Financial Services Employment Law

News, Updates, and Insights for Financial Services Employers

NLRB Rules That Employees Can Use Company Email for Union Organizing – Affects All Employers

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Our colleague Steven Swirsky at Epstein Becker Green wrote an advisory on an NLRB ruling that affects all employers: “NLRB Holds That Employees Have the Right to Use Company Email Systems for Union Organizing – Union and Non-Union Employers Are All Affected.” Following is an excerpt:

In its Purple Communications, Inc., decision, the National Labor Relations Board (“NLRB” or “Board”) has ruled that “employee use of email for statutorily protected communications on nonworking time must presumptively be permitted” by employers that provide employees with access to email at work.  While the majority in Purple Communications characterized the decision as “carefully limited,” in reality, it appears to be a major game changer.  This decision applies to all employers, not only those that have union-represented employees or that are in the midst of union organizing campaigns.

Under this decision, which applies to both unionized and non-union workplaces alike, if an employer allows employees to use its email system at work, use of the email system “for statutorily protected communications on nonworking time must presumptively be permitted . . . .” In other words, if an employee has access to email at work and is ever allowed to use it to send or receive nonwork emails, the employee is permitted to use his or her work email to communicate with coworkers about union-related issues.

Read the full advisory here.

Considerations for Employee Benefit Programs That Benefit Employers and Employees

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My colleague Lee T. Polk authored Epstein Becker Green’s recent issue of its Take 5 newsletter.   This Take 5 features five considerations suggesting the advantages of employee benefit plans as programs that are beneficial to both employers and employees.

  1. Tax Aspects of Qualified Retirement Plans Can Save Money For Both Employers and Employees
  2. The Benefits of a Contractual Claims Limitation Period
  3. The Benefits of a Contractual Venue Selection Clause
  4. The Standard of Judicial Review in the Context of Top Hat Plan Benefit Disputes
  5. Fiduciary Exception to the Attorney-Client Privilege in Plan Administration

Read the full newsletter here.

SEC Office of the Whistleblower Files Annual Report to Congress on Dodd-Frank Whistleblower Program

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Last week, the U.S. Securities and Exchange Commission’s Office of the Whistleblower, created in 2011 pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, released its mandated report to Congress on operations for Fiscal Year 2014, ending on September 30, 2014.  A number of interesting facts, statistics and developments were reported.  Here is a selection of particularly relevant highlights:

  • FY 2014 was the most active year yet in terms of whistleblower awards. The SEC has made awards to 14 whistleblowers since inception of the program, including 9 in 2014 alone.
  • “To date, over 40% of the individuals who received awards were current or former employees;” another 20% were company consultants or contractors, or had been solicited to act as consultants.
  • According to the SEC, over 80% of those receiving awards reportedly raised their concerns internally to supervisors or compliance professionals before going to the SEC, which means nearly 20% are still skipping internal whistleblower reporting policies and systems.
  • “Several of the cases in which a whistleblower received an award concerned firms involved in the financial services industry, with some involving broker-dealers.”  Alleged wrongdoing included on-going Ponzi schemes, false or misleading statements in offering memoranda or marketing materials, and false pricing information.
  • On September 22, 2014, the SEC authorized payment of its largest whistleblower award to date — over $30 million.  This was the fourth overseas whistleblower to receive an award, highlighting that whistleblowers around the world are eligible for awards and the importance for employers of implementing whistleblower and compliance policies globally.
  • On August 29, 2014, the SEC authorized its first award to a compliance or audit professional – over $300,000 to an auditor who blew the whistle internally and waited 120 days before reporting to the SEC, during which time the company had taken no action on the allegations.  The auditor therefore satisfied one of the exceptions to exclusion from eligibility for awards for compliance and audit professionals.
  • On July 31, 2014, the SEC issued an award of over $400,000 to an independent agent of an insurance company, who had “aggressively worked internally to bring the securities law violation to the attention of appropriate personnel in an effort to obtain corrective action” regarding misleading descriptions of financial products.  Although the SEC did not disclose the name of the whistleblower or the company, the whistleblower himself went to the press after receiving the award, identifying himself as well as his employer in telling his story.
  • On June 16, 2014, the SEC exercised its own anti-retaliation enforcement authority for the first time, charging a hedge fund advisory firm with retaliating against its head trader for reporting prohibited principal transactions to the SEC.  The alleged retaliatory acts included removing the whistleblower from his position and making him a compliance assistant, stripping him of supervisory responsibility, and making him investigate the very wrongdoing he reported to the SEC without any meaningful resources to do so.  The firm and its owner paid $2.2 million to settle the charges – with full disclosure by the SEC of, and publicity regarding, the identity of the firm and its owner.

  The full report is available on the SEC’s Office of Whistleblower website – click here.

Complimentary Webinar – A Year in Review: What’s New in the World of Trade Secrets and Non-Competes

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To register for this webinar, please click here.

Please join us on Tuesday, December 16, 2014 at 1:00 p.m. EST as we review developments in 2014 and what employers should expect and prepare for in 2015.

During this one hour webinar, we will discuss:

  • Recent decisions regarding what constitutes adequate consideration for a non-compete
  • The trend toward criminal prosecution of trade secret theft, especially in the international context
  • Interesting decisions determining choice-of-law issues
  • New and pending state and federal legislation

This webinar is hosted by Epstein Becker Green and presented by:

David J. Clark
Robert D. Goldstein
Peter A. Steinmeyer

Registration is complimentary.  To register for this webinar, please click here.

NLRB’s Murphy Oil Decision Reaffirms Board’s Position on Class or Collective Action Waivers Despite Rejection by Federal Courts

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When the Supreme Court held in American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013),  that the Federal Arbitration Act does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery, many employers in the financial services industry, if they had not done so already, strengthened the language of  their mandatory arbitration provisions and policies to include explicit class action and class arbitration waivers.  Notwithstanding the American Express decision and earlier Supreme Court decisions that have paved the way for the enforceability of contractual class action waivers, however, the National Labor Relations Board has been saying, in essence, “not so fast.”

On Epstein Becker Green’s Management Memo blog, my colleague Jill Barbarino reviews the National Labor Relations Board’s ruling in Murphy Oil that revisited and reaffirmed its position that employers violate the National Labor Relations Act by requiring employees covered by the Act (virtually all nonsupervisory and non-managerial employees of most private sector employees, whether unionized or not) to waive, as a condition of their employment, participation in class or collective actions.

Click here to read the Management memo blog post in its entirety.

Labor and Employment Cases Predominate in the Supreme Court’s Current Term

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By Stuart M. Gerson

While by most accounts the current term of the Supreme Court is generally uninteresting, lacking anything that the popular media deem to be a blockbuster (the media’s choice being same-sex marriage or Affordable Care Act cases), the docket is heavily weighted towards labor and employment cases that potentially affect employers in all industries including  retail, health care, financial services, hospitality, and manufacturing.  In chronological order of argument they are as follows.

The Court already has heard argument in Integrity Staffing Solutions, Inc. v. Busk, No. 13-433, which concerns whether the Portal-to-Portal Act, which amends the Fair Labor Standards Act, requires employers to pay warehouse employees for the time they spend, which in this case runs up to 25 minutes, going through post-shift anti-theft screening. Integrity is a contractor to Amazon.com, and the 9th Circuit had ruled in against it, holding that the activity was part of the shift and not non-compensable postliminary activity. Interestingly, DOL is on the side of the employer, fearing a flood of FLSA cases generated from any activity in which employees are on the employers’ premises.  This case will affect many of our clients and should be monitored carefully.

On November 10th, the Court will hear argument in M&G Polymers USA,  LLC v. Tackett, No. 13-1010, which I see as an important case, though most commentators don’t seem to realize it. The question involves the so-called “Yard-Man Presumption” in the context of whether the courts should infer that silence as to the duration of retirement health insurance benefits established under a CBA are meant to apply for the lifetimes of covered retirees.

In two other cases involving an issue of discretion and judicial review set for argument on December 1st, Perez v. Mortgage Bankers Ass’n, No. 13-1041; and Nichols v. Mortgage Bankers Ass’n, No. 13-1052, the Court will decide whether DOL violated the Administrative Procedure Act by not affording notice-and-comment rulemaking to a reversal of a wage and hour opinion letter issued in 2006.  The DC Circuit ruled against DOL in both cases (one in which DOL is the petitioner; another in which affected loan officers are petitioners), rejecting DOL’s contention that the policy change was an “interpretive rule” not subject to APA notice-and-comment strictures. The case at bar itself doesn’t involve much, but as a precedent concerning how free agencies like DOL (a particular worry to employers during this administration), are to regulate unilaterally, free of judicial oversight it will be important, especially in the DC Circuit where there are so many agency cases.

On December 3rd, the Court will hear argument in Young v. United Parcel Service, Inc., No. 12-1226, which poses whether the Pregnancy Discrimination Act requires an employer to accommodate a pregnant woman with work restrictions related to pregnancy in the same manner as it accommodates a non-pregnant employee with the same restrictions, but not related to pregnancy. The 4th Circuit had ruled in favor of the company, which offered a “light duty program” held to be pregnancy blind to persons who have a disability cognizable under the ADA, who are injured on the job or are temporarily ineligible for DOT certification. Ms. Young objects to being considered in the same category as workers who are injured off the job. This case, too, will create a precedent of interest to at least some of our clients. Of  note, last week United Parcel Service sent a memo to employees announcing a change in policy for pregnant workers advising that starting January 1, the company will offer temporary light duty positions not just to workers injured on the job, which is current policy, but to pregnant workers who need it as well. In its brief UPS states “While UPS’s denial of [Young’s] accommodation request was lawful at the time it was made (and thus cannot give rise to a claim for damages), pregnant UPS employees will prospectively be eligible for light-duty assignments.”  The change in policy, UPS states, is the result of new pregnancy accommodation guidelines issued by the Equal Employment Opportunity Commission, and a growing number of states passing laws mandating reasonable accommodation of pregnant workers.

In a case not yet fully briefed or set for argument, Mach Mining LLC v. EEOC, No.13-1019, the Court will  decide whether the EEOC’s pre-suit conciliation efforts are subject to judicial review or whether the agency has unreviewable discretion to decide the reasonableness of settlement offers. The Seventh Circuit has ruled in favor of the EEOC in the instant case, but every other Circuit that has considered the matter has imposed a good-faith-effort standard upon the EEOC.

On October 2nd, the Supreme Court granted cert. in a Title VII religious accommodation case, EEOC v. Abercrombie & Fitch Stores, Inc., No. 14-86. The case concerns whether an employer is entitled to specific notice, in this case  of a religious practice – the wearing of a head scarf —  from a prospective employee before having the obligation to accommodate her.  In this case, the employer did not hire a Muslim applicant. The Tenth Circuit ruled that the employer was entitled to rely upon its “look” policy and would not presume religious bias where the employee did not raise the underlying issue. Retail clients and others will be affected by the outcome.

Finally, also on October 2nd, the Supreme Court granted cert. in Tibble v. Edison Int’l, which raises the issue of whether retirement plan fiduciaries breach their duties under ERISA by offering higher-cost retail-class mutual funds when identical lower-cost institutional class funds are available and the plan fiduciaries initially chose the higher-cost funds as plan investments more than six years (the notional statute of limitations) before the claim was filed. This issue has been around for years and the Court finally will resolve it.   The dueling rationales have been discussed in depth on many financial pages, for example recently in the New York Times. The potential importance of the case relates to whether trustees have a separate duty to reconsider their past decisions under a continuing violation theory that would supersede ERISA’s statute of limitations. The Solicitor General, in an amicus brief, argued on behalf of the United States that trustees of ERISA plans owed a continuing duty of prudence, which they breach by failing to research fund options and offer available lower-cost institutional-class investments during the six-year period prior to the filing of the complaint. The Court apparently took the case on the SG’s recommendation that noted the unresolved split on the issue in the Circuits.  If the Solicitor General proves correct, and the Petitioner prevails, fiduciaries all across the employment spectrum will be exposed to greater risk of scrutiny for their past actions.

More will follow as developments warrant.

Act Now Advisory – Protecting Your Workforce: What You Need to Know About Ebola

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The Ebola virus disease (“Ebola”) has become a worldwide threat, which, among many other effects, has forced employers to think about how to protect their employees. Employers also must consider how Ebola might impact employment policies and procedures, including, but not limited to, those addressing attendance, leaves of absence, discipline, and medical testing.

My colleagues Susan Gross SholinskyFrank C. Morris, Jr.;William J. MilaniSteven M. SwirskyNancy L. Gunzenhauser; and Maxine Adams have written a comprehensive Act Now advisory providing legal framework of best practices and legal risks pertaining to Ebola.

Click here to read the advisory in its entirety.

Eight Ways for Employers to Encourage Potential Whistleblowers to Report Internally (Video)

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One of many changes wrought by passage of the Dodd-Frank Act is that employers cannot compel potential whistleblowers to report known or suspected unlawful activity to the company before reporting such information to the Securities Exchange Commission (SEC).  Employees are eligible for a bounty award from the SEC even if they do not first – or ever – report internally. The SEC’s position is that mandatory internal reporting could discourage at least some potential whistleblowers.  Consistent with that position, SEC Whistleblower Rule 21F–17 provides:

No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement (other than agreements dealing with information covered by [certain sections of the rules]) with respect to such communications. (17 C.F.R. § 240.21F-17(a)) (emphasis added).

In the following video clip from a recent webinar, I discuss some of the actions employers can take to try to encourage and incentivize employees to report wrongdoing internally:

 

For more of my comments on whistleblowers, see my Videos page.

 

FINRA Reminds Employers That Employees Can Communicate with FINRA and Employers Need to Let Them Know!

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By Kenneth DiGia and Lauri F. Rasnick

FINRA just issued a reminder regarding its views on confidentiality provisions and confidentiality stipulations.

Settlement Agreements

In Regulatory Notice 14-40, FINRA follows up on its prior Notice to Members 04-44, in which it had cautioned firms about the use of certain provisions in settlement agreements that impede, or have the potential to impede, FINRA investigations and the enforcement of FINRA actions.  Specifically, FINRA had addressed settlement agreement provisions which limited, prohibited or discouraged employees from disclosing settlement terms or underlying facts in dispute to FINRA or securities regulators.  FINRA proposed acceptable language to be included in settlement agreements or similar contracts which contain confidentiality obligations.

FINRA now takes its position a step further and proposes revised sample language for employers to include.  The new sample provision is as follows:

Any non-disclosure provision in this agreement does not prohibit or restrict you (or your attorney) from initiating communications directly with, or responding to an inquiry from, or providing testimony before, the SEC, FINRA, any other self-regulatory organization or any other state or federal regulatory authority, regarding this settlement or its underlying facts or circumstances.

The primary difference in the language that FINRA has now suggested as opposed to the prior provision it set forth is with regard to maintaining an employee’s ability to initiate communications directly with the SEC, FINRA or any other self-regulatory organization or any other state or federal regulatory authority.  Indeed, FINRA’s recent notice was meant to remind firms that confidentiality provisions – whether contained in settlement agreements, confidentiality agreements or other contracts – cannot be used to prohibit or restrict individuals from initiating communications.  According to FINRA, confidentiality provisions should expressly authorize such communications.

Confidentiality Stipulations

The Recent Notice also discussed the need for clarity in confidentiality stipulations or orders which may be entered into during arbitration proceedings to protect the confidentiality of proprietary/confidential materials exchanged by the parties or produced by third parties during arbitration. Such confidentiality orders or stipulations generally prohibit the use of materials designated as confidential outside of the arbitration proceeding.  Notice 14-40 warns that such stipulations or orders cannot restrict or prohibit the disclosure of documents to the SEC, FINRA or other self-regulatory organization or any other state or federal regulatory authority.  While the Notice focuses on stipulations and orders entered into during arbitration proceedings, the message would apply equally to stipulations entered into during, for example, court or administrative proceedings.

Regulatory Notice 14-40 is at least the fourth reminder by FINRA (and its predecessor the NASD) that separation agreements entered into must not impede its investigatory functions.  Given these repeated reminders, employers should review their separation agreements to ensure that former employees are told that they remain free to communicate with FINRA (and other related entities) regarding any such terms or their underlying facts and circumstances.  Other employment documents containing confidentiality provisions, such as confidentiality agreements, handbooks, and employment agreements should similarly be reviewed for compliance.  Employers should also ensure that confidentiality agreements used in arbitrations or other proceedings likewise do not restrict the investigatory authority of FINRA (and other related entities).  Failure to do so may result in FINRA disciplinary proceedings on the basis that such conduct is “inconsistent with just and equitable principles of trade.”

EBG’s 33rd Annual Labor and Employment Client Briefing: Recap of Financial Services Workshop

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At the Firm’s 33rd Annual Labor and Employment Client Briefing, Lauri Rasnick and John Fullerton spoke on the financial services industry panel about the impact of increased compliance obligations on the employment relationship and developments in the areas of applicant screening, whistleblower complaints, internal investigations, and diversity and inclusion.

Here are a few takeaways from that session:

  • Eleven states have enacted legislation prohibiting the use of consumer credit reports in making employment decisions.  There has been a dramatic increase in state and local “ban the box” legislation prohibiting inquiry into criminal history on employment applications, as 13 states and over 70 cities and counties now have “ban the box” laws.  Most of these statutes, however, provide important exceptions for certain types of financial services industry employers, and / or recognize that financial services employers may have certain criminal background screening obligations imposed by federal law or FINRA
  • The pace of monetary awards by SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) whistleblower program has increased in 2014; the most recent of which, and the largest to date, was an award of over $30 million to a single whistleblower.  As this incentive program receives increasing attention and publicity, it creates tremendous tension for employers seeking to encourage employees to report any alleged compliance issues or violations internally before reporting them to the SEC, without impeding employees from reporting to the SEC if they so choose.
  • In light of the diversity and inclusion assessment standards proposed in October 2013 by the Federal Reserve Board, CFPB, FDIC, NCUA, OCC, and SEC, pursuant to Section 342 of Dodd-Frank, it is important that financial services industry employers promote diversity and inclusion in the workplace.  There is increasing pressure on employers who do not otherwise have an obligation to do so (as the result, for example, of being a federal contractor) to create concrete diversity and inclusion policies, use metrics to track diversity in their workforces, and incorporate diversity considerations into strategic plans for hiring, retention, and promotion.
  • Complaints from employees or third parties have the potential to lead to costly, protracted litigation.  Accordingly, it is critical that internal investigations are handled properly.  Employers conducting internal investigations should: appropriately define the objectives of the investigation at the outset; select the right investigator (considering the investigator’s relationship to the complainant, relationship to decision-makers, ability to assert privilege against disclosure of information obtained, etc.); control communications among witnesses that could taint the investigation or give rise to more complaints; keep an accurate and complete factual record; and prepare a comprehensive investigative report that takes into account the applicable legal considerations.

For more on the client briefing generally, we welcome you to review the following articles for a summary of the remarks given by guest speakers M. Solicitor Smith, Solicitor of Labor of the U.S. Department of Labor, and Victoria Lipnic, Commissioner of the U.S. Equal Employment Opportunity Commission: 3 Top Labor and Employment Enforcement Priorities – Corporate Counsel; DOL’s Smith Says Proposed OT Rule is Still Months Away – Law360; and Don’t Expect Wellness Program Guidance: EEOC Commish – Law360.