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- Two Federal Agencies Battle In Federal Court Over Whistleblower Treatment
- The Inbox: July 18, 2014
- By Terminating Its CEO, American Apparel Unexpectedly Unravels Lending Agreement
- The Inbox - Independence Day Edition
- What’s Worse Than Losing A Non-Compete Dispute? Paying $200K For The Fun Of Losing
- The Inbox – World Cup Edition
- SEC’s First Anti-Retaliation Action Under Dodd-Frank Act Carries Warning for Employers
- …And All He Got Was a Fashionable T-Shirt: American Apparel Terminates Its CEO
- The Inbox: June 20, 2014
- Second Circuit To Weigh Whether Whistleblower Protections Extend Internationally
- "Key Man" Provisions
- After-Acquired Evidence
- Age Discrimination
- Arbitration and ADR
- Breach of Contract
- Change-in-Control Provisions
- Civil Litigation
- Dodd-Frank Act
- Equal Pay
- Executive Compensation
- Family Medical Leave
- Fiduciary Duties
- First Amendment
- Government Employers and Employees
- Monthly Roundup
- Motions to Dismiss
- Noncompete Agreements
- Pregnancy Discrimination
- Preliminary Injunction
- Religious Discrimination
- Sarbanes-Oxley Act
- Severance Agreements
- Social Media
- Statutes of limitations
- Summary Judgment
- Termination With or Without Cause
- The Basics
- The Inbox
- Title VII
- Trade Secrets
- Vicarious Liability
- Wage and Hour
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- Wrongful Termination
Blogs We Like:
The AmLaw Daily
The BLT: The Blog of LegalTimes
Connecticut Employment Law Blog
The D&O Diary
Delaware Employment Law Blog
DeNovo: A Virginia Appellate Law Blog
The Employer Handbook
Executive Pay Matters
The Federal Criminal Appeals Blog
Grand Jury Target
Screw You Guys, I’m Going Home: What You Need To Know Before You Scream “I Quit,” Get Fired, Or Decide to Sue the Bastards
Trade Secrets & Noncompete Blog
Virginia Appellate News & Analysis
WSJ Law Blog
Talk about your inter-family disputes: one federal agency – the Department of Labor – has filed suit against the United States Postal Service, an independent federal agency (but one of the few explicitly authorized by the Constitution). The reason for the federal lawsuit, filed in Missouri: the Postal Service’s alleged poor treatment, firing, and alleged harassment of an employee who claims he blew the whistle on safety hazards in a mail facility.
Here’s the background, delivered despite any contrary weather: Thomas Purviance worked for the Postal Service for 35 years, most recently as a maintenance supervisor at a mail distribution center near St. Louis. He had no record of disciplinary or performance issues. In late December 2009, Purviance complained to his supervisors about what he perceived to be carbon monoxide and fuel oil leaks from some of the equipment at the center, as well as a pile of oil-soaked rags which he thought was a safety hazard. Getting no response, Purviance eventually called the local fire marshal and made a 911 call to report the carbon monoxide leak. Read More ›
We’re in the midst of summer and the news outlets are replete with anti-compete and whistleblower developments. But before we get to those, let’s turn our attention to China:
If the dog days of summer here in the U.S. aren’t sweltering enough, imagine what they must feel like in the bustling, smog-laden cities of China. The Wall Street Journal reports that Coca- Cola Co. offers “environmental hardship pay” to some employees as a condition for relocating to some of China’s cities. Ed Hannibal of the HR consulting firm, Mercer LLC, indicates that it is not uncommon for multinational companies to offer the extra pay to incentivize workers to relocate to polluted cities. It helps to offset severe living conditions and ensure the company’s continued presence on the ground.
These days it seems employers face an uphill battle to see non-compete agreements prevail in court. Recently, a Louisiana state court carefully examined the terms of a non-compete in Gulf Industries, Inc. v. Boylan (La. App. 1 Cir. June 6, 2014). The National Law Review reports that the employer in this case inserted a two year non-compete provision into a one-year employment contract. According to the Court, even though Boylan’s employment extended two years past the date specified in the employment contract, the non-compete provision kicked in when the one year employment term was satisfied. The employer sought to extend the non-compete, arguing that it did not take effect until Boylan resigned. The Court disagreed and held that the non-compete had run during Boylan’s continued employment with the company. Little did he realize at the time, but Boylan was quite the multi-tasker. Read More ›
Firing a key executive can have repercussions beyond a severance dispute or a wrongful termination or discrimination claim by the executive. American Apparel’s recent termination of its CEO, Dov Charney, provides the latest example of the wide-ranging consequences that can arise when a C-level employee is let go. In American Apparel’s case, the consequences have included the threat of default on a $15 million loan and a resulting shareholder lawsuit.
How did this happen? According to the New York Post, when Lion Capital LLC lent American Apparel the $15 million, the two entered into a lending agreement that said American Apparel would be in default if it fired Charney. After American Apparel’s board told Charney it was going to fire him in 30 days, Lion Capital accelerated its demand for payment on the loan, threatening the company with bankruptcy. American Apparel argued in an SEC filing that it wasn’t in default because Charney was still technically CEO. However, it continued to work behind the scenes to remedy the situation. Now, the company now appears to have struck a deal with a hedge fund to save it from Chapter 11. Read More ›
Happy 4th of July! While many Americans enjoy a festive day of parades, barbecues and fireworks, let’s see if this week’s highlights spark your interest:
- The American Apparel/Dov Charney feud seems set to implode as the parties fire missiles and missives at one another. According to Fortune, Mr. Charney requested a special shareholder meeting in an attempt to increase the number of sympathetic directors on the board while also reporting in a regulatory filing that he is working with investment firm Standard General to amass a controlling interest. Meanwhile, American Apparel responded by adopting a poison pill which would cap a shareholder or group of shareholders interest at 15 percent.
- Bloomberg reported that the former employees of Goldman Sachs, who have alleged gender bias in their suit against it, ignited a class certification request on Tuesday. In support of their motion, the plaintiffs argued that female vice presidents and associates were systematically paid and promoted less than their male counterparts in the investment banking, management and securities divisions since September 10, 2002.
No one likes to be wrong, and being proven wrong stinks. And that’s especially true for folks in my profession – we’re not known for being gracious losers.
But even worse than just being proven wrong is having to pay the other side what they spent to prove you wrong. This is a relatively rare thing in the United States: the “American Rule” means that each side pays its own attorney’s fees, unless a contract or statute shifts the winner’s fees to the losing party’s side of the ledger.
But those fees – over $200,000 of them – were shifted to the loser in Stuart Irby Co. v. Tipton, et al., an Arkansas case involving a non-compete clause that the plaintiff said prevented three of its former salesmen from going to work for another business in the electrical supply industry. As we’ve noted, Arkansas can be a tough place for businesses trying to enforce non-competes: for example, its courts won’t rewrite them for the parties if they’re overly broad or otherwise unenforceable. Read More ›
On Thursday, even though the United States lost to Germany, they moved on from the Group of Death to take on Belgium in the World Cup round of 16. In honor of US Soccer’s achievement, we are glad to present this footy-themed edition of the Inbox.
- The New York Post continues to report on the controversy surrounding last week’s decision to terminate American Apparel CEO Dov Charney. In this piece, one of our editors achieved his goal of being quoted in that paper, although neither he nor Charney got a clever rhyming front-page headline.
- A New Jersey judge issued a red card to a shareholder lawsuit against Johnson & Johnson, tossing the case out on summary judgment. MassDevice.com reported that the judge decided that J&J acted in good faith when it decided not to claw back $40 million that had been paid to its former CEO, William Weldon.
The Securities & Exchange Commission gained significant new enforcement powers in the Dodd-Frank Act of 2010. Under the Act, the SEC can award bounties to whistleblowers who provide information leading to successful enforcement actions. It has already exercised this power, making eight whistleblower awards since starting its whistleblower program in late 2011. The Dodd-Frank Act also allows the SEC to sue an employer who retaliates against a whistleblower, but the SEC hasn’t previously taken that step.
Ten days ago, that changed. The SEC announced that it had charged Paradigm Capital Management and owner Candace King Weir with engaging in prohibited trades and retaliating against a head trader who reported the trades to the SEC, and that Paradigm and Weir had settled the charges for $2.2 million. Without its new enforcement authority under Dodd-Frank, the SEC wouldn’t have been able to bring the retaliation charge.
According to the SEC’s press release, Paradigm “removed [the whistleblower] from his head trader position, tasked him with investigating the very conduct he reported to the SEC, changed his job function from head trader to a full-time compliance assistant, stripped him of his supervisory responsibilities, and otherwise marginalized him.”
The formal order issued by the SEC further describes what happened to the whistleblower. The day after the trader told Paradigm that he had reported these particular trades to the SEC, Paradigm removed him from his position. The trader and Paradigm tried to negotiate a severance package, but when that fell through, Paradigm brought him back to investigate trades and work on compliance policies – but not to resume his head trading responsibilities. Read More ›
Last week, American Apparel announced that its board had decided to terminate Dov Charney, the company’s founder, CEO, and Chairman, “for cause.” (We’ve discussed the meaning of terminations “for cause” in prior posts here and here.) The board also immediately suspended Charney from his positions with the company. Although the board didn’t initially disclose the reasons for its action, Charney is not new to controversy; in recent years, he has faced allegations of sexual harassment and assault.
The reasons for Charney’s termination have now become public, and they aren’t pretty. In its termination letter, available here, the board accuses Charney of putting the company at significant litigation risk. It complains that he sexually harassed employees and allowed another employee to post false information online about a former employee, which led to a substantial lawsuit. The board also says that Charney misused corporate assets for “personal, non-business reasons,” including making severance payments to protect himself from personal liability. According to the board, Charney’s behavior has harmed the company’s “business reputation,” scaring away potential financing sources. Read More ›
This has been a noteworthy week here at Suits by Suits for developments in the law concerning whistleblowers; in addition to our in-depth articles we published this week, we also saw the following developments:
- The big news – which we tweeted about yesterday – is that the U.S. Supreme Court issued its opinion in Lane v. Franks, a case we’ve been watching with considerable interest. In a unanimous (9-0) decision, the Supreme Court ruled that whistleblowers are protected against retaliation by their employers when they are called to testify in court about corruption, departing from past cases in which employees were held not to have First Amendment rights to discuss matters learned at their jobs. Writing for the unanimous Court, Justice Sotomayor held that such testimony is in fact protected by the First Amendment because “Anyone who testifies in court bears an obligation, to the court and society at large, to tell the truth.” We’ll be analyzing this decision in depth in the coming days.
- The Supreme Court’s decision in Lane v. Franks comes on the heels of a survey conducted by the federal Office of Personnel Management showing that nearly 20% of federal employees are afraid of retaliation if they were to disclose “a suspected violation of any law, rule or regulation” by any government agency. (61.2% affirmed that they felt free to disclose such violations without fear of reprisal.) The Washington Post analyzed these results in the context of the ongoing controversy regarding the department of Veterans’ Affairs; the Acting Secretary of the VA, Sloan Gibson, has promised to protect any whistleblowers from reprisal. Nevertheless, attorney Scott D. Gerber, writing in the Huffington Post, opines that the VA’s whistleblower protection program “is broken, too.”
- Relatedly, the Wall Street Journal opined that recent activity and statements by the Securities and Exchange Commission (SEC) may signal that the agency is prepared to take stronger measures against employers who retaliate against whistleblowers.
- Illustrating the SEC’s get-tough policy, earlier this week, it fined a hedge fund, Paradigm Capital Management, for retaliating against a whistleblower that reported alleged “improper transactions” by the hedge fund to the SEC.
Of course, not everything that happened this week involved whistleblowers; here are a few other Suits by Suits that may be of interest:
- The U.S. Supreme Court granted certiorari in a case that will determine whether mortgage loan officers are “employed in a bona fide executive, administrative, or professional capacity” and thus exempt from mandatory overtime pay requirements.
- Finally, the Washington Post documented the fallout over years’ worth of complants about American Apparel’s CEO Dov Charney (as well as photographer Terry Richardson) for multiple alleged instances of sexual misconduct. Despite founding the company, the American Apparel board of directors ultimately suspended Charney for a 30-day cure period as required by contract before he can be terminated. Charney’s bizarre conduct is alleged to include wandering through American Apparel offices in his underpants, masturbating in front of a (female) reporter, among other behvaiors that led one plaintiff to describe his leadership as a “reign of sexual terror.” The Post also called out Richardson’s “aesthetic of hipster softcore pornography” (which it then documents by reproducing a half-dozen advertising shots of young-looking models).
While we’re talking about whistleblowers, it’s worth noting that two days ago, the U.S. Court of Appeals for the Second Circuit heard oral argument on appeal from the a federal district court’s opinion in Meng-Lin Liu v. Siemens AG, 978 F.Supp.2d 325 (S.D.N.Y. 2013). This case raises the significant question as to whether the anti-retaliation provisions of the Dodd-Frank Act, 15 U.S.C. § 78u-6(h)(1)(a), apply to an employee who is terminated by a non-U.S. corporation that does business in (and is regulated by) the United States. Read More ›