Financial Services Employment Law

News, Updates, and Insights for Financial Services Employers

2nd Circuit Expands Dodd-Frank Anti-retaliation Protection To Cover Internal Whistleblowing

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On September 10, 2015, the Second Circuit Court of Appeals ruled in Berman v. Neo@Ogilvy LLC that an employee who reports an alleged securities violation only to his or her employer, and not to the SEC, is nevertheless covered by the anti-retaliation protections afforded by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”).

Berman, a former finance director of Neo@Ogilvy, claimed that his employer and its corporate parent, WPP Group USA, Inc., violated the whistleblower protections of Dodd-Frank by wrongfully terminating him for raising concerns internally about business practices that allegedly constituted accounting fraud.  The companies moved to dismiss the claim, arguing that Berman was not a whistleblower subject to protection under Dodd-Frank because he did not report the alleged violations to the SEC.  The District Court agreed.

In a 2-1 decision, the Second Circuit reversed the District Court’s decision on appeal.  The Court found that the provisions of Dodd-Frank are ambiguous as to whether an employee who reports an alleged violation internally, but not to the SEC, qualifies as a whistleblower.  On the one hand, Section 21F(a)(6) of Dodd-Frank limits the definition of “whistleblower” to include only those individuals who provide information relating to an alleged securities violation to the SEC.  Yet, on the other hand, Section 21F(h)(1)(A) of Dodd-Frank’s retaliation protection provision prohibits retaliation against individuals who make disclosures that are, inter alia, required or protected under the Sarbanes-Oxley Act of 2002 (“SOX”), and SOX protects employees who make internal complaints of suspected securities laws violations without reporting them to outside agencies.

Finding that these were conflicting statutory provisions, the Court deferred to the SEC’s interpretation of the statute, under which an individual is a “whistleblower” if he or she provides information pursuant to Section 21F(h)(1)(A) of Dodd-Frank, which, as explained above, prohibits retaliation against employees for making internal complaints that would be protected by SOX.  Accordingly, the Court held that under SEC Rule 21F-2, “Berman is entitled to pursue Dodd-Frank remedies for alleged retaliation after his report of wrongdoing to his employer, despite not having reported to the Commission before his termination.”

Judge Dennis Jacobs, dissenting, opined that Dodd-Frank is “unambiguous”:  Section 21F(a)(6) is controlling because it defines who is a “whistleblower” under the relevant section of the statute and expressly provides that only those who report to the SEC can qualify.   Judge Jacobs pointed out that Dodd-Frank Section 21F(h)(1)(A), which the majority found creates ambiguity by incorporating protections provided by SOX, does not expand the statutory definition of whistleblower under Dodd-Frank, but instead identifies which acts done by whistleblowers are protected by Dodd-Frank.  In other words, according to Judge Jacobs, Section 21F(h)(1)(A) does not apply to protect a person unless he or she qualifies as a “whistleblower,” as the term is defined by Section 21F(a)(6).  Judge Jacobs criticized the majority for disregarding the plain text of Dodd-Frank’s definition of whistleblower and creating an ambiguity in the statute that does not exist solely to expand the reach of the anti-retaliation provisions of Dodd-Frank.

Notably, the Second Circuit’s decision creates a split in authority with the Fifth Circuit Court of Appeals, which came down the opposite way when faced with the same issue in 2013.  As a result, this issue is almost surely headed to the Supreme Court for resolution. Further, in holding that Dodd-Frank provides a private right of action for those who report violations only internally, the Second Circuit’s decision may lead to significantly more whistleblower retaliation claims in the future because, in comparison to the SOX whistleblower protections, Dodd-Frank offers a much longer statute of limitations, double back pay damages, and no administrative exhaustion requirement.

Epstein Becker Green’s Wage and Hour App Now Includes All 50 States and More

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Wage & Hour Guide for Employers AppWe’d like to share some news with financial services industry employers: Epstein Becker Green has released a new version of its Wage & Hour Guide for Employers app, available without charge for Apple, Android, and BlackBerry devices.

Following is from our colleague Michael Kun, co-creator of the app and leader of our Wage and Hour group:

We have just updated the app, and the update is a significant one.

While the app originally included summaries of federal wage-hour laws and those for several states and the District of Columbia, the app now includes wage-hour summaries for all 50 states, as well as D.C. and Puerto Rico.

Now, more than ever, we can say that the app truly makes nationwide wage-hour information available in seconds. At a time when wage-hour litigation and agency investigations are at an all-time high, we believe the app offers an invaluable resource for employers, human resources personnel, and in-house counsel.

Key features of the updated app include:

  • New summaries of wage and hour laws and regulations are included, including 53 jurisdictions (federal, all 50 states, the District of Columbia, and Puerto Rico)
  • Available without charge for iPhoneiPad, Android, and BlackBerry devices
  • Direct feeds of EBG’s Wage & Hour Defense Blog and @ebglaw on Twitter
  • Easy sharing of content via email and social media
  • Rich media library of publications from EBG’s Wage and Hour practice
  • Expanded directory of EBG’s Wage and Hour attorneys

If you haven’t done so already, we hope you will download the free app soon.  To do so, you can use these links for iPhoneiPad, Android, and BlackBerry.

SEC Issues Interpretation of its Regulations on Definition of Dodd-Frank Whistleblower

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On August 4, 2015, the SEC issued an “Interpretation of the SEC’s Whistleblower Rules Under Section 21F of the Securities Exchange Act of 1934.” (pdf).  Unsurprisingly, and consistent with the position that it has been taking in amicus briefs on the issue, the SEC states that a whistleblower need not report suspected wrongdoing to the Commission in order to be protected by the anti-retaliation provisions of Dodd-Frank.  Rather, internal whistleblowing that is protected under the Sarbanes-Oxley Act is protected activity sufficient to state a claim under Dodd-Frank, according to the SEC.  We recently posted a video discussion of this very topic (here), noting that there is currently a sharp split of judicial authority on this critical question, and that the issue may well be headed to the Supreme Court for resolution.  The Fifth Circuit held in Asadi v. G.E. Energy (USA), LLC, 720 F.3d 620 (5th Cir. 2013), that a Dodd-Frank whistleblower must report wrongdoing to the Commission to be protected by that statute; a decision from the Second Circuit on the issue is pending in Berman v. Neo@Ogilvy LLC, 14-4626 (2d Cir.).  Ultimately, of course, it is the job of the courts to determine what Congress intended in the Dodd-Frank Act, but if the issue does indeed reach the Supreme Court – and in every federal district and appellate court case until that time – those favoring a broad interpretation of the definition of a “whistleblower” under the Dodd-Frank anti-retaliation provision will surely be citing the SEC’s new interpretation of its regulations.


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.