorneys without consent of the company’s attorneys. At least one government agency, the Securities and Exchange Commission (“SEC”), said this violates whistleblower rights and is illegal. No corporation can impose any confidentiality agreement on its employees that may prevent (or chill) the right of an employee to report allegations of wrongdoing to a governmental agency. This is consistent with a 2011 rejection of an internal whistleblowing requirement. SEC Release 34-64545. In other words, no corporation may first require an employee to use an in-house “hotline” to blow the whistle before going outside to a governmental agency or filing a false claim lawsuit.  See other False Claims Act (“FCA”) examples analyzed by our Los Angeles based employment law attorneys here.

Learning lesson for corporate whistleblowers: There is no requirement to get “clearance” from any corporate office before reporting allegations of misconduct to a governmental agency such as the SEC. In most cases, potential whistleblowers in our Los Angeles employment attorney whistleblower office have been best served by speaking with one of our employment attorneys prior to reporting any allegations to the government. Many programs, such as the Federal FCA, found at 31 U.S.C. 3730(h), require that the employee be the first to file a lawsuit in order to protect their legal rights.

What about the corporation who demands a confidentiality agreement that its employees will not report allegations of wrongdoing – or sharing of documents- with their attorneys? Alternatively, what can an employee tell his or her attorney? Some attorneys believe the information should be orally shared with the attorney. In other cases, it is appropriate to keep documents originally sent to or from the client/employee. Yet another viewpoint maintains that only documents which come to or from the client as part of their daily work should be kept. This is as opposed to the employee going on a “document hunt.” The DC courts Jacobs vs Schiffer, 204 F.3d 259 (DC Cir 2000) and Martin vs Lauer (1982) have held that restrictions on an employee’s ability to provide information to their attorneys improperly interfered with the employee’s First Amendment right of access to the courts.

In rare cases, whistleblowers have found themselves on the receiving end of lawsuits, usually called “cross complaints,” for sharing data with their attorneys. Your law firm should be prepared to defend you against this misuse of the judicial system and then seek all legal remedies including attorney fees, to which you are entitled to, for having to defend your right to be a whistleblower.

Many whistle blowers find themselves subject to retaliation for reporting suspected illegalities. Retaliation is illegal under state laws such as California Labor Code 1102.5 and the Federal FCA. Employees subjected to adverse action are entitled to full relief, including double back pay, punitive damages and lost past and future wages.

If you believe that you, or another employee, suffered an employment law matter related to filing a False Claims Act case or related matter that involving government money, prompt action to preserve your rights is crucial.  Contact the experienced employment law attorneys at Stephen Danz & Associates for a free consultation to discuss your circumstances and legal options.