After a two-year hiring blitz in response to a significant increase in mergers and acquisitions, initial public offerings, and SPACs, Wall Street is reversing course. Over the last several months, many of the nation’s leading financial institutions have returned to their practice of annual layoffs or announced their plans to do so. Goldman Sachs laid off approximately 3,200 employees; Credit Suisse plans to let go 2,700 employees; Morgan Stanley cut approximately 1,800 employees; Bank of New York Mellon Corp plans to lay off about 1,500 employees; BlackRock Inc. will let go of 500 employees; and Barclays plans to cut about 200 employees.
But sometimes these layoffs can be a convenient way for employers to also get rid of squeaky wheels or people who have raised concerns about fraud, discrimination, or other misconduct. Employees affected by these mass layoffs may receive a severance offer as part of their departure package, but those severance payments come with a tradeoff: employees generally must waive their rights to any legal claims they may have against their former employers to receive their severance. Before signing these often broad waivers of rights, Wall Street professionals should consider whether they are waiving valuable legal claims, and whether their inclusion in this round of layoffs was retaliation for blowing the whistle on fraud, discrimination, or other misconduct.
Other financial services industry employees wrapped up in this round of layoffs may have had concerns about fraud or misconduct at their company but did not speak up for fear of retaliation. Although many whistleblower statutes, including the Dodd-Frank Act, the Sarbanes-Oxley Act, the Consumer Financial Protection Act, and the Anti-Money Laundering Whistleblower Protection Law, provide anti-retaliation protections, many employees rightly fear being punished for doing the right thing. However, in the wake of these mass-layoffs, many former employees may feel more comfortable blowing the whistle on their former employers.
Notably, even if a financial service professional has signed a severance agreement with a general release, those releases cannot waive an employee’s right to report illegal conduct to the government. Former employees are still able to file complaints with the SEC and employers that impede reporting to the SEC may be in violation of SEC rules and regulations.
Still, even former employees sometimes fear retaliation for blowing the whistle – they reasonably worry about being blacklisted or having their name attached to a whistleblower complaint. But SEC whistleblower tips are confidential and, if submitted by an attorney on the whistleblower’s behalf, can even be anonymous.
Former employees in the financial services industry may know about Ponzi schemes, fraudulent solicitation, misappropriation of customer funds, market manipulation, insider trading, churning, unauthorized trading, or money laundering, among other things. With the fear of retaliation lifted, former employee whistleblowers may be in a better position to bring these harmful schemes to light.
Even before this round of layoffs, whistleblowing to the SEC has exploded, with over 12,000 tips in 2021 and 2022—more than double the number of tips in 2019 and a huge increase over 2020. This is likely due to some of the eye-popping rewards that whistleblowers have received— the largest SEC award to date is $114 million and the largest CFTC award to a single individual is nearly $200 million. The number of tips will likely continue to rise with this combination of massive rewards and major layoffs.
Determining whether someone potentially qualifies for a reward or anti-retaliation protection requires careful analysis of each case’s unique facts and circumstances. Severance agreements are dense, legally binding contracts that need careful parsing. And blowing the whistle is a major decision that can have ripple effects on someone’s life and career. Wall Street whistleblowers or would-be whistleblowers who have been included in the most recent round of layoffs need to consider their options carefully. If you are thinking about reporting fraud or blowing the whistle on your current or former employer, or if you’ve blown the whistle and been retaliated against, you can contact attorneys in Outten & Golden’s whistleblower and retaliation practice group.