On October 11, 2016, the United States Court of Appeals for the Seventh Circuit vacated the July 28, 2016 decision of a Seventh Circuit panel holding that sexual orientation discrimination is not sex discrimination under Title VII (discussed in our August 2, 2016 article) and granted rehearing en banc. En banc oral argument is scheduled for November 30, 2016.
Our colleague Peter A. Steinmeyer, a Member of the Firm at Epstein Becker Green, has a post on the Trade Secrets & Noncompete Blog that will be of interest to many of our readers in the financial services industry: “Employer’s Waiver Of Non-Compete Period In Order To Avoid $1 Million Payment Held Ineffective.”
Following is an excerpt:
In Reed v. Getco, LLC, the Illinois Court of Appeals was recently faced with an interesting situation: under a contractual non-compete agreement, the employer was obligated to pay the employee $1 million during a six month, post-employment non-competition period. This was, in effect, a form of paid “garden leave” — where the employee was to be paid $1 million to sit out for six months – perhaps to finally correct his golf slice or even learn the fine art of surfing. It was a win-win situation that seemingly would be blessed by most courts; it was for a reasonable length of time, and the employee was set to be paid very handsomely for sitting out. Accordingly, it is doubtful that most judges would have had an issue with it.
Yet here, the employer apparently had second thoughts – and just over a week after the employee resigned, the employer notified the employee that it was waiving the six month non-compete, allowing him to work anywhere, and therefore not paying him any portion of the promised $1 million. …
One option to control such costs is to make explicit in the agreement that the employer has the right to shorten any non-compete or garden leave period, and that the employer also has an accompanying right to proportionately reduce or eliminate any accompanying payment obligation. The absence of such an express contractual authorization was the death knell for Getco in this case.
Read the full post here.
When: Tuesday, October 18, 2016 8:00 a.m. – 4:00 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:
- Latest Developments from the NLRB
- Attracting and Retaining a Diverse Workforce
- ADA Website Compliance
- Trade Secrets and Non-Competes
- Managing and Administering Leave Policies
- New Overtime Rules
- Workplace Violence and Active-Shooter Situations
- Recordings in the Workplace
- Instilling Corporate Ethics
This year, we welcome Marc Freedman and Jim Plunkett from the U.S. Chamber of Commerce. Marc and Jim will speak at the first plenary session on the latest developments in Washington, D.C., that impact employers nationwide.
We are also excited to have Dr. David Weil, Administrator of the U.S. Department of Labor’s Wage and Hour Division, serve as the guest speaker at the second plenary session. David will discuss the areas on which the Wage and Hour Division is focusing, including the new overtime rules.
In addition to workshop sessions led by attorneys at Epstein Becker Green – including some contributors to this blog! – we are also looking forward to hearing from our keynote speaker, Former New York City Police Commissioner William J. Bratton.
View the full briefing agenda 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 Peter L. Altieri, a Member of the Firm at Epstein Becker Green, has a post on the Trade Secrets & Noncompete Blog that will be of interest to many of our readers in the financial services industry: “Non-Solicit Violation: $4.5 Million Punitive Damage Award Upheld.”
Following is an excerpt:
Rarely do we see punitive damages being awarded in cases involving the movement of employees and information between firms. The Superior Court of Pennsylvania last week affirmed a punitive damage award granted by a Judge of the Court of Common Pleas in such a matter, albeit which also found tort liability against the new employer and the five former employees.
The decision in B.G. Balmer & Co., Inc. v. Frank Crystal & Co. Inc., et al. sets forth a classic example of “bad leavers” and a complicit new employer. Confidential information concerning clients was copied and given to the new employer. The senior employees, on Company time and using Company facilities, conspired with the new employer to hire the junior employees and solicit existing clients, including the largest and best clients of the Company. Complete indemnification was provided by the new employer to the employees. Personnel files were purloined and not returned upon request. Upon resignation they immediately solicited the company’s largest client and did so using trade secret and confidential information of the Company while disparaging the Company in the process. …
The conduct of the defendants in Balmer provides a roadmap on how not to recruit employees from a competitor and the resulting punitive damages award should be a further deterrent to all bad leavers and their new employers.
Read the full post here.
We previously reported that on June 9, 2015, six federal agencies (“Agencies”) subject to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Act”) issued much-anticipated joint final standards (“Final Standards”) in accordance with Section 342 of the Act for assessing the diversity policies and practices of the entities that they regulate (“Covered Entities”). See our earlier client advisory for an overview of the Final Standards which are divided into five general categories: (i) organizational commitment to diversity and inclusion, (ii) workforce profile and employment practices, (iii) procurement and business practices (or supplier diversity), (iv) practices to promote transparency of organizational diversity and inclusion, and (v) entities’ self-assessment.
The Final Standards were published in the Federal Register and became effective on June 10, 2015. It has now been over a year since the issuance and publication of the joint final standards with little further guidance provided to employers.
Just last month, however, a Frequently Asked Questions (“FAQs”) on the Final Standards was issued by the Board of Governors Reserve System, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency. In the FAQs, the agencies set forth several key points:
- Assessments of regulated entities should be self-assessments.
- It is recommended that self-assessments cover the standards set forth in the Final Standards but can include additional issues as well.
- Self-assessments should be conducted on an annual basis.
- Information concerning a regulated entity’s self-assessment should be voluntarily provided to the Director of the Office of Women and Minority Inclusion of the entity’s primary federal regulator within 90 days of the close of the calendar year.
- Information concerning a regulated entity’s diversity and inclusion efforts should be published on its website or otherwise communicated.
- In terms of defining “diversity”, there is no preclusion in an entity defining it more broadly than including women and minorities.
- Regulated entities’ self-assessments of their diversity policies and practices, and the provision of such assessments to their respective regulators, are voluntary.
The agencies further clarify that an entity’s diversity policies and practices will not be assessed by its primary federal regulator and examinations by regulators will not consider compliance with the Final Standards. Rather, the agencies are relying on the regulated entities to engage in self-assessment. In addition, the agencies state that they will be using the information provided through self-assessments to monitor progress and trends, identify best practices and possibly highlight certain practices or successes anonymously.
While compliance with the Final Standards is not mandatory, many firms are interested in improving their diversity and inclusion efforts and can look to the Final Standards for ways to engage in self-analysis and development. In this vein, employers should consider in what ways they are currently implementing actions envisioned by the Final Standards and what other actions may be taken. Even this exercise can be beneficial. Many employers that go through this analysis identify shortcomings and develop goals and plans for improvement, all of which can go a long way to ultimately increasing diversity.
Twice in the past two weeks, the Securities and Exchange Commission (“SEC” or “Commission”) issued a cease-and-desist order settling proceedings against companies for using confidentiality and waiver of claims provisions in employee separation or severance agreements that violate an SEC rule promulgated after passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The rule in question is designed to encourage and allow whistleblowers to freely disclose information to the SEC without impediments and ensure that they are (and remain) entitled to collect monetary incentive awards if the Commission determines that they are eligible for such awards. In both cases, the companies were required, as part of the settlement of claims without admission of liability, to take affirmative remedial actions and pay fines of hundreds of thousands of dollars as the result of fairly typical language in their separation agreements. In addition, the SEC has signaled that not only will it take action in response to separation agreements that may limit an employee’s ability to communicate with the SEC, but also it will oppose attempts by employers to limit an employee’s right to receive whistleblower incentive awards.
To read more, click here for our Act Now Advisory
Our colleague Steven M. Swirsky, a Member of the Firm at Epstein Becker Green, has a post on the Management Memo blog that will be of interest to many of our readers in the financial services industry: “Can Your Corporate Social Responsibility Policy Make You a Joint-Employer With Your Suppliers? The NLRB May Find That It Does”
Following is an excerpt:
The National Labor Relations Board (NLRB or Board), which continues to apply an ever expanding standard for determining whether a company that contracts with another business to supply contract labor or services in support of its operations should be treated as a joint employer of the supplier or contractor’s employees, is now considering whether a company’s requirement that its suppliers and contractors comply with its Corporate Social Responsibility (CSR) Policy, which includes minimum standards for the contractor or supplier’s practices with its own employees can support a claim that the customer is a joint employer. …
Employers are well advised to review the full range of their operations and personnel decisions, including their use of contingent and temporaries and personnel supplied by temporary and other staffing agencies to assess their vulnerability to such action and to determine what steps they make take to better position themselves for the challenges that are surely coming.
Read the full post here.
In a rare case interpreting the Worker Adjustment and Retraining Notification (“WARN”) Act “sale of business” exception, the U.S. Court of Appeals for the 8th Circuit recently held in Day v. Celadon Trucking Servs., Inc., 8th Cir., No. 15-1711 (July 5, 2016) that a buyer of a business remained liable under WARN to the seller’s employees to whom the buyer did not make offers of employment, despite provisions in the asset purchase agreement (“APA”) that placed all WARN Act liability on the seller.
The case arose out of a typical asset purchase transaction between Continental Express, Inc. (“Continental”) and Celadon Trucking Services, Inc. (“Celadon”). The plaintiffs were a class of 449 former Continental employees who were not offered jobs with Celadon when it purchased Continental’s trucking business in December 2008.
The parties’ APA contractually required the seller Continental to retain the employees who were not made offers by Celadon in employment status for a 14 day period after the deal closed. Continental then terminated the remainder of the employees, however, it did not issue WARN notice to them. The APA also contractually allocated all WARN Act liability to Continental, however, having liquidated the business, Continental was unable to satisfy that liability. Therefore, the plaintiffs pursued their WARN Act claim against the buyer Celadon.
Under the WARN “sale of business” exception, the seller is responsible for providing WARN notice for terminations occurring up to and including the effective date of the sale, and the buyer is responsible for providing notice for terminations after the date of the sale. In addition, under WARN the employees of the seller are statutorily deemed to be employees of the buyer immediately after the effective date of the sale. 29 U.S.C. § 2101(b)(1). This provision primarily serves two related purposes – that employees who are hired by the buyer are not considered to have experienced a true “loss of employment” for WARN purposes, and that one of the parties (whether seller or the buyer) remains obligated to issue WARN notice to seller employees who are not hired by the buyer and actually lose employment.
In Day the court rejected the buyer’s argument that was not responsible for WARN liability to the remainder of the seller’s employees because the APA stipulated that the employees remained the seller’s employees after the close of the deal. The court held that under the WARN “sale of business” exception, the buyer was ultimately liable for the WARN obligation to the employees who were terminated after the sale regardless of the APA language.
The key takeaway of the Day case for parties to a corporate transaction is that WARN liabilities are governed by statute, and the implications of WARN obligations and the sale of business provision of WARN must be carefully evaluated. The case highlights that although the sale of business exception may be helpful to buyers in absolving them of WARN obligations to employees who they hire, the application of this important WARN “exception” may also result in the buyer remaining liable for the seller’s failure to provide WARN notice to employees whom the buyer does not offer continued employment, particularly where neither party satisfied the obligation to issue WARN notice or provide the employees with WARN pay in lieu of notice.
Bound by precedent, on July 28, 2016, a panel of the U.S. Court of Appeals for the Seventh Circuit held that sexual orientation discrimination is not sex discrimination under Title VII of the Civil Rights Act of 1964. The panel thereby affirmed the decision of the U.S. District Court for the Northern District of Indiana dismissing the claim of Kimberly Hively, a part-time adjunct professor at Ivy Tech Community College, that she was denied the opportunity for full-time employment on the basis of her sexual orientation.
The importance of the Seventh Circuit panel’s opinion is not in its precise holding but both (i) the in-depth discussion of Seventh Circuit precedence binding it, the decisions of all of the U.S. Courts of Appeals (except the Eleventh Circuit) that have held similarly, and Congress’s repeated rejection of legislation that would have extended Title VII’s protections to sexual orientation, and (ii) the multifaceted bases for its entreaties to the U.S. Supreme Court and the Congress to extend Title VII’s prohibition against sex discrimination to sexual orientation discrimination.
The Seventh Circuit panel highlighted the following reasons as to why the Supreme Court or Congress must consider extending Title VII’s protections to sexual orientation:
- The EEOC ruled last year that sexual orientation is sex discrimination under Title VII. The Equal Employment Opportunity Commission (EEOC) held for the first time, in 2015, that “sexual orientation is inherently a ‘sex-based consideration” and that sexual orientation discrimination is “necessarily an allegation of sex discrimination under Title VII.” The EEOC’s rationale was that sexual orientation discrimination (i) “necessarily entails treating an employee less favorably because of the employee’s sex”; (ii) is associational discrimination when an employer discriminates against an LGBT employee on the basis of the sex of the person they marry or date; and (iii) is a form of discrimination based on gender stereotyping. Although the EEOC’s decision applies only to government employees, its reasoning would apply to private-sector employment. Further, while the EEOC’s decisions are not binding on the courts, they are entitled to some deference, given that the EEOC is the agency primarily charged with enforcing Title VII.
- The distinction between sex stereotyping and sexual orientation discrimination is arbitrary. The U.S. Supreme Court declared in 1989 that Title VII protects employees who fail to comply with typical gender stereotypes. On that basis, courts have recognized claims for sex stereotyping as constituting claims for sex discrimination under Title VII, although, in doing so, courts have had to draw the line between sex stereotyping discrimination, which is prohibited under Title VII, and sexual orientation discrimination, which is not prohibited under Title VII. This has led to the conclusion by many courts that the line between sex stereotyping discrimination and sexual orientation discrimination is arbitrary.
- LGBT rights are protected in other contexts and other jurisdictions. The Supreme Court has protected LGBT rights under constitutional analyses by (i) striking down a state constitutional amendment prohibiting the protection of LGBT persons from discrimination on the basis of sexual orientation, (ii) protecting the right to engage in private consensual sexual conduct without government intervention, (iii) striking down the Defense of Marriage Act, and (iv) declaring the right of same-sex couples to marry in every state. Also, 22 states (and the District of Columbia) prohibit sexual orientation discrimination in employment, and 12 additional states prohibit sexual orientation discrimination in government employment.
- Title VII’s association protections accorded on the basis of race should apply equally to LGBT individuals. The EEOC and the courts protect employees in interracial relationships—whether marriage, friendships, and other associations. The Seventh Circuit panel reasoned that, since the same standard of protection is accorded to each of Title VII’s protected categories, the same protection should be accorded to individuals in a relationship, regardless of sex.
- The definition of “sex” would not need to be expanded. The Supreme Court has already said, “Congress intended to strike at the entire spectrum of disparate treatment of men and women resulting from sex stereotypes.”
The Seventh Circuit panel concluded that the EEOC, many courts, and even the Seventh Circuit panel itself do not condone a legal structure that tolerates employment discrimination on the basis of sexual orientation. However, until the Supreme Court issues an opinion or Congress enacts legislation that extends Title VII’s protection against sex discrimination to sexual orientation discrimination, the courts must adhere to precedent.
What the Decision Means for Employers
The takeaway for employers is not that Title VII fails to currently prohibit sexual orientation discrimination in employment. Rather, the Seventh Circuit panel’s decision reminds us that the EEOC and several district courts have held that Title VII’s prohibition against sex discrimination extends to sexual orientation discrimination and close to half of the states prohibit sexual orientation discrimination in employment.
Our colleagues Adam C. Abrahms and Steven M. Swirsky, attorneys at Epstein Becker Green, have a post on the Management Memo blog that will be of interest to many of our readers in the financial services industry: “NLRB Drops Other Shoe on Temporary/Contract Employee Relationships: Ruling Will Require Bargaining In Combined Units Including Employees of Multiple Employers – Greatly Multiplies Impact of BFI Expanded Joint Employer Test.”
Following is an excerpt:
The National Labor Relations Board (“NLRB” or “Board”) announced in its 3-1 decision in Miller & Anderson, 364 NLRB #39 (2016) that it will now conduct representation elections and require collective bargaining in single combined units composed of what it refers to as “solely employed employees” and “jointly employed employees,” meaning that two separate employers will be required to join together to bargain over such employees’ terms and conditions of employment.” …
The potential for confusion and uncertainty is enormous. In an attempt to minimize these concerns, the Board majority stated that the so-called user employer’s bargaining obligations will be limited to those of such workers’ terms and conditions that it possesses “the authority to control.”
Read the full post here.