The Securities and Exchange Commission last week settled an enforcement action against a firm for including in its employee agreements a confidentiality provisions that would impede potential whistleblowers. The firm, BlueLinx Holdings Inc, is a listed company subject to the Exchange Act.

The firm’s agreements with employees contained a number of confidentiality provisions, including one that forbade employees from voluntarily sharing company information. What the provisions did not contain was a carve out “permitting an employee to provide information voluntarily to the Commission or other regulatory or law enforcement agencies.” The SEC found that by including such provisions in agreements with employees, the firm “raised impediments to participation by its employees in the SEC’s whistleblower program.” In so doing, the firm violated Exchange Act Rule 21F-17, which prohibits impeding communication with the SEC about possible securities law violations.

This is at least the third action this year by the SEC against firms for using provisions in employment agreements that impede employees from voluntarily providing information to the SEC’s whistleblower program. SEC staff had also been warning firms over the past few years that the SEC is actively looking for such provisions in employment agreements. Since there is no allegation in these cases that a particular whistleblower was impeded, it is fair to assume that the SEC will not wait for a whistleblower to come along before it brings such a case against any other firm with these provisions in its employment agreements.