In less than one week, the Securities and Exchange Commission (“SEC”) announced enforcement actions against two companies that had required their departing employees to waive their rights to any monetary recovery under the SEC’s whistleblower program in violation of Rule 21F-17 under the Securities Exchange Act of 1934, as amended. The SEC announced these actions on August 10 against Atlanta-based BlueLinx Holdings, Inc. and August 16 against California-based Health Net, Inc. The SEC found that BlueLinx’s severance, release, and similar agreements violated Rule 21F-17 by requiring departing employees to: (1) waive their rights to monetary recovery and (2) notify BlueLinx’s legal department before disclosing any confidential information to the SEC. The SEC further found that Health Net’s waiver and release of claims agreements violated Rule 21F-17 by requiring departing employees to waive their rights to monetary recovery. By including the problematic provisions in their agreements, the SEC said the companies removed a critical incentive from the SEC’s whistleblower program designed to encourage individuals to report securities law violations to the SEC and, in the BlueLinx matter, also forced departing employees to choose between identifying themselves to BlueLinx as a whistleblower or potentially losing their severance pay and benefits.

In light of the SEC’s recent focus on Rule 21F-17, public and private companies should review their existing confidentiality and severance agreements, releases, employment agreements, orientation and training materials, internal policies, and other documents and processes to ensure they do not contain language or impose requirements that could be construed to impede or restrict a person’s right or ability to voluntarily disclose information to the SEC or to collect monetary awards under the SEC’s whistleblower program. Where appropriate, companies should amend agreements and update policies to remove any impediments under Rule 21F-17 and notify employees of such amendments and updates to ensure that employees subject to potential impediments are aware of their rights to communicate possible securities law violations to the SEC.