Company Paying Penalty for Violating Key Whistleblower Protection Rule
BlueLinx Holdings Inc. settled SEC charges for violating Rule 21F-17 by including severance agreement clauses that forced outgoing employees to waive rights to whistleblower awards, resulting in a $265,000 penalty and mandatory corrective actions.
BlueLinx Holdings Inc., an Atlanta-based building products distributor, agreed to pay a $265,000 penalty to settle SEC charges for violating Rule 21F-17 by embedding provisions in its severance agreements that required employees to forfeit potential whistleblower awards in exchange for severance and post-employment benefits. The company added these restrictive clauses in mid-2013, nearly two years after the SEC’s 2011 adoption of Rule 21F-17, which explicitly prohibits impediments to reporting securities law violations. Without admitting or denying the findings, BlueLinx consented to a cease-and-desist order and committed to amending its agreements and notifying former employees of their rights to report to the SEC without penalty.
BlueLinx Holdings Inc., an Atlanta-based building products distributor, settled SEC charges for violating Rule 21F-17 by including provisions in its severance agreements that required outgoing employees to waive their rights to receive monetary whistleblower awards from the SEC in order to obtain severance payments and other post-employment benefits. The company implemented these restrictive clauses in mid-2013, nearly two years after the SEC adopted Rule 21F-17 in August 2011, which explicitly forbids any action that impedes individuals from communicating with the SEC about potential securities law violations. The SEC found that BlueLinx’s language effectively chilled employees from coming forward with critical information, undermining the integrity of its whistleblower program. Without admitting or denying the allegations, BlueLinx consented to a cease-and-desist order and agreed to pay a $265,000 penalty. As part of the settlement, BlueLinx committed to amending all severance agreements to clearly state that employees may report to the SEC and other federal agencies without prior approval and without forfeiting any whistleblower awards. The company also agreed to make reasonable efforts to notify former employees who signed severance agreements after August 12, 2011, of their restored rights, and to certify compliance with these undertakings to the SEC’s Enforcement Division. The SEC’s Enforcement Division and Office of the Whistleblower emphasized that companies cannot undermine whistleblower protections by conditioning severance on the surrender of reporting rights.
Exhibits & Attached Documents (1)
Extracted insights
- $265K $265,000 $100K–$1M
- person antonia chion
- company bluelinx holdings inc.
- agency sec cease-and-desist order without admitting or denying findings
- agency sec investigation
- agency Securities and Exchange Commission
- person tara kelly
- person yuri b. zelinsky
- BlueLinx Holdings Inc. violated securities laws by using severance agreements that required outgoing employees to waive their rights to monetary recovery
- BlueLinx Holdings Inc. agreed to pay $265,000 penalty
- BlueLinx Holdings Inc. added monetary recovery prohibition to all severance agreements in mid-2013
- SEC adopted Rule 21F-17 prohibiting actions to impede communication with SEC about securities law violations
- BlueLinx Holdings Inc. forced employees to waive possible whistleblower awards or risk losing severance payments
- BlueLinx Holdings Inc. consented to SEC cease-and-desist order without admitting or denying findings
- BlueLinx Holdings Inc. agreed to amend severance agreements to allow employees to report securities law violations to SEC without prior approval
- BlueLinx Holdings Inc. agreed to contact former employees who executed severance agreements after Aug. 12, 2011 to notify them of whistleblower rights
- Tara Kelly conducted SEC investigation
- V.V. Cooke conducted SEC investigation
- Yuri B. Zelinsky supervised case
- Antonia Chion supervised case
The Securities and Exchange Commission today announced that an Atlanta-based building products distributor is settling charges that it violated securities laws by using severance agreements that required outgoing employees to waive their rights to monetary recovery should they file a charge or complaint with the SEC or other federal agencies. BlueLinx Holdings Inc. has agreed to pay a $265,000 penalty. According to the SEC’s order, BlueLinx added the monetary recovery prohibition to all of its severance agreements in mid-2013, nearly two years after the SEC’s adoption of Rule 21F-17 that prohibits any action to impede someone from communicating with the SEC about possible securities law violations. BlueLinx’s restrictive language forced employees leaving the company to waive possible whistleblower awards or risk losing their severance payments and other post-employment benefits. “We’re continuing to stand up for whistleblowers and clear away impediments that may chill them from coming forward with information about potential securities law violations,” said Stephanie Avakian, Deputy Director of the SEC’s Enforcement Division. Jane Norberg, Acting Chief of the SEC’s Office of the Whistleblower, added, “Companies simply cannot undercut a key tenet of our whistleblower program by requiring employees to forego potential whistleblower awards in order to receive their severance payments.” BlueLinx consented to the SEC’s cease-and-desist order without admitting or denying the findings. The company agreed to two undertakings: (1) to amend its severance agreements to make clear that employees may report possible securities law violations to the SEC and other federal agencies without BlueLinx’s prior approval and without having to forfeit any resulting whistleblower award, and (2) to make reasonable efforts to contact former employees who had executed severance agreements after Aug. 12, 2011 to notify them that BlueLinx does not prohibit former employees from providing information to the SEC staff or from accepting SEC whistleblower awards. BlueLinx further agreed to certify to Enforcement Division staff that it has complied with its undertakings. The SEC’s investigation was conducted by Tara Kelly and V.V. Cooke. The case was supervised by Yuri B. Zelinsky and Antonia Chion.
The Securities and Exchange Commission today announced that an Atlanta-based building products distributor is settling charges that it violated securities laws by using severance agreements that required outgoing employees to waive their rights to monetary recovery should they file a charge or complaint with the SEC or other federal agencies. BlueLinx Holdings Inc. has agreed to pay a $265,000 penalty. According to the SEC’s order, BlueLinx added the monetary recovery prohibition to all of its severance agreements in mid-2013, nearly two years after the SEC’s adoption of Rule 21F-17 that prohibits any action to impede someone from communicating with the SEC about possible securities law violations. BlueLinx’s restrictive language forced employees leaving the company to waive possible whistleblower awards or risk losing their severance payments and other post-employment benefits. “We’re continuing to stand up for whistleblowers and clear away impediments that may chill them from coming forward with information about potential securities law violations,” said Stephanie Avakian, Deputy Director of the SEC’s Enforcement Division. Jane Norberg, Acting Chief of the SEC’s Office of the Whistleblower, added, “Companies simply cannot undercut a key tenet of our whistleblower program by requiring employees to forego potential whistleblower awards in order to receive their severance payments.” BlueLinx consented to the SEC’s cease-and-desist order without admitting or denying the findings. The company agreed to two undertakings: (1) to amend its severance agreements to make clear that employees may report possible securities law violations to the SEC and other federal agencies without BlueLinx’s prior approval and without having to forfeit any resulting whistleblower award, and (2) to make reasonable efforts to contact former employees who had executed severance agreements after Aug. 12, 2011 to notify them that BlueLinx does not prohibit former employees from providing information to the SEC staff or from accepting SEC whistleblower awards. BlueLinx further agreed to certify to Enforcement Division staff that it has complied with its undertakings. The SEC’s investigation was conducted by Tara Kelly and V.V. Cooke. The case was supervised by Yuri B. Zelinsky and Antonia Chion.