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BlueLinx agrees to pay penalty for severance agreement

New York workers might be interested to learn that BlueLinx Holdings Inc. will pay a civil penalty of $256,000 for requiring outgoing workers to defer their rights to monetary recovery if they file complaints with federal agencies. The SEC reported that about 160 employees signed severance contracts that included the provision, which BlueLinx added in June 2013.

In August 2011, a rule of the Securities Exchange Act became effective and made it illegal to hinder communication from employees to the SEC about potentially illegal activities. The reason regulators adopted the rule was to safeguard whistleblowers from retaliation. In its investigation of the BlueLinx severance contracts, the SEC concluded that the additional provision violates this rule.

Along with the $256,000 penalty, BlueLinx will modify its severance contract to clarify that employees can alert federal agencies about possible breaches of securities laws without company approval or forfeiting any whistleblower award. The company will also make a reasonable effort to notify former workers that they are not prohibited from providing information or accepting awards.

The SEC has issued penalties against two other companies for violating the same regulation. In April 2015, the agency penalized KBR, Inc. for restrictive language in confidentiality contracts. In June 2016, the SEC penalized Merrill Lynch for similar statements in severance contracts. In all three of the penalty orders, the SEC did not indicate that employees were actually prevented from providing the government with confidential information.

When companies retaliate against employees for reporting potential violations of securities laws, the employees could contact employee law attorneys for advice on their rights and legal options. An attorney might help a whistleblower make an informed decision.

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