HR in the Dock

Posted 7:02 PM by Michael Fox

Although most headlines following the first criminal indictment in the burgeoning back dating of stock options scandal read like this, Former Brocade CEO charged in options scandal, no HR executive should overlook that also indicted was Stephanie Jensen, who served as the Vice President of Human Resources for Brocade from 1999 to 2004. Recent corporate scandals have focused on accounting and finance, but given HR's role in the administration of stock options this has the potential for the first wide spread occasion where HR professionals may find themselves the target of civil and criminal actions.

Briefly, what is alleged to have happened at Brocade and perhaps as many as 2,000 other publicly held companies is that stock options were back dated to a time when the stock was at its lowest price, often guaranteeing an immediate gain when they were actually issued. It involved not only back dating the options, but in some cases falsifying other corporate records to reflect the incorrect dates, with the underlying problem being that it caused false financial reporting.

At least in the Brocade case it does not appear this was a quest for personal gain, but was seen as necessary to compete in the recruiting wars for talent. It doesn't take long to see the beginning of what could have been a real slippery slope:

• It had to be done to help the company grow and compete;
• Everyone else was doing it;
• There was no personal gain involved; and
• It didn't appear to really hurt anyone.

Whether the last part is true is something for the economists to debate (and I am sure they will in great detail) but there seems to be little question it did result in erroneous reporting of the company's financials. The SEC and the Department of Justice also contend it is a violation of both civil and criminal laws.

I can see the details laid out in the criminal complaint against Stephanie Jensen as sounding altogether too close to what many could imagine happening in their own company:

F. Brocade's Purported Stock Option Granting Process.

22. According to an August 2000 e-mail circulated by JENSEN and other documents, JENSEN and REYES purported to adhere to the following procedures and practices (among others) when REYES exercised his delegated authority to grant stock options to new hires: (1) stock options would only be granted to a person once his or her employment at Brocade actually commenced, whether in a full-time or part-time capacity; (2) the stock option grant would be subject to Committee approval of the Board of Directors, that is, approval by REYES acting on behalf of the Compensation Committee; (3) the exercise price of the stock options would be set on the date the Committee met; and (4) the exercise price of the stock options would be equal to the market value of Brocade's stock on the grant date, that is, the date the Committee met and approved the stock options.

G. Brocade's Actual Stock Opting Granting Process.

23. According to witnesses who worked within Brocade's HR department, Brocade did not actually follow the above described process. Rather, REYES and JENSEN often waited until the end of the fiscal quarter before granting the stock options. JENSEN's staff routinely printed out the historical closing prices for Brocade's stock and highlighted the low dates during the quarter. They provided the historical pricing information to JENSEN with a draft of the Committee meeting minutes approving stock option grants for the employees who were eligible for grants. JENSEN or her staff gave the historical pricing information to REYES with the meeting minutes. REYES routinely signed the meeting minutes and dated the minutes as if the meetings occurred on the highlighted low dates and the stock options were priced at the market value of Brocade's stock on those dates.

24. By June 2003, the above described practice for pricing stock option grants had become so routine that an HR employee prepared a memorandum describing the practice. The memorandum explicitly directs the HR employees to recommend a pricing date by printing out historical closing prices for Brocade's stock and identifying the closing price that is the lowest since the last pricing date. This memorandum was shared by lower level HR employees who helped implement the process. The above-described process continued into 2004.

According to the indictment some employees were given stock options actually pre-dating their interview with the company.

Obviously, the above at this point are just allegations and there are no doubt serious arguments that even if true, it may not violate any laws -- but when you are facing a potential sentence of twenty years in prison, a $5 million fine and a separate civil lawsuit seeking financial penalties from a government enforcement agency -- it brings the potential dangers of an HR job home.

HR is often called on to be the conscience of a company. Time may soon tell how well that mission has been accomplished.

UPDATE: The CEO of Brocade, Gregory Reyes, who was indicted at the same time as Stephanie Jensen, has now been found guilty of 10 counts of security fraud by a California federal jury. Ex-Brocade CEO Reyes guilty on all securities fraud counts. No trial date has been set for Jensen.

$11M Verdict in the Nutmeg State

Posted 10:17 AM by Michael Fox

The General Electric p.r. guys are earning their money this week. First, one of the more widely publicized bounced checks in history, General Electric CEO bounces check, followed by this, Ex-GE employee wins $11m suit. The first one is a lot easier to explain as Chairman Jeffrey Immelt apparently wrote the check to a political campaign on an account he did not know had been closed. The other headline, as they say in East Texas, may take some more "splaining."

The jury verdict followed a five day trial before a federal jury in Bridgeport, Connecticut on Hermant K. Mody's discrimination and retaliation complaints. Among his allegations according to the story in the Connecticut Post:

Since joining the company in 1998 he watched younger, white males pass him by in job promotions and management positions. He said GE has not contributed to its pension fund since 1987 and is able to do so by maintaining a young work force, and laying off or terminating employees as they become older. On July 22, 2002, he sent a memo to Tom Lavalle, GE's human resources manager, outlining his claims of discrimination and unfair treatment... Once he complained of the discrimination, he charged GE treated him unfairly, assigning him to menial tasks.

Something clearly upset the jury as in addition to a backpay award of $591,000 the jury awarded $500,000 for compensatory damages. Mody, an engineer with a PhD has been out of work since his termination in March 2003. Those two damage elements alone would have hit the MDV standard, but the jury topped it off with $10 million in punitive damages.

From the limited details provided in the story it is clear there were a number of issues involved, including that Mody had taken a leave of absence for kidney problems which required dialysis and was terminated within a couple of weeks of his return.

This has the earmarks of the type of situation which occur more often than you would think. An employee situation that can be seen from two totally different perspectives -- legitimate employment action or terribly wronged employee. Sometime the dividing line between the two is truly a matter of viewpoint -- but having the "wrong" viewpoint can be very expensive.

Update (11/2/07): The District Court has now entered a judgment affirming the decision, but requiring plaintiff to accept a reduction of the $10 million punitive damage to $5 million or face a retrial on that issue alone. According to CNN, Dr. Mody's lawyer was quoted as saying, "It's hard to say you're happy when a judge eliminated $5 million from a jury verdict, but I am happy with it." I would guess so, since that leaves in excess of $7 million.

The opinion also dealt with another issue I have often wondered about, but never researched. What happens if the plaintiff dies? The answer, at least according to Judge Eginton's ruling which can be found here is that it goes to the estate. That includes the award of more than $700,000 in front pay, notwithstanding the argument of the defendant that it constitutes a windfall. Here Dr. Mody's teen age children will be the recipients if the judgment survives appeal as his wife also died after the trial but before the resolution of post-trial motions.

This update also allowed me to correct the spelling of Dr. Mody's last name in the main entry. I had erroneously spelled it Moody. Since the link to the original story from the Connecticut Post is now dormant, I can't tell whether it was my error (quite possibly) or the paper's.

Labels: MDV

---

Comments: Post a Comment

Wednesday, July 19, 2006

A Big Win for Wal-Mart - ERISA Preempts Maryland Benefits Law

Posted 1:53 PM by Michael Fox

See the AP story for details: Judge Overturns Wal-Mart Health Care Law. The opinion by District Judge J. Frederick Motz is here. Watch for a fast track appeal to the 4th Circuit.

Comments: Post a Comment

Holding the Line on Gender Stereotyping

Posted 12:03 PM by Michael Fox

Is what a divided panel of the 6th Circuit tried to do today as it affirms a district court's dismissal on the pleadings of a complaint brought by an individual who argued that taunts and harassment based on his perceived homosexual status was actionable under the 6th Circuit's developing body of law prohibiting gender stereotyping. See my earlier post here. Vickers v. Fairfield Medical Center (6th Cir. 7/19/06) [pdf].

Playing out the end game of Vickers' proposed theory, the Court wrote:

Ultimately, recognition of Vickers’ claim would have the effect of de facto amending Title VII to encompass sexual orientation as a prohibited basis for discrimination. In all likelihood, any discrimination based on sexual orientation would be actionable under a sex stereotyping theory if this claim is allowed to stand, as all homosexuals, by definition, fail to conform to traditional gender norms in their sexual practices.

In fact, the Court concluded that was the intent of the 71 page complaint.

The dissent was from a district judge sitting by designation, so it will be interesting to see if there are enough votes on the Court to give this case a broader hearing. My guess -- no.

Update: Having hit the publish button prematurely, I was remiss in not giving a hat tip to Howard Bashman at How Appealing for the first mention of the court's decision in Vickers and also two links to stories from the Gay People's Chronicle which have in depth coverage about the case and allegations, both when it was originally filed here (3rd story down) and when it was argued on appeal here. One fact which I learned from the 2nd article, the attorney who argued the case for Vickers, Randi A. Barnabee, also represented Jimmy Smith in the initial 6th Circuit case which first extended protection to transgendered individuals, and is transgendered herself.

Comments: Post a Comment

No Appeal of Conditional Certification of FLSA Class

Posted 10:51 AM by Michael Fox

At least not in two circuits. Today, the 6th Circuit joins the 5th in holding that it has no jurisdiction to consider an appeal of a district court's order conditionally certifying a wage and hour class action and authorizing notice to be mailed to potential class members. According to the Court:

The correct inquiry examines whether Wal-Mart may now appeal the court’s conditional conclusion that the 1,200 ASMs, or however many choose to opt into the suit, are similarly situated for the purposes of § 216(b). When viewed through the appropriate lens, the district court’s order clearly fails to satisfy the Cohen test. The order describes itself as conditional and temporary, and there is no reason our court could not, following an appeal from final judgment, determine that part or all of the plaintiff group was improperly deemed to be similarly situated and therefore improperly notified and included by opt-in. We see no obstacle to our court’s later review of this issue.

Comer v. Wal-Mart Stores, Inc. (6th Cir. 7/19/06) [pdf]. The Court admitted that there would be no way to "de-notice" the 1,200 assistant store managers who would now be invited to join the lawsuit, but that practical impact was not enough to provide jurisdiction.

As I have mentioned many times in this blog, federal courts jealously guard their role as courts of limited jurisdiction. As a philosophical matter that is sound -- few things are more dangerous than unchecked power. Still, I think reviewing this type of decision makes a lot of sense. The solution is not for courts to stretch to find jurisdiction where it does not exist, but for Congress to give them the power; unfortunately, that is not likely to happen.

Labels: FLSA

Comments: Post a Comment

Positive Discrimination - An Oxymoron?

Posted 10:02 AM by Michael Fox

More accurately it semes to be a debate heating up in the UK where advocates are pushing for changes that would allow the hiring of "ethnic minorities" because of their lack of representation in certain jobs. According to the story, Positive race discrimination row: The end justifies the mean:

The spectre of positive discrimination being allowed in the UK has moved a step closer, with the head of an influential new government advisory body calling for changes to the law.

Since I don't know the history of what we called affirmative action here, I don't know whether the UK is years ahead or behind this argument in America. Certainly, we have been down this road before and although there is increased attention to the importance of diversity I don't see much stomach for recognition of legalized discrimination to accomplish that goal.

---

Comments: Post a Comment

Tuesday, July 18, 2006

Fighting Over 15 - 7th Circuit Adds Another Wrinkle

Posted 5:46 PM by Michael Fox

Any time a bright line exists between coverage or not, there will be fights as to how to determine the line. Wading into one such fight, the 7th Circuit today holds that two individuals -- even though given unfettered reign by the sole proprietor to run her restaurant-- were employees for purpose of determining the 15 needed for coverage under Title VII. Smith v. Castaways Family Diner (7th Cir. 7/18/06) [pdf].

Although the Supreme Court had focused on that issue in Clackamas Gastroenterology Assocs.
v. Wells, 538 U.S. 440, 123 S. Ct. 1673 (2003), Judge Rovner focused on an issue not mentioned in Clackamas, the source of the two individuals' power. Unlike Clackamas, where the physicians whose status in question were also shareholders and members of the Board of Directors, at Castaways, the power derived strictly because the sole owner delegated it. As Judge Rovner explains that is a distinction that makes a difference:

[A] distinction must be drawn between the power that a supervisor or manager exercises as of right and the power that he exercises by delegation. It is not at all unusual for the owner of a business enterprise to bring someone else in to run the business on her behalf, just as Gonzalez has done. In practice, that person may be given virtually unbounded day-to-day discretion and authority in operating the business. Nonetheless, he exercises that discretion and authority at the pleasure of the business owner; he has no inherent right, as the owner does, to control the business. In that respect, his position is no different from that of any other worker: he could be overruled (and, depending on the terms of his employment contract, fired) just as summarily as the lowest ranked employee. By contrast, the owner of a business, even if he chooses not to exercise it, always has the right to control the direction and operation of the business.

And the fact that there was a family relationship, the two in question were the husband and mother of the owner, by itself was not legally significant.

Although obviously important to the small group at the Knox, Indiana diner, my guess is this opinion will be even more intently read at a much larger institution located at One South Dearborn, Chicago. There it will be an effort to discern which way the 7th Circuit might be leaning on the issue headed their way of whether ex-partners of Sidley, Austin are themselves employers and thus not proper plaintiffs, either directly or through the proxy of the EEOC in a discrimination suit.

Prior decisions from that fight, which has already been to the circuit twice on procedural issues, were cited. My guess is that today's focus on the source of power, not how effective one was in wielding it -- is a slightly different and certainly welcome slant that will not be overlooked by the defendant as the Sidley litigation continues.

---

Comments: Post a Comment

Monday, July 17, 2006

Four Years .....

Posted 8:03 AM by Michael Fox

Is one U.S. presidential term, the length of time traditionally spent in acquiring an undergraduate degree and how long I have been offering my thoughts on developments in employment law at this particular spot.

On July 17, 2002, inspired by Denise Howell and Ernie Swenson, who were pioneers and remain guiding lights in the world of legal blogs, I wrote my first post.

As far as I know I was the first to write with a focus on employment law, but quickly there were others who not only started (the easy part), but continue day in and day out occupying the same "space" (to use a term that has thankfully been heard a lot less since the tech bust.) Among those colleagues are Ross Runkel, who actually has a group of blogs on different facets of employment law, George Lenard, Michael Fitzgibbon, Diane Pfadenhauer and more recently, but closer geographically, Chris McKinney. And then there are those who write in related fields, Janell Grenier in benefits, the folks at Lynch Ryan on workers compensation and Jordan Barab on safety. And of course there are those who are newer, but no longer new, the academic duo at Workplace Prof Blog, Suits in the Workplace, and those who write from the standpoint of organized labor (as does Jordan Barab) at The House of Labor, or from the employees' perspective, Paul Mollica and Paula Brantner who writes Today's Workplace, and others that I am sure I am overlooking.

I hope collectively, and certainly for my part, that we are contributing useful information. Thanks for coming around to check it out.

Errata: Thanks to Paula Brantner for correcting my error on the author of the blog at Workplace Fairness. As Paula noted I also got the name of the blog wrong as it is actually called Today's Workplace and is on the website of the organization Workplace Fairness. Instead of "the folks at NELI" which was contained in the original post, I meant to type NELA, for National Employment Lawyer Association, although that too would have been wrong. In the past the two organizations were joined, but now, though pursuing the same goals, operate separately according to a joint statement at the NELA website. My apologies.

---

Comments:

"the folks at NELI who write Workplace Fairness,"

I'm not sure who this is. I'm Paula Brantner, and I write Today's Workplace, the Workplace Fairness blog, as it says in our heading.

# posted by  Paula : 10:46 PM

 

Post a Comment

Friday, July 14, 2006

If You Are Preparing Your CEO To Testify - You Need to Read This

Posted 10:12 AM by Michael Fox

Ross Laguzza is a great source of information (and a nice guy as well) and is quoted extensively in an article by commercial litigator, Linda Listrom, Keep Executive Witnesses From Falling Off the Credibility Cliff, that should be on your reading list if you are preparing an executive to give testimony.

Over the last couple of years I have been fortunate enough to be invited to give a presentation, How Employers Make Juries Mad and Pay For It With Big Verdicts, to several groups across the country. One area I stress is the danger of what I refer to as "top dog behavior." I now have a great new quote from Dr. Laguzza:

Show me a highly verbal executive and I will show you the fast lane to punitive damages.

That one is close enough to the mark to merit your close attention.

---

Comments: Post a Comment

Thursday, July 13, 2006

First Burlington Northern v. White Reversal

Posted 6:23 PM by Michael Fox

The 6th Circuit becomes the first appellate court I am aware of to cite the recent Supreme Court decision in Burlington Northern v. White in reversing a summary judgment in a retaliation case on the element of "adverse, retaliatory action." Randolph v. Ohio Department of Youth Services(6th Cir. 7/13/06)[pdf].

Here the complaining employee was first suspended, then terminated, but later reinstated with 70% backpay. The district court had held this did not rise to the level of an actionable adverse action.

It is fitting that the 6th Circuit got to be the first to use Burlington Northern since it was the court from which the case came. Still today's decision is not that big a deal, since the 6th Circuit in its own Burlington Northern opinion had held that termination, with later reinstatement at 100% backpay was an actionable adverse action. Thus the Supreme Court decision did not alter the result. The more important first use of Burlington Northern will be the case where the ultimate outcome is changed by the Supreme Court's action -- that decision is forthcoming -- stay tuned.

Labels: retaliation

---

Comments: Post a Comment

Wednesday, July 12, 2006

If You've Ever Been Taken to Task By Judge Posner ...

Posted 9:36 PM by Michael Fox

Then you will have to appreciate his opinion in Sylvester v. SOS Children's Villages Illinois, Inc. (7th Cir. 7/12/06) where in re-examing the prima facie test for retaliation he turns his sometimes caustic pen to an earlier opinion from his own court. The opinion in Stone v. City of Indianapolis Public Utilities Division, 281 F.3d 640, 644 (7th Cir. 2002), had a special purpose:

We limit this published opinion to a question on which clarification is needed. It is the proper standard for summary judgment when a plaintiff claims that he was retaliated against for complaining about employment discrimination.

In re-examining the test for retaliation he now notes that Stone contains "misleading dictum," which fortunately the Court in a number of other opinions had "sensibly disregard[ed]."

Rather harsh language about a fellow jurist it seems -- until you remember -- the author of that clarification in Stone was none other than -- Judge Posner.

In addition to that irony, if you practice in the 7th Circuit you need to review today's updated clarification as it may indicate at least a subtle shift in the Court's test for reviewing summary judgments in retaliation, and in all likelihood, discrimination cases as well.

Labels: retaliation

Comments: Post a Comment

2nd Circuit Dodges Questions on Leave as Reasonable Accommodation -- And a Bigger Problem

Posted 4:38 PM by Michael Fox

While hinting at the potential problems with requests for leaves of absence as reasonable accommodations under the Americans with Disabilities Act, the 2nd Circuit avoided most of those issues when it reversed an employer's summary judgment on that issue. Instead it held the district court drew an improper inference that the employee had requested an indefinite leave of absence -- in its view of the appropriate inferences, a jury could conclude the employee asked for a two week leave of absence to see a specialist. The Court could not say such request was for an unreasonable accommodation, given that the employer improperly failed to consider it. Graves v. Finch Pruyn & Company, Inc. (2nd Cir. 7/12/06) [pdf].


But in a footnote discussing the question of leaves of absence as accommodations, the Court commented:

We note, however, that the idea of unpaid leave of absence as a reasonable accommodation presents Â?a troublesome problem, partly because of the oxymoronic anomaly it harborsÂ? Â? the idea that allowing a disabled employee to leave a job allows him to perform that jobÂ?s functions Â? Â?but also because of the daunting challenge of line-drawing it presents.Â?

The Court also wanted to make sure it did not foreclose a second shot at summary judgment by the employer, noting:

On remand, Finch Pruyn should be allowed to move for summary judgment based upon insufficient assurance of GravesÂ?s successful return to work. At this stage, we decline to consider this argument without benefit of the district courtÂ?s analysis.

Some might see this as a little bit of passing the buck back to the district court, perhaps to do its "dirty work" for it. However, I think it may be more a symptom of how difficult it is for courts (not to mention employers) to deal with the ADA -- trying to balance the apparent breadth of the law, with a desire not to allow it to overwhelm both employers and the courts.

The problem lies in one of the fundamental aspects of the ADA -- whether an employee is disabled -- is an after the fact determination. As our ten plus years of history now makes clear, it is frequently not until the appellate court weighs in, that we know the answer to that basic question. However, the obligations of the employer under the ADA depend on it - if the employee is not disabled, no obligation; if the employee is disabled, then the employer had obligations. Finding out five years after the employment decision was made is hardly helpful. (Nor does it seem quite fair that an employer has to make that decision in a short period of time, whereas the courts have difficulty making it after years of litigation and with as much time as they choose to take.)

Is there any solutiondilemmat dilemna short of treating every close case as a disability? If not, is that really what Congress intended?

Labels: ADA

Comments: Post a Comment

Before the Scandal Hits - Someone Knows -- And Might Just Make a Copy

Posted 11:09 AM by Michael Fox

At least that's the developing story line in a lawsuit brought by Stephen Landry, the former head of Human Resources for Sycamore, bringing Sycamore into discussions about the scandal du jour -- companies backdating stock options.

The Lakeland Ledger.com website has a detailed story from the Associated Press, Memo: Sycamore workers discussed manipulating stock option grants, and Landry's claim he was terminated for opposing the backdating practices. For those interested in the backdating issue, the money quotes are about an internal memo attached to one of Landry's pleadings:

the memo says Ed Zaval, a vice president of customer service, "was promised his stock option grant would be issued at the low of the quarter price." It said his actual start date was Jan. 2, 2001, but the low for the quarter was Dec. 21, 2000, at $29.125. Under the category, "action," the memo says to "change Ed's date of hire to reflect 12/21/00 and his stock option should be granted 12/21/00."Under "risk assessment," the memo reads: "Low risk. Senior level employee and the risk of exposure to this agreement is low. No audit risk."

But for me, and for all employers, I think the real money quote is how Landry had a memo written after his termination. According to the story:

Landry's attorney, Kevin Powers, said a colleague of Landry's found the 2001 memo on a fax machine, made a copy and gave it to Landry.

That has a ring of truth -- in two different lawsuits I have handled documents obtained in just that way appeared as attachments to court pleadings. Never underestimate the power of a copying machine.

A hat tip to WSJ's LawBlog for the alert to this story.

---

Comments: Post a Comment

Monday, July 10, 2006

Sticks and Stones ... But Words Can Be Costly Too - $4.5 Worth

Posted 11:22 AM by Michael Fox

Two employers have recently been reminded of an important lesson -- defamation is not just a concern of media entities. And those claims can be serious as juries in Maine and Texas recently made clear -- returning MDV's for the loss of a good name.

In Maine, it was Merrill Lynch on the wrong side of a Portland verdict, Jury awards nearly $3M in Maine defamation case. Although it is hard to tell exactly what happened from the news reports, it appears Merrill Lynch was sued for complying with a statutory duty to report about the conduct of a broker.

Things were complicated however with some contradictory internal materials according to the news story:

At least two letters from Merrill Lynch attorneys defended Galarneau's handling of the account that was in question. And an internal review of her conduct found no wrongdoing, Galarneau's lawyers said.

From my experience what may well have happened -- in response to a claim of wrongdoing by the broker, the company initially defended the actions; then after some more digging, more information about the broker's conduct was uncovered, decision to terminate made and required statutory report was filed. At trial, they get beat up with evidence of their initial actions. A classic Catch 22 for the employer it would seem.

In central Texas another of those situations that seems to occur more than you would think was also being played out - the employee you are convinced is stealing, but somehow it can't (or doesn't) get proved. A car dealer found out the hard way those accusations can boomerang when an employee accused of stealing was no-billed by a grand jury. It wasn't the end of things at the Coryell County courthouse however -- Tranum loses $1.5 million civil case.

Costly reminders that there are always two sides to every story -- and being on the down side of one accusing an employee of wrong doing is not a good place to be.

Update: The initial verdict in the Maine case has now made its way through post-trial motions and been decided by the appellate court. Although the Court affirmed the basic defamation holding, it did strike the $2.1 million punitive damage award, leaving a verdict of $850,000 intact. Galarneau v. Merrill Lynch (1st Cir. 10/12/07).

Labels: MDV

Comments:

From my 20 years of experience in the financial industry, and in particular with Merrill Lynch, your assumption is inaccurate to say the least. The public records of this trial clearly show the facts supported the jury's decision. Merrill Lynch lied and got caught. Instead of appealing, they would be better served to terminate employment of those managers involved in this deception to defame a woman broker. The public would recognize and appreciate Merrill Lynch stepping up to the plate and finally doing the right thing.

# posted by  Anonymous : 12:01 PM

 

Post a Comment

1st Test of SOX Preliminary Reinstatement Saga Continues

Posted 9:18 AM by Michael Fox

The ongoing saga of David Welch, who more than 2 years ago was "reinstated" under Sarbanes Oxley, continues with his filing of a motion in federal district court to force his former employer Cardinal Bankshares to take him back as CFO. A magazine with an interetest in the subject, CFO.com, has the latest development, Feds Back Sarbox Whistle-blower.

Last Thursday, Welch accepted the challenge from Cardinal Bankshares and filed a motion in district court to compel his reinstatement and the DOL has intervened to support that effort. (For those wanting some context, see a time line of the fight beginning with Welch's termination in October, 2002 at Latest Step in First SOX Reinstatement Case).

Although this is not the first time this matter has been addressed by the federal courts, it appears that there may not be procedural outs that have been used to avoid ruling on the merits, so stay tuned, perhaps, for a substantive decision on reinstatement rights under Sarbanes-Oxley. It is important to remember that this procedural battle is being fought before there is a final ruling that Cardinal Bankshares has violated the whistleblower provisions of SOX. And that of course is what bothers the employer but what Welch and the DOL argue is possible.

---

Comments: Post a Comment

Friday, July 07, 2006

3rd Circuit - Make Sure the EEOC Charge Is Verified Before Responding

Posted 9:48 AM by Michael Fox

A school district thought it had hit a home run -- obtaining dismissal of a sexual harassment lawsuit because the plaintiff's EEOC charge wasn't verified, as required by Title VII and the implementing regulations. And although I have often said (tongue in cheek) that while anyone can win on the facts, it takes a real lawyer to win on a technicality, it is hard to argue with the 3rd Circuit's conclusion here:

Under the circumstances of this case, the School District’s motion to dismiss on the basis of Buck’s failure to verify her charge seems like “an afterthought, brought forward at the last possible moment” to preclude “consideration of the merits”; it can prevail “only from technical compulsion irrespective of considerations of practical justice.” [cite omitted] Given our determination that the verification requirement is not an inflexible bar to suit, but a statutory requirement of the initial charge, with non-compliance amenable to equitable considerations, we cannot countenance this result. Accordingly, we hold that where, as here, an employer has actual notice of a discrimination charge and chooses to respond to the merits of the claim before the EEOC without asserting lack of verification as a defense it waives its right to secure dismissal of the federal court proceedings on that basis. [emphasis added]

Buck v. Hampton Township School District (6/30/06) [pdf] .

Although I haven't given much thought to whether there is a legal argument against the underlying premise, that the requirement for verification is not jurisdictional, given the outcome in Arbaugh v. Y & H Corp. (S. Ct. 2/11/06) [pdf] where a unamininous Supreme Court took less than six weeks after oral argument to pour out a similar "technicality" -- holding the 15 employee requirement of Title VII was not jurisdictional -- I doubt such research would be fruitful.

Since it is hard to imagine that if raised, it would not be corrected, Buck probably consigns another "technicality" to the dustbin. A hat tip to the DLR for alerting me to Buck.

Labels: EEOC

---

Comments: Post a Comment

Monday, July 03, 2006

5th Circuit Clarifies 2 FMLA Damage Elements

Posted 9:34 AM by Michael Fox

Last Friday the 5th Circuit upheld a contested FMLA termination case, but remanded for retrial on 2 damage elements. It found the Court erred by not using the FLSA/ADEA model for insurance benefits and retirement payout. Lubke v. City of Arlingon (5th Cir. 6/30/06) [pdf].

On insurance the correct standard is:

Either actual replacement cost for the insurance, or expenses actually incurred that would have been covered under a former insurance plan. The lost “value” of benefits, absent actual costs to the plaintiff, is not recoverable.

At his termination, Lubke received a payout of his pension. The 5th Circuit rule under the FLSA/ADEA, now applicable to the FMLA, is:

An employer’s portion of retirement and other payments made to a terminated employee must be deducted from an award of lost wages and benefits in ADEA discrimination cases.

Slowly, but surely, the courts are beginning to fill in the gaps of our newest employment law. 13 years after its passage, some might say -- about time.

Labels: FLSA, FMLA

---

Comments: Post a Comment

Home