As has been reported by the New York Times, NBC, and other outlets, asset-management firm TCW is defending a lawsuit filed by a former fund manager, Sara Tirschwell, charging the firm with gender discrimination and retaliation, among other allegations. Ms. Tirschwell’s lawsuit has received media attention not only because of the substantial damages that she demands (in excess of $30 million), but also—and perhaps, principally—because the suit has been characterized as Wall Street’s first public brush with the #MeToo movement.

The basic contours of the dispute are familiar. TCW maintains that it terminated Ms. Tirschwell for performance reasons. According to TCW, Tirschwell committed multiple, serious compliance violations, and also was unable to generate the target level of investment in her distressed debt strategy fund. Ms. Tirschwell, for her part, claims that TCW’s stated reasons for her termination were pretextual. She contends that her submission of a formal complaint of sexual harassment against her supervisor, whom she had dated for a time before joining TCW, was the true reason for her termination. In Ms. Tirschwell’s view, TCW’s termination of her employment only nine days after she submitted her complaint to HR was no coincidence.

Despite the familiar outlines of the dispute, Ms. Tirschwell’s claims present a significant wrinkle—one that makes this case particularly worth following for employers in the financial services sector. Ms. Tirschwell alleges that her supervisor and former paramour leveraged his support of her fund into a renewal of their sexual relationship, and that he withdrew this support when Ms. Tirschwell ultimately refused to continue the relationship—ostensibly dooming the fund.

Hence, while the case highlights considerations for management that cut across industries, these issues receive a critical overlay in the Wall Street context of this dispute: how might management’s decision-making be impacted where the alleged modality of harassment or retaliation implicates return on investment?

At base, the Tirschwell case serves as a reminder that employers must proceed cautiously when an employee otherwise identified for probable termination (or any other adverse action) for legitimate reasons, as was Ms. Tirschwell by TCW’s account, complains internally—whether to HR, a supervisor, or otherwise—of harassment. Any post-grievance adverse action might later be cast as retaliatory—and might be presumed as such if it follows immediately on the heels of a grievance, as in Ms. Tirschwell’s case. Before taking adverse action, employers should always consider whether an employee’s issues have been documented and communicated sufficiently, and whether employees who engaged in comparable conduct faced similar consequences in keeping with firm policies. This sort of analysis, though, becomes even more critical with the complicating factor of a harassment grievance added to the mix. Further, even where there exists an unquestionable record of the employee’s transgressions, if circumstances allow, an employer should ideally complete a thorough investigation of the employee’s allegations before going forward with the adverse employment action.

Even if the firm has done everything right, though, an employee still may accuse the firm of retaliation. Now, the firm’s principal question is whether to settle quietly even if it believes there is no liability, or dig in and defend its actions in court. Much of the time, firms have chosen the first option, valuing discretion above all else. But that calculus already may be in the process of changing, at least in some cases, as states, such as New York and New Jersey, chip away at nondisclosure provisions in settlement agreements in response to the #MeToo movement. How might that calculus change further where, as with Ms. Tirschwell’s claims, the allegations would tend to engender pressure—and, potentially, additional suits—from the firm’s clients and/or stakeholders? Debunking allegations of financial malfeasance in the context of litigation with an employee would not necessarily preclude, as a matter of law, investors and stakeholders from levying similar allegations in a separate suit. Nevertheless, as a matter of optics, a firm might choose to contest allegations like Ms. Tirschwell’s vehemently, in a public forum, so as to assure its investors and stakeholders regarding its stewardship of their assets—and, in so doing, perhaps deter a pile-on of legal action.

We have also recently seen shareholder suits alleging a breach of fiduciary duty arising from the way that companies have responded to employee accusations of sexual harassment. The Tirschwell case, though, seems unique in that, according to Ms. Tirschwell, the alleged harassment/retaliation itself placed stakeholders in financial peril. Depending on the outcome of the dispute between Ms. Tirschwell and TCW, might would-be plaintiffs claiming harassment/retaliation be inclined to generate leverage by suggesting, like Ms. Tirschwell’s allegations, that the alleged misbehavior exposed investors and stakeholders? Though not every plaintiff could draw a line between alleged harassment and investor well-being as straight as the one Ms. Tirschwell seems to have drawn, one assumes that creative arguments could link the two together, in some way, in many cases.

The Tirschwell case should serve as a reminder to employers to be vigilant and proactive when it comes to harassment: create robust policies and procedures prohibiting harassment and for handling complaints, take all complaints seriously, and take prompt action when harassment policies are violated.

Our colleague Tzvia Feiertag at Epstein Becker Green has a post on the Health Employment and Labor Blog that will be of interest to our readers in the financial services industry: “NJ Employers and Out-of-State Employers with NJ Residents Prepare: State Updates Website on Employer Reporting for New Jersey Health Insurance Mandate.”

Following is an excerpt:

As employers are wrapping up their reporting under the Affordable Care Act (“ACA”) for the 2018 tax year (filings of Forms 1094-B/C and 1095-C/B with the IRS are due by April 1, 2019, if filing electronically), they should start preparing for new reporting obligations for the 2019 tax year.

After a string of failed efforts to repeal the ACA, Congress, through the Tax Cuts and Jobs Act of 2017 (“TCJA”), reduced the federal individual shared responsibility payment assessed (with limited exceptions) against individuals who failed to purchase health insurance to $0 beginning January 1, 2019. In response, to ensure the stability and provide more affordable rates for health coverage, States, such as New Jersey, have stepped in and adopted their own individual health insurance mandates. New Jersey’s individual health insurance mandate requires employers to verify health coverage information provided by individuals. To assist with employer reporting, New Jersey has launched an official website (lasted updated on March 19, 2019) with guidance on the filing requirements. …

Read the full post here.

Our colleague Nancy Gunzenhauser Popper at Epstein Becker Green has a post on the Retail Labor and Employment Law Blog that will be of interest to our readers in the financial services industry: “April Fools’ Joke? No—NYC Employers Really Have Two Sets of Training Requirements.”

Following is an excerpt:

Don’t forget – April 1 marks the beginning of a new set of sexual harassment training requirements in New York City. While the training requirement began across New York State on October 9, 2018 (and must be completed by October 9, 2019), the City imposes additional requirements on certain employers. Both laws require training to be provided on an annual basis.

While the State law requires training of all New York employees, regardless of the number of employees in the State, the City law applies only to employers with 15 or more employees. However, when counting employees under the City law, an employer must also count independent contractors who work for the employer in New York City.

Read the full post here.

Our colleague Laura A. Stutz at Epstein Becker Green has a post on the Health Employment and Labor Blog that will be of interest to our readers in the financial services industry: “Race Discrimination on the Basis of Hair Is Illegal in NYC.”

Following is an excerpt:

The New York City Commission on Human Rights published legal enforcement guidance defining an individual’s right to wear “natural hair, treated or untreated hairstyles such a locs, cornrows, twists, braids, Bantu knots, fades, Afros, and/or the right to keep hair in an uncut or untrimmed state.”   The guidance applies to workplace grooming and appearance policies “that ban, limit, or otherwise restrict natural hair or hairstyles”:

[W]hile an employer can impose requirements around maintaining a work appropriate appearance, [employers] cannot enforce such policies in a discriminatory manner and/or target specific hair textures or hairstyles. Therefore, a grooming policy to maintain a ‘neat and orderly’ appearance that prohibits locs or cornrows is discriminatory against Black people because it presumes that these hairstyles, which are commonly associated with Black people, are inherently messy or disorderly. This type of policy is also rooted in racially discriminatory stereotypes about Black people, and racial stereotyping is unlawful discrimination under the [New York City Human Rights Law].

A grooming or appearance policy prohibiting natural hair and/or treated/untreated hairstyles to conform to the employer’s expectations “constitutes direct evidence of disparate treatment based on race” in violation of the City’s Human Rights Law. …

Read the full post here.

Our colleague Brian G. Cesaratto at Epstein Becker Green has a post on the Technology Employment Law Blog that will be of interest to our readers in the financial services industry: “Washington State Considers Comprehensive Data Privacy Act to Protect Personal Information.” Following is an excerpt:

Washington State is considering sweeping legislation (SB 5376) to govern the security and privacy of personal data similar to the requirements of the European Union’s General Data Protection Regulation (“GDPR”). Under the proposed legislation, Washington residents will gain comprehensive rights in their personal data. Residents will have the right, subject to certain exceptions, to request that data errors be corrected, to withdraw consent to continued processing and to deletion of their data. Residents may require an organization to confirm whether it is processing their personal information and to receive a copy of their personal data in electronic form.

Covered organizations will be required to provide consumers with a conspicuous privacy notice disclosing the categories of personal data collected or shared with third parties and the consumers’ rights to control use of their personal data. Significantly, covered businesses must conduct documented risk assessments to identify the personal data to be collected and weigh the risks in collection and mitigation of those risks through privacy and cybersecurity safeguards. …

Read the full post here.

On November 6, 2018, the U.S. Court of Appeals for the Tenth Circuit handed down a decision that impacts employers across all industries, including the financial services industry. In a “win” for employers, the Tenth Circuit ruled that “…the False Claims Act’s anti-retaliation provision unambiguously excludes relief for retaliatory acts which occur after the employee has left employment.” Potts v. Center for Excellence in Higher Education, Inc., No. 17-1143 (10th Cir. Nov. 6, 2018).

The False Claims Act (“Act”) imposes liability on any person who knowingly defrauds the federal government. See 31 U.S.C. § 3729(a). The Act also contains an anti-retaliation provision protecting whistleblower employees from certain retaliatory acts by their employers. In Potts, the Tenth Circuit determined that the Act’s term “employee” includes only persons who were current employees at the time of the alleged retaliation.

The case involved Debbi Potts who resigned from her position as the campus director of an educational organization in July 2012. In connection with her resignation, Potts entered into a separation agreement with her employer in which she, among other things, agreed to not disparage the organization or “contact any governmental or regulatory agency with the purpose of filing any complaint or grievance.” Notwithstanding the agreement, and well after her resignation, Potts sent a disparaging email and filed a complaint to the organization’s accreditor alleging deceptions in maintaining accreditations. The organization brought a breach of contract claim against Potts for violating the agreement. Potts countersued alleging retaliation because the organization’s claim violated the False Claims Act since her complaint was protected activity.

The Tenth Circuit affirmed the dismissal of Potts’s retaliation claim by finding that “the False Claims Act, by its list of retaliatory acts, temporally limits relief to employees who are subjected to retaliatory acts while they are current employees.” The Tenth Circuit relied on established statutory interpretation canons in reaching its conclusion. Accordingly, in the Tenth Circuit, a former employee cannot engage in protected activity after termination of employment and as a result cannot maintain a cognizable claim under the Act for purported retaliation for such protected activity. This approach is consistent with the interpretations of other courts which have considered this same issue.

While the decision may provide some relief to employers, they should still proceed with caution in taking action against employees for raising violations of the False Claims Act or other laws. Moreover, there are regulatory opinions and actions which employers should carefully consider with their employment counsel in drafting separation agreements as certain regulators prohibit employers from having separation agreements that contain overbroad restrictions (i.e., restrictions that may impinge on employees’ rights to report unlawful practices or occurrences to the SEC or other governmental agencies).

Our colleague  at Epstein Becker Green has a post on the Retail Labor and Employment Law blog that will be of interest to our readers in the financial services industry: “DOJ Finally Chimes In On State of the Website Accessibility Legal Landscape – But Did Anything Really Change?

Following is an excerpt:

As those of you who have followed my thoughts on the state of the website accessibility legal landscape over the years are well aware, businesses in all industries continue to face an onslaught of demand letters and state and federal court lawsuits (often on multiple occasions, at times in the same jurisdiction) based on the concept that a business’ website is inaccessible to individuals with disabilities.  One of the primary reasons for this unfortunate situation is the lack of regulations or other guidance from the U.S. Department of Justice (DOJ) which withdrew long-pending private sector website accessibility regulations late last year.  Finally, after multiple requests this summer from bi-partisan factions of Members Congress, DOJ’s Office of Legislative Affairs recently issued a statement clarifying DOJ’s current position on website accessibility.  Unfortunately, for those hoping that DOJ’s word would radically alter the playing field and stem the endless tide of litigations, the substance of DOJ’s response makes that highly unlikely.

DOJ’s long-awaited commentary makes two key points…

Read the full post here.

In May, the U.S. Supreme Court ruled in Epic Systems Corp. v. Lewis that employers may lawfully require employees to sign arbitration agreements that include a waiver of the right to participate in an employee class action lawsuit or arbitration. Below, we discuss the significance of this decision and highlight issues that employers may wish to consider in the wake of it.

Epic Systems—a Pivotal Win for Employers

The NLRB planted the seed for Epic Systems in 2012, when it first took the position that Section 7 of the National Labor relations Act (“NLRA”)—which affords employees the right to self-organize, bargain collectively, and “engage in other concerted activities”—precludes enforcement of employee class action waivers. The federal Circuit Courts of Appeal split on the NLRB’s position in the ensuing years. Deepening the divide, the DOJ under the current administration broke with the NLRB.

In Epic Systems the Supreme Court rejected the notion that class actions are “concerted activities” inviolable under Section 7 of the NLRA, opining that the term is not a broad catchall. The Court observed that, while the NLRA includes many specific procedural rules, rules relating to class or collective actions are not among them. Absent clear Congressional intent, the Court reasoned that the NLRA could not “displace” the Federal Arbitration Act (“FAA”) and its edict promoting the enforceability of arbitration agreements.

Further, even if the employees could show that “the NLRA actually renders class and collective action waivers illegal[,]” the Court stated that the employees still could not properly invoke the FAA’s “saving” clause, which permits annulment of arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract.” The Court characterized this as an “‘equal-treatment’ rule for arbitration contracts”—i.e., an arbitration contract (including a class action waiver) will be nullified only if it suffers from an elemental flaw in its formation, such as fraud.

In sum, Epic Systems represents a continuation of the Supreme Court’s recent trend of favoring arbitration agreements.

What Employers Should Consider Next

Though Epic Systems marks a resonant victory for employers, issues around the scope and effectiveness of class action waivers remain. Financial services employers may wish to consider:

Can our firm implement a class action waiver?

In implementing waivers, the financial services sector must be mindful of FINRA’s regulatory authority. Though any doubt about the lawfulness of consumer class action waivers was erased in 2011, FINRA has since said that a member firm’s use of waivers in customer contracts violates FINRA’s rules “intended to preserve investor access to . . . judicial class actions[.]”

FINRA has not, however, announced a parallel prohibition on waivers in employment agreements. Indeed, the Second Circuit Court of Appeals in 2015 held that FINRA’s arbitral rules—though they preclude arbitration of claims subject to class actions and certain types of collective actions—do not bar employers from enforcing employee waivers.

Should our firm implement a class action waiver?

Although Epic Systems confirms that employers may require employees to waive the right to participate in a class actions, employers still must consider the practical implications. The environment around arbitration agreements and class action waivers is politically-charged, and firms implementing a class action waiver may receive backlash from employees and advocacy groups. Accordingly, any program rollout should be given due consideration.

What is the appropriate vehicle for the waiver?

A class action waiver may be included in an employment policy made available to—and acknowledged indirectly by—employees, or it could be included in a specific agreement that itself requires an employee’s signature.   The former may be an easier rollout, but the latter could be less susceptible to a claim that the employee(s) never agreed to the waiver.

Employers also should note that, although Epic Systems addressed class action waivers in the context of arbitration agreements, a class action waiver could also appear in an agreement that permits the parties to choose litigation instead of arbitration, if that is the preference.

To whom will the waiver apply?

Employers should consider whether a waiver will apply to all or some employees. Conditioning a new hire’s employment on a waiver could be fairly straightforward, but rolling out a new requirement to current employees might be more difficult from a practical and legal perspective. As noted in Epic Systems, arbitration agreements (and concomitant waivers) may be nullified under the FAA on fundamental grounds—including, potentially, a lack of “consideration” given in exchange for the waiver. Hence, employers might consider presenting existing employees with waivers in connection with a raise, bonus, promotion, etc.

What form should the waiver take?

Class action waivers should be as simple and concise as possible. Ambiguity may open the door to an adverse interpretation by a court or arbitral panel skeptical of waivers as a general matter. Epic Systems does not offer much guidance in this regard, but various trial and appellate court opinions do.

Might any class or collection actions be outside the scope of even a well-drafted a waiver?

Lastly, even a well-crafted class action waiver may not fully insulate employers. In this vein, the financial services sector—with its nucleus in New York—should keep an eye on a bill introduced in the New York State legislature, the “Empowering People in Rights Enforcement (EMPIRE) Worker Protection Act” (“EWPA”). It would amend New York’s Labor Law such that complainant employee(s) could step into NYSDOL’s shoes and pursue civil penalties “on behalf of . . . other current or former employees” and “allege multiple violations that have affected different employees.” If passed, employees could attempt to use the EWPA as an end-run around class action waivers. Employees may contend that, as NYSDOL itself is not bound by a contractual waiver, employee(s) cloaked with NYSDOL’s authority likewise would be unhindered by that waiver. Employees have made essentially that argument, with success thus far, in relation to California’s Private Attorneys General Act (“PAGA”), after which the EWPA is modeled.

Join Epstein Becker Green attorneys, Brian G. Cesaratto and Brian E. Spang, for a discussion of how employers can best protect their critical technologies and trade secrets from employee and other insider threats. Topics to be discussed include:

  • Determining your biggest threat by using available data
  • What keeps you up at night?
  • Foreseeing the escalation in risk, from insider and cyber threats to critical technologies
  • New protections and remedies under the Trade Secret Protection Act of 2014
  • Where are your trade secrets located, and what existing protections are in place?
  • What types of administrative and technical controls should your firm consider implementing for the key material on your network to protect against an insider threat?
  • What legal requirements may apply under applicable data protection laws?
  • How do you best protect trade secrets and other critical technologies as information increasingly moves into the cloud?
  • Using workforce management and personnel techniques to gain protection
  • The importance of an incident response plan
  • Developing and implementing an effective litigation response strategy to employee theft

Wednesday, October 3, 2018.
12:30 p.m. – 2:00 p.m. ET
Register for this complimentary webinar today!

Our colleagues  at Epstein Becker Green has a post on the Retail Labor and Employment Law blog that will be of interest to our readers in the financial services industry: “NYC Commission on Human Rights Issues Guidance on Employers’ Obligations Under the City’s Disability Discrimination Laws.”

Following is an excerpt:

The New York City Commission on Human Rights (“Commission”) recently issued a 146-page guide titled “Legal Enforcement Guidance on Discrimination on the Basis of Disability” (“Guidance”) to educate employers and other covered entities on their responsibilities to job applicants and employees with respect to both preventing disability discrimination and accommodating disabilities. The New York City Human Rights Law (“NYCHRL”) defines “disability discrimination” more broadly than does state or federal disability law, and the Guidance is useful in understanding how the Commission will be interpreting and enforcing the law. …

Read the full post here.