Clifford Chance

A busy two months for U.S. whistleblower developments including a new reward program for whistleblowers and new penalties for companies.

You could not be faulted if you missed the multiple U.S. whistleblower developments this month, which is why we summarize here the three things you oughta know (and what you should be doing about them).

First, on August 1, 2024, the U.S. Department of Justice (DOJ) unveiled the details of its Corporate Whistleblower Awards Pilot Program intended through individual financial incentives to help root out corporate misconduct. Any individual who is not involved in the criminal activity itself that helps the DOJ discover "significant corporate or financial misconduct"— otherwise unknown to the DOJ—may qualify to receive a portion of the resulting forfeiture that exceeds $1 million in net proceeds. DOJ noted that in the first month of Program it had already received more than 100 whistleblower reports.

Second, this month DOJ's Criminal Division released its updated "Evaluation of Corporate Compliance Programs". There, perhaps in part in response to concerns that the above Pilot Program does not address whistleblower retaliation, DOJ will look at "Commitment to Whistleblower Protection and Anti-Retaliation" as part of its assessment of a company's compliance program. As we know, DOJ will give weight to a corporate compliance program when assessing how to resolve an investigation, including penalty amounts.

Third, the SEC continues its efforts to encourage whistleblowers by penalizing companies where the SEC views that had historically been seen as standard clauses in employment contracts and separation agreements as having a chilling effect on whistleblowers. For example, on September 9, 2024, the SEC announced settled charges against seven public companies who agreed to pay more than $3 million combined in civil penalties, for using employment, separation, and other agreements that violated rules prohibiting actions to impede whistleblowers from reporting potential misconduct to the SEC. With these recent cases, the SEC has taken the position that separation agreements whereby the exiting employee agrees to not accept any awards were they to bring a case against their former employer, has the effect of chilling claims and therefore are prohibited.

Now that you know, what should you do? Start at a minimum by reviewing your compliance policies/procedures as well as your separation agreements and employment contracts to make sure your house is in order given these whistleblower developments.