Our colleagues 

As we previously reported, on April 9, 2019, the New York City Council passed Int. 1445-A, which prohibits employers from pre-employment drug testing for marijuana and tetrahydrocannabinols (“THC,” the active ingredient in marijuana). On May 10, 2019, Int. 1445-A became law by operation of the New York City legislative process, which automatically made the bill law after 30 days without action by Mayor de Blasio. The law becomes effective May 10, 2020, giving New York City employers one year to prepare.

Under the law, employers, labor organizations, and employment agencies, and all of their agents, are prohibited from requiring a prospective employee to submit to a marijuana or THC drug test as a condition of employment. This conduct is now characterized as an “unlawful discriminatory practice.” There are, however, several exceptions to the law. For example, the law will not apply to employees in the following roles: safety-related positions, transport-related positions, caregivers, and certain federal contractors. Further, to the extent that a collective bargaining agreement requires drug testing, the law will not apply to such testing. Please see our Act Now Advisory for further details related to these exceptions. …

Read the full post here.

Tuesday, May 7, 2019 – Downtown Dinner Program

Wednesday, May 8, 2019 – Repeat Suburban Lunch Program

Join our colleagues Lauri Rasnick, Kevin Ryan, and Peter Steinmeyer for an interactive panel discussion which will provide insights into recent developments and expected trends in the evolving legal landscape of trade secret and non-competition law. This program will also discuss unique issues and developments in the health care and financial services industry. Our colleagues will also be joined by Thomas J. Shanahan, Associate General Counsel at Option Care.

Issues arising from employees and information moving from one employer to another continue to proliferate and provide fertile ground for litigation. Many businesses increasingly feel that their trade secrets or client relationships are under attack by competitors—and even, potentially, by their own employees. Individual workers changing jobs may try to leverage their former employer’s proprietary information or relationships to improve their new employment prospects, or may simply be seeking to pursue their livelihood.

How can you put yourself in the best position to succeed in a constantly developing legal landscape?

Whether you are an employer drafting agreements and policies or in litigation seeking to enforce or avoid them, you will want to know about recent developments and what to expect in this area.

During this program, the panel will discuss:

  • Legal trends in the enforceability of non-competes
  • New and pending state and federal legislation, including the Massachusetts Noncompetition Agreement Act
  • Recent judicial decisions regarding restrictive covenants, including an important California case concerning provisions barring solicitation of employees
  • New cases and statutes regarding protection of trade secrets
  • Continuing governmental scrutiny of “no poach” agreements and restrictions on low wage workers

To register, click here. 

ACC Chicago is an Approved Illinois CLE Provider. 1 General Credit Hour (pending) for this program. Participants seeking MCLE credit need to sign in and provide their Illinois Bar number

On April 5, 2019, FINRA published Regulatory Notice 19-10 (the “Notice”) addressing the responsibilities of member firms when communicating with customers about departing registered representatives.  As the Notice indicates, in the event a registered representative leaves a member firm, FINRA aims to avoid any disruption in the service of customer accounts and to ensure that customers can make a “timely and informed choice” about where to maintain their assets. The Notice contains two key points about what is expected of member firms in terms of customer communications when a registered representative departs.

First, the Notice states that firms should have policies and procedures to ensure that customers whose accounts were serviced by a departing registered representative do not experience an interruption in service, and receive information regarding how their accounts will continue to be serviced, including but not limited to: (i) how, and to whom, the customer may communicate questions and trade instructions; and (ii) the representative to whom the customer is now assigned.  Firms should thus be prepared to communicate immediately with customers and to relay specific information about who will be handling their accounts in the absence of their prior representative.

Second, the Notice provides that, when registered representatives leave the firm, the firm should provide additional information when asked by customers.  If a customer asks a member firm questions about a departing registered representative, the Notice states that the member firm should provide customers with “timely and complete answers” about the departing representative.  Addressing an apparent concern that customers may have received distorted or inaccurate information in the past, the Notice states that communications with customers in reference to departing representatives must be fair, balanced, and not misleading.

With respect to information that should be provided if responsive to a customer inquiry, the Notice highlights:

  1. clarification that the customer may choose either to retain his or her assets at the current firm to be serviced by a new registered representative, or to transfer those assets to another firm; and
  2. reasonable contact information of the departing registered representative, i.e., a phone number, email address, or mailing address – provided that the representative consented to disclosure of his or her contact information to customers.

Attorneys who counsel registered representatives have long advised representatives to ensure that they provide their new contact information and consent to its disclosure when they resign from their employment.  With FINRA’s issuance of Regulatory Notice 19-10, member firms should take the opportunity to review their policies and procedures regarding communications with customers at the time of registered representative departures to ensure that they are compliant with FINRA’s expectations.  If there are non-solicitation obligations applicable to the departing registered representatives, employers should consider how these may be impacted, if it all.  Further, firms should provide training regarding these policies and expectations to employees whose duties may be impacted by them.

Webinar – Spring/Summer 2019

Internship programs can help employers source and develop talent, but they do not come without their pitfalls. If you are an employer at a tech startup, a large financial institution, a fashion house, or something else entirely, and you plan on having interns this summer, this webinar is for you. Learn the steps for creating a legally compliant internship program.

For many years, the U.S. Department of Labor (“DOL”) used the “six-factor test” when determining whether an employee was legally considered an unpaid intern, such that the intern would not be subject to the wage and hour requirements of the Fair Labor Standards Act. This changed at the beginning of 2018, when the DOL adopted the “primary beneficiary test” in a move allowing increased flexibility for employers and greater opportunity for unpaid interns to gain valuable industry experience. Employers that fail to follow the requirements to ensure that an intern is properly treated as an unpaid intern, rather than an employee who is entitled to minimum wages and overtime, could face costly wage and hour litigation.

Our colleagues Jeffrey M. LandesLauri F. Rasnick, and Ann Knuckles Mahoney guide viewers on how they can establish lawful unpaid internship programs. This webinar also addresses the extent to which wage and hour laws apply to interns, and the seven factors that make up the “primary beneficiary test.” This webinar provides viewers practical tips for administering an internship program, whether paid or unpaid, by identifying key considerations for all stages of the internship process.

Click here to request complimentary access to the webinar recording and presentation slides.

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).