A recent U.S. Securities and Exchange (SEC) administrative proceeding against California based Health Net illustrates a challenge when documenting settlements with exiting employees in Thailand.  Heath Net used severance agreements that required employees to waive their rights to obtain monetary awards from the SEC’s whistleblower program.  The SEC’s whistleblower program permits whistleblowers in Foreign Corrupt Practices Act (“FCPA”) and securities fraud cases to claim a 10% to 30% reward in enforcement actions where the penalties recovered exceed U.S.$1 million.  Although the severance agreements did not purport to prevent employees “from participating in any investigation before a federal agency”, this same paragraph of those severance agreements required “employees to waive his or her right to any monetary recovery related to such investigation.”  Health Net was required to pay a US$340,000 penalty and take other remedial measures.

Terminated employees in Thailand are entitled to generous severance payments. An employee who has worked ten or more years is entitled to severance equaling about ten months pay, unless “cause” under Labor Protection Act section 119 can be established for the termination, something which is often impossible to establish.  Further, employees are permitted to seek damages for “unfair termination” on top of the mandatory severance payments to which they are entitled.  If severance is not paid, employees are entitled to very high interest on the unpaid severance payment.  Further, when an employee is not paid statutory severance, she or he can file private criminal proceedings against the managing director, director or a person who has responsibilities for operations of the company for failure to pay severance.  Not surprisingly, some employees do file criminal cases to obtain leverage when negotiating a separation package, particularly when the separation is acrimonious.

It is therefore also not surprising that employers in Thailand, including subsidiaries of U.S. companies subject to the jurisdiction of the SEC, almost always seek to document the separation and payments to exiting employees to prevent these sorts of claim under Thailand’s labor laws.  These documents typically include a very broad release and, in many cases, they will also include confidentiality clauses, which can be read, fairly or unfairly, to preclude whistleblower tips to the SEC.

The bottom line here is that all employers, but particularly subsidiaries of U.S. companies (or any other company that might be subject to the broad jurisdictional sweep of the FCPA), not only need to consider their exposure under Thailand’s pro-employee labor laws, but also liability under the U.S.’s FCPA and other anti-corruption laws, when documenting settlements with exiting employees.  The customary practice of including broad releases and confidentiality requirements in settlements with departing employees could expose the company, its directors and its U.S. parent to even larger, and possibly criminal, liability in the U.S.

The Health Net case is not an outlier in U.S. enforcement of the FCPA. The SEC also brought actions against KBR, Inc. in April 2015 and Merrill Lynch in June 2016 for using agreements that restricted employees’ ability to disclose information to government agencies.