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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
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- Executive Compensation
- Family Medical Leave
- Fiduciary Duties
- First Amendment
- Government Employers and Employees
- Monthly Roundup
- Motions to Dismiss
- Noncompete Agreements
- Pregnancy Discrimination
- Preliminary Injunction
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- The Basics
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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
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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 ›
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.
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.
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).
- Netflix is challenging the lawsuit filed against it by its former content acquisitions executive Jerry Kowal, whom Netflix fired before he could resign to work for Amazon last summer. Kowal's claims against Netflix - which we examined earlier - include defamation. Netflix now claims that Kowal took its confidential documents - downloading them while on vacation weeks before he left for Amazon.
- A 48-year-old former director of Disney's story department has sued Disney in Los Angeles Superior Court for age discrimination, claiming that Disney fired him after 26 years and replaced him with a woman in her late 20s or early 30s.
- Twitter's COO Ali Rowghani resigned this week, although he will continue as an employee of the company. Reportedly, he had little to do after CEO Dick Costolo took on more responsibilities at the struggling company. Rowghani and Costolo exchanged friendly tweets about his resignation, so we would be surprised to see a suit by suit emerge.
- SunTrust Bank is paying $300,000 to settle a charge by the EEOC that one of its branch managers in Sarasota sexually harassed three women who reported to him by, for example, allegedly repeatedly trapping one of them at the teller's desk using his body and telling another that she should wear a bathing suit to work.
Summer humidity has arrived here in the mid-Atlantic, but the skies are blue and the thermometer isn’t creeping above 90 as of yet. Here are some tidbits of executive-employer news to print and read in the shade when it’s time to cool off:
- Not that the White House needed more controversy right now, but the Office of Special Counsel is investigating 37 whistleblower claims arising from 19 different Veterans Administration facilities, reports Jack Moore of Federal News Radio. The range of misconduct that the whistleblowers allegedly disclosed includes “improper scheduling practices, the misuse of agency funds and inappropriately restraining patients.”
- Chris Cassidy of the Boston Herald writes that the Massachusetts House Speaker, Robert DeLeo, and the state’s governor, Deval Patrick, are clashing over noncompete agreements. Patrick has been pushing to ban the prohibitions, while DeLeo and his allies argue that they should remain because employees have shown a willingness to live with them.
- “I’m Number One!” In the CEO world, the top-ranked executive in terms of compensation is Charif Souki of Cheniere Energy Inc., who raked in $142 million last year. Now, Souki’s compensation has sparked a disgruntled shareholder lawsuit, according to Zain Shauk, Caleb Melby and Laura Marcinek of Bloomberg. The lawsuit has led Cheniere to push off its annual meeting by three months. Shareholder advisory firms are telling the company’s stockholders that they should not vote to approve further expansion of its executive compensation.
- Darren Heitner, writing for Forbes, brought us the story of a football agent’s lawsuit against Octagon, his former employer. Doug Hendrickson, who now works for Relativity Sports, alleges that the noncompete provision in his employment agreement with Octagon is an illegal restraint of trade under California law. Hendrickson has represented Marshawn Lynch in the past; no word as to whether his lawyers are familiar with Beast Mode.
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.”
Here at the Suits by Suits Executive Employment Dispute Resolution and Litigation Centre, we’re closing the door and shutting things down, to paraphrase Alan Jackson, as Memorial Day approaches (our history of that day is here, by the way). We’ve decided to walk to the beach this year because it may actually be faster than getting on the highway – given that fifteen percent of our Washington, D.C. home base clogs the roads to get out of town, while more than that come in to wander around the National Mall in search of restrooms.
Assuming you are not reading this while you’re driving, you may find this collection of developments in the world of executive employment disputes and related fields to be interesting:
- Some interesting thoughts about the criticism The New York Times faces after its surprise firing of executive editor Jill Abramson is here; it includes this truism: “An important lesson is for employers to understand that the leverage that they may have over employees in the workplace does not necessarily extend to the court of public opinion.”
- An alleged whistleblower who worked at Dish Network in its South Asian business alleges the satellite TV provider is blacklisting him from working in Bollywood.
- The growing scandal surrounding the Veterans’ Affairs department has, of course, whistleblower implications – we’ll likely be writing about this more in the future, but here’s one note about an allegedly blown whistle at a Colorado VA facility.
- Those cyber-thieves got more than data; they got a chunk taken out of his pay too: former Target CEO Gregg Steinhafel had his 2013 compensation slashed by more than one-third by the retailer’s board of directors this week; he’ll also have to repay over $5 million in retirement benefits. Don’t cry too loudly for the CEO whose exit was an “involuntary termination” after a data breach scandal rocked the company’s holiday shopping season last year: he still has a golden parachute worth more than $54 million.
- Maybe he’s not an executive, but he’s certainly a high flyer: an air marshal who was fired after discussing cutbacks to the air marshal program on television will have to defend his appellate victory at the United States Supreme Court. Robert MacLean convinced the U. S. Court of Appeals for the Federal Circuit that he should have been allowed to use a whistleblower defense when the TSA undertook to fire him; this week, the Supremes agreed to hear the government’s appeal of that ruling.
- Insert the Memorial Day beer-drinking pun of your choice here: A St. Louis jury returned a verdict in favor of megabrewer Anheuser Busch this week, finding that it did not discriminate against a former top-ranking executive when it paid her less than men in similar positions. Even though her bonus and salary were over 40 percent lower than her male predecessor’s, the jury found no evidence to support the executive’s claim of gender discrimination.
I thought April showers brought May flowers, but the month of May has brought both showers and flowers to the DC-Baltimore area. Luckily, our colleague Andrew Torrez was not parked on the Baltimore street that was swept away by the recent deluge. As for this week’s news in employer-executive disputes, we’ve managed to pluck a few tidbits that have bloomed despite the storms:
- In the continuing saga of a proposed ban on non-compete agreements in Massachusetts (which we have covered here and here), 37 technology CEOs recently wrote to the state legislature to advance the cause of the ban, reported Kyle Alspach of BetaBoston;
- Two trade associations have resolved an expensive dispute over poaching of employees. Dietrick Knauth of Law360 wrote that TechAmerica sued the Information Technology Industry Council for hiring away the leaders of its government procurement team, but has now agreed to a settlement. TechAmerica argued that the Council wanted to put it out of business by stealing its member companies.
- Patron Tequila settled during trial with an executive who claimed that he was entitled to $70 million in bonuses – and just in time for Cinco de Mayo. City News Service said that Ajendra Singh sued Patron and its founder, John Paul DeJoria, alleging that he was promised equity bonuses based on the value of the company in exchange for operating its new factory in Mexico.
- A California Senate committee is recommending a bill that would raise corporate taxes for companies who have CEOs that make more than 100 times that of its median worker, and would provide tax benefits to companies whose CEOs make less than that ratio. Harold Meyerson of the Washington Post wrote that the bill was “one of the few remaining avenues that could enable workers to regain some of their lost income,” “in the absence of both unions and full employment.”
- Melissa Lipman of Law360 reports that eBay settled an antitrust suit alleging that it entered into an anti-competitive agreement with Intuit not to recruit each other’s employees. The deal includes an injunction and a $3.75 million payout. The $3.75 million is more than the price for the third most expensive item ever bought on eBay – lunch with Warren Buffett.
Here as we approach the close of April, we’ve noticed (in something of our Moneyball moment) that three of the four cities where Zuckerman Spaeder has offices – New York, Baltimore, and Washington – host baseball teams that have won more than half their games thus far this season. Our colleagues in Tampa are the only ones with a team winning below .500. Maybe we can make up for that by opening an office in Milwaukee, where the Brewers have won nearly 75% of their games.
In any event, the items below came over our transom this work and are worthy of note in the world of executive employment disputes:
- Mary Willingham, the controversial University of North Carolina staff member whose comments on student-athlete literacy were widely circulated, has resigned, citing a hostile work environment in the flak over her views.
- A federal judge in New York dismissed Veramark Technologies’ suit against its former VP of sales and his new employer Cass Information Systems; the court held that Veramark’s non-compete agreement with the former VP was not enforceable because Veramark couldn’t show it was needed to protect its existing customer relationships.
- Speaking of non-competes, another columnist in the Boston Globe – which has extensively covered Governor Deval Patrick’s proposal to ban non-competes – has come out in support of that ban.
- An Alabama newspaper published this “how-to” guide to whistleblowing this week.
- 64,000 technology workers in the Silicon Valley have tentatively settled their lawsuit against Apple, Google, Intel, and Adobe, alleging those companies colluded to keep down wages and limit “poaching” employees from one company to another. The settlement is reportedly for $324 million, and comes just a few days after the employees argued against Apple’s motion that they could not use statements about the character of late Apple CEO Steve Jobs.
- A bill in the Iowa State Senate that would expand whistleblower protections moved to the full body this week.
- A former bank examiner’s whistleblower suit against the Federal Reserve was dismissed this week, after a federal judge in New York ruled that she had not connected her allegations of wrongdoing at J. P. Morgan with her termination.