The Immigration Law Group at Epstein Becker Green released a Special Immigration Alert that will be of interest to our readers.

Topics include:

  1. President Trump Issues Revised Executive Order on Travel
  2. USCIS Suspends Premium Processing for H-1B Petitions Starting April 3, 2017: All H-1B Petitions, Including H-1B Cap Petitions, Are Affected!
  3. Use of New Form I-9 Is Now Mandatory
  4. IRS Announces That Delinquent Taxpayers Face Revocation/Denial of U.S. Passports
  5. DHS Issues Two New Memos on Enforcement/Border Security

Read the full alert here.

 

34th Annual Workforce Management Briefing Banner

When:  Thursday, October 15, 2015    8:00 a.m. – 3:00 p.m.

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

This year, Epstein Becker Green’s Annual Workforce Management Briefing focuses on the latest developments that impact employers nationwide, featuring senior officials from the U.S. Department of Labor and the Equal Employment Opportunity Commission. We will also take a close look at the 25th anniversary of the Americans with Disabilities Act and its growing impact on the workplace.

In addition, we are excited to welcome our keynote speaker Neil Cavuto, Senior Vice President, Managing Editor, and Anchor for both FOX News Channel and FOX Business Network.

Our industry-focused breakout sessions will feature panels composed of Epstein Becker Green attorneys and senior executives from major companies, discussing issues that keep employers awake at night.  From the latest National Labor Relations Board developments to data privacy and security concerns, each workshop will offer insight on how to mitigate risk and avoid costly litigation.

View the full briefing agenda here. Contact Kiirsten Lederer or Elizabeth Gannon for more information and to register.   Seats are limited.

On May 5, 2015, the Eleventh Circuit Court of Appeals ruled in Wiersum v. U.S. Bank, N.A. (pdf) that the National Bank Act (“NBA”), 12 U.S.C. §24 (Fifth), preempted a bank officer’s state law whistleblower claim that he was wrongfully terminated for opposing the bank’s alleged unlawful conduct. This was a first-impression issue for the Eleventh Circuit, and the majority concluded that the state law claim was preempted because it directly conflicted with the power Congress vested in federally chartered banks to dismiss officers “at pleasure.”

Wiersum, a former Vice President and Wealth Management Consultant for U.S. Bank, claimed that the bank had wrongfully terminated him in retaliation for complaining about, and refusing to participate in, the bank’s alleged unlawful practice of conditioning credit upon asset management (i.e., illegal tying arrangements). He alleged that his termination violated the Florida Whistleblower Act (“FWA”), which prohibits an employer from taking adverse personnel action against an employee because he or she objected to an activity of the employer that violates a law, rule, or regulation. The Eleventh Circuit, however, ruled that Wiersum’s claim was preempted by the NBA, which permits the board of directors of a national banking association to appoint officers, define their duties, and “dismiss such officers or any of them at pleasure.”

The Court analyzed the dispute as a question of conflict preemption – i.e., where state law is preempted because it conflicts with federal law such that a party cannot comply with both state and federal requirements, or conflicts with the objectives of Congress in enacting applicable federal regulations. The majority of the Court concluded that in this case the state law (FWA) conflicted with applicable federal law (NBA): on the one hand, the FWA would prohibit U.S. Bank from terminating an officer for objecting to alleged unlawful activities, while, on the other hand, the NBA grants U.S. Bank the full discretion to terminate an officer at will. Relying on decisions from the Fourth and Sixth Circuits that recognized the NBA’s preemptive power over state laws that divest a national bank of the right to terminate officers at pleasure, the majority held that the state whistleblower claim was in direct conflict with, and therefore barred by, the NBA’s at-pleasure provision.

In a dissenting opinion, Hon. Beverly Martin argued that the historical underpinnings of the  at-pleasure provision demonstrate that it was not intended to preempt state whistleblower law, and that the Fourth and Sixth Circuit decisions the majority relied upon have “very little supporting their broadly preemptive interpretation of the NBA” and have been criticized by other federal courts.  Judge Martin wrote that the consequences of the majority ruling are “worrying” because it denies bank officers protections afforded by state and local anti-retaliation laws.

The majority was unswayed, calling this a “straightforward case of conflict preemption” and finding the dissent’s concerns unfounded because bank officers would continue to be protected by federal laws that prohibit unlawful whistleblower retaliation (e.g., Dodd-Frank). The majority decision confirms the power afforded to national banks to dismiss officers “at pleasure” – at least for the time being in the Eleventh Circuit. Yet, for the reasons articulated in the dissent, the extent to which national banks can rely on the NBA’s “at pleasure” provision as a defense to whistleblower claims brought pursuant to state and local laws may be less certain unless and until the issue is squarely addressed by the U.S. Supreme Court.

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.

By John F. Fullerton III and Jason Kaufman

In its recent decision in Santoro v. Accenture Federal Services, LLC [pdf], the Fourth Circuit Court of Appeals has joined the Fifth Circuit [pdf] in narrowly interpreting the prohibition against predispute arbitration agreements in the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) — and employers can breathe a further sigh of relief.

Dodd-Frank amended the Sarbanes-Oxley Act (“SOX”) to, among other things, prohibit agreements requiring predispute arbitration of SOX claims (see 18 U.S.C. § 1514A(e)(2)).  The language Congress used, however, is quite broad, and when the statute was first enacted, caused concern among employers that the prohibition meant that the entire arbitration agreement could be invalidated with respect to all types of claims if SOX claims were not expressly carved out:

“No predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section.”

Compounding the concern, courts in some jurisdictions have extended the reach of this ban, holding that it applies retroactively to agreements made even before Dodd-Frank was enacted, when they would not have had an express carve-out for SOX claims. Indeed, for the most part, court decisions prior to Dodd-Frank had held that SOX whistleblower retaliation claims could be compelled to arbitration.

In this case, Santoro had entered into an employment contract with Accenture Federal Services that contained an arbitration clause requiring all disputes arising out his employment with Accenture to be brought in arbitration.  After he was terminated and replaced by a younger employee, Santoro filed a complaint against Accenture in the Eastern District of Virginia, alleging claims under the Age Discrimination in Employment Act, Family and Medical Leave Act, and Employee Retirement Income Security Act – but, significantly, no whistleblower retaliation claims under Dodd-Frank or SOX.

Accenture moved to compel arbitration pursuant to the employment contract, but Santoro argued in opposition that the entire arbitration agreement was invalid under Dodd-Frank.  He argued that in the post-Dodd-Frank era, all predispute arbitration agreements lacking a Dodd-Frank carve-out are invalid, even for plaintiffs who are not pursuing any whistleblower claims.  In other words, because the contract did not specifically exempt Dodd-Frank claims from arbitration, and thus could allegedly be interpreted as requiring arbitration of such claims, the entire arbitration agreement was invalid.  The District Court rejected this argument and Santoro appealed.

Noting first that it was undisputed that the employment contract contained an arbitration agreement and that Santoro’s claims fell within the agreement’s scope, the Court determined that, based on the statutory language and the context surrounding its enactment, Dodd-Frank’s statutory prohibitions against predispute arbitration agreements apply only to the extent such agreements waive or limit judicial resolution of whistleblower retaliation claims:

“Under Dodd-Frank, Congress has protected the right to bring a whistleblower cause of action in a judicial forum, nothing more. . . .  Nothing in Dodd-Frank even refers to arbitration apart from this limited reference in [18 U.S.C. § 1514A(e) and 7 U.S.C. § 26(n)] that are otherwise concerned solely with the creation of a cause of action for whistleblowing employees.”

Accordingly, the Court held that Dodd-Frank did not invalidate Santoro’s arbitration agreement because Accenture was not seeking to compel him to arbitrate any whistleblower claims; and, more generally, when there are no whistleblower causes of action at issue in a litigation, Dodd-Frank does not invalidate an enforceable arbitration agreement.  While this is a positive outcome for employers, particularly with respect to their older agreements, employers should continue to review their arbitration provisions and agreements going to forward to ensure that they do not require arbitration of whistleblower retaliation claims arising under Section 806 of SOX.

By John F. Fullerton III and Jason Kaufman

Almost four years after it was enacted in 2010, the full impact of the Dodd Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) on the enforceability of predispute arbitration agreements is not completely clear.  Some whistleblower retaliation claims are still subject to mandatory arbitration agreements, while others plainly are not, depending upon when the arbitration agreement was executed, the statute under which the claim is brought, and the jurisdiction in which the employer and employee find themselves.

First, prior to the passage of Dodd-Frank, courts had held that whistleblower retaliation claims filed under Section 806 of the Sarbanes-Oxley Act (“SOX”) could be compelled to arbitrate under mandatory arbitration agreements between an employer and employee.  Dodd-Frank amended Section 806 to include an explicit ban on agreements to arbitrate SOX claims: “No predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section.”  There is a split in authority, however, regarding whether this provision applies retroactively to invalidate arbitration agreements executed before Dodd-Frank was enacted.  Federal courts in Massachusetts and New York [pdf] have reasoned that retroactive application is appropriate because congressional intent as to the temporal scope of the statute is unclear, and because the right to arbitrate is jurisdictional – i.e., relates only to the forum in which claims can be heard – rather than substantive.  Courts in New Jersey (most recently) [pdf], Nevada, Colorado, South Carolina, and the District of Columbia, on the other hand, have rejected this rationale based on the well-settled presumption against statutory retroactivity, and their determination that the right to arbitrate is not merely a question of jurisdiction, but a vested contractual right that cannot be withdrawn retroactively absent clear congressional intent.  Thus, in the latter jurisdictions, some SOX claims remain arbitrable if the arbitration agreement pre-dates Dodd-Frank.

Second, there is also a question, at least, as to whether agreements requiring predispute arbitration of whistleblower retaliation claims made under the Securities Exchange Act are enforceable in the post-Dodd-Frank era.  Dodd-Frank amended both the Commodity Exchange Act and the Securities Exchange Act, in very similar terms, to include incentives for whistleblowers to report violations to the Commodity Futures Trading Commission and Securities Exchange Commission, as well as provisions protecting them from retaliation for doing so.  Although the Commodity Exchange Act was amended expressly to invalidate predispute arbitration agreements in language identical to that now contained in Section 806 of SOX, as explained above, no such language was added to the anti-retaliation provision of Section 21F of the Securities Exchange Act.

As a result, agreements requiring arbitration of whistleblower retaliation claims brought under the Section 21F appear to remain enforceable although the same agreement would be unenforceable with respect to claims under the Commodity Exchange Act.  At the same time, the SEC regulations state that “employers may not require employees to waive or limit their anti-retaliation rights under Section 21F,” which some have interpreted as precluding predispute arbitration agreements as well.  In fact, some plaintiffs have argued that the omission of a predispute arbitration provision from Section 21F was simply a drafting error and that courts should read the SOX arbitration provision into Section 21F. Nevertheless, notwithstanding the SEC regulations, the few court decisions that have addressed the issue, including one from the Southern District of New York [pdf], have compelled arbitration of whistleblower retaliation claims under Section 21F of the Securities Exchange Act based on the plain language of the statute, i.e. the absence of any provision rendering pre-dispute arbitration agreements unenforceable.

Employers should therefore be aware that until these ambiguities are finally clarified – whether by Congress or the courts – it appears that a case-by-case determination will be necessary regarding when and where their mandatory arbitration agreements are enforceable with respect to whistleblower retaliation claims under these statutes.

The Supreme Court has opened up an enormous pool of potential whistleblower claimants against employers who might not otherwise be covered by the Sarbanes-Oxley Act of 2002 (“SOX”). Reversing the First Circuit Court of Appeals, the Supreme Court has held, in Lawson v. FMR (pdf), that the SOX whistleblower protection provisions set forth in 18 U.S.C. §1514A protect the employees of private companies that contract with public companies that are directly covered by the Act. The decision is consistent with that of the Administrative Review Board in Spinner v. David Landau & Associates (ARB May 30, 2012), which similarly held that the whistleblower provision protects the employees of privately-held contractors and sub-contractors of publicly-held companies. The First Circuit in Lawson had rejected that interpretation of the Act.

 The case was brought by former employees of a private company that contracted to be the investment manager of and advisor to publicly-traded mutual funds that had no employees of their own. The issue, in a nutshell, was this: can an employee who works for a private company that is not directly covered by SOX nevertheless file a whistleblower retaliation claim against her employer when that employer is a contractor to a public, SOX-covered employer; or as the Court put it:

Does §1514A shield only those employed by the public company itself, or does it shield as well employees of privately held contractors and subcontractors—for example, investment advisers, law firms, accounting enterprises— who perform work for the public company?

The statutory text at issue is as follows:

No [public] company . . . , or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee . . . to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of section 1341 [mail fraud], 1343 [wire fraud], 1344 [bank fraud], or 1348 [securities or commodities fraud], any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders. [emphasis added]

The language requiring interpretation was the highlighted term “an employee;” specifically, whether it is limited to the employees of the public company or refers to employees of the contractors or subcontractors as well. Justice Ginsburg, writing for the majority, held that Section 1514A “shelters employees of private contractors and subcontractors, just as it shelters employees of the public company served by the contractors and subcontractors.” She was joined by the Chief Justice and Justices Breyer and Kagan. Justices Scalia and Thomas joined in principal part, while Justice Sotomayor, joined by Justices Kennedy and Alito, dissented.

The majority decision rested primarily on the view that the narrower reading impermissibly requires the unsupported interpolation of the phrase “of a public company” after “an employee.” The majority also noted that “[c]ontractors are not ordinarily positioned to take adverse action against employees of the public company with whom they contract,” such that the reference to “an employee” logically must include the contractor’s own employees. The majority also rejected reliance on the statutory heading in the statute, “Protection for Employees of Publicly Traded Companies Who Provide Evidence of Fraud” (emphasis added), as evidence of Congressional intent.

The dissent’s view was that Section 1514A is far more ambiguous than the majority recognizes, particularly in light of the statute’s headings, and that the Court’s broad interpretation leads to “absurd results” because it means, for example, that the household employees of employees of public companies are protected by SOX. The majority found this to be a “theoretical” rather than realistic concern.

 In sum, the 6-3 holding by a majority comprised of both liberals and conservatives that SOX protects employees of private contractors when they report covered forms of fraud, thus giving an expansive reading of the scope of coverage of the Act, seems to be another inevitable win for whistleblowers in a post-Enron world.

The Department of Labor (DOL) announced yesterday that whistleblowers covered by any one of 22 statutes administered by the Occupational Safety and Health Administration – which includes whistleblower retaliation complaints under Section 806 of the Sarbanes-Oxley Act (SOX) — can now file complaints online.  Section 806 of SOX affords protection to employees who have allegedly suffered an adverse action because they complained, externally or even just to their supervisor, that the company has committed a violation of various fraud statutes (frauds and swindles, wire fraud, bank fraud, securities and commodities fraud), or a violation of any rule or regulation of the Securities and Exchange Commission (SEC), or any provision of Federal law relating to fraud against shareholders.   The online form, which is up and running, provides employees an additional and, for many, easier way to file a retaliation complaint to commence OSHA’s investigative process.   Previously, employees had to mail a complaint, or visit or call an OSHA office.  But the speed, efficiency and familiarity of the Internet creates the possibility that some employees who might not otherwise have filed complaints may now do so.  This new accessibility to the enforcement agency mirrors the ease with which employees can provide tips regarding wrongdoing and apply for bounty awards to the SEC or Commodity Futures Trading Commission under the Dodd-Frank Act, which can also be done on-line.

To read the full DOL press release, click here

By Jason Kaufman

The Dodd-Frank Act created a comprehensive whistleblowing program by amending the Securities Exchange Act of 1934 to include Section 21F, entitled “Securities Whistleblower Incentives and Protection,” and establishing the “Office of the Whistleblower” to enforce its provisions.  Individuals who voluntarily provide the SEC with original information that leads to a successful SEC enforcement action resulting in monetary sanctions greater than $1 million are entitled to an award of between 10 and 30 percent of the total sanctions collected.  According to the SEC’s 2013 Annual Report to Congress on the Dodd-Frank Whistleblower Program, the incentives are working.

The SEC reports that since this whistleblowing program went into effect in August 2011, the number of complaints has increased each year.  During Fiscal Year 2013, the SEC received 3,238 complaints from across the county and around the world, reflecting an increase over the prior fiscal year of almost every type of allegation (e.g., offering fraud, insider trading, etc.).  Four whistleblowers received awards during Fiscal Year 2013, one of whom received a more than $14 million award representing the largest granted to date.  In total, the SEC paid approximately $14.8 million in awards to whistleblowers in Fiscal Year 2013, and, with more than $439 million remaining in the Investor Protection Fund from which the awards are paid, further awards seem likely.

Given the easy public access to information concerning the whistleblower program and the ability to submit tips and apply for awards on-line, the broad confidentiality and anti-retaliation protections afforded to whistleblowers, and huge potential payout, it is no surprise that the program is gaining traction and whistleblower complaints are on the rise.

By John F. Fullerton III

At the Firm’s 32nd Annual Client Briefing held yesterday, I spoke on the financial services industry panel about the Dodd-Frank bounty program and the whistleblower anti-retaliation provisions of both the Dodd-Frank and Sarbanes-Oxley Acts.  Here are a few takeaways from that session:

  • There have been at least three reported awards from the SEC to anonymous tipsters under the Dodd-Frank bounty program, the most recent of which, earlier this month, was an award of $14 million to a whistleblower whose information led to the recovery of “substantial investor funds.”
  • Employees are not required to use the internal complaint procedures established by Sarbanes-Oxley before reporting alleged wrongdoing directly to the SEC or CFTC, although they may still be encouraged to so do; however, employers may not “impede” employees from speaking directly to those agencies, such as through confidentiality policies or provisions in separation agreements.  It remains to be seen how broadly “impede” is defined, whether it applies only to explicit restrictions or whether it expands to cover any actions by the employer that would arguably chill employees’ exercise of their protected right to report alleged wrongdoing directly to the SEC or CFTC.
  • Dodd-Frank’s whistleblower retaliation protection is even broader and more pro-employee than the Sarbanes-Oxley provisions, including the right to sue directly in court, double damages for violations, and a statute of limitations that can range from an unusually lengthy 6 to 10 years.
  • Although there is currently a split in authority among the federal courts on this issue, several decisions in the Southern District of New York here in Manhattan have held that a Dodd-Frank whistleblower is protected even if his whistleblowing is not to the SEC, as the statute seems to require, but rather, only to his supervisor or manager, as Sarbanes-Oxley allows.  This effectively means that anything that violates the Sarbanes-Oxley anti-retaliation provisions also violates Dodd-Frank, and employees are free to pursue identical claims simultaneously in federal court and through the administrative complaint procedures set forth in Sarbanes-Oxley.
  • In recent years, the Administrative Review Board (ARB) has issued decisions that have broadly interpreted the Sarbanes-Oxley whistleblower protection provisions in ways that make it easier for employees to sustain their claims.  In one such case, the ARB ruled that the whistleblower provision protects the employees of privately-held contractors and sub-contractors of publicly-held companies, opening up an enormous pool of potential claimants against employers who might not otherwise be covered by Sarbanes-Oxley.  A federal appellate court came to the opposite conclusion in a different case in May of this year.  The Supreme Court granted review and will hear argument in that case on November 12, 2013.  We will be reporting on that case here on this blog as soon as the decision is issued.