Gregory (Greg) Keating, Member of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s Boston office, was quoted in The Wall Street Journal, in “Nondisclosure Agreements Get Trickier Under New SEC Scrutiny,” by Mengqi Sun. (Read the full version – subscription required.)

Following is an excerpt:

Companies have long used employee nondisclosure agreements to protect proprietary information. Now, regulators are trying to ensure that clauses in those agreements don’t also serve to inhibit whistleblowers from reporting potential corporate wrongdoing. …

The hefty D.E. Shaw penalty could mean “very extreme potential exposure” for companies, according to Gregory Keating, a partner at law firm Epstein Becker & Green who helps companies defend themselves in whistleblower cases. The expanding damage and scope of SEC actions has prompted many corporate clients to reach out in recent weeks, he said, many asking him to review every clause in their agreements and policies.

For instance, Keating said, he inserted whistleblower protection carve-out language into a dozen different agreements for one company, “just to make it clear that we do not intend to stop or chill people’s rights to communicate with the SEC or other agencies,” he said.

But without clear guidance from the SEC on what language would be appropriate in these agreements, he said, it remains difficult for employers not to use contractual language that could muzzle people looking to report wrongdoing.

Keating defended the right of employers to use nondisclosure agreements to protect confidential information from being disclosed, especially to competitors. What is considered confidential can be defined broadly as long as it is consistent with their products, he said, including an invention, customer information and personnel compensation.

But competitors, in his view, don’t include government agencies.

“Good news for employers is that I don’t think this is rendering nondisclosure agreements obsolete at all,” said Keating. “But if the employers do not hear this call, they could face extremely high monetary and reputational risks in the form of an SEC enforcement action.”

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