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Workplace secrecy agreements on the rise

– In November 2012, the U.S. Department of Energy asked contract employees at the Hanford plutonium processing plant in Washington state to take an unusual oath.

The DOE wanted them to sign nondisclosure agreements that prevented them from reporting wrongdoing at the nation’s most contaminated nuclear facility without getting approval from an agency supervisor. The agreements also barred them from using any information for financial gain, a possible violation of federal whistleblower laws, which allow employees to collect reward money for reporting wrongdoing.

Donna Busche reluctantly signed the agreement.

“It was a gag order,” said Busche, 51, who served as the manager of environmental and nuclear safety at the Hanford waste treatment facility for a federal contractor until she was fired in February after raising safety concerns. “The message was pretty clear: ‘Don’t say anything to anyone, or else.’ ”

The company that fired Busche, URS, has said her termination was unrelated to her whistleblowing. Busche and another employee testified before Congress in March at a hearing called by Sen. Claire McCaskill, D-Mo., to examine the handling of whistleblowers at Hanford.

An Energy spokesman denied that the nondisclosure agreements violated federal law.

“The DOE fully complies with the law,” Brendan Daly said. “We not only encourage but require contractors to report waste, fraud and abuse, with no retaliation.”

Lawyers who represent whistleblowers such as Busche say they are seeing a rise in the use of overly restrictive nondisclosure agreements, which prevent employees from reporting fraud, even to government investigators. The agreements incorporate language that goes beyond those that had traditionally protected proprietary information, the lawyers said.

In recent months, agreements criticized as overly restrictive have surfaced at Kellogg, Brown and Root, one of the nation’s largest defense contractors, and International Relief and Development, a nonprofit organization in Arlington County, Virginia. The nonprofit collected more than $1 billion in tax dollars for war-related projects funded by the U.S. Agency for International Development.

The Securities and Exchange Commission is investigating the agreements at KBR, and the Special Inspector General for Afghanistan Reconstruction is examining the agreements used by IRD. Both companies have denied wrongdoing, and IRD changed the wording of its agreements after they were written about in the Washington Post.

Fear of retaliation for reporting fraud in the workplace is on the rise, according to surveys of federal employees and workers on Wall Street. The U.S. Office of Special Counsel is investigating reports that the Department of Veterans Affairs retaliated against 37 workers who had come forward with allegations of wrongdoing.

Pressure to bolster whistleblower laws and provide more protection for those who come forward mounted after reports of fraud in the banking and financial services industries that led to the recession. In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which established the Office of the Whistleblower at the SEC. The law also created a bounty program at the SEC to pay whistleblowers.

On June 16, the new SEC whistleblower office announced that it had filed its first civil case, involving a whistleblower who accused a hedge fund of retaliation after the whistleblower reported improper trading activity. The hedge fund settled by paying a $2.2 million fine.

Nondisclosure agreements traditionally have been used to prevent employees from going to competitors and taking trade secrets with them. But attorneys for whistleblowers say they are seeing a dramatic increase in the number of potentially illegal agreements employees are being asked to sign since the Dodd-Frank law went into effect.

“Corporate America is becoming far more sophisticated and aggressive in its efforts to discourage people from coming forward and reporting externally,” said Jordan Thomas, who helped to establish the SEC’s whistleblower office as an assistant director there and now works for a New York law firm, Labaton Sucharow. One of his clients is the hedge-fund whistleblower.

Whistleblower experts say corporations are trying to shield themselves by creating rigid internal reporting rules, such as requiring people to report wrongdoing to their supervisors at work before going to outside investigators. Companies are also asking workers to sign agreements that bar them from speaking out or benefiting from the bounty program.

“We are seeing a marked increase in an effort by employers to prevent their employees from speaking to regulators,” said David Marshall, a partner at Katz, Marshall & Banks, a whistleblower law firm in Washington. “As these whistleblower programs have grown more prominent, we have seen a growth in the number of types of agreements. They have a truly chilling effect on employees coming forward.”