When:  Thursday, September 14, 2017    8:00 a.m. – 4:30 p.m.

Where:  New York Hilton Midtown, 1335 Avenue of the Americas, New York, NY 10019

Epstein Becker Green’s Annual Workforce Management Briefing will focus on the latest developments in labor and employment law, including:

  • Immigration
  • Global Executive Compensation
  • Artificial Intelligence
  • Internal Cyber Threats
  • Pay Equity
  • People Analytics in Hiring
  • Gig Economy
  • Wage and Hour
  • Paid and Unpaid Leave
  • Trade Secret Misappropriation
  • Ethics

We will start the day with two morning Plenary Sessions. The first session is kicked off with Philip A. Miscimarra, Chairman of the National Labor Relations Board (NLRB).

We are thrilled to welcome back speakers from the U.S. Chamber of Commerce.  Marc Freedman and Katie Mahoney will speak on the latest policy developments in Washington, D.C., that impact employers nationwide during the second plenary session.

Morning and afternoon breakout workshop sessions are being led by attorneys at Epstein Becker Green – including some contributors to this blog! Commissioner of the Equal Employment Opportunity Commission, Chai R. Feldblum, will be making remarks in the afternoon before attendees break into their afternoon workshops. We are also looking forward to hearing from our keynote speaker, Bret Baier, Chief Political Anchor of FOX News Channel and Anchor of Special Report with Bret Baier

View the full briefing agenda and workshop descriptions here.

Visit the briefing website for more information and to register, and contact Sylwia Faszczewska or Elizabeth Gannon with questions.  Seating is limited.

Our colleague Joshua A. Stein, a Member of the Firm at Epstein Becker Green, has a post on the Retail Labor and Employment Law blog that will be of interest to many of our readers in the financial services industry: “Start Spreading the News – EDNY Denies Motion to Dismiss Website Accessibility Complaint.”

Following is an excerpt:

While the ADA finished celebrating its 27th anniversary at the end of July, for plaintiffs looking to bring website accessibility complaints in New York the party is still ongoing.  Following on the heels of last month’s decision of the U.S. District Court for the Southern District of New York in Five Guys, Judge Jack B. Weinstein of the U.S. District Court for the Eastern District of New York, in Andrews vs. Blick Art Materials, LLC, recently denied a motion to dismiss a website accessibility action, holding that Title III of the ADA (“Title III”), the NYS Human Rights Law and the New York City Human Rights Law all apply to websites – not only those with a nexus to brick and mortar places of public accommodation but also to cyber-only websites offering goods and services for sale to the public. …

Read the full post here.

On June 14, 2017, Delaware Governor John Carney signed into law a bill that amends Delaware’s Code relating to unlawful employment practices to prohibit employers from (i) engaging in salary-based screening of prospective employees where prior compensation must satisfy certain minimum or maximum criteria or (ii) seeking the compensation history of a prospective employee from the prospective employee or a current or former employer (the “Law”). Under the Law, “compensation” is defined broadly to include wages, benefits, or other compensation.

Similar to the New York City salary history ban, employers are not prohibited from discussing and negotiating salary expectations, so long as employers avoid asking for a prospective employee’s compensation history. Additionally, after an employment offer has been made and accepted, and compensation terms have been extended and accepted, the Law allows for the confirmation of a prospective employee’s compensation history. Any such compensation confirmation must be authorized by the employee in writing.

The Law adds to a growing wave of bans on compensation history inquiries. Similar restrictions have been enacted in Massachusetts (eff. July 1, 2018), Oregon (eff. October 9, 2017) and Puerto Rico (eff. March 8, 2018), as well as in New York City (eff. October 31, 2017), Philadelphia, and most recently, San Francisco (eff. July 1, 2018). Philadelphia’s pay history ban was supposed to take effect May 23, 2017, but the City delayed its enforcement in light of a legal challenge by the Chamber of Commerce for Greater Philadelphia. The law is not yet being enforced by the City.

Our colleague Joshua A. Stein, a Member of the Firm at Epstein Becker Green, has a post on the Retail Labor and Employment Law blog that will be of interest to many of our readers in the financial services industry: “Latest Website Accessibility Decision Further Marginalizes the Viability of Due Process and Primary Jurisdiction Defenses.”

Following is an excerpt:

In the latest of an increasing number of recent website accessibility decisions, in Gorecki v. Hobby Lobby Stores, Inc. (Case No.: 2:17-cv-01131-JFW-SK), the U.S. District Court for the Central District of California denied Hobby Lobby’s motion to dismiss a website accessibility lawsuit on due process and primary jurisdiction grounds.  In doing so, the Hobby Lobby decision further calls into question the precedential value of the Central District of California’s recent outlier holding in Robles v. Dominos Pizza LLC (Case No.: 2:16-cv-06599-SJO-FFM) which provided businesses with hope that the tide of recent decisions might turn in their favor. …

Read the full post here.

Our colleague Joshua A. Stein, a Member of the Firm at Epstein Becker Green, has a post on the Retail Labor and Employment Law blog that will be of interest to many of our readers in the financial services industry: “Nation’s First Website Accessibility ADA Trial Verdict Is In and It’s Not Good for Places of Public Accommodation.”

Following is an excerpt:

After years of ongoing and frequent developments on the website accessibility front, we now finally have – what is generally believed to be – the very first post-trial ADA verdict regarding website accessibility.  In deciding Juan Carlos Gil vs. Winn-Dixie Stores, Inc. (Civil Action No. 16-23020-Civ-Scola) – a matter in which Winn-Dixie first made an unsuccessful motion to dismiss the case (prompting the U.S. Department of Justice (“DOJ”) to file a Statement of Interest) – U.S. District Judge Robert N. Scola, Jr. of the Southern District of Florida issued a Verdict and Order ruling in favor of serial Plaintiff, Juan Carlos Gil, holding that Winn-Dixie violated Title III of the ADA (“Title III”) by not providing an accessible public website and, thus, not providing individuals with disabilities with “full and equal enjoyment.”

Judge Scola based his decision on the fact that Winn-Dixie’s website, “is heavily integrated with Winn-Dixie’s physical store locations” that are clearly places of public accommodation covered by Title III and, “operates as a gateway to the physical store locations” (e.g., by providing coupons and a store locator and allowing customers to refill prescriptions). …

Read the full post here.

Featured on Employment Law This Week: The Department of Labor’s Fiduciary Rule will go into effect on June 9th.

The controversial rule will require financial professionals who advise clients on retirement accounts to promote suitable products and act in the best interests of their clients. Secretary of Labor Alexander Acosta announced in a Wall Street Journal op-ed that there is “no principled legal basis” to delay the rule, although full enforcement won’t begin until 2018. The department intends to issue a Request for Information to seek public opinion on revisions and related exemptions.

Watch the segment below and read our recent post.

The Department of Labor (“DOL”) previously announced the applicability date for the DOL’s fiduciary rule (the “Fiduciary Rule”) will be June 9, 2017.  On May 22, 2017, in an opinion piece for the Wall Street Journal, Labor Secretary Alexander Acosta disclosed that, despite the Administration’s agenda of deregulation, the regulators are required to following existing law and must enforce the Fiduciary Rule.  On the same date, the DOL announced, in Field Assistance Bulletin 2017-02 (“FAB 2017-2”), that during a transition period from June 9, 2017 until January 1, 2018, the DOL will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the Fiduciary Rule and related exemptions or treat those fiduciaries as being in violation of the Fiduciary Rule and related exemptions.  The DOL explained that its general approach to implementation will emphasize assisting plans, plan fiduciaries, and financial institutions with compliance, rather than citing violations and imposing penalties on these parties.

Under FAB 2017-2, during the transition period, financial institutions and advisors are still required to comply with the “impartial conduct standards” in dealing with consumers, which require advisors to follow fiduciary norms and basic standards of fair dealing, which is described in more detail here.

The DOL further stated in FAB 2017-2 that it may still make additional changes to the Fiduciary Rule and the related exemptions. Any such changes would be based on the DOL’s on-going analysis of the issues raised in President Trump’s February 3, 2017 memorandum related to the effect of the Fiduciary Rule on the ability of Americans to gain access to retirement information and financial advice.  The DOL stated that it intends to issue a Request for Information (“RFI”) seeking additional public input on possible changes to the Fiduciary Rule and related exemptions.

In conjunction with FAB 2017-2, the DOL also issued a set of 15 FAQs that cover a variety of topics, including:  implementation of the Fiduciary Rule and related exemptions during the transition period from June 9, 2017 to January 1, 2018; possible future changes to the Fiduciary Rule; robo-advice providers; communications that are not subject to the Fiduciary Rule; and the seller’s carve-out.  A summary of certain of the more significant FAQs follows:

  • The phased implementation schedule applies to the Best Interest Contract Exemption (requiring customers be protected through contractual provisions that advisors will act in the best interests of the customer) and the Principal Transaction Exemption (imposing standards for advice regarding transactions between employer retirement plans and IRAs) during the transition period. Absent further action from the DOL, the transition period ends on January 1, 2018 and full compliance with all of the conditions of these exemptions will be required for financial institutions and advisers.
  • Parties subject to the Fiduciary Rule need not come into compliance until 11:59 PM local time on June 9, 2017 and will not be treated as fiduciaries under the Fiduciary Rule before then.
  • The RFI to be issued by the DOL will ask for comment on whether an additional delay in the January 1, 2018 applicability date would allow for more effective retirement investor assistance and help avoid excessive expense. The DOL notes that, by granting additional time, it may be possible for firms to create a compliance mechanism that is less costly and more effective than the interim measures that that they might otherwise use. By way of example, the DOL mentions that the possible use of “clean shares” in the mutual fund market to mitigate conflicts of interest is likely not going to be ready for implementation by January 1 2018. “Clean shares” sold by the broker would not include any form of distribution-related payment to the broker. Instead, the financial institution could set its own commission levels uniformly across the different mutual funds that advisers may recommend. As long as the compensation is reasonable, the DOL states that this approach would be an optimal means of reducing conflicts of interest with respect to mutual fund recommendations.
  • During the transition period, financial advisers subject to the BIC Exemption will satisfy its requirements by complying with the impartial conduct standards, even if the adviser recommends proprietary products or investments that generate commissions or other payments that vary with the investment recommended. The DOL, however, expects financial institutions to adopt the policies and procedures that they reasonably conclude are necessary to ensure that the advisers comply with the impartial conduct standards during the transition period.

Take-Aways

Financial advisers and institutions that provide investment advice must be in compliance with the Fiduciary Rule as of 11:59 PM on June 9, 2017. For the BIC Exemption, Principal Transaction Exemption and the prohibited transaction exemptions amended by the DOL in connection with the Fiduciary Rule, implementation will be phased, beginning on June 9, 2017 with full compliance on January 1, 2018, subject to further action by the DOL. During the transition period, financial institutions and advisors must work diligently and in good faith to comply with the impartial conduct standards of the Fiduciary Rule.

While Congress’ attention has most recently been focused on the American Health Care Act, that bill will most likely not be the only proposed legislation that Congress will consider in 2017. It appears that a tax reform plan (the “2017 Tax Proposal”), which could also have a wide-reaching impact, is also on the agenda.

If the 2017 Proposal includes provisions relating to defined contribution retirement plans sponsored by private employers, such as 401(k) plans, the impact will be felt by employers and investment managers, as well as by plan participants. While the Trump Administration has stated that the current version of its 2017 Tax Proposal does not reduce pre-tax contributions to 401(k) plans, speculation continues that a later draft may include curtailment of these contributions or other changes with a similar impact.

Reduction of benefits under defined contribution plans as a means of raising tax revenues is not a novel idea. The Tax Reform Act of 2014 (the “2014 Tax Proposal”), which was introduced in 2014 by former Republican Congressman Dave Camp, included various provisions that would have potentially reduced the availability of, or tax benefits under, 401(k) plans and other defined contribution plans.  A summary of certain of these provisions follows, along with an analysis of the potential impact on participants, plan sponsors and investment managers:

Reduce pre-tax contributions. Under the 2014 Tax Proposal, participant pre-tax deferrals into 401(k) plans would have been limited to 50% of the Internal Revenue Code limits for pre-tax contributions and catch-up contributions. Participants could make contributions in excess of the 50% limit (up to 100% of the limits) as Roth contributions, which are made on an after-tax basis. For 2017, the limits on pre-tax and catch-up contributions are $18,000 and $6,00 respectively. This provision would have made similar changes to plans sponsored by tax-exempt organizations and state and local governments.

Impact:  For participants who traditionally make the maximum pre-tax deferrals permitted, this provision would increase their annual income taxes and potentially reduce their retirement savings.  This provision could also decrease participant investments in 401(k) plans, which would reduce the amount of retirement plan assets available for management by investment managers.  Sponsor of plans that do not permit Roth contributions may feel obligated to amend their plans to permit Roth contributions, which would involve expenses that generally could not be paid from the plan.

Accelerate required minimum distributions. The 2014 Tax Proposal would have required participants who became 5% owners of their employer after age 70 ½, but before retirement, to begin to take distributions by April 1 of the following year. Under current law, the required date is April 1 of the year following retirement. Additionally, the 2014 Tax Proposal would have required that distributions to certain beneficiaries be made within five years following the death of the participant.. Under current law, distributions may, in some cases, be over the life expectancy of the beneficiary.

Impact:  This provision would accelerate income taxes on the minimum required distributions to 5% owners and certain beneficiaries, as minimum required distributions are not eligible for rollover to an IRA. Investment managers would feel the impact of this change to the extent that the affected participants reduce their contributions to pay the taxes due on these accelerated required minimum distributions.

Suspend inflation adjustment to contribution limits. The 2014 Tax Proposal would have suspended the inflation adjustment for the annual limit on employee pre-tax contributions to 401(k) plans and other defined contribution plans. Under current law, these limits are indexed annually for inflation.

Impact:  Suspension of the inflation adjustment on pre-tax contributions would reduce contributions to defined contribution plans.  This reduction would result in increased income taxes and potentially reduced retirement savings for participants and reduced retirement plan assets available for management by investment managers.

No new SEPs or SIMPLE 401(k) plans. The 2014 Tax Proposal would have prohibited employers from establishing new Simplified Employee Pensions (“SEPs”) and Savings Incentive Match Plans (“SIMPLE 401(k)s”). Under current law, certain employers may make contributions to SEPs up to the maximum permitted, which, for 2017, is the lesser of $54,000 and 25% of compensation. In a SIMPLE 401(k), which is available to employers with no more than 100 employees, participants may make deferrals on a pre-tax basis (up to $12,500 in 2017) and employers make either a 2% matching contribution for the employee deferrals or a 3% profit-sharing contribution to all eligible employees.

Impact:  By prohibiting adoption of new SEPs and SIMPLE 401(k)s, this provision would have restricted employers’ ability to design a compensation and benefits program that met the needs of their business and employees.  Their employees would be denied the ability to make pre-tax contributions and to defer income tax on those deferrals to a later date, which would affect their current tax obligations and, potentially their retirement savings.  This provision also would reduce the amount of retirement plan assets available for management by investment managers.

Conclusions

While the details of the final version of the 2017 Tax Proposal are not yet knowable, the 2014 Tax Proposal provides some insight into the types of provisions that ultimately could be included. Given the potential impact of the 2017 Tax Proposal on defined contribution plans, plan sponsors may want to defer significant amendments to their plans until the extent of that impact is more certain.

Amid challenges regarding Philadelphia’s upcoming law prohibiting employers from requesting an applicant’s salary history, the City has agreed not to enforce the upcoming law until after the court has finally resolved the injunction request.

The law, which was set to become effective May 23, 2017, has been challenged by the Chamber of Commerce for Greater Philadelphia (the “Chamber”). The Chamber’s lawsuit alleges that the pending law violates the First Amendment by restricting an employer’s speech because, among other reasons, “it is highly speculative whether the [law] will actually ameliorate wage disparities caused by gender discrimination.” It is also alleged that the law violates the Commerce Clause of the U.S. Constitution, the Due Process Clause of the Fourteenth Amendment, and Pennsylvania’s Constitution as well as its “First Class City Home Rule Act” by allegedly attempting to restrict the rights of employers outside of Philadelphia.

On April 19, a judge for the Eastern District of Pennsylvania stayed the effective date of the law, pending the resolution of the Chamber’s motion for a preliminary injunction. Prior to resolving the injunction, the parties will first brief the court on the Chamber’s standing to bring the lawsuit. This issue, regarding whether the Chamber is an appropriate party to bring this lawsuit, will be fully briefed by May 12, 2017, before the law is set to become effective. However, there are several other issues to be resolved as part of the lawsuit. The City’s decision to stay enforcement of the pending law until all issues are resolved is intended to help employers and employees avoid confusion during the pendency of the lawsuit.

Although the City of Philadelphia will not enforce this law in the interim, employers with any operations in Philadelphia should review their interviewing and hiring practices in case the lawsuit is decided in favor of the City. Further, employers in Massachusetts and New York City will also be subject to similar restrictions on inquiring about an applicant’s salary history when those laws go into effect. Massachusetts’ law is scheduled to become effective in July 2018, and New York City’s law will become effective 180 days after Mayor de Blasio signs the law, which may occur as soon as this week.

Advisers and financial institutions that provide fiduciary investment advice have an additional 60 days before having to comply with the final regulations defining who is a fiduciary under the Employee Retirement Income Security Act of 1974, as amended (the “Fiduciary Rule”).  On April 4, 2017, the Department of Labor (“DOL”) issued a final rule (the “Final Rule”), which delays the applicability date of the Fiduciary Rule until June 9, 2017 and also extends for 60 days the applicability dates of the Best Interest Contract Exemption (the “BIC Exemption”) and the Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRA (the “Principal Transaction Exemption” and collectively, the “Exemptions”).  Advisers and financial institutions relying on the Exemptions as of June 9 need only comply with the impartial conduct standards (as explained below), as the remaining conditions of the Exemptions will not become effective until January 1, 2018, if not withdrawn or revised.  The 60-day delay was proposed by the DOL on March 2, 2017, in response to a directive from President Trump to review the Fiduciary Rule (the “President’s Memorandum”), as explained in this article.

In the Final Rule, the DOL explains that, while its review of the Fiduciary Rule is likely to take more than 60 days, a delay in the application of the Fiduciary Rule and impartial conduct standards for an extended period would not be appropriate, given the DOL’s previous findings of ongoing injury to retirement investors. The impartial conduct standards require advisers and financial institutions to:

  • Give advice that is in the “best interest” of the retirement investor. This best interest standard has two chief components – prudence and loyalty;
  • Charge no more than reasonable compensation; and
  • Make no misleading statements about investment transactions, compensation, and conflicts of interest.

For this reason, the DOL concludes that it can best protect the interests of retirement investors in receiving sound advice, provide greater certainty to the public and minimize the risk of unnecessary disruption by extending the applicability date to June 9, 2017 for the Fiduciary Rule and the impartial conduct standards in the Exemptions. Compliance with the other conditions of the Exemptions, such as requirements to make specific disclosures and representations of fiduciary compliance in written communications with investors is not required until January 1, 2018, by which time the DOL intends to complete the examination directed by the Presidential Memorandum.

The DOL cites the following advantage of the approach set forth in the Final Rule:

  • With the June 9,2017 applicability date for the impartial conduct standards, provides retirement investors with the protection of basic fiduciary norms and standards of fair dealing, while honoring the directive in the President’s Memorandum to review any potential undue burdens.
  • By delaying implementation of the other conditions of the Exemptions until January 1, 2018, eliminates or mitigates the risk of litigation in the IRA marketplace, which was one one of the chief concerns expressed by the financial services industry in connection with the Fiduciary Rule and the Exemptions.
  • Addresses concerns of the financial services industry about uncertainty over whether they need to immediately comply with all of the requirements of the Exemptions.

The DOL leaves open the possibility that it may further extend the January 1, 2018 applicability dates or to grant additional interim relief. The DOL states that the Final Rule does not foreclose the DOL from considering and making changes to the Fiduciary Rule and the Exemptions, based on new evidence or analyses developed pursuant to the President’s Memorandum.

Takeaways for Advisers and Financial Institutions

Effective June 9, 2017, advisers and financial institutions that provide fiduciary investment advice to retirement plan investors will have to comply with the Fiduciary Rule and the impartial conduct standards in the Exemptions. Since, in the view of the DOL, these provisions are generally the least controversial aspects of the DOL’s changes to the rules related to fiduciary investment advice, compliance with the June deadline most likely will not be difficult, especially in light of the 60-day delay.

However, advisers and financial institutions should also look past June 9 to the January 1, 2018 deadline and determine if they will delay or adjust their implementation schedule to meet that deadline. Those advisers and institutions that assume the Fiduciary Rule and Exemptions will be significantly revised or rescinded may want to consider significantly delaying the implementation process pending additional guidance from the DOL.  Alternatively, some of these advisers and institutions may want to consider whether they will incorporate all or portions of the Fiduciary Rule and Exemptions into their business practices, even if rescinded by the DOL.