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- The Basics: An Introduction to Indemnification and Advancement
- The Inbox: March 7, 2014
- A Look at the Concurring and Dissenting Opinions in the Supreme Court's Sarbanes-Oxley Whistleblower Decision
- Supreme Court Allows Employees of Private Contractors to Bring Sarbanes-Oxley Whistleblower Retaliation Claims
- The Inbox, Why Does The Shortest Month Feel So Long Edition
- E-mailing Work Documents to Your Personal Account Looks Fishy, Says NY Appeals Court in New Non-Compete Opinion
- Whistleblower or wrongfully terminated employee? California Supreme Court says: whistleblower
- The Inbox, How Many More Decades Until Spring Edition
- Vanterpool v. Cuccinelli: Threading the Needle to Preserve a Free Speech Claim Against a Government Employer without Admitting to Lying Earlier About Who Spoke
- Vanterpool v. Cuccinelli (yes that Cuccinelli) Sheds Light on Political Patronage Dismissals
- After-Acquired Evidence
- Age Discrimination
- Arbitration and ADR
- Breach of Contract
- 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 – Change-in-Control Provisions
- Social Media
- Statutes of limitations
- Summary Judgment
- The Basics
- The Inbox
- Title VII
- Trade Secrets
- Vicarious Liability
- Wage and Hour
- Workplace Conditions (Occupational Safety and Health)
- 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
Showing 75 posts in The Inbox.
The 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.
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:
- Non-competes down in Dixie: this analysis looks at how North Carolina courts enforce non-competes after a merger, this one looks at Florida’s statute governing those agreements, and this one discusses two recent Tennessee cases about them – and the author concludes non-competes are “alive and well (and enforceable)” in the Volunteer State.
- And from about as far from Dixie as you can get – Anchorage, Alaska – comes this thoughtful article about how small business owners and departing employees should look at non-competes. It notes that execs who leave to set up their own businesses in violation of a non-compete face the customary lawsuit as well as a unique risk: they will have “proved themselves dishonorable and word travels fast in Alaska.”
- Arthur Laffer, please call your office and bring your famous curve: Hungary’s Constitutional Court struck down that country’s 98% tax on severance payments, finding it conflicted with EU rulings and regulations aimed at protecting property ownership.
- The bounties offered to tipsters under Dodd-Frank haven’t yet turned into the problem big companies feared, the Wall Street Journal reports.
- The Title VII case involving retailer Abercrombie & Fitch’s prohibition on employees wearing hijabs – which we’ve written about before – led to a relatively rare split decision in the Tenth Circuit Court of Appeals this week, on the procedural point of whether all of the justices of that court should reconsider a ruling in Abercrombie’s favor made by three of the justices (if you’re a fan of appellate practice and/or French, this was a petition for rehearing en banc). Some pundits say this split could motivate the Supreme Court to take the case; others say no.
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 Securities and Exchange Commission has filed an amicus brief in the Second Circuit, arguing that its interpretation of a “whistleblower” under Dodd-Frank – essentially an employee who reports wrongdoing either internally or to the SEC – should be followed. We’ve covered this case, Liu v. Siemens, before, for an earlier ruling holding that Dodd-Frank’s whistleblower protections don’t apply overseas.
- Staying with the whistleblower theme for a minute: government contractor Kellogg Brown & Root is being attacked by a whistleblower, who has complained to the SEC and the Justice Department that employees are forced to sign confidentiality agreements that prevent them from ever disclosing allegations of wrongdoing. This one could be interesting…
- Auto retailer Carmax is defending the arbitration clause in its employment agreement in a California appellate court, urging it to reject an employee’s argument that the clause is illusory because Carmax reserved the right to amend it at any time.
- The bankruptcy trustee for real estate company Grubb & Ellis is trying to claw back $650,000 from a former executive, alleging the payments in stock and paid time off were fraudulent.
- Finally, while we write a lot about non-compete agreements between executives and employers generally, we rarely see them between divorcing spouses – but a California court of appeal ruled on just such an issue this week. The court held that a judge’s order prohibiting one spouse from working in the same field – the rum importing business – as the other spouse didn’t violate California’s general ban on non-compete agreements because the order was an order, and not an agreement. It remanded the case, however, finding its five-year, worldwide ban on the one spouse getting into the rum importing business was overbroad.
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:
- BLR.com 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.
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:
- Our friends at the Trade Secrets & Noncompete Blog have a nice piece analyzing the basics of the enforceability of covenants not to compete under New York law as seen through the lens of the recent federal court opinion in Reed Elsevier, Inc. v. TransUnion Holding Company, Inc. (No. 13 Civ. 8739, S.D.N.Y. Jan. 8, 2014).
- Speaking of noncompetes -- here's a unique wrinkle that came to our attention: Texas has a statute (§ 15.50 of the Texas Business and Commerce Code) that, in subsection (a) reflects the general LBI test we've discussed at some length, but in subsection (b) sets forth a list of statutory requirements for such clauses to be enforceable against physicians, including the requirement that the covenant must "provide for a buy out of the covenant by the physician at a reasonable price." Id., § 15.50 (b)(2). It's an idiosyncratic requirement, but -- as one employer recently found out -- it's not just boilerplate; by failing to include such a buyout, an appellate court bounced an otherwise-valid noncompete. LasikPlus of Texas, P.C. v. Mattioli (No. 14-12-01155-CV; 14th. App. Dist. Nov. 21, 2013). Our own Jason Knott discussed this case in depth back in December.
- Relatedly, the Texas-based computer forensics firm has released a white paper entitled "Top 10 Best Practices for Non-Compete Enforcement," intended as a guide for employers and their lawyers in drafting covenants not to compete that are more likely to survive an LBI analysis. The paper doesn't cover what we think is the most important issue -- knowing the specifics of your jurisdiction; see the above entries -- but does reflect some of the concerns we've continued to stress here since this blog's inception. It's worth a read.
- Finally, amidst the controversy over large new raises given by Goldman Sachs and JPMorgan Chase to chief executive officers Lloyd Blankfein and Jamie Dimon (once called "The Most Dangerous Man in America"), several executives have voluntarily turned down multi-million-dollar bonuses awarded to them by their respective boards, including Barclays CEO Antony Jenkins (doing so for the second year in a row), and IBM CEO Virginia Rometty, and in fact, all of IBM's senior management.
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.
- Speaking of sports, a former employee of an organization that sets up youth baseball leagues is asking a Tennessee court to void his non-compete agreement, arguing that the agreement is “unnecessary” because it “serves no legitimate business purpose or motive. There is absolutely nothing unique, novel, or secret about scheduling baseball games.” He also contends that he wasn’t asked to sign the agreement until his employer had decided to terminate him.
- An update on one we’ve been covering since we started in this blogging business: a new trial has been ordered in former “Desperate Housewives” star Nicollette Sheridan’s lawsuit alleging Touchstone Television Productions shouldn’t have fired her for complaining that a producer assaulted her; the court, accepting Sheridan’s argument, reversed an earlier decision that dismissed her case for failing to fully pursue administrative remedies.
- We’ve also written before about allegations of employment discrimination at the Borgata Casino in Atlantic City. This week, the casino settled a case brought by over a dozen former employees who allege they were fired because they reached the ripe old age of…40.
- Now that this Inbox is turning into the Ghost of Blog Posts Past, let’s continue the theme: we wrote several months ago about the case of Thomas Kimmett, a former deputy attorney general for the Commonwealth of Pennsylvania, who alleged he was fired in retaliation for reporting what he called waste and abuse in the office. This week, the Third Circuit Court of Appeals affirmed a district court’s ruling dismissing the suit, holding that Kimmett’s First Amendment rights weren’t violated because his complaints about the waste and abuse didn’t fall within the protection of Pickering v. Board of Education, a Supreme Court case that protects public employees who exercise their free speech rights.
- IBM 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.
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.)
Neither snow nor rain nor heat nor gloom of night – and certainly not a batch of freezing rain and ice that’s currently paralyzing the greater Baltimore-Washington area right now – stays your trusty editors from the swift completion of their appointed rounds; namely, bringing you the weekly roundup of Suits by Suits:
- It may not make the headlines on cable news channels, but next Tuesday, the Supreme Court will hear oral argument in United States v. Quality Stores, Inc. to determine whether severance payments made by employers to involuntarily-terminated employees are subject to FICA taxes. The U.S. Court of Appeals for the 6th Circuit says such payments are not “wages” and thus not subject to FICA tax; a prior IRS ruling disagrees. The Human Resource Executive Online estimates that businesses may qualify for $1 billion or more in refunds if the 6th Circuit opinion is upheld.
- The Occupational Safety and Health Administration (OSHA) issued a ruling requiring a trucking company, Oak Harbor Freight Lines, Inc., to compensate a driver who refused to work while taking a prescribed narcotic cough suppressant while sick in violation of OSHA regulations. The order also requires the company to cease retaliating against workers who refuse to operate vehicles while ill or fatigued in derogation of safety regulations.
- Speaking of which, the Wall Street Journal describes a series of new whistleblower protection laws that just went into effect in California, creating an entirely different legal regime. As the story notes: “Instead of establishing a specific program for individuals to submit tips, like the Securities and Exchange Commission’s whistleblower program, these laws broaden an individual’s right to pursue action if retaliated against for reporting suspected wrongdoing. The potential civil fine is up to $10,000 per violation, among other potential sanctions. (We’ve writen extensively about whistleblowers, usually in the federal context.)
- Of course, no issue of the Inbox would be complete without the usual roundup of complaints over golden parachutes. This week, we learned that Paterson, NJ was continuing to study the legality of a $74,000 payment to former mayor Jose “Joey” Torres in connection with accrued but unused sick days and vacation time; and that a U.S. trustee has objected to a proposed $650,000 in severance payments to two outgoing executives of discount fashion retailer Loehmann’s, currently in Chapter 11 bankruptcy. Despite the public controversy that often surrounds such payments, it hasn’t affected the boardroom: a study reveals that shareholders have approved a higher percentage of so-called golden parachutes in 2013 (86%) than they did in 2012 (82%), even as third-party advisers are increasingly advising shareholders to vote no.
- And finally: there’s been much coverage of Colorado’s law legalizing recreational use of marijuana – my personal favorite story is “I just bought pot for the first time with my boss’s money!” – but, as those killjoys at the Wall Street Journal note, Colorado employers remain free to prohibit marijuana use by their employees and back up such prohibitions with regular, mandatory drug tests. (The same story does note that drug use at the workplace has been on the decline for a decade, and that marijuana use accounted for just 2% of positive tests in 2012.)
Here at the Suits by Suits World Last-Minute Gift-Buying-Wrapping-And-Shipping Center, we’re scrambling to finish preparations for our big holiday celebration, but as always, employment-related disputes are filling our time: The eight maids-a-milking are whispering about Title VII violations, the nine ladies dancing are insisting on an ERISA-type plan for future health costs stemming from dancing-related injuries, the ten lords-a-leaping and eleven pipers piping are just getting in everyone’s way, and the twelve drummers drumming claim that putting them last on the list is our way of retaliating against them for blowing the whistle on harsh working conditions in an offshore toy factory owned by this jolly red friend of ours.
And all of them wonder how it is that they were gifted to us without violating slavery and human trafficking laws. Bah humbug! No, that’s too strong – it is our favorite holiday.
In any event, here are the most interesting news items that came across our transom in the past week:
- For those of us who write about executive employment disputes, the case of Missouri anchorman Larry Connors has been the gift that kept giving all year, raising interesting issues – now, he’s filed a discrimination suit against the TV station that fired him.
- A fired real estate executive received a holiday gift this week when the Second Circuit Court of Appeals reinstated her retaliation claim against her former employer, real estate manager Andalex. Andalex didn’t walk away without a stocking-stuffer, though: the appellate court affirmed a trial court’s dismissal of the executive’s hostile work environment claim and her claims for gender and national origin discrimination.
- In a drama that seems like it’s gone on as long as Masterpiece Theater but could use a little Law & Order: UK to move things along, the fallout from the BBC’s executive pay scandal continues to rock the United Kingdom.
- Speaking of overseas developments, here’s a thoughtful article on things to consider when you send employees overseas.
- Internet-based travel company Expedia is facing an investor’s derivative lawsuit arising out of its award of stock to CEO Dara Khosrowshahi. The investor alleges the board couldn’t give Khosrowshahi the stock as a bonus because the company hasn’t met the required targets to authorize it.
- Add Vermont to the list of states looking at tightening their whistleblower protections.
- The Wall Street Journal has this interesting piece on how non-competes can hamper second and third act careers for talented folks.