The nature of the SEC’s business a regulator of public companies lends a certain expansive aspect to its jurisdiction. That is, when your job as a government agency is to be sure public companies are making complete and accurate disclosure to the market, there’s almost no limit to what some people will want those companies to disclose. Before you know it, a securities regulator can find itself also regulating conflict minerals, climate change, political contributions (gone for now, but probably not forever), cybersecurity . . . . I don’t think we’ve reached the outer bounds.
Now the Commission is wading deeper and deeper into the employment law business. We’ve known for some time that the SEC was looking for cases in which to enforce the Dodd-Frank anti-retaliation provisions of the whistleblower rules. It brought such a case against Paradigm Capital Management just last June. Also last year, SEC whistleblower chief Sean McKessy warned against companies writing severance agreements to buy their former employees’ silence with post-employment benefits. “And if we find that kind of language, not only are we going to go to the companies, we are going to go after the lawyers who drafted it,” he said.
But thanks to the Wall Street Journal’s Rachel Louise Ensign, that’s not all. Oh, no; that’s not all. In an article from last week, she reports that the Commission is actively looking for that kind of language. It has sent a request letter asking a number of companies “to turn over every nondisclosure agreement, confidentiality agreement, severance agreement and settlement agreement they entered into with employees since Dodd-Frank went into effect, as well as documents related to corporate training on confidentiality.” The letter also asks for “all documents that refer or relate to whistleblowing” and lists of terminated employees.
I think this is a relatively big deal. It’s not like McKessy hasn’t warned companies about this sort of thing. But it seems like his office is partially developing into an employment law force. It may not be what people expected when he started that job, but here we are.