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- Judge Approves $20 Million in Executive Bonuses From Bankrupt Company, Finding That Incentives Weren't "Lay-ups"
- The Inbox - There Will Be Damages
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- Show Some Consideration
- The Inbox - Liars, Titans and Terror Babies, Oh My!
- Foreign Whistleblower Cashes in on Report to SEC
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P. Andrew Torrez, named one of Maryland's star lawyers by Benchmark, is a partner in Zuckerman Spaeder’s Baltimore office. He represents both plaintiffs and defendants in complex commercial litigation matters at trial and on appeal.
Showing 90 posts by P. Andrew Torrez.
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 ›
One recurring topic here at Suits by Suits is the default corporate practice of including mandatory arbitration clauses in employment contracts; we’ve written frequently about that practice. Such clauses typically specify that “the parties agree to submit any dispute arising out of this Agreement to binding arbitration.” Read More ›
It's that time again... time to check in on the week's news in Suits by Suits:
- The United States Court of Appeals for the First Circuit issued its opinion in Velazquez-Perez v. Developers Diversified Realty Corp, No. 12-2226 (May 23, 2014), holding that an employer can be liable for sex discrimination under Title VII of the Civil Rights Act of 1964 when an employee is terminated at the instigation of a “jilted co-worker intent on revenge.” (We wouldn’t have used the word ‘jilted.’) Surprisingly, this is a case of first impression.
- We’ve frequently discussed the controversial case of Fifeld v. Premier Dealer Services, 993 N.E.2d 938 (2013), in which an Illinois appellate court invalidated a noncompete clause for lack of mutual consideration. One wrinkle we told you about occurred in Alabama, in which a federal court refused to enforce a noncompete that was signed after the employee had already began working for his employer. Last week, the Superior Court of Pennsylvania followed suit in Socko v. Mid-Atlantic Systems of CPA, Inc., 2014 PA Super 103 (2014), holding that such clauses are void unless supported by independent consideration.
- Ok, so we discuss noncompetes a lot here on this blog -- but even we were surprised by this next story. Apparently God himself -- or herself; we're open-minded types -- has now gotten in on the act. Patheos blogger Warren Throckmorton discusses the interesting case of Phil Poirier, a community group pastor who was essentially fired from the Mars Hill megachurch in Everett, Washington for his refusal to sign a non-compete agreement that would ban him from taking a “next church ministry” within ten miles of any Mars Hill church (which has hundreds of “branches” across the U.S.). Throckmorton is continuing to update the fascinating saga, including creating a “no-compete zone” map highlighted in red that illustrates the practical consequences of the clause Poirer refused to sign. (Hint: it's virtually all of the state of Washington.)
- Now that we’ve discussed religion, I suppose we can check in on a hot-button political issue, too. Stoking the debate over executive pay inequality is a recent survey of CEO pay conducted by the Associated Press (using data provided by Equilar, an executive pay research firm). The AP’s findings are that that the median CEO received $10.5 million in compensation in 2013, up 8.8% from the previous year. Of that, $1.1 million is in base salary (up 4.8% from 2012), with the largest incentive-based components being cash bonuses (median $1.9 million, up 12.6%) and stock awards ($4.5 million, up 4.2%).
- In light of the public outcry over CEO pay, we’ve learned that California is considering a bill, SB 1372, that would offer tax breaks to companies based on the “compensation ratio” between the amount paid to that company’s CEO (or highest-paid employee) and the median income level of all of the company’s employees. The new law would create nine tax brackets (subsection g(2)); the bottom line is that companies where the CEO earns 100x or less than the average employee would get a break in their marginal tax rates, while those paying more would see their tax rates increase. As the Washington Post put it: this bill “is the first in the nation that seeks to mitigate economic inequality through corporate tax reform.”
As long-standing readers of Suits by Suits know, California is at the forefront of the “state-by-state smackdown” regarding covenants not to compete, having prohibited essentially all such clauses by statute. (You can refresh your recollection by reviewing our discussion of California law, here.)
Consequently, one of the arguments deployed by other states looking to restrict or ban noncompetes is that the business climate created in California encourages worker mobility, and that climate in turn is attractive to the technology sector (and in particular, to technology start-ups), who depend upon “poaching” away top talent that may be underpaid at a competitor. You can read these arguments in more depth here (part 1), here (part 2), and most recently here (part 3).
The common thread that runs through these arguments is that California encourages worker mobility, and that mobility, in turn, is good for Silicon Valley. The argument has some appeal. Read More ›
Even if you’re only an occasional reader of Suits by Suits, you know that we’re committed to engaging in a practical discussion of the varying ways in which an employee’s covenant not to compete might be legal in one jurisdiction but unenforceable in another. It’s our view that both employers and employees need to know about these potential landmines where the employer operates in multiple U.S. states.
But knowing what the substantive law in each state is regarding noncompetes is only half of the battle. Affected parties need to know not only whether a court will determine that a particular noncompete clause is unenforceable as written, but also what that court will do after it makes such a determination. And that’s what this post is all about.
Broadly speaking, a court can do one of three things with a defective covenant not to compete: Read More ›
Momentum continues to build in Massachusetts for that state to adopt the California model and ban the enforcement of employee covenants not to compete in the state. Last fall, we told you that Gregory Bialecki, Secretary of Housing and Economic Development under Gov. Deval Patrick (D), went on record as saying that the administration supports the “outright elimination of enforceability” of noncompetes in Massachusetts in a story broken by Scott Kirsner of the Boston Globe.
Of course, there is often a world of a difference between a politician “supporting” something and being willing to actually spend political capital to try and bring about actual legislation. At first, Gov. Patrick’s support was limited to 2013’s H.B. 1715, which (as we explained here, over a year ago) would not have prohibited noncompetes, but would have instead created a statutory regime that prohibited such clauses that exceeded six months in length. That bill failed to pass the legislature in 2013. Read More ›
We here at Suits By Suits used up pretty much all of our literary creativity in drafting last week’s Inbox, a stirring tribute to the late, great director John Hughes as seen through the cast of his seminal film, The Breakfast Club. So this week, in the words of Joe Friday, you get just the facts, ma’am – which is to say, a terse rundown of the week’s developments delivered in a gruff, no-nonsense style:
- This Wednesday, the U.S. Occupational Safety and Health Administration (OSHA) issued an interim final rule and public requests for comments regarding the employee protection provisions of the Consumer Financial Protection Act of 2010, the portion of the Dodd-Frank Act that established the Consumer Financial Protection Bureau to protect whistleblowers who report violations of various consumer protection laws. The interim final rule describes the process that OSHA investigators and administrative law judges will take in evaluating whistleblower complaints under this statute, and mirror regulations OSHA has implemented over the last few years with respect to other whistleblower statutes under its jurisdiction.
- We’ve previously discussed the Illinois appellate court’s 2013 decision in Fifield v. Premier Dealer Services, which altered the landscape of noncompete law in Illinois by seemingly declaring a bright-line rule that an employee must have worked for his or her employer for two years in order for the employer to subsequently enforce a noncompete clause. This week, attorneys writing in the National Law Review analyze a recent decision by a federal District Court judge applying Illinois law, Montel Aetnastak v. Miessen. In that case, the Court refused to follow Fifield and apply a “bright-line” two-year test, instead holding that the appellate court holdings have been “contradictory” and that there has been no “clear direction from the Illinois Supreme Court,” thus permitting that court to enforce a noncompete clause against an employee who had worked for her employer for only 15 months. We will be watching to see how the state courts respond; we wouldn’t be surprised to see a certified question to the Illinois Supreme Court to resolve the status of Fifield with finality.
- While the Hobby Lobby case has garnered national attention these past few weeks, a new dispute between religious employers and employees may be brewing in Hawaii. The Roman Catholic Church has rolled out a new Teacher Employment Agreement that permits teachers at 36 parochial schools in Hawaii to be terminated for “living immorally,” defined as “adultery, homosexual activity, same sex unions, procuring, abetting or promoting abortion, euthanasia or in vitro fertilization, and unmarried cohabitation.” The Hawaii Civil Rights Commission will scrutinize the contract to determine if the new contract violates Hawaii’s state law protections against discrimination based on marital status and sexual orientation, particularly with respect to teachers who teach purely secular subjects. The superintendent of Hawaii Catholic Schools has argued that even secular teachers at parochial schools are “role models whose job is also a ministry,” thus falling under a ministerial exemption. We’ll continue to monitor this situation.
- Relatedly, a New York appellate court upheld a $1.6 million verdict (including $1.2 million in punitive damages) against Gloria’s Tribeca, Inc. and chief owner Edward Globokar, who own and operate a chain of Mexican restaurants in New York City called “Mary Ann’s.” The restaurants would hold weekly, mandatory “prayer meetings” in which chef Mirella Salemi was insulted, told she was “going to hell” for being gay, and, in at least once case, was instructed to fire another employee for being gay. (Salemi refused.) The appellate court rejected the restaurant’s First Amendment claims, holding instead that the practices violated the New York City Human Rights Law.
Oh, and just one more thing:
- Long-standing consumer advocate (and perennial Presidential candidate) Ralph Nader has launched “Nader’s Penny Brigade,” a grassroots organization with the goal of bringing attention to what Nader calls the growing disparity between executive compensation and average worker pay. The first item on Nader’s agenda has to do with the accounting measures used in how large corporations accrue profits in relation to bonuses paid to top executives; an issue that we’ve previously highlighted in this space. The organization’s name stems from Nader’s plea that shareholders donate one penny for every share that they own to fund oversight. We just thought you might like to know.
In researching and writing Monday’s blog post, I came across another unique wrinkle in the Florida statute that governs covenants not to compete, § 542.335 of the Florida Statutes. I think it's worth examining that provision in more detail as part of our ongoing efforts to educate employers and employees as to the varying state-by-state nuances in different jurisdictions that can affect the ultimate questions as to whether and how that state will enforce an employee’s covenant not to compete. Read More ›
The State-By-State Smackdown - New York vs. Florida: When Two Seemingly Similar Things Are Not The Same
In our recurring “State-by-State Smackdown” series on the evolving law with respect to covenants not to compete, we’ve described the traditional balancing-test approach that is the law in the majority of jurisdictions as the Legitimate Business Interest or “LBI” test. In understanding this shifting landscape, we’ve typically highlighted statutes and/or judicial opinions in jurisdictions that have begun to shift away (or even depart entirely) from the classical LBI analysis.
Today, we’re doing something a little different, taking our cue from a recent New York state appellate decision: Brown & Brown, Inc. v. Johnson, 980 N.Y.S. 2d 631 (App. Div., 4th Dep’t, February 7, 2014). Read on. Read More ›