On July 14, 2016, the Ontario Securities Commission (OSC)
launched the Office of the Whistleblower, the first paid
whistleblower program by a securities regulator in Canada. The OSC
whistleblower program offers compensation of up to C$5 million to
individuals who come forward with tips on violations of Ontario
securities law that lead to an enforcement action. Anti-reprisal
provisions have also been added to the Securities Act
(Ontario) that allow the OSC to take enforcement action against
employers who retaliate against whistleblowers and to nullify
contractual provisions that preclude or purport to preclude
whistleblowing activities by current or former employees. Given the
relative infancy of the OSC whistleblower program, reporting
issuers can seek guidance from the administration and enforcement
of the Securities and Exchange Commission (SEC) whistleblower
program, which is similar in form and substance to the OSC
In early August the SEC brought two enforcement actions that
reinforce its stated focus on protecting whistleblower
rights.1 In each instance, the companies included a
provision in their severance agreements requiring the departing
employee to waive any right to monetary recovery in any proceeding
based on any communication by the departing employee to any
government agency. This waiver was a condition of the receipt of
any severance payments and benefits by the departing employee. Each
company was found by the SEC to have violated SEC Rule 21F-17,
which prohibits any person from taking any action to impede a
whistleblower from communicating with the SEC about possible
securities law violations.
In addition to the waiver of monetary recovery, the severance
agreement for BlueLinx Holdings Inc. included a provision requiring
the departing employee to notify the company's legal department
in the event the employee believed he or she was required by law or
legal process to disclose confidential information. Such a
provision is common in severance agreements and raises the question
of whether the SEC may find that such a notice requirement violates
SEC Rule 21F-217 unless there is an express exclusion for
whistleblowing. Although such confidentiality provisions are not
intended to impede whistleblowing, the SEC may in future find that
the practical effect of such provisions discourages whistleblowing
Canadian employment agreements, severance agreements, protective
agreements and corporate codes of conduct frequently contain
provisions requiring an employee (i) not to disclose any
confidential information to any other person and/or (ii) to use
confidential information solely for the purposes of the operation
of the business. Ontario reporting issuers may wish to review their
current employment-related agreements to determine whether the
confidentiality or other related provisions could be considered to
discourage whistleblowing by employees in light of the newly
implemented OSC whistleblower program. Depending on future
administrative actions brought by the SEC and the OSC regarding the
impact of confidentiality and other related provisions on
whistleblowing activities, employers may wish to modify their
existing employment-related agreements to include an express
carve-out for whistleblowing by current and former employees.
1. em>In the Matter of BlueLinx Holdings Inc.
(August 10, 2016) [BlueLinx]; In the Matter of Health
Net, Inc. (August 16, 2016).
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