SEC: No way to legally prevent the Whistle from being blown

SEC: No way to legally prevent the Whistle from being blown

In what is generally considered a standard provision, the companies’ agreements allowed for the former employee’s participation in any government investigation but required a waiver of the right to recover any incentive payments the law provides for whistleblowing in healthcare.

Both companies were thrown hefty fines due to the violation of these federal security laws. Health Net, Inc. was hit with a $340,000 fine and BlueLinx Holdings was hit with a $265,000 fine.

The SEC issued substantial fines to these companies for this waiver requirement for two reasons:
1. The whistleblower incentive is a key part of enforcement efforts
2. Any public company’s attempt to eliminate or limit that incentive violates the law

Note: The SEC also found a provision in many employer’s severance agreements relating to keeping matters confidential. The agreements require employees to inform the company’s legal department before they self disclose any information to the government.

“We’re continuing to stand up for whistleblowers and clear away impediments that may chill them from coming forward with information about potential securities law violations,” said Stephanie Avakian, Deputy Director of the SEC’s Enforcement Division.

Check out our Whistleblower blog series:
Avoiding Whistleblowers- developing an effective and safe place to disclose
Healthcare Whistleblower at Work: This isn’t your Snow White Story
Healthcare Background Checks: More than just checking the box

Read the full reports below:
Company Punished for Severance Agreements That Removed Financial Incentives for Whistleblowing (Health Net, Inc.)
Company Paying Penalty for Violating Key Whistleblower Protection Rule (BlueLinx Holdings)

Michael Rosen, Esq.

Written by Michael Rosen, ESQ
ProviderTrust Co-Founder,

Michael brings over 20 years of experience founding and leading risk mitigation businesses, receiving numerous accolades such as: Inc Magazine’s Inc 500 Award and Nashville Chamber of Commerce Small Business of the Year
Connect with Michael on Linkedin

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