“Financial incentives in the form of whistleblower awards, as Congress recognized, are integral to promoting whistleblowing to the Commission,” said Antonia Chion, Associate Director of the SEC Enforcement Division.  “Health Net used its severance agreements with departing employees to strip away those financial incentives, directly targeting the Commission’s whistleblower program.” 

Health Net consented to the SEC’s cease-and-desist order without admitting or denying the findings. The company agreed to make reasonable efforts to inform former employees who signed the severance agreements from Aug. 12, 2011, to Oct. 22, 2015, that Health Net does not prohibit former employees from seeking and obtaining a whistleblower award from the SEC under Section 21F of the Securities Exchange Act. Health Net further agreed to certify to Enforcement Division staff that it has complied with this undertaking.

Finally, it also agreed to pay agreed to pay a $340,000 penalty. 

Health Net is the second company this month fined by the SEC for clauses in their severance agreements requiring department workers to waive their rights as whistleblowers. On Aug. 10 the SEC announced that BlueLinx Holdings Inc., had agreed to pay a $265,000 penalty in a very similar case: the company forced employees leaving it to waive possible whistleblower awards or risk losing their severance payments and other post-employment benefits.

“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.