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February 02, 2017 feature

OSHA Enacts Settlement Agreement Rules in Whistleblower Cases

New guidelines impose restrictions on employers’ terms discouraging protected activity

By Kelso L. Anderson

Settlement agreements between employers and employees must not infringe upon protected whistleblower activities, according to new guidelines from the Occupational Safety and Health Administration (OSHA).

The Interim Guidance reflects a broad exercise of OSHA's regulatory power that comports with a recent trend in which agencies deploy their considerable regulatory prowess to protect whistleblowers, say ABA Section of Litigation leaders.

Whistleblower Settlement Agreements Protect Employees

Pursuant to the Occupational Safety and Health Act of 1970, OSHA's mission is to "assure safe and healthful working conditions for working men and women by setting and enforcing standards and by providing training, outreach, education, and assistance." Consistent with that mission, OSHA reviews settlement agreements between employers and employees as part of its administration of whistleblower protection statutes. According to the preamble of its Interim Guidance, in circumstances where a private settlement agreement "impermissibly restricts or discourages protected activity," OSHA acts within its authority to eliminate such terms from such an agreement.

The Interim Guidance also explains that OSHA "will not approve a 'gag' provision that prohibits, restricts, or otherwise discourages a complainant from participating in protected activity." The guidelines further explain that "protected activity" includes "but is not limited to, filing a complaint with a government agency, participating in an investigation, testifying in proceedings, or otherwise providing information to the government." According to OSHA, restrictions typically emanate from confidentiality or non-disparagement clauses in private settlement agreements, which employees usually view as limiting their ability to engage in protected activity.

The Interim Guidance identifies specific examples of "constraints" in settlement provisions that OSHA will not approve. They include: (1) a provision that restricts an employee's ability to provide information to the government, participate in investigations, file a complaint, or testify in proceedings about an employer's past or future conduct; (2) a provision that requires an employee to notify his or her employer before filing a complaint or voluntarily communicating with the government regarding the employer's past or future conduct; and (3) a provision that requires an employee to affirm that he or she has not previously provided information to the government or engaged in other protected activity, or to disclaim any knowledge that the employer has violated the law.

"The new guidelines serve to expand OSHA's inquiry into private settlement agreements," explains Joseph M. Murray Jr., Atlanta, GA, an employment lawyer and member of the Section of Litigation's Employment & Labor Relations Law Committee. Murray maintains that "the new guidelines are more expansive and explicitly reject certain types of provisions that are routinely included in private settlement agreements." In fact, the Interim Guidance supersedes the guidance in Chapter 6, paragraphs XII.E.2 and 3, of the OSHA Whistleblower Investigations Manual, which is entitled "Criteria for Reviewing Private Settlements." "The old guidelines were similar but somewhat more limited," says Murray.

OSHA Whistleblower Protection Is Consistent with Other Agency Regulations

Aside from the broad exercise of OSHA's regulatory powers, the Interim Guidance preserves whistleblower protections that other agencies already provide employees. In particular, the final of the four "constraints" in private settlement agreements identified as a concern by the Interim Guidance covers "a provision that requires a complainant to waive his or her right to receive a monetary award (sometimes referred to in settlement agreements as a 'reward') from a government-administered whistleblower award program for providing information to a government agency."

To amplify OSHA's concern with the foregoing constraint, the Interim Guidance notes specifically that OSHA will not approve a provision that requires an employee "to waive his or her right to receive a monetary award from the Securities and Exchange Commission, under Section 21F of the Securities Exchange Act, for providing information to the government related to a potential violation of securities laws." Notably, in a footnote buttressing the reasoning for prohibiting this constraint, the Interim Guidance identified regulations from other agencies, including the U.S. Commodity Futures Trading Commission and the Internal Revenue Service, both of which "establish award programs for individuals who provide information directly to a government agency."

OSHA's guidance with respect to whistleblower rewards "follows the SEC's recent approach with regard to prohibiting whistleblower 'gag' orders, such as confidentiality agreements that impose mandatory reporting requirements to the employer and also provisions that require an employee to waive any right to receive monetary awards for whistleblowing," remarks John S. Ho, New York, NY, cochair of the Section's Labor and Employment Law Committee newsletter.

The SEC's recent approach, Ho recalls, emanates from "a cease-and-desist order issued on August 10, 2016, in In re Blue Linx Holdings Inc." In that order, the SEC required the employer to excise language from its agreements that prevented employees from accepting monetary awards from the SEC for whistleblowing activities. The order further took exception to a confidentiality provision that required departing employees to notify their employers' legal departments "prior to disclosing any financial or business information to any third parties without expressly exempting the SEC from the scope of the restriction," Ho describes.

Pointing out that, unlike the SEC, OSHA's regulatory reach is broad and "these new guidelines have a broader reach than the SEC's earlier action [in In re Blue Linx Holdings Inc.] because OSHA governs employers who are not publicly-traded companies," says Thomas J. Whiteside, Irvine, CA, newsletter editor for the Section's Trial Evidence Committee. Consequently, "even employers who are not regulated by the SEC should now review their severance, settlement, and confidentiality agreement templates to ensure compliance with OSHA's new guideline," cautions Whiteside.

Regardless of the reach of OSHA's regulatory authority, OSHA's Interim Guidance is designed to "ensure that an employer does not contractually restrict or otherwise deter an employee from engaging in whistleblower activity and collaterally to help ensure that employees who do engage in such activity may do so without fear or concern of retaliation," Ho maintains.

Employers Must Tread Carefully

Section leaders and employment law experts believe that the Interim Guidance will require employers to carefully draft settlement agreements involving whistleblowers. "By more carefully defining terms that an [OSHA] investigator is to treat skeptically, the Interim Guidance imposes more specific burdens on employers facing whistleblower claims," observes Arthur L. Silbergeld, Los Angeles, CA, an employment law expert and Fellow of The College of Labor and Employment Lawyers. "Alternatively, an attorney drafting a settlement agreement may look to the Interim Guidance for terms to avoid in order to ensure that it will pass muster with OSHA," says Silbergeld.

One such term that should be excluded from broad confidentiality and non-disparagement language in settlement agreements is "except as provided by law" language. In the coda to the Interim Guidance, OSHA explains that this language may not be clear to all employees; instead, the Interim Guidance recommends that those five words be replaced with a longer, but more lucid disclaimer reinforcing protection for whistleblowers.


Kelso L. Anderson is an associate editor for Litigation News.

Keywords: OSHA, Occupational Safety and Health Administration, employer, employee, whistleblower, SEC, employment law


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