The Securities and Exchange Commission, for the first time, enforced a provision of the Dodd-Frank Act that says companies can’t take action to prevent employees from communicating with the SEC about possible securities law violations, fining military contractor KBR $130,000 for attempting to do so.  According to the SEC complaint, KBR has required those it questions in internal investigations on potential illegal or unethical conduct to sign confidentiality statements saying they won’t talk about anything discussed during the interview without first talking to the company’s lawyers. While the SEC said it is unaware of any actual instances where KBR was, in fact, prevented from communicating directly with the SEC, it said the language itself impedes such communication, which is a violation of Rule 21F-17 of the Dodd-Frank Act. In addition to paying the fine, KBR also agreed to add to their statement the following clause:

 “Nothing in this Confidentiality Statement prohibits me from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. I do not need the prior authorization of the Law Department to make any such reports or disclosures and I am not required to notify the company that I have made such reports or disclosures.”  

However, it also did not admit or deny the charges arrayed against it. The SEC hopes that other companies will create similar amendments to their own non-disclosure agreements to account for the whistleblower protection rules. 

“KBR changed its agreements to make clear that its current and former employees will not have to fear termination or retribution or seek approval from company lawyers before contacting us.” said Sean McKessy, Chief of the SEC’s Office of the Whistleblower.  “Other employers should similarly review and amend existing and historical agreements that in word or effect stop their employees from reporting potential violations to the SEC.”