Financial Services Employment Law

News, Updates, and Insights for Financial Services Employers

Regulators Issue Final Dodd-Frank Standards for Assessing Diversity Policies and Practices of Covered Entities in the Financial Services Industry

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On June 10, 2015, the much-anticipated joint final standards (“Final Standards”) issued by six federal agencies (“Agencies”) in accordance with Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Act”) for assessing the diversity policies and practices of the entities that they regulate (“Covered Entities”) were published and became effective.   Covered Entities include financial institutions, investment banking firms, mortgage banking firms, asset management firms, brokers, dealers, financial services entities, underwriters, accountants, investment consultants, and providers of legal services.  In issuing the Final Standards, the Agencies stated that their goal is to provide a framework for an entity “to create and strengthen its diversity policies and practices . . . and to promote transparency of organizational diversity and inclusion.”

My colleagues Lauri Rasnick and Dean Singewald have written an Act Now Advisory describing the Final Standards and explaining important steps financial services employers should take now.

Read the full Act Now Advisory here.

How Should Employers Revise Confidentiality Agreements to Comply with SEC Rule 21F-17(a)? (Video)

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On April 1, 2015, the SEC issued its first-ever enforcement action against a company for using overly restrictive language in one of its confidentiality agreements in violation of SEC Rule 21F-17(a).  We posted previously regarding the settlement order between the SEC and KBR, Inc.  In that Order, KBR, Inc., agreed to include the following language in its confidentiality agreements:

“Nothing in this Confidentiality Statement prohibits me from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. I do not need the prior authorization of the Law Department to make any such reports or disclosures and I am not required to notify the company that I have made such reports or disclosures.”

In the following video clip from a recent webinar, I discuss this whistleblower carve-out language and whether it should be included in all confidentiality agreements:

Scope of Dodd-Frank Whistleblower Anti-Retaliation Provision Remains Critical, Open Question (Video)

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Can an employee who blows the whistle on alleged securities law violations within the company (and is therefore protected by the anti-retaliation provision of the Sarbanes-Oxley Act), but does not blow the whistle externally to the SEC, also invoke the more advantageous anti-retaliation protections of the Dodd-Frank Act in a private lawsuit?  Or is Dodd-Frank limited to protecting external whistelblowers? There is a growing split of authority on this question among various federal appellate and district courts.  On June 17, 2015, the Second Circuit heard oral arguments on this issue in Berman v. Neo@Ogilvy LLC, 14-4626 (2d Cir.); a decision should be forthcoming this year that may or may not deepen the divide.

In the following video clip from a recent webinar, I discuss the split of judicial authority on this issue, the reasons behind it and what is ultimately at stake:

See more of my videos here.

EEOC Updates Pregnancy Discrimination Guidance

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In the wake of the U.S. Supreme Court’s decision in Young v. UPS, [1]  the EEOC has modified those aspects of its Enforcement Guidance on Pregnancy Discrimination and Related Issues (“Guidance”) that deal with disparate treatment and light duty.

Under the prior guidance, issued in 2014, the EEOC asserted that a pregnant worker could prove a violation of the Pregnancy Discrimination Act (“PDA”) simply by showing that she was “treated differently than a non-pregnant worker similar in his/her ability or inability to work.”  The 2014 guidance also took the position that an employer could not refuse to offer a pregnant worker an accommodation by relying on a policy that provides light duty only to workers injured on the job.  The Supreme Court, however, was highly critical of and rejected this interpretation of the PDA, finding that it would require employers who provide a single worker with an accommodation to provide similar accommodations to all pregnant workers, irrespective of other criteria.

Thus, in the Guidance the EEOC deleted that language and an entire section that discussed its interpretation of “Persons Similar in Their Ability or Inability to Work.”  The EEOC has updated its discussions about disparate treatment and light duty work assignments for pregnant workers by adopting the Supreme Court’s holding that a plaintiff may establish a prima facie case of pregnancy discrimination by following the McDonnell Douglas burden-shifting framework (i.e., by showing that she is pregnant, that she sought accommodation which was not granted, and that the employer accommodated others similar in their ability or inability to work).  Further, a plaintiff may show that the legitimate, non-discriminatory reasons for the employer’s actions – even if supported by a facially neutral policy – were pretextual by showing the employer’s policies caused a “significant burden” on pregnant workers without reasons that were “sufficiently strong to justify the burden.”

To illustrate, the Guidance states that a practice of providing light duty to a large percentage of non-pregnant employees, while failing or refusing to provide light duty to a large percentage of pregnant workers, might demonstrate that the policy significantly burdens pregnant employees.  The Guidance, however, fails to specify what it considers a “large percentage,” and provides no detail or examples as to what reasons might be sufficiently strong to justify such a burden.

This is the second time in two years that the EEOC has updated its enforcement guidance in this area.  Last year, the EEOC revamped the Guidance to provide an overview of coverage under the PDA, to address the impact of the inclusion of pregnancy-related impairments under the Americans with Disabilities Amendments Act of 2008, and to address other benefits that must be provided to pregnant workers.  These aspects of the Guidance remain unchanged.

Employers should take note of the EEOC’s increased scrutiny of facially neutral policies that may impose significant burdens on pregnant workers.  The EEOC’s current Strategic Enforcement Plan identifies the accommodation of pregnancy-related limitations as an emerging issue that will be prioritized, and the updated Guidance on this subject is evidence of the agency’s focus in this area.

[1] Young v. UPS, 135 S. Ct. 1338 (2015).

New York City Investigation of Hiring Practices

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My colleague Laura A. Stutz  at Epstein Becker Green has a Retail Labor and Employment Law blog post that will be of interest to employers doing business in New York City: “New York City Investigation of Hiring Practices:.

Following is an excerpt:

New York City’s Commission on Human Rights is now authorized to investigate employers in the Big Apple to search for discriminatory practices during the hiring process. This authority stems from a law signed into effect by Mayor de Blasio that established an employment discrimination testing and investigation program.  The program is designed to determine if employers are using illegal bias during the employment application process.

Read the full original post here.

Five EEOC Initiatives to Monitor on the Agency’s Golden Anniversary

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My colleague Nathaniel M. Glasser recently authored Epstein Becker Green’s Take 5 newsletter.   In this edition of Take 5, Nathaniel highlights five areas of enforcement that U.S. Equal Employment Opportunity Commission (“EEOC”) continues to tout publicly and aggressively pursue.

  1. Religious Discrimination and Accommodation—EEOC Is Victorious in New U.S. Supreme Court Ruling
  2. Transgender Protections Under Title VII—EEOC Relies on Expanded Sex Discrimination Theories
  3. Systemic Investigations and Litigation—EEOC Gives Priority to Enforcement Initiative
  4. Narrowing the “Gender Pay Gap”—EEOC Files Suits Under the Equal Pay Act
  5. Background Checks—EEOC Seeks to Eliminate Barriers to Recruitment and Hiring

Read the Full Take 5 here.

Proposed DOL Rule To Make More White Collar Employees Eligible For Overtime Pay

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My colleagues Michael S. Kun and Jeffrey H. Ruzal at Epstein Becker Green wrote a Wage and Hour Defense blog post that will be of interest to all financial services employers: “Proposed DOL Rule To Make More White Collar Employees Eligible For Overtime Pay.”Clock

Following is an excerpt:

More than a year after its efforts were first announced, the U.S. Department of Labor (“DOL”) has finally announced its proposed new rule pertaining to overtime. And that rule, if implemented, will result in a great many “white collar” employees previously treated as exempt becoming eligible for overtime pay for work performed beyond 40 hours in a workweek – or receiving salary increases in order that their exempt status will continue.

Read the full original post here.

Mayor Signs NYC Ban-the-Box Law

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On Monday, June 29, 2015, Mayor Bill de Blasio signed into law the bill passed by the New York City Council “banning-the-box.” The law goes into effect on Tuesday, October 27, 2015. As discussed in our earlier advisory, the ban-the-box movement removes from an employment application the “box” that requests criminal conviction history. New York City’s law also imposes additional requirements upon the employer when making an adverse employment decision on the basis of criminal conviction history.

NLRB Dramatically Educates Private School on Meaning of Concerted Protected Activity

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It is important for financial services employers to remember that the National Labor Relations Act protects their employees even when those employees are non-union, and that when groups of employees engage in discussions about their terms and conditions of employment via the employer’s email system, that conduct may constitute protected activity for which the employees may not be punished.  A recent example is highlighted by my colleague Nancy L. Gunzenhauser at Epstein Becker Green in a Management Memo blog post: “NLRB Dramatically Educates Private School on Meaning of Concerted Protected Activity. ”

Following is an excerpt:

While we have been reminding readers of the fact that  the National Labor Relations Act (the “Act”) protects employees regardless of whether they are represented by a union and the Act applies to non-unionized workforces, too, recently  a National Labor Relations Board (the “NLRB”) Administrative Law Judge issued a decision following an unfair labor practice (“ULP”)  hearing based on a charge filed by a teacher at New York City’s prestigious Dalton School that should serve as an object lesson for employers in all non-union businesses.

Read the full original post here.

Sixth Circuit Rules That a Reasonable Belief About Unlawful Conduct Is Enough to State a Sarbanes-Oxley Retaliation Claim

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In its May 28th, 2015 decision in Rhinehimer v. U.S. Bancorp Investments, Inc. (pdf), the Sixth Circuit Court of Appeals ruled that an employee who reports alleged unlawful conduct has engaged in protected activity for the purposes of a retaliation claim under the Sarbanes-Oxley Act (“SOX”), 18 U.S.C. § 1514A, as long as he or she has an objectively reasonable belief that the activity reported is prohibited under SOX.  The Sixth Circuit has joined the Second and Third Circuit Courts of Appeal in rejecting the previously adopted standard that an employee’s conduct must “definitively and specifically” relate to one of the enumerated categories of fraud by approximating the basic elements of the fraud claim.  The issue has not yet been revisited in the First, Fourth, Fifth, and Ninth Circuits since the Administrative Review Board rejected the “definitively and specifically” standard in Sylvester v. Parexel Int’l LLC, ARB Case No. 07-123 (May 25, 2011).

Rhinehimer was a certified financial planner at U.S. Bancorp who was terminated after he complained to his supervisor about questionable trades made by a coworker to the detriment of his elderly client – trades Rhinehimer claimed constituted unsuitability fraud.  He alleged that his termination constituted unlawful whistleblower retaliation in violation of SOX, which makes it illegal for companies to retaliate against an employee who reports alleged fraudulent activity.  Rhinehimer obtained a verdict at trial and U.S. Bancorp appealed.  On appeal, the Sixth Circuit was asked to determine whether a jury could reasonably find that Rhinehimer engaged in protected activity under SOX.

SOX requires that an employee reasonably believe that the activity reported is prohibited by law.  The defendants argued that Rhinehimer did not have a reasonable belief because he did not meet the “definitively and specifically” standard, which requires an employee to justifiably believe that each of the legally-defined elements of the suspected fraud occurred.  Acknowledging decisions by other Courts of Appeals, including the Second and Third Circuit Courts, the Sixth Circuit similarly rejected the “definitively and specifically” standard, finding that such an interpretation is inconsistent with the purpose of SOX, which was designed to provide broad protection for employees who provide information regarding “any” conduct reasonably believed to constitute a violation of relevant law. Instead, the Sixth Circuit held that a plaintiff need only have a reasonable belief, based on the totality of the circumstances of the case, that the conduct complained of was prohibited under SOX.  Ultimately, the Court held that a person in Rhinehimer’s position met this standard.

The trend is plainly in favor of rejecting the “definitively and specifically” standard of determining protected activity, but employers can still prevail by demonstrating that an employee lacked reasonable belief – a fact-specific inquiry that requires a showing of both subjective belief and objective reasonableness.

The authors gratefully acknowledge the assistance of summer associate Judah Rosenblatt in the preparation of this post.