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© 2014 Zuckerman Spaeder LLP

Showing 77 posts in The Inbox.

The Inbox: April 4, 2014

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.

The Inbox: Mr. Vernon “Expected A Little More From A Varsity Letterman” Edition

It’s been a busy week here at the Suits-by-SuitsGlobal Executive Employment Dispute Centre in Washington, D.C., what with interesting Supreme Court arguments being heard, the famous Cherry Blossoms about to blossom, our beloved Nationals putting final touches on their pitching rotation, and even some more snow from the winter without end. 

But none of that matters next to what’s really important about this week: which is that Monday marked thirty years (!) since the fabled “Breakfast Club” met for detention on a dreary Saturday, March 24, 1984, (at Shermer High School, Shermer, Illinois…).  In celebration of the great teen-angst classic, we’re using quotes from the film to introduce this week's collection of interesting news notes from the world of executive-level employment disputes.  So here they are, framed by the work of the movie’s writer and director, the late, great John HughesRead More ›

The Inbox: March 7, 2014

RollsRoyceImageThe biggest news of the week in Suits by Suits is the Supreme Court’s decision in Lawson v. FMR LLC, which was handed down on Tuesday.  Our Jason Knott weighed in with two excellent, in-depth pieces examining both the majority opinion as well as the concurring and dissenting opinions (including the very unusual dissenting lineup of Sotomayor, Kennedy, and Alito).  We think this is a groundbreaking decision for whistleblowers and employers that will continue to affect the legal landscape for years.  Other analysts have weighed in on Lawson, including the ABA and The Wall Street Journal (subscription required).

Of course, that’s not all that happened in the news this week:

  • We’re monitoring a recently-filed lawsuit by AK Steel Corp., alleging that its former employee, Thomas Miskovich, violated his noncompete contract and tortiously interfered with AK Steel’s business when he jumped ship for Novelis Corp.  Norvelis has responded that it is in the aluminum business – not the steel business – and thus is not a “competitor” of AK Steel.  A federal district court in Ohio rejected AK Steel’s request for a TRO but will hear arguments for a preliminary injunction in two weeks; we’ll be sure to keep you posted.
  • Writing for Forbes, Steve Parrish has some practical advice for employers in crafting executive compensation packages that reduce tax burdens on employees, including the issuance of restricted stock that employees forfeit if they leave the company as a kind of “golden handcuff.”
  • But wait!  Before you rush out and draft lucrative new compensation packages, keep in mind that such packages remain a touchy subject among shareholders.  We’ve talked about the “say-on-pay” provisions of the Dodd-Frank Act on multiple occasions; this week, we saw something similar happen across the Atlantic.  After shareholders rejected a more lucrative compensation package, Julius Baer – a private bank based in Switzerland – reduced CEO Boris Collardi’s pay by nearly 11% in 2013.  And Rolls-Royce announced a plan to claw back any executive bonuses paid out to employees who subsequently come under investigation (“in the case of serious non-compliance with the Rolls-Royce code of conduct, reputational damage or gross misconduct”).
  • On balance, though, such reductions in executive compensation remain the exception, rather than the norm.  So while eyebrows were raised, we weren’t surprised to learn that GlaxoSmithKline PLC increased CEO Andrew Witty’s 2013 compensation by 63% despite ongoing investigations by the Chinese government into alleged kickbacks and fraud that have led to the arrest of four Glaxo executives in China.
  • And Witty isn’t the only executive to bring home the bacon; Wells Fargo’s CEO John Stumpf – already the highest-paid bank CEO in the U.S. – was awarded $1 million in restricted stock as part of his 2013 compensation, and, just days after RadioShack announced that it may close as many as 1,100 retail stores in light of its second straight annual loss, the company announced raises and bonuses for top executives, including a half-million-dollar retention bonus for CEO Joseph Magnacca.
  • Relatedly:  Excellus BlueCross Blue Shield – the largest not-for-profit insurer in New York – revealed earlier this week that it had paid outgoing CEO David Klein a $12.9 million retirement bonus and former CFO Emil Duda $10.95 million in retirement pay, which it says were “industry norms at the time the agreements were made.”  Key to the packages were noncompete clauses that were said to have kept the officers from working for Excellus’s competitors.
  • Putting it all together:  MoneyNews’s Dan Weil, analyzing a study performed for The Wall Street Journal, suggests that for purposes of awarding compensation bonuses, many companies are using non-standard methods of computing their earnings – particularly by excluding certain expenses that would otherwise affect the company’s bottom line under generally accepted accounting principles – in ways that reward executives for the upside but fail to calculate downside risks.  And Antony Jenkins, CEO of international financial giant Barclays PLC, suggests that executive bonuses are necessary to retain key staff; after Barclays cut compensation in 2012, nearly 700 high-level U.S. employees left, presumably for richer pastures.  Barclays reversed course and awarded increased bonuses in 2013 to avoid a “death spiral” of further departures.

The Inbox, Why Does The Shortest Month Feel So Long Edition

Here at our polar vortex bunker in the freezing Nation’s Capital, supplies are running short and we’re vigorously debating whether we should make a mad dash to the Suits by SuitsMobile and drive straight down to visit our colleagues in Tampa, Florida, or just tough it out and pray/chant/hope that the cold will ultimately break.  In the meantime, we’ve defrosted the following interesting bits of news from the world of executive employment issues: 

The Inbox, How Many More Decades Until Spring Edition

Here at the Suits by Suits Worldwide Operations Center, weather continues to have us flummoxed, vexed, and annoyed: even though a famous Pennsylvania rodent discerned that we would have six more weeks of our brutal winter, we’ve had a pleasant warm spell that is about to come to a crushing end due to a storm front that goes by the curious name of "Texas Hooker" (we did not make that up).  And we’re about to be plunged back into the depths of the polar vortex yet again – although our earlier bouts with the grim chill may have wiped out our area’s growing population of stink bugs.   

In any event, we always take shelter from the storms, the cold, and the heat by digging into our Inbox of interesting developments in executive employment disputes and the issues that surround them, including:

The Inbox - Valentine's Day Edition

Love is in the air as couples celebrate Valentine’s Day with chocolates, flowers and romantic dinners.  But there’s no love lost between some employers and their executives, as this week’s Inbox shows:

  • reports on a fascinating case involving Bruce Kirby, former CEO of Frontier Medex.  In a lawsuit in Maryland federal district court, Kirby alleged that he was the beneficiary of a change-in-control severance plan and that Frontier kept him on for over a year solely for the purpose of defeating his severance benefits, even though it told him it was going to terminate him before that.  The court ruled that he was not contractually entitled to severance, but could pursue a claim that Frontier interfered with his benefits, violating ERISA.
  • Retired Ohio Bureau of Workers’ Compensation attorney Joe Sommer is asking the Ohio Supreme Court to review a decision that limited the application of whistleblower protections in that state.  He believes that the Franklin County Court of Appeals overly limited whistleblower claims when it ruled that an employee had to report criminal conduct in order to be protected from retaliation.
  • According to Benefits Pro, the EEOC “slammed” CVS over its severance deals in a lawsuit against the company in Illinois federal court.  The lawsuit alleges that CVS required employees to sign severance agreements with five pages of small print, some of which bargained away the employees’ rights to communicate to agencies about practices that violated the law.  CVS says that nothing in those agreements barred employees from going to the EEOC with complaints.
  • Hook ‘em, Mack!  Former Texas football coach Mack Brown, who resigned after this season, did get some love from his employer, as the San Francisco Chronicle reports that he will receive $2.75 million that he was owed under his contract in event of termination.  He will also get a cushy $500k job this year as special assistant to the president for athletics.
  • John O’Brien of Legal News Line reports that a California appellate court will allow a whistleblower’s claim of retaliation under the False Claims Act to be heard in state court.  Dr. Scott Driscoll, a radiologist, claims that he was fired for complaining that his employer was committing Medicare fraud.  When the employer sued him in state court, Driscoll counterclaimed for FCA violations.  The California court decided that it had jurisdiction to hear the claim, rejecting the employer’s argument that federal courts have exclusive jurisdiction over FCA retaliation claims.

The Inbox - February 7, 2014

Our legal world was abuzz this week with the news that the law firm of Quinn Emmanuel will inaugurate a "work away week" in which its lawyers will be given $2,000, told to travel to anywhere in the world (so long as they have 24/7 internet access) and work from the beach or travel destination of your choice.  We here at Suits by Suits aren't quite so fortunate, but we do have all the inside information about the latest disputes between employers and employees:

The Inbox, Pre-Super Bowl Edition

Here at Suits by Suits Polar Vortex Centre, the debate rages even as the hours tick down to kickoff: who should we root for in Sunday’s big game, the Denver Broncos or the Seattle Seahawks?  Both teams’ home bases, from our point of view, have much to commend them in terms of the executive employment issues we love so much.  Seattle is home to Robinson Cano’s almost-quarter-billion-dollar deal with the Seattle Mariners – maybe not C-suite, but a great employment arrangement in and of itself.  Colorado, on the other hand, has given us some toothy stories over the years: from kidnapping to wrongful termination related to speech and a neat case on national origin discrimination.  

But since our beloved Washington football club was essentially eliminated from contention in about, er, October, none of it has really mattered much to us. 

In any event, before you dig into the chili and chicken wings (or not), here are some of the week’s most interesting happenings that concern executive-employer relationships:

The Inbox - January 24, 2014

  • woman refusing cashIBM CEO Virginia “Ginni” Rometty said on Tuesday that she is passing up her annual bonus after the company missed its quarterly earnings expectations and its annual revenues declined in 2013.
  • Meanwhile, former Yahoo COO Henrique de Castro’s severance, with an estimated value of $60 million, is being called one of the largest golden parachutes ever for a fired executive.   See our post earlier this week explaining how employment agreements can lead to severance payments even to executives who were asked to leave for poor performance.
  • We don’t know whether de Castro got to take his personal data with him.  The Wall Street Journal reported this week that 21 percent of companies remotely wipe clean data from phones and tablets used by employees for work activities when an employee quits or is fired, even where the employee owns the device and even where the employee stored personal data on the device.
  • The U.S. Court of Appeals for the Third Circuit (see Erica Plaso v. IJKG opinion) affirmed the judgment against a consultant who sued the hospital where she had worked for a hostile working environment, claiming that she was sexually harassed on the job.  The Third Circuit agreed with the trial court that the hospital wasn’t the consultant’s employer for purposes of Title VII, and that her employer was the consulting company that contracted with the hospital to provide services.     

The Inbox – Ramping Up Edition

No, this headline is not a pun about the closed on-ramps to the George Washington Bridge.  Rather, it’s meant to acknowledge that as the New Year gets into full swing, folks are starting to ramp up their analysis of ongoing issues in disputes that involve executives and their employers.  We’ve seen a number of interesting stories and summaries cross our desk:

  • Ben James of Law360 published a thorough recap of the lingering questions about Dodd-Frank’s whistleblower protections.  We’ve got one more question: will the Supreme Court’s upcoming decision in Lawson v. FMR LLC (we covered the oral argument here) affect a whistleblower’s choice between initially pursuing a Dodd-Frank claim in federal court, or filing a Sarbanes-Oxley claim with the Department of Labor?  Right now, some courts are putting a narrow construction on who can sue under Dodd-Frank, so if the Lawson Court takes an expansive view of Sarbanes-Oxley, it may give new life to that statute as an appealing option for whistleblowers.
  • What’s not ramping up: romance in the home of the new president of Alabama State University.  Debra Cassins Weiss of ABA Journal reports that Gwendolyn Boyd, who is single, will not be allowed to “cohabit with a romantic partner in the university residence so long as she is single,” according to her employment contract.  Boyd says she has “no issue” with the provision.  Sorry, suitors.  (Which, by the way, would be a good name for our group of loyal readers.)
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