Seyfarth Shaw

Tracy Billows Quoted in Westlaw Journal Employment
“Justices: States not liable for damages under family-leave law”

Thu, 24 May 2012 00:00:00 -0400

Labor and Employment partner Tracy Billows was quoted in an article appearing in the April 3 edition of Westlaw Journal Employment. The article discussed the U.S. Supreme Court ruling in Coleman v. Court of Appeals of Maryland et al., a case in which the justices determined that a state worker cannot sue his/her employer for money damages for alleged violations of the self-care provision of the federal Family and Medical Leave Act (FMLA).

The verdict in Coleman was won by a very small margin. The minority claimed that the self-care provision discourages gender discrimination in the workplace, making it possible for women to work while still playing an active role in their families—a key goal of the FMLA.

Tracy makes a distinction between the family-care and self-care components of the statue, commenting, “The justices looked at the underlying purpose of the family care and self-care sections of the FMLA, and determined that the self-care provision did not involve gender issues.” She adds, “With the family care provision, it was assumed that women would be responsible for such responsibilities, while the self-care provision would not, and, therefore was gender-neutral.”

Gerald Maatman Quoted in Risk & Insurance
"Discrimination and the New EEOC"

Thu, 24 May 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment Partner Jerry Maatman was quoted recently in a Risk & Insurance article examining the surge in EEOC discrimination cases in recent years.

"Every day the phone is ringing," Jerry tells the magazine. "An EEOC charge is more meaningful than it was five years ago. It's a serious matter these days."

Jerry suggests the best defense against an EEOC suit is having in place an effective workplace due process that takes complaints seriously and handles them with state-of-the-art complaint processes, complaint hotlines and sophisticated protocols for human resource departments.

"A healthy company will have a larger number of internal complaints but a small number of external complaints, because grievances were listened to and handled properly," he says.

Val Hoffman and Alex Passantino Quoted in Law360
"Contractors Must Offer Jobs To Predecessor Workers, Feds Say"

Thu, 24 May 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment Partner Val Hoffman and Senior Counsel Alex Passantino were quoted recently in a Law360 article on new regulations requiring government contractors to take over service work from other companies to offer jobs to their predecessors' employees.

The rule, Val said, will force contractors to incur more costs when taking over a project.

"It's an admirable effort to ensure continued employment for workers that might otherwise be displaced, but there are very real practical issues," Hoffman said.

Alex noted that the rule change creates a "difficult evidentiary burden" for contractors who don't hire their predecessor's employees and can even create compliance issues when they are given incomplete or incorrect information.

"The executive order and the rules limit contractors' ability to establish their own workforce," Passantino said.

California Court Holds That Federal Labor Law Does Not Preempt Wage Deduction Claim

Thu, 24 May 2012 00:00:00 -0400

As a general rule, when a union employee asserts claims against an employer requiring interpretation of the collective bargaining agreement (CBA), those claims are preempted by section 301 of the federal Labor Management Relations Act (LMRA). In Sciborski v. Pacific Bell Directory, the California Court of Appeal held that a union employee's unlawful wage deduction claim under California Labor Code section 221 was not preempted by the LMRA because the claim arose from independent state law and did not require interpretation of the CBA. The Court further held that the employer violated Labor Code section 221 when it made deductions from wages in order to recover a sales commission previously paid to the employee through a clerical error, where there was no CBA provision authorizing the deductions.

The Facts

Plaintiff Annie Sciborski worked as an advertising sales representative for Pacific Bell. She was a member of the International Brotherhood of Electrical Workers, and the terms and conditions of her employment were governed by a CBA, under which Sciborski earned a basic salary and commissions on completed sales.
In September 2007, Sciborski sold an advertising campaign to a Pacific Bell customer. The sale entitled Sciborski to a commission of $36,000, which management approved and then paid. Shortly thereafter, the union protested that management's assignment of the customer account to Sciborski had breached the terms of the CBA. Pac Bell agreed with the union and notified Sciborski that it had assigned her the account through a clerical error. Pac Bell then attempted to recover the commission already paid to Sciborski by deducting regular amounts from her wages.
On April 2, 2008, after Pac Bell had already deducted approximately $19,000 from Sciborski's wages, she resigned in order to prevent additional wage deductions.

Case Background

Sciborski sued Pac Bell for improper wage deductions in violation of Labor Code section 221. A jury found that the deductions violated Labor Code section 221, and resulted in Sciborski's constructive discharge in violation of public policy. The jury awarded her $36,000 in lost earnings and the trial court awarded $291,155 in attorney's fees against Pac Bell.
Pac Bell appealed, arguing that, since Sciborski's claims required the court to interpret the CBA, the claims were preempted by federal labor law.

The Court of Appeal's Decision

The Court of Appeal concluded that Sciborski's Labor Code section 221 claim was not preempted by Section 301 of the LMRA, because it arose from independent state law and did not require interpretation of the CBA.
Section 301 preempts state law governing a claim if a court must interpret a disputed provision of the CBA to decide the claim. Courts analyzing whether preemption applies utilize a two-part test: (1) whether the claim arises from independent state law or from a CBA; and, if the claim arises from independent state law, (2) whether the claim nevertheless requires interpretation of a CBA.

Pac Bell argued that Sciborski's claim was preempted because (1) it was legally entitled to recoup the $36,000 sales commission if it had not yet been earned, and (2) the CBA had to be interpreted in order to determine whether the advance was in fact earned. The Court of Appeal rejected this argument because there was no express CBA provision establishing that a commission would not be earned if an account was improperly assigned due to a clerical error. The Court further held that Pac Bell, without such an express provision, "was not entitled to unilaterally declare that the commission was not earned and use self-help measures to deduct funds from Sciborski's wages," because doing so would violate Labor Code section 221.

What Sciborski Means for Employers

Sciborski illustrates the risk that California employers take in unilaterally making wage deductions as a means to recover amounts that the employee owes to the employer. California Labor Code section 221 prohibits such "self-help" in most circumstances. Because of the strong California public policy protecting wages, an employer's right to recover an advanced commission generally requires a showing that the employee expressly agreed to the employer's right to recover under stated conditions.

Employers should also recognize that just because a union has grieved an issue or demanded certain actions, acquiescence to the grievance or demand does not automatically create a safe harbor from any violations of statutory law.

Justice Department Extends ADA Compliance Deadline For Pools And Spas To January 31, 2013 But Leaves “Fixed” Lift Requirement Intact.

Fri, 18 May 2012 00:00:00 -0400

The American Hotel & Lodging Association (AH&LA) scored a victory for the lodging industry and other businesses with pools and spas when the Department of Justice (DOJ) announced on May 18, 2012 that it would extend the Americans with Disabilities Act (ADA) compliance deadline for existing pools and spas to January 31, 2013. Minh Vu, the leader of Seyfarth's ADA Title III Team, served as the AH&LA's outside counsel on this matter.

The extension was substantially longer than what the DOJ initially had proposed following strong objections by the lodging industry and other business groups to new requirements concerning pool lifts that were announced by DOJ in a technical guidance dated January 31, 2012. The requirements are that pool lifts used to provide accessible entries into existing pools and spas (1) must be "fixed" unless not "readily achievable," (2) must be next to the pool/spa at all times when the facilities are open, and (3) cannot be shared between two bodies of water even if they are in the same location. DOJ subsequently clarified in a May 2, 2012 webinar that "fixed" means attached to the pool deck in some way. This means that "portable" lifts brought out upon request would not be acceptable, and every pool would have to have its own lift or ramped entry, unless the business can demonstrate that having a fixed lift or sloped entry is not "readily achievable." Only at that point can a portable lift be used.

The hospitality and business community viewed the technical guidance as a significant change from the pool lift requirements issued by DOJ in its September 15, 2010 final regulations and launched an intensive campaign to reverse these substantive changes and delay the initial compliance date of March 15, 2012.

AH&LA's efforts resulted in last minute action by DOJ to extend the March 15, 2012 deadline to May 21, 2012 while it considered comments to a Notice of Proposed Rulemaking (NPRM) to further extend the deadline to September 17, 2012. AH&LA submitted extensive comments explaining that a longer extension was needed to allow lodging facilities to develop their compliance plans in light of the new "fixed" lift requirement and to order and install the required equipment. Other business groups, including the one representing the pool and spa industry, supported AH&LA's position. This issue received considerable Congressional attention which prompted a House Judiciary Subcommittee hearing as well as the passage of a House appropriations bill that, if made into law, would prohibit DOJ from enforcing the fixed pool lift requirement for one year. Ms. Vu testified on behalf of the AH&LA at the House hearing.

DOJ's decision to extend the compliance deadline to January 31, 2013 for existing pools and spas is a significant victory, particularly because the outdoor pool season will not begin in some parts of the country until several months later.

The announcement by DOJ does not change the substance of DOJ's "fixed" lift requirement. In retaining this requirement, DOJ did not address concerns raised by AH&LA and other business groups such as the increased liability associated with making lifts permanently available when life guards are not present, the reasonableness of sharing of lifts between multiple pools and spas, or the extensive construction and electrical bonding work needed to install fixed lifts.

In granting a longer extension than previously proposed, DOJ credited many of AH&LA's arguments. DOJ stated that the additional time will allow covered entities to analyze whether it is readily achievable to install a fixed lift and to implement their compliance plans. The DOJ noted that some owners and operators were having difficulty locating available fixed compliant pool lifts for purchase. DOJ also noted the concern that businesses unable to obtain compliant pool lifts would close their pools or purchase non-compliant pool lifts. The DOJ had received over 1,400 comments in favor of an extension, and nearly 500 comments opposing it.

Camille Olson Quoted in Time
“Hard Labor. Inside the mounting backlash against unpaid internships”

Thu, 17 May 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Camille Olson was quoted in an article appearing in the May 21 issue of Time magazine. The article discussed recent litigation against companies who do not pay interns.

According to the article, employers claim that they pay interns in the form of experience, which can exceed the value of monetary compensation. However, if unpaid interns are filling jobs that would otherwise go to entry-level employees, the Fair Labor Standards Act mandates that interns receive compensation for their work. Several ex-interns are currently leading class actions against their previous employers, claiming violation of the act.

Camille surmised that the ex-interns could win their suits, as a backlash against unpaid internships is beginning. Fewer unpaid internships could also mean more entry-level jobs for 20-to-24-year-olds, whose unemployment rate in the U.S. reached 13.2 percent last month.

Minh Vu Quoted in Hotel Management
"House of Representatives may remove pool lift installation extension from ADA rules"

Thu, 17 May 2012 00:00:00 -0400

Seyfarth Shaw Washington, D.C. partner Minh Vu was quoted in Hotel Management on May 9. The article discussed a recent hearing in which the House of Representatives considered removing the amendment protection for the State Appropriation bill which would make changes related to the Americans with Disabilities Act regarding pool lifts.

"Other options that are available include sloped entries or ramps, but using a pool lift is the only feasible solution for the majority of properties," said Minh. "There are nine requirements that hotels have to comply with, and most of the industry was planning on purchasing portable lifts."

Manufacturers also claim that not enough pool lifts can be produced to meet the current hotel industry demand, resulting in further violations. Minh pointed out, "Hotel owners and operators really do want to comply and provide the lifts. They don't understand why a portable lift isn't as good as a fixed lift. They are also concerned about children playing on the lifts and having catastrophic injuries."

Click here to read the full article: http://www.hotelmanagement.net/operations-management/house-of-representatives-may-remove-pool-lift-installation-extension-from-ada-

Richard Alfred Quoted in Business Insurance and Workforce Management
"Pharmaceutical Sales Reps Exempt from FLSA Overtime Rules"

Wed, 16 May 2012 00:00:00 -0400

Seyfarth Shaw Boston office Labor & Employment partner Richard Alfred was quoted in Business Insurance and its sister publication Workforce Management on May 10 in an article discussing the Seventh Circuit Court of Appeals decisions in Schaeffer-La Rose v. Eli Lilly and James Jirack et al. v. Abbott Laboratories Inc. The court consolidated the two cases in its ruling, which concluded that pharmaceutical companies are exempt from providing sales representatives with overtime pay under the administrative exemption to the FLSA's overtime requirements.

Regardless of the Supreme Court's highly anticipated ruling in the GlaxoSmithKline case considering whether pharmaceutical representatives are exempt under the FLSA's outside salespersons exemption, Richard explained that the Seventh Circuit's decision, "will be very important to employers in general that rely on the administration exemption in classifying their employees…[as it] is the most frequently relied on exemption of the white collar exemptions and the one that is the most difficult to understand." The Seventh Circuit's ruling on the administrative exemption in these cases, "provide[s] considerable clarity," Richard notes.

Richard Alfred Quoted in The Fiscal Times
"Managers Sue for Overtime, Citing Unfair Practices"

Wed, 16 May 2012 00:00:00 -0400

Boston Labor & Employment partner Richard Alfred was quoted in a May 9 article of The Fiscal Times. The article discussed the increasing number of wage and hour lawsuits which grew by 32 percent from 2008, and 378 percent since 2000.

Richard said that the increased volume of laid-off employees seeking redress for their terminations has led to these lawsuits and that that in many cases, plaintiffs’ attorneys find the termination may not be grounds for legal action, but that their former employers’ pay practices raise legal questions.

In many of these instances, employers aren’t intentionally stiffing workers or denying them overtime pay, Richard said. “They’re trying to compensate employees fairly and according to legal requirements, and they’re struggling to get it right because the wage and hour laws are ambiguous in many respects,” he added.

Richard noted the conflicting positions different federal courts have taken regarding whether pharmaceutical sales representatives should be classified as exempt or non-exempt as examples of why this is challenging for employers. The Second Circuit’s ruling in the Novartis case that sales representatives are non-exempt conflicts with recent decisions in the Third Circuit, Ninth Circuit and an Indiana district court that found in separate cases against drug makers that sales reps should be considered exempt.

“You have these different decisions all over the country, so how does a national employer with pharmaceutical sales representatives in the Second Circuit, the Third Circuit, and the Ninth Circuit deal with this issue?” Richard said. “It puts companies in a very difficult position of having to make decisions with uncertainty that can lead to the risk of enormous, potentially catastrophic exposure for damages.”

Click here to read the full article: http://www.thefiscaltimes.com/Articles/2012/05/09/Managers-Sue-for-Overtime-Citing-Unfair-Practices.aspx#page1

Camille Olson Quoted in The New York Times
“The Uses and Misuses of Unpaid Internships”

Wed, 16 May 2012 00:00:00 -0400

Employment partner Camille Olson was quoted in an article appearing in the May 7 issue of The New York Times. The article discussed companies’ use of unpaid interns.

Camille commented that internships can be a great way for employers to get a good sense of a potential hire and see how hard working or creative someone is. However, Camille remarked that she generally advises employers, especially profit-making employers, to pay their interns. She noted that the Labor Department’s guidelines are quite strict about when employers can legally avoid paying interns at least the minimum wage: the internships must resemble vocational education; the internship experience must be for the benefit of the interns; the interns must work under close supervision; their work cannot be used as a substitute for that of regular employees; and their work cannot be of immediate benefit to the employer.

To read the entire article, click here: http://economix.blogs.nytimes.com/2012/05/07/the-uses-and-misuses-of-unpaid-internships/

Richard Alfred Quoted in The AmLaw Litigation Daily
"Seventh Circuit Muddies Waters on Overtime Pay for Pharma Sales Reps"

Tue, 15 May 2012 00:00:00 -0400

Seyfarth Shaw Boston office Labor & Employment partner Richard Alfred was quoted in The AmLaw Litigation Daily on May 9 in an article discussing the Seventh Circuit Court of Appeals decision in Schaeffer-La Rose v. Eli Lilly and James Jirack et al. v. Abbott Laboratories Inc., concluding that sales reps fall under the administrative exemption.

Richard noted that the decision will be helpful to companies facing litigation over the outside salesperson exemption, "[t]he administrative exemption is the most commonly used exemption and the most confusing…the Seventh Circuit gave that exemption much more clarity than it had previously." Richard also added that if the Supreme Court decides that sales reps do not fall under the outside salesperson exemption in the highly anticipated upcoming GlaxoSmithKline case, "the administrative exemption will become the new battleground."

Seyfarth Shaw Appoints New Los Angeles Managing Partner

Tue, 15 May 2012 00:00:00 -0400

Contacts:
Brian Kiefer, Director of Public Relations
(312) 460-6401, bkiefer@seyfarth.com

Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

LOS ANGELES (May 15, 2012) — Leading law firm Seyfarth Shaw LLP announced today that Laura Shelby, partner in the Labor & Employment Department, has been named managing partner of the Los Angeles-Century City office.

Established in 1973 as Seyfarth's first office in California, the Century City office is one of the firm's fastest growing with more than 90 attorneys. Earlier this year, the Century City office welcomed Litigation partner Frank Burke, who joined from Steptoe & Johnson LLP. Combined with its Downtown office, Seyfarth now has nearly 150 attorneys in the Los Angeles market who serve clients across the country.

“I’m excited by this role and look forward to continuing to grow Seyfarth’s presence and platform in California in several key areas, including corporate, litigation, real estate, employee benefits, and labor and employment,” explained Shelby.

Shelby focuses her practice on representing management and employer organizations in labor relations and employment litigation with a particular emphasis in the areas of wrongful discharge, employment discrimination, and sexual harassment.

Seyfarth Shaw has over 800 attorneys located in 10 offices throughout the United States, including: Atlanta, Boston, Chicago, Houston, Los Angeles, New York, Sacramento, San Francisco and Washington, D.C., as well as internationally in London. Seyfarth Shaw provides a broad range of legal services in the areas of labor and employment, employee benefits, litigation, corporate and real estate. The firm’s clients include over 300 of the Fortune 500 companies, and our practice reflects virtually every industry and segment of the economy. For more information, please visit www.seyfarth.com.

DOL Provides Additional Guidance on Participant Fee Disclosures

Tue, 15 May 2012 00:00:00 -0400

In October, 2010, the Department of Labor (“DOL”) published final regulations under Section 404(a) of ERISA which require that the administrators of 401(k) and other retirement plans which allow participants to direct their own investments to provide information regarding the plan’s designated investment alternatives (“DIAs”) and the fees and expenses that are charged against participant accounts. A summary of these disclosures is provided in our Management Alert dated July 26, 2011, a copy of which can be accessed here. After a few delays in the effective date, calendar year plans will have to begin providing these disclosures by August 30, 2012, along with quarterly disclosures by November 14, 2012.

On May 7, 2012, the DOL issued Field Assistance Bulletin 2012-02 (the “FAB”), which provides additional guidance about these disclosures in a question and answer format. The FAB also contains several very helpful illustrative examples. The key issues discussed in the FAB are summarized below.

Applicability of the Regulations to Certain Plans

In the FAB, the DOL confirmed that a Code Section 403(b) plan established by a tax-exempt organization is covered by the disclosure rules if the plan permits participant direction of investments. However, disclosures are not required with respect to annuity contracts or custodial accounts issued under 403(b) plans to current or former employees before January 1, 2009 if the employer is not required to make contributions (and has stopped making contributions), the employee can enforce the contract or account without involvement of the employer, and the employee is fully vested.

Types of Investments for Which Disclosures Must be Provided

The FAB clarifies that a brokerage window, in which participants can choose investments not offered by the plan’s investment fund lineup (such as individual stocks) is covered by the disclosure rules. If a plan has a brokerage window, the disclosures must include a general description of the brokerage window. This description must provide sufficient information to enable participants to understand how and to whom to give investment instructions under the window, any account balance requirements, any restrictions or limitations on trading, and whom to contact with questions. In addition, the plan must provide an explanation of any fees and expenses that may be charged against the account of a participant in connection with the use of the brokerage window, and a statement of any fees and expenses that were actually charged to the participant’s account during each quarter. The description must be provided to all participants who are eligible to use the brokerage window, not just those participants who have actually used it.

Additionally, the FAB provides that a “model” portfolio, consisting of combinations of the plan’s DIAs, is ordinarily not treated as a DIA if it is clearly presented as a means of allocating account assets among the specific investment alternatives. However, if in choosing a model portfolio, the plan participant acquires an equity security, unit participation, or similar interest that itself invests in a combination of the plan’s DIAs, the model portfolio would ordinarily be treated as a DIA and would be subject to the disclosure rules.

The FAB also states that a plan must also provide the required disclosures for DIAs that are closed to new money, because the information will help participants invested in that alternative to decide whether to keep their funds invested there.

Furthermore, if the plan fiduciary has selected an investment platform, but has not designated any of the mutual funds on that platform as DIAs, the platform is not, by itself, a DIA, although the individual investments within the platform may be considered to be DIAs for which disclosure is required. While the DOL cautioned against a plan providing too many DIAs, it did state that when a platform holds more than 25 investment alternatives, the DOL will not, as a matter of enforcement policy, require all of the investment alternatives to be treated as DIAs if the plan administrator (1) makes the required disclosures for at least three of the investment alternatives on the platform that collectively constitute a “broad range” of alternatives under ERISA Section 404(c), and (2) makes the required disclosures with respect to all other investment alternatives on the platform in which at least five participants (or at least 1% of participants for plans with more than 500 participants) are invested at least 90 days before the annual disclosure.

Disclosures of Administrative Expenses Charged to Individual Accounts

The FAB addresses several questions regarding when fees must be disclosed and how to address possible uncertainties. First, the FAB states that when the cost of certain services and fees are not known at the time of the disclosure, the explanation must describe the facts and circumstances that are known at the time. Therefore, if the plan expects to incur fees for a particular service but does not know the amount of the fees that will be incurred, the disclosure should state that the fees are expected to be incurred, and describe how those fees would be allocated to participants.

Additionally, the FAB provides that fees that may not be charged against the individual accounts of participants (for example, because the plan does not permit them to be charged against individual accounts or because the employer has provided a written commitment to the plan to pay them) do not have to be disclosed. In cases where administrative expenses are offset by other payments (for example, revenue sharing payments from the plan’s investments are commonly used to offset recordkeeping fees), the disclosures must describe the gross amount of the fees and the manner in which the plan allocates the fees, but can describe the amounts that offset the fees. In addition, the disclosure does not have to specify which administrative expense will be offset by the revenue sharing payments. Instead, it just needs to state that some or all of the expenses will be offset.

If a stable value fund purchases an insurance policy that is designed to smooth the rate of return of the fund’s underlying investments, and the cost of the insurance is paid from the assets of the fund, this cost must be included in the total annual operating expenses of the fund.

Other Guidance on How to Provide the Disclosures

If there is a change to a DIA’s fee and expense information after the plan has provided the annual disclosure, a new comparison chart with the updated information does not have to be provided earlier than the date of the next annual disclosure. However, the plan’s website should be updated with the new fee and expense information as soon as practicable after the change.

The FAB provides that a plan may provide multiple comparative charts or documents that contain the information required by the disclosures, as long as the charts are provided at the same time and the tables are designed to facilitate a comparison among the DIAs. Performance data for DIAs that have been in existence for more than 10 years are not required to disclose investment returns since their inception, notwithstanding the fact that the model comparative chart published by the DOL included “since inception” performance and benchmark information.

In the FAB, the DOL also noted that it does not intend, at this time, to issue a model glossary of terms required to be provided with the disclosures. However, the FAB did reference sample glossaries submitted by industry groups and stated that plan fiduciaries should determine the glossary that is appropriate for their participants. The DOL also confirmed that disclosures can be furnished with other documents or as a stand-alone set of documents.

The DOL regulations also require the administrator to maintain a website which contains detailed information about each investment alternative. The FAB provides that the website landing page does not have to contain all of the investment information that is required for a DIA, but the information provided must be “sufficiently specific” to lead the participant to the required information.

Next Steps

Many service providers have already developed templates to facilitate the required disclosures and provided them to companies for their review. For those disclosures that have already been provided that do not comply with the FAB, the DOL stated that enforcement actions will generally be unnecessary if the disclosures applied the regulations in good faith and steps are taken to comply with the FAB in future disclosures. Companies should review the new DOL guidance with their service providers and legal advisors to determine whether the fee disclosures should be revised.

Timothy Haley, Scott Schaefers and Reema Kapur Published in Law360
"Recent Class Decision Highlights the Perils of Exchanging Wage Information"

Tue, 15 May 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment attorneys Timothy Hale and Reema Kapur, and Litigation attorney Scott Schaefers wrote an article published in Law360 on May 1. The article discussed a recent decision in U.S. District Court for the Eastern District of Michigan which highlighted the risks associated with the exchange of wage information and demonstrated that how employers gather wage information can create liability risks.

The writers point out "the Court's ruling provides an important lesson for employers in connection with the setting of their employees' wages." They note, employers should resist the temptation to engage in wage information described in the decision, which included 1) through direct contacts by employees at the various hospitals, 2) at healthcare industry meetings and through healthcare industry organizations and 3) through third-party surveys that did not satisfy the safety zone requirements of the joint enforcement policy statements issued by the Department of Justice and the Federal Trade Commission. Instead, they should limit this information exchange to the "safety zone" within the DOJ and FTC guidelines.

This "safety zone" is limited to surveys that satisfy conditions including (i) the survey is managed by a third party (e.g., a purchaser, government agency, health care consultant, academic institution, or trade association); (ii) the information provided by survey participants is based on data more than 3 months old; and (iii) there are at least five providers reporting data upon which each disseminated statistic is based, no individual provider’s data represents more than 25 percent on a weighted basis of that statistic, and any information disseminated is sufficiently aggregated such that it would not allow recipients to identify the compensation paid by any particular provider.

Richard Alfred Quoted in Law360
"7th Circ. Says Admin OT Exemption Covers Pharma Sales Reps"

Mon, 14 May 2012 00:00:00 -0400

Seyfarth Shaw Boston office Labor & Employment partner Richard Alfred was quoted in Law360 on May 9 in an article discussing Seventh Circuit Court of Appeals ruling that Eli Lilly and Abbott Laboratories sales representatives are overtime-exempt administrative employees. The decision in Schaeffer-La Rose v. Eli Lilly and James Jirack et al. v. Abbott Laboratories Inc. could give the drug industry much needed support if the Supreme Court rules against the pharmaceutical industry and orders drug companies to pay overtime.

"The decision gives the pharmaceutical industry a safety net in the event that the Supreme Court rules against the industry on the outside sales exemption…then the administrative exemption is going to become the battleground for all the pending cases and for the many more cases we can expect to be filed," Richard noted, adding, "[h]aving the Seventh Circuit join the Third Circuit and rule contrary to the Second Circuit on the administrative exemption will help the defendants make their arguments in all these other cases."

In February 2012 the Third Circuit found a Johnson & Johnson sales representative subject to the administrative exemption, while in July 2012 the Second Circuit found that the administrative exemption did not apply to Novartis sales representatives. It was noted that the Seventh Circuit's ruling on the administrative exemption gives pharmaceutical companies another tool to fight these law suits, but the Supreme Court's ruling in favor of an outside sales exemption would eliminate the suits altogether.

The Daily Journal Names Pair of Seyfarth Partners “Top Women Lawyers”

Fri, 11 May 2012 00:00:00 -0400

Contacts:
Brian Kiefer, Director of Public Relations
(312) 460-6401, bkiefer@seyfarth.com

Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

LOS ANGELES (May 11, 2012) — Leading law firm Seyfarth Shaw LLP announced today that two of the firm’s Los Angeles office partners, Laura Shelby and Diana Tabacopoulos have been named to the Daily Journal’s “Top Women Lawyers” list. The annual list of California's top female attorneys profiles 75 litigators and 25 corporate or transactional lawyers who have played a significant role in California's legal market over the past year.

Laura Shelby has been at the forefront of California employment practice for more than 20 years and recently assumed the role of Managing Partner for Seyfarth’s Los Angeles - Century City office, one of the fastest growing offices in the firm. Shelby's practice focuses on employment litigation. Over the years, she has also been successful at obtaining dismissal of cases through summary judgment. Most recently this was evidenced by dismissals on race discrimination, retaliation, breach of contract and a long fought disability case. Through these victories, Shelby has helped shape employment law in California. She was highlighted in a profile in the Daily Journal for her work on a Supreme Court case in which an employer was being sued on the issue of privacy in the workplace, when a surveillance camera was installed in the office of a nonprofit residential facility for neglected and abused children.

Shelby successfully argued that the reason that the employer installed the camera was to find out who was using the computer at night to look at child pornography. The Court agreed that employer had the right to conduct surveillance in the workplace under appropriate circumstances

“It was the right thing to do,” Shelby told the Daily Journal. “It’s always an uphill battle for employers. Laws are very much in favor of plaintiffs suing, and the system favors plaintiffs. As a defense lawyer, I think to win a case, you’ve got to grab the moral high ground.”

With more than 20 years of experience, Diana Tabacopoulos specializes in defending corporations in complex wage and hour class actions as well as ERISA and consumer class actions. Tabacopoulos has been lead counsel in more than 75 wage and hour class and collective actions in California and nationwide. She has been most successful in challenging class allegations at the outset of litigation, thereby saving her clients the significant time and expense associated with the defense of class actions. When cases do proceed, she has a nearly perfect record of opposing class certification in California state-based and federal nationwide wage and hour class and collective actions. When it comes to facing opposing counsel, Tabacopoulos said, “I try to be well-prepared for them and give them a snapshot of what’s to come, how the evidence will shake out. I give them a lot to think about.”

In her Daily Journal profile, Tabacopoulos was commended for her work in defeating class certification for a client charged with claims for alleged missed meal periods on behalf of nearly 55,000 employees in California. In a 42-page decision, the judge found that regardless of how Brinker turned out, [the client] provided evidence to that it made every effort to provide legally compliant meal periods. Tabacopoulos said she knew her client had a solid case, regardless of the outcome of the highly anticipated Brinker meal-and-rest-period Supreme Court decision.

Richard Alfred Quoted in Forbes
"Court Rebuffs Labor Dept. On Sales Rep Overtime"

Fri, 11 May 2012 00:00:00 -0400

Seyfarth Shaw Boston office Labor & Employment partner Richard Alfred was quoted in Forbes on May 9. The article discussed Seventh Circuit Court of Appeals decision in Schaeffer-La Rose v. Eli Lilly, which rejected the idea that pharmaceutical companies must provide overtime pay to their sales representatives.

The Department of Labor (DOL) issued a brief supporting the plaintiffs which, if heeded by other courts, could mean billions of dollars in liability for drug companies as plaintiff lawyers form class actions to recoup years of back pay. “The stakes are so high in these cases, it’s become a very difficult calculation as to whether an employer will actually go to trial,” said Richard. “If you lose you lose in a mega-catastrophic way.”

The Seventh Circuit’s willingness to decide this case was surprising to some observers because there are very similar issues currently pending before the Supreme Court. If the Supreme Court rules against the pharmaceutical industry and orders drug companies to pay overtime, Richard said, the Seventh Circuit’s holding on administrative exemption should still apply in that district. If the Supreme Court rules in favor of the pharmaceutical industry, it makes the Seventh Circuit’s decision superfluous.

The administration's position was a departure from decades of policy in which the definition of “sales” was very broad, Richard said, and mirrors the legal arguments of class-action attorneys trying to assemble lawsuits on behalf of thousands of drug sales reps. The DOL has also argued in favor of overtime for mortgage-loan officers, another popular target for class-action lawyers.

Richard noted that lawyers have capitalized upon the unclear definitions to win millions of dollars in settlements and fees by forming suits on behalf of white-collar employees most would traditionally consider exempt from overtime, such as stockbrokers and store managers, and not everyone welcomes their efforts. He pointed out that companies may be forced to abandon flexible work arrangements, including allowing employees to telecommute and set their own hours, from the risk of being forced to cough up years of back pay later if they’re sued.

Click here to read the full article: http://www.forbes.com/sites/danielfisher/2012/05/09/court-rebuffs-labor-dept-on-sales-rep-overtime/

Strategy & Insights: Managing Transgender Issues in the Workplace Following The EEOC's Macy Ruling

Fri, 11 May 2012 00:00:00 -0400

Although no federal statute explicitly prohibits employment discrimination based on gender identity,¹ courts have increasingly held that transgender individuals are protected from discrimination under federal law. Indeed, on April 20, 2012, in the landmark ruling Macy v. Bureau of Alcohol, Tobacco, Firearms and Explosives,² the Equal Employment Opportunity Commission ("EEOC") held that transgender individuals may state a claim for sex discrimination under Title VII.

The Macy ruling by the EEOC serves as a reminder to employers that they must become more attuned to issues related to employees' gender identity and/or expression, in addition to other protected characteristics under federal law. In this Strategies & Insights edition, we will briefly review the Macy decision and then offer practical advice for employers in dealing with transgender issues in the workplace.

The EEOC's Ruling in Macy

Complainant, Mia Macy applied for an open position with the Bureau of Alcohol, Tobacco, Firearms and Explosives. Macy was assured that she would receive the position pending completion of a background check. During the background check process, Macy informed the Bureau that she was in the process of transitioning from male to female. Five days later, Macy received an email from the Bureau notifying her that, due to federal budget cuts, the position was no longer available. Macy later learned that the position was not eliminated, and another candidate was hired. Macy therefore believed that her transgender status resulted in the Bureau's failure to select her for the position.

Because Macy was a federal agency job applicant, she was required to follow the federal sector EEO process of filing an internal complaint with the Bureau, instead of filing a charge of discrimination directly with the EEOC.³ In her EEO complaint filed with the Bureau, Macy checked the box for "sex" and alleged that she had been discriminated against and denied the position on the basis of her "sex, gender identity (transgender woman), and on the basis of sex stereotyping."

The Bureau accepted Macy's complaint, but limited adjudication of her charge solely to the discrimination claim based on "sex" pursuant to Title VII and the EEOC regulations which apply to federal agencies. The Bureau also accepted Macy's remaining claims based on "gender identity stereotyping," but informed Macy that such claims would only be processed and investigated according to the Department of Justice policy, which does not provide the same rights and remedies afforded by Title VII and EEOC regulations.

Macy appealed to the EEOC, arguing that the Bureau's decision to bifurcate her claims amounted to a "de facto dismissal" of her entire Title VII claim, which included a claim of discrimination based on gender identity and transgender status. The EEOC accepted Macy's appeal and, while it did not rule on the merits of her claims, determined that claims of discrimination based on transgender status and gender identity are cognizable as claims of sex discrimination under Title VII. The EEOC concluded that the Bureau had erroneously separated Macy's complaint into distinct claims and that each of the allegations contained in the complaint was simply a different means of stating a claim of discrimination based on sex, which is actionable under Title VII. Accordingly, it remanded Macy's complaint to the Bureau.

The EEOC found support for its decision in Price Waterhouse v. Hopkins, 490 U.S. 228, 239 (1989), in which the U.S. Supreme Court held that Title VII bars discrimination based on gender stereotypes, in other words, "failing to act and appear according to expectations defined by gender" -- a form of sex discrimination that has since been described as "sex stereotyping."⁴ The EEOC also cited to Smith v. City of Salem,⁵ in which the Sixth Circuit held that Title VII prohibited sex stereotypes regardless of whether the plaintiff was labeled a transsexual.⁶

In sum, the EEOC reasoned that "although most courts have found protection for transgender people under Title VII under a theory of gender stereotyping, evidence of gender stereotyping is simply one way of proving sex discrimination."⁷ The EEOC went on to state that "Title VII prohibits discrimination based on sex whether motivated by hostility, by a desire to protect people of a certain gender, by assumptions that disadvantage men, by gender stereotypes, or by the desire to accommodate other people's prejudices or discomfort."⁸ While the EEOC acknowledged that transgender, like sex stereotyping, is not an independent protected status, it concluded that a transgender person "may establish a prima facie case of sex discrimination through a number different formulations."⁹

What the Macy Decision Means for Employers

The significance of the EEOC's decision in Macy cannot be understated. In ruling that transgender employees may state a claim for sex discrimination under Title VII, the EEOC explicitly reversed course and overturned several of its own administrative decisions, and issued a holding that is contrary to several federal court rulings interpreting Title VII. While previously there was no apparent consensus on whether the EEOC would accept such charges (and no consensus among federal courts), and administrative decisions were likely relegated to individual district offices or investigators, the EEOC's ruling makes clear that the EEOC will now accept charges of discrimination based on gender identity and/or transgender status at all of its 15 district offices.

Going forward, it is expected that the EEOC's decision will result in an increased number of charges of discrimination filed and investigated based on gender identity and/or expression. We also anticipate that the EEOC will take a more aggressive stance in investigating and litigating charges based on gender identity and/or expression. Moreover, given the EEOC's key objectives in its Strategic Plan for 2012-2016 to ensure that members of the public understand their rights as well as the recourse available to them, employers can expect that the EEOC will take additional measures to educate future and potential claimants regarding this ruling.

Further, while the EEOC's ruling is not binding on federal courts, and given the trend in federal decisions, employers should be mindful that transgender individuals may be protected under Title VII¹⁰ and that any allegations concerning transgender discrimination, gender stereotyping or gender identity - to the extent they can be interpreted to fall within the EEOC's interpretation of "sex" - may expose them to liability, in addition to protections that may exist under state or local laws. This decision may also impact the Employment Non-Discrimination Act, a proposed amendment to Title VII that would add "sexual orientation" and/or "gender identity" to Title VII as protected categories. This decision by the EEOC could provide political support for the passage of the bill in Congress.

Based on these developments, and this evolving area of law, employers must familiarize themselves with issues related to gender identity and expression to avoid potential liability. While in certain respects, an employer's approach to transgender employee issues may be similar to those already in place to prevent discrimination against individuals in other protected categories, claims by gender non-conforming individuals may present unique challenges and pitfalls while the law in this area develops.

Employer Best Practices in Addressing Transgender Issues in the Workplace

In order to avoid potential pitfalls in this emerging area of law, employers must be mindful of issues related to gender identity or expression that might arise during interviewing, hiring, discipline, promotion and termination decisions. Human Resources professionals and management must also be particularly vigilant when an employee identifies him or herself as transgender, or announces his or her plan to undergo sex change surgery. Moreover, the Macy decision, and the implications of Price Waterhouse's "sex stereotyping" theory are not just limited to transgender employees. Indeed, employers should be careful to understand that many forms of "sex stereotyping" may give rise to actionable claims, not just discrimination or harassment against individuals who identify as transgender.

Following the Macy decision, the following are best practices that employers should consider:

Revisit Non-Discrimination Policies: Although the EEOC's decision is not binding and there is no federal law which explicitly protects transgender employees from discrimination, employers should consider revising internal equal employment, non-discrimination and anti-harassment policies to include gender identity and expression as protected categories.
Conduct Training: Employers should also make their managers and employees more sensitive to gender identity and expression by incorporating these topics in EEO and harassment training programs. In addition to general training, employers may also consider conducting a more targeted training in this area when a transgender employee announces that he/she is transitioning. Such training will not only support the employee and help manage the specifics of the transition process, but may also foster respect, sensitivity and understanding from other employees.
Dress codes: Employers should revise dress codes and policies to make them gender neutral. For instance, policies that specifically define the kinds of attire that males and females may wear tend to be based on sexual stereotypes and gender expectations. By contrast, policies that require professional business attire irrespective of sex or gender are recommended. For employers who have a "male" and "female" version of a uniform, employees should be allowed to wear the uniform that comports with their gender identity.
Use of Pronouns: Employers should be mindful to use the appropriate pronouns consistent with the employee's gender presentation. To the extent there is uncertainty about an employee's gender, it may be appropriate to respectfully communicate with an employee regarding his or her preference in a confidential matter, and agree with the employee on a communications plan for notifying co-workers and customers of any change to pronoun or name use.
Restroom Access: Employers should consider access to restrooms, locker rooms and other gender-specific facilities. An employer should consider an employee's full time gender presentation and identity when making decisions regarding restroom access or whether unisex facilities may be appropriate for a temporary time period.
Develop Guidelines for Managing Workplace Transition: It also prudent for an employer to develop guidelines and procedures to manage situations where an employee announces that he/she will be transitioning. Employer should approach an employee's transition as an interactive process. This may involve, for example, designating a key human resources official or manager to serve as a liaison and point of contact for the transitioning employee. The employer should have an open and continuous dialogue with the employee and set clear expectations regarding how the transition will occur, the steps that need to take place (e.g. notification to clients, coworkers and others), and the information the employer will require from the transitioning employee.
Employee Privacy and Confidentiality: Employers must be mindful that although a transgender employee's transition may become a matter of public knowledge in the workplace, personal details about any employee's transition are private and entitled to confidentiality.
Administrative and Personnel Records: Employers should be prepared to update or change the employee's name and sex in certain employee records. For example, employers should consider which records must reflect the employee's name and sex at birth, and which records can be modified to assist the employee in the transition (e.g. email addresses, name plates, business cards, security badges, etc.).
Health Insurance and Benefits: Employers may also consider whether changes can be made to its disability and leave-related policies and/or to its health insurance plan offerings to better accommodate the needs of transgender employees.

In sum, employers should increase their awareness of and sensitivity to issues related to gender identity and expression in the workplace. Employers must be aware that transgender individuals may be protected under federal law in addition to relevant state or local laws, and that any allegations concerning transgender discrimination, gender stereotyping or gender identity, require the same analysis, investigation and response as a traditional sex discrimination complaint. Finally, employers must evaluate their internal policies, practices and procedures with an eye toward transgender issues to avoid potential complaints and liability.

1. The terms "sex," "gender," "sexual orientation" and "transgender" are distinguishable. "Sex" is a term used to denote whether an individual is biologically male or female. "Gender" refers to an individual’s external characteristics and behaviors such as appearance, dress, mannerisms, speech patterns, and social interactions that are perceived as masculine or feminine, regardless of their biological sex, with "gender identity" being a person’s internal, deeply-felt sense of being male, female, something other or in-between. "Sexual orientation" describes an individual’s enduring physical, romantic and/or emotional attraction to another person. "Transgender" is an umbrella term for people whose gender identity and/or gender expression differs from the sex they were assigned at birth

2. Macy v. Bureau of Alcohol, Tobacco, Firearms and Explosives, EEOC Appeal No. 0120120821 (April 23, 2012)

3. See generally 29 C.F.R. §1614

4. Macy at 6

5. 378 F.3d 566, 568-575 (6th Cir. 2004)

6. Macy at 6

7. Macy at 12

8. Id

9. Macy at 12-13

10. Currently, the statutes of only 16 states and the District of Columbia specifically protect transgender identity as a separate protected category in employment.

See generally 29 C.F.R. §1614

2. 2

California Supreme Court: Neither Side Can Recover Attorney’s Fees In Meal and Rest Break Cases

Fri, 11 May 2012 00:00:00 -0400

California generally follows the rule that each side pays its own attorney's fees. But many statutes entitle the prevailing party to recover reasonable attorney's fees from the losing party. One such statute, Labor Code section 218.5, entitles the prevailing party to recover attorney's fees in any action brought "for the nonpayment of wages." By a special exception, Section 218.5 does not apply to actions for minimum wages or for overtime premium pay; in those actions only the prevailing employee can recover.

The question would arise, then, whether a prevailing employer can use Section 218.5 to recover attorney's fees in cases alleging a denial of meal or rest breaks. One would think the answer would be yes, because the money employers owe for denying meal and rest breaks has been held to be "wages" instead of "penalties." But the California Supreme Court recently held otherwise in Kirby v. Immoos Fire Protection, Inc. The Court ruled that a claim for meal or rest pay is not a claim for "the nonpayment of wages" but is instead a claim for the denial of meal and rest breaks, where the remedy just happens to be in the form of a wage. Accordingly, neither the plaintiff nor the defendant in a claim for denied meal or rest breaks is entitled to attorney's fees for winning the case.

The Proceedings in the Trial Court And The Court of Appeal

Anthony Kirby sued his former employer, Immoos Fire Protection, Inc. for various Labor Code violations as well as violation of the Unfair Competition Law (Business and Professions Code Section 17200 et seq.). After Immoos prevailed against the claim alleging missed meal and rest breaks, the trial court awarded attorney's fees to Immoos. The Court of Appeal affirmed that award, and rejected Kirby's claim that an exception to Section 218.5 applied because Kirby was also suing for unpaid minimum or overtime wages.

The California Supreme Court granted review to consider whether a party who prevails on a Labor Code section 226.7 claim for an alleged failure to provide meal or rest breaks may be awarded attorney's fees under section 218.5.

The Supreme Court Decision

The Supreme Court first examined whether a Section 226.7 claim for an alleged failure to provide meal or rest breaks amounts to a claim for unpaid minimum or overtime wages, and therefore qualifies as a claim under Labor Code section 1194, which provides that only a prevailing employee can recover attorney's fees. On this issue the Court ruled against Kirby, concluding that Section 1194 claims for unpaid minimum wages or overtime pay do not include claims for failure to provide meal or rest breaks.

The Court next considered whether Section 218.5, which authorizes attorney's fees for a party prevailing in an "action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions," applies to a meal or rest break claim under Section 226.7. The Court concluded that Section 218.5 does not apply, because such a claim is not a claim for "nonpayment of wages." Instead the section is "primarily concerned with ensuring the health and welfare of employees by requiring that employers provide meal or rest periods" as mandated by law.

The words "nonpayment of wages" refer to an alleged legal violation and not a desired remedy. As such, whether or not a wage has been paid is irrelevant to whether Section 226.7 was violated, and payment of the extra hour of pay does not excuse a violation. Instead, the failure to provide required meal or rest breaks is what triggers the violation of Section 226.7. Accordingly, the Court concluded that a Section 226.7 claim is not an action brought for nonpayment of wages under Section 218.5, meaning that Section 218.5 does not authorize an award of attorney's fees to any prevailing party, whether employee or employer.

What Kirby Means For Employers

The good news for employers is that employees are not entitled to attorney's fees in actions alleging missed meal or rest breaks. The bad news is that employers are now deprived of an incentive they once had to discourage employees from bringing weak claims for missed breaks.

Percentage Rent Delays - Time is Money...

Thu, 10 May 2012 00:00:00 -0400

In an effort to procure or retain retail tenants in a shopping center, many landlords are agreeing to base rent based entirely on gross sales from the tenant’s operations in the premises. This has raised an interesting problem concerning the availability of sales records and the timing of the payment of rent based upon such sales. In many cases, sales records are not available for 30 days after the month in which such sales take place. Thus the possibility exists that a landlord may have to wait three months between rent payments during the conversion process from fixed base rent to rent which is based only upon gross sales. For example, following such a modification or extension of the lease effective May 1, the landlord would be required to wait until July 1 for its next payment. If the landlord was receiving fixed base rent on the first day of every month, the landlord may have received a rent payment on April 1 and then, because May gross sales (the first month under the new rent structure) won’t be known until June 30, landlord would not receive any payment until at least July 1. Payments will thereafter lag two months through the balance of the percentage rent period. This could prove problematic if the tenant is a large portion of the landlord’s rental stream and the landlord is relying on rent payments to make its mortgage payments every month.

Using the example above, several alternatives are available to remedy this situation:

Tenant can be required to make a rent payment on May 1, and each subsequent month, based upon gross sales for the period two months earlier (for example, March sales information would be available on April 30 and used to determine May rent) and a rent payment could be made on May 1 without any interruption of cash flow to the landlord. As an alternative, gross sales can be based upon the prior year’s sales during the same month (assuming this is not a new lease). The parties can then agree to a reconciliation of the relevant rental period on either a monthly basis (when actual sales are available) or annually.
Tenant can be required to pay a minimum base rent every month, beginning on May 1, which minimum is based upon an estimate of gross sales for the month in question. The tenant may want to suggest a lower base to hedge against possible sales concerns, but even in this scenario, the landlord continues to get a steady flow of income. Again, the parties can reconcile monthly or annually after actual gross sales are determined.
Tenant can be asked to “prepay” the last two months of the term upon executing the lease or amendment, or the last two months of the period when only percentage rent is payable (if fixed rent kicks in again at a later time), based again upon an estimate of gross sales for those two months. Landlord would therefore have current funds available for use when deposited, instead of being two months in arrears throughout the term. There would be a reconciliation after the end of the percentage rent only term, comparing actual rent calculated upon gross sales during the final two months of percentage rent to the prepayment amount previously paid.

By: Ira Fierstein

Ira Fierstein is a partner in Seyfarth’s Chicago office and co-chair of the firm’s Leasing Group. If you have further questions, please contact your Seyfarth Shaw attorney Ira Fierstein at ifierstein@seyfarth.com.

OFCCP News You Can Use: The Latest Developments and Upcoming Events

Thu, 10 May 2012 00:00:00 -0400

OFCCP Starts New Round of CSALs

As of May 2, 2012, the Office of Federal Compliance Programs (OFCCP) began sending out the next wave of Corporate Scheduling Announcement Letters (CSALs) to alert federal contractors and subcontractors of possible upcoming compliance evaluations. Significantly, it appears that OFCCP is moving away from its prior practice of sending a single CSAL to corporate headquarters with a list of potential locations that could be scheduled for audit, and is instead sending individual letters directly to specific establishments that may be subject to a compliance evaluation. Contractors should therefore be diligent in alerting individual establishments to be on the lookout for any such letters and to immediately forward them to corporate headquarters.

Inaugural Southeast Industry Liaison Group Regional Conference To Be Held in Charlotte

The Inaugural Southeast Industry Liaison Group (SE-ILG) Regional Conference will be held in Charlotte, NC on June 6 - June 8, 2012 at the Charlotte Omni Hotel. Members of Seyfarth Shaw's OFCCP & Affirmative Action Compliance Team will present a workshop discussing the scope and impact of proposed changes to regulations concerning protected veterans. You can still register to attend the conference by clicking here.

Seyfarth Shaw to Host Breakfast Briefing on OFCCP's Increasingly Aggressive Enforcement and Regulatory Activities

On June 5, 2012, Valerie Hoffman, Christine Hendrickson and Annette Tyman of Seyfarth Shaw's Chicago office will host a Labor and Employment Breakfast Briefing, Attention All Federal Contractors! Be Prepared to Navigate the OFCCP's Newly Aggressive Audits and "Game-Changing" Regulatory Changes, to discuss OFCCP's latest enforcement activities and proposed regulatory changes, and their possible impact on the contractor community.

To register for this event, please click here.

Greater LA ILG to Host OFCCP Director Shiu

The Greater Los Angeles Industry Liaison Group (GLAILG) will host a meeting on June 6, 2012 at the UCLA campus in Los Angeles at which OFCCP Director Patricia A. Shiu will speak. Registration information will be appearing soon on GLAILG's website: www.greaterlailg.com.

If you have questions about this One Minute Memo, please contact the Seyfarth attorney with whom you work or any attorney on our OFCCP & Affirmative Action Compliance Team.

2012 Cal-Peculiarities: How California Employment Law is Different

Thu, 10 May 2012 00:00:00 -0400

Seyfarth Shaw LLP has released the 2012 edition of Cal-Peculiarities: How California Employment Law is Different, an authoritative guide to the ever-expansive rulings, regulations, and bills that have transformed California into the most employee- and plaintiff-friendly venue in the nation.

The 247-page guide is the work of the firm’s California Workplace Solutions Group, which includes many of Seyfarth’s 125 California-based labor and employment attorneys. During the past 13 years, Cal-Peculiarities has earned a national reputation as the must-have manual for executives, line managers, human resources professionals, general counsel, and others whose workplace practices may come under California jurisdiction.

View press release for more information

The complete 13th Annual Edition is available to clients of the firm and interested corporate counsel. To request a copy of the book, please click the button below. For questions, please e-mail calpeculiarities@seyfarth.com.

Seyfarth Shaw Issues 13th Annual Edition of Cal-Peculiarities - The Definitive 2012 Guide to California’s Distinctive Employment Laws and Workplace Regulations

Thu, 10 May 2012 00:00:00 -0400

Contacts:
Brian Kiefer, Director of Public Relations
(312) 460-6401, bkiefer@seyfarth.com

Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

Seyfarth guide captures latest idiosyncrasies, including key updates on arbitration agreements, union picketing, human trafficking, genetic discrimination – even required workplace training for “patient lifting”

LOS ANGELES (May 10, 2012) — Leading law firm Seyfarth Shaw LLP announced today the release of its 2012 edition of Cal-Peculiarities: How California Employment Law is Different, an authoritative guide to the ever-expansive rulings, regulations, and bills that have transformed California into the most employee- and plaintiff-friendly venue in the nation.

The 247-page guide is the work of the firm’s California Workplace Solutions Group, which includes many of Seyfarth’s 125 California-based labor and employment attorneys. During the past 13 years, Cal-Peculiarities has earned a national reputation as the must-have manual for executives, line managers, human resources professionals, general counsel, and others whose workplace practices may come under California jurisdiction.

First issued in 1999, Cal-Peculiarities has grown thicker by the year, reflecting the track record of state lawmakers and some judges to broaden the scope of worker protections to exceed benchmarks established under federal law. With the largest workforce of any state in the nation, decisions made in California often carry outsized, trend-setting influence across the country.

The latest edition of Cal-Peculiarities addresses legislative and judicial milestones from the past 12 months that put a new California stamp on significant labor and workplace issues, including:

“Unconscionable” provisions which nullify service-contract arbitration agreements;
Relative leeway accorded plaintiffs and defendants in employment discrimination cases;
California’s default view that workers are employees and not independent contractors – and ever-larger civil penalties for the willful misclassification of workers;
Pro-employee tilts in the playing field regarding “stray remarks” and the same-actor doctrine.

Moreover, the 2011 transition in the governor’s office from a pro-business Republican to a pro-labor Democrat also opened the door wider to novel legislative change, including:

Requirements that larger companies publicize how they are keeping slavery and human trafficking out of their supply chains – an increasingly hot-button concern in light of well-reported problems within the factories of some of California’s leading electronics manufacturers;
Provisions describing multiple identifiers of sexual identity;
Enhanced protections of genetic information under civil rights and housing and employment acts;
Limits on use of job applicants’ credit histories in making hiring decisions;
Mandatory “safe patient handling” policies and “trained lift teams” at hospitals;
Employer-friendly ban on requiring companies to use electronic verification of job applicants’ right to work in the United States.

In 21 footnoted chapters, complete with a detailed and user-friendly glossary of labor-employment terms and statutory and wage order provisions, Cal-Peculiarities outlines both the backdrop and the fallout of 2004’s Labor Code Private Attorney General Act, which allows employees to “stand in” for the state labor commissioner in bringing labor code actions and seeking civil damages from employers. David Kadue, the Editor in Chief, reports that this legislation sparked a boom in workplace litigation in California that shows few signs of slowing down – even if last month’s closely watched and long-awaited Brinker decision by the California Supreme Court handed employers a victory with regard to employee rest and meal breaks.

“The Brinker decision is a shield for some employers, but it will simply slow and not stall the onslaught of cases brought by plaintiffs seeking classwide damages and pursuing ‘bounty-hunter’ lawsuits under the Private Attorney General Act, which allows workers to seek up to 25 percent of penalties imposed on an employer,” Kadue said. “Only time will tell if Brinker is the first step in putting that genie back in the bottle. Brinker aside, California still places unprecedented legislative, administrative, and legal pressure on companies doing business there.”

Cal-Peculiarities – so called due to the unusual protections enjoyed by California workers that extend far beyond federal benchmarks – addresses a broad variety of laws concerning labor and employment compliance in the Golden State: wage-hour laws, rights to organize, prohibitions on English-only rules, accommodations for lactating mothers and substance addicts, compensation due employees for time undergoing security checks, and limits on “Good Samaritan” actions, among many others.

Complicating the landscape further, California appellate courts continue to march to the tune of a special drummer, issuing extraordinarily pro-plaintiff decisions, as does the federal Ninth Circuit Court of Appeal, which covers California.

As Editor in Chief, Kadue reinforces the essence behind Cal-Peculiarities in the guide’s conclusion: “Whether you consider California a leader in ‘progressive’ employment laws likely will depend on whether you are a plaintiff’s attorney or an employer,” Kadue writes. “One thing that any objective observer must acknowledge, however, is that California employment law often is peculiar.”

Pamela Devata Quoted in Chicago Daily Law Bulletin
“EEOC tells employers to handle criminal records with caution”

Wed, 09 May 2012 00:00:00 -0400

Employment partner Pamela Devata was quoted in an April 27 Chicago Daily Law Bulletin article concerning employers’ use of criminal background checks when making hiring decisions. The article reported on new guidelines issued by the U.S. Equal Employment Opportunity Commission with respect to Title VII. The guidelines instruct employers to consider, before ruling out a job candidate with an arrest record, the following three things: the nature of the offense, the time since the offense occurred, and the nature of the job the candidate holds or seeks.

Pam urged employers who perform criminal record checks on job candidates to pay more attention to what they look for and how they use the information they find. "Employers shouldn't even be asking about certain criminal history or getting certain criminal history about (an) individual that's not job-related," she advised.

Greetings to all of those who attended our March Webinar "Dealing With The EEOC In 2012: Strategies For Employers Targeted In The Commission’s Systemic Enforcement Litigation Program"

Wed, 09 May 2012 00:00:00 -0400

We thought you would find of interest a positive development of last night from the U.S. Court of Appeals for the Eighth Circuit. As many of you know, this continues to be a roller-coaster year for employers, with numerous decisions relating to EEOC-initiated litigation. One of the "cases to watch" we mentioned in our webinar was the Eighth Circuit's decision on February 12 in EEOC v. CRST Van Expedited, Inc. The EEOC v. CRST decision dealt a blow to the EEOC's investigation and conciliation tactics, and was regarded as one of the most important EEOC decisions in recent years. The EEOC asked the Eighth Circuit to reconsider its ruling, and on Monday, it granted the EEOC's request. The very next day, however, the Eighth Circuit upheld its earlier ruling, and once again took the EEOC to task for its "sue first, aim later" tactics.

The following link gives a detailed analysis of the decision, as well as a link to the substantial 62-page decision. We suggest that it is a "must read" for any employer facing EEOC systemic investigations or litigation.

Here is the link: http://www.workplaceclassaction.com/eeoc-litigation/8th-circuit-grants-eeoc-petition-for-rehearing-in-the-crst-litigation-but-holds-against-the-eeoc-aga/

We will continue to monitor developments on this front, and our most up-to-date analyses appear on our blog: www.workplaceclassaction.com

Thank you, and happy reading.

By: Gerald Maatman and Chris DeGroff

Calculating and Paying the Comparative Effectiveness Research Fee

Wed, 09 May 2012 00:00:00 -0400

This is the thirty-ninth issue in our health care reform series of alerts for employers on selected topics in health care reform. (Our general summary of health care reform and other issues in this series can be accessed by clicking here.) This series of Health Care Reform Management Alerts is designed to provide a more in-depth analysis of certain aspects of health care reform and how it will impact your employer-sponsored plans.

[√] Applies to grandfathered plans

[√] Applies to new health plans and plans that lose grandfathered status

The Affordable Care Act imposes a “comparative effectiveness fee,” on all insurers and sponsors of group health plans, for plan years ending on or after October 1, 2012 (meaning calendar year plans are subject to the fee starting in 2012). The fee, which is intended to pay for governmental research comparing the clinical effectiveness of various medical treatments, amounts to $1 per covered life in the first year, and $2 per covered life in each subsequent year. (The fee sunsets in 2018). Recently proposed IRS regulations clarify how to determine what types of coverage trigger the fee, how to calculate covered lives, and how to pay the fee. While the fee is assessed against insurers (for fully-insured plans) and plan sponsors (for self-funded plans), this alert focuses on the latter.

Fee Assessed Against “Group Health Plan” Sponsors

The regulations clarify that the fee will be assessed for “group health plan” coverage, but not for HIPAA excepted benefits. This means there will be no fee assessed for stand-alone dental and vision benefits, or for most health flexible spending accounts (FSAs)* (this list is not exhaustive). In addition, employee assistance, disease management and wellness programs are specifically exempted unless they provide “significant benefits in the nature of medical care or treatment”. On the other hand, the fee will be assessed for coverage provided to former employees, including coverage provided under a retiree-only plan, despite the fact that retiree-only plans are exempt from most of the Affordable Care Act mandates.

Sponsors rarely offer these ancillary benefits in stand-alone form though -- they are usually paired with major medical coverage. To address this, the regulations provide that a plan sponsor offering multiple arrangements providing health coverage (i.e. two or more self-insured health plans or programs that have the same plan year) may treat them as a single plan for purposes of calculating the fee. For example, if a self-insured arrangement providing major medical benefits is paired with a self-insured prescription drug program or a health reimbursement arrangement (HRA), the plan sponsor may treat the arrangement as one and pay one fee. On the other hand, if a insured arrangement is paired with a self-funded HRA, there will be two fees assessed for one covered life - one fee against the insurer and the other against the plan sponsor of the HRA.

Calculating Covered Lives

The amount of the fee is equal to the average number of lives covered under the plan for the plan year, times the applicable dollar amount ($1 for the plan year ending on or after October 1, 2012 and before October 1, 2013, and $2 thereafter). Self-funded plan sponsors can choose among any of three methods to calculate the average number of covered lives:

Actual Count. The sponsor may calculate the average lives for the plan year by adding the covered lives (participants plus dependents) for each day of the plan year and dividing by the number of days in the plan year.
Snapshot Count. The sponsor may instead add the total lives for one day in each quarter (or an equal number of days for each quarter), and divide by the number of days used (minimum of four). With this method, the plan sponsor may look to actual lives covered (employees, spouses and dependents), or it can add the number of individuals with self-only coverage, to the product of the number of participants with coverage other than self-only multiplied by 2.35.
[(self-only) + (other than self-only x 2.35)] (The IRS determined that the average non-self-only election covers 2.35 participants.)
Form 5500. Finally, the sponsor may look to the participants reported on the Form 5500. The Form 5500 does not report dependents though -- only employees. So, for plans with dependent coverage, the plan sponsor must add together the number of reported participants on the first and last day of the plan year (while this seems like over-counting, the regulations clarify that this inflated count is intended to reflect those dependents not reported on the Form). For plans without dependent coverage, the plan sponsor can simply add the two numbers, then divide by two.

The regulations contain a special rule for HRAs and FSAs. If a plan sponsor does not maintain another self-insured health plan, the plan sponsor may treat each FSA or HRA as covering a single covered life. If the plan sponsor maintains multiple arrangements, they may be treated as a single plan, as explained above.

Plan sponsors may only choose one counting method in any given plan year, but the sponsor can change methods from year to year. The IRS released the proposed regulations on the fee after the start of the first applicable plan year, meaning many sponsors may have missed the opportunity to capture the information necessary to use approach #1 or #2 above. To account for this, the IRS is allowing sponsors in this situation to use any reasonable counting method for the first plan year.

Paying the Fee

The tax is assessed on plan sponsors of self-funded plans. For most plans, this means the employer. For multiemployer plans, this means the joint board of trustees. The IRS declined to comment on whether the fee could be paid out of a trust (in the multiemployer context and for single employers maintaining a VEBA). Instead, the IRS deferred to the DOL, which is the agency responsible for issuing guidance relating to fiduciary standards and use of plan assets. The preamble to the regulations suggested the DOL will issue guidance in the near future.

Sponsors must pay the fee annually using IRS Form 720. (Despite the Form being entitled Quarterly Federal Excise Tax Return, a plan sponsor that files a Form 720 only to report the fee is not required to file a Form 720 at other times during the year.) The form and payment in full will be due by July 31 of each year, beginning July 31, 2013, for most plan sponsors.

* Benefits provided under health FSAs are excepted benefits if (i) there is other nonexcepted group health plan coverage available by reason of employment, and (ii) the maximum benefit payable to any participant for the year cannot exceed two times the employee’s salary reduction election under the health FSA for the year (or, if greater, the amount of the employee’s salary reduction election for the health FSA for the year, plus $500).

Frederic Singerman and Jill Keblawi Published in the Journal of Pension Benefits
"Interest on Delayed Pension Payments: The Emerging New Normal?"

Tue, 08 May 2012 00:00:00 -0400

Seyfarth Shaw Washington, D.C. office attorneys Frederic Singerman and Jill Keblawi wrote an article published in the May 2012 edition of the Journal of Pension Benefits. The article discusses delayed pension payments and lays out the regulatory framework and touches upon how the courts are diverging from the Internal Revenue Service framework.

If a payment is delayed because the amount of payment cannot be ascertained or the participant cannot be located, a payment retroactive to the participant's annuity starting date 'may be made no later than 60 days' after the plan determines the amount of payment or the participated is located." Fred and Jill point out that this regulation does not indicate that interest is required, and that other Treasury regulations support that pension plans are not required to make adjustments for late payments.

However, the Treasury regulations concerning retroactive annuity starting dates (RASD) specifically required interest on those payments if the participant selects a RASD. And while a reasonable delay is allowed regarding payments, Fred and Jill point out that there has been an increase in recent court decisions ordering pans to pay interest to participants on non-RASD annuities.

While the law is still emerging in this area, there are some conclusions that Fred and Jill draw. They suggest that plan administrators understand their distribution commencement process and should review it to minimize delays. Administrators should also consider whether the process produces delays that are in or out of line with industry standards, and whether the process can be improved. They conclude by stating that the only "no risk" approach is to pay interest on any late payment.

Pamela Devata Quoted in CQ Researcher
"Criminal Records and Employment"

Tue, 08 May 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Pamela Devata was quoted in the April 20 edition of CQ Researcher. The article discussed whether barriers should be eased for ex-prisoners when making employment decisions.

"Across the board, generally speaking, employers don't want to hire someone who is a threat to their business or to their customers or other employees," Pam said. "But they don't necessarily care that someone had a drug-possession conviction seven years ago as long as someone is not intoxicated on the job." However, "If someone has engaged in rape or violence or drug manufacturing, most employers would be concerned."

"The question is not whether or not a person is more likely to engage in a certain activity after a certain time," Pam noted, stating that an employer's concern generally stems from direct experience. "After a certain amount of time, it becomes irrelevant. It's insane that we think it's OK for peoples' records of stuff they did long ago to be left open, and not recognize that people change, grow, mature."

Concerning expunged criminal records, Pam said, "If a record is expunged, employers don't want to know about it." She commented, "I've never had an employer say they want to take action based on an expunged record."

The article also delved into background checking industry. "In my experience and my practice, more often than not background screening companies take painstaking procedures to follow the law," said Pam.

The article concludes by stating that looking forward, employers can expect there to be more regulations that create less barriers for the formerly incarcerated.

Pamela Devata Quoted in Law360
“EEOC Hints Case-By-Case Criminal Checks A Better Bet”

Tue, 08 May 2012 00:00:00 -0400

Employment partner Pamela Devata was quoted in an April 27 Law360 article concerning the use of criminal background checks. According to the article, the U.S. Equal Employment Opportunity Commission has issued new guidance regarding employers’ use of arrest and conviction records when making employment decisions.

“The EEOC can make an employer's life very difficult if the employer decides not to comply with this guidance,” Pam remarked.

Pam encouraged employers to determine the necessity of using criminal background checks on a case-by-case basis, to avoid being accused of discrimination under Title VII. “I think the first thing employers need to do is review their employment application policies and procedures with regard to requesting and using criminal history,” she said. “They need to specifically identify the essential function of each job and how criminal history may or may not relate to it.”

David Kadue Quoted in SHRM and La Opinion
"Ruling seen as victory for California employers" and "Corte Suprema falla a favor de empleadores Corte Suprema falla a favor de empleadores"

Tue, 08 May 2012 00:00:00 -0400

Seyfarth Shaw Los Angeles partner David Kadue was quoted in SHRM and La Opinion on April 25. The articles discussed a ruling in Brinker Restaurant v. Superior Court, which concluded that employers only need to provide meal breaks for workers, not ensure that they actually take them. Brinker's attorneys argued that there should be flexibility for employees when choosing whether to take their scheduled breaks, and the decision still requires compliance with California meal and rest break law, manager training and good written policies.

In both articles, David stressed the importance of having a written policy. "Further, the written policy should specifically instruct employees to notify someone in upper management or human resources, in writing, if they have requested but have been denied the opportunity to take a meal and/or rest break," he told SHRM.

He also noted that although the court denied class certification for the “off the clock” work claims, it ruled that meal break claims can still be brought as class actions. “That’s the fly in the ointment,” he said. “We will have more litigation and another trip to the Supreme Court on that issue,” he predicted.

Other significant rulings included:

Held, as to rest breaks, California employees are entitled to 10 minutes of rest for shifts from 3.5 to 6 hours in length, 20 minutes for shifts of more than 6 and up to 10 hours and 30 minutes for shifts of more than 10 hours up to 14 hours.
Clarified that California wage-and-hour law does not dictate in what sequential order meal and rest periods must be taken and does not prohibit an employer from scheduling meal periods early within the shift. While the first meal break must be made available within the first five hours of work, there is no “rolling five-hour rule,” which would require an employer to provide a meal period for each five hours worked.
Upheld the appellate court decision claims of off-the-clock work were not appropriate for class certification, saying that, “On a record such as this, where no substantial evidence points to a uniform, companywide policy, proof of off-the clock liability would have had to continue in an employee-by-employee fashion.”

To read the full (Spanish) article from La Opinion, click here: http://www.laopinion.com/article/20120413/IMPORT01/304139872

Brian Ashe Quoted in The Recorder
"Rest Break Ruling a Plus for Plaintiffs Lawyers"

Mon, 07 May 2012 00:00:00 -0400

Seyfarth Shaw San Francisco partner Brian Ashe was quoted in The Recorder on April 30. The article discussed a recent California Supreme Court decision, Kirby v. Immoos Fire Protection, which reversed a ruling that awarded $50,000 in legal fees to an employer who had prevailed on a claim for missed rest breaks.

Supreme Court Judge Goodwin Liu disagreed with the plaintiffs, who argued that missed rest breaks are the same as unpaid minimum wages or overtime, which would bring them under Labor Code in which only plaintiffs can recover fees. He pointed out that the meal break statute does not involve unpaid wages at all.

Brian said, "As a practical matter, defense fees are extremely difficult to get awarded," and even harder to collect, he added.

Brian said that Judge Liu was "very strict in his interpretation of the statute, which is helpful." He noted that Liu was one of the most active questioners at the November arguments in Brinker Restaurant v. Superior Court and suggested Liu may be a justice to watch on employment law issues.

Steven Pearlman Quoted in Law360
"DOL Ruling Makes SOX Whistleblower Cases Harder to Beat"

Mon, 07 May 2012 00:00:00 -0400

Seyfarth Shaw Chicago partner Steven Pearlman was quoted on May 1 in Law360. The article discussed a recent Department of Labor Administrative Review Board (ARB) ruling which revived the Sarbanes Oxley Act (SOX) case of a fired American Commercial Lines in-house attorney, Angela Zinn, and it was the first time the ARB found that whistleblowers do not need to establish an employer's "legitimate" reason for taking action against them was pretextual. The decision also made clear the difference between worker retaliation cases under SOX and those under Title VII, and it established that whistleblowers have a lighter burden of proof.

In SOX cases, the whistleblower has to show, by way of evidence, that he or she engaged in protected activity that led to an adverse employment decision, shifting the burden to the employer to show it would have taken some action regardless of the allegedly protected activity.

Under Title VII, following an employer's offering of evidence as to its rationale, the burden of proof shifts back to the whistleblower to show that the employer's reasons were pretext. The ARB said that in the Zinn case, the judge "erred in using that analysis."

Steve said, "The decision is of particular importance to employers in light of other ARB decisions from the past year that have taken a broad view of protected activity." One such decision was Sylvester v. Parexel in May 2011 which suggested the ARB would likely rule in favor of the employee when deciding disputes over what constitutes protected activity. He said that has led to employers putting their effort into arguing against causation — arguing that the challenged employment decision wasn't caused by a desire to retaliate against a whistleblower — as opposed to fighting over whether a complainant's conduct amounted to SOX-protected activity."

"It looks like the ARB is inclined to give the call to the employee when it comes to protected activity," Steve said. "Employers have rebooted and in many cases will focus like a laser on causation."

With the Zinn decision, however, the ARB has cautioned that questions of causation will be answered with the complainant in mind, Steve noted. “It doesn't take all of the wind out of employers' sails, but can be interpreted as a setback.”

Steve pointed out that it is still unclear what standard exists without a pretext.

The ARB said that an Administrative Law Judge should "weigh the circumstantial evidence as a whole" to determine the context of adverse actions, which Steve said was "a distinction almost without a difference," providing insufficient guidance for employers.

"The distinction between an ALJ assessing whether or not an employer's proffered reason for taking adverse action was pretextual, and an ALJ assessing whether they've been shown clear and convincing evidence that the employer would have done the same thing regardless of protected activity is a blurry one," he added.

“I think that employers need to beware that they are going to really have to put extra effort into demonstrating the clear legitimacy of their reasons for letting the employee go. I feel confident that federal courts will find that the analysis and the reasoning here is attenuated,” Steve concluded.

Bart Lazar Quoted in Legal Bisnow
"5 Key Points on Privacy"

Fri, 04 May 2012 00:00:00 -0400

Seyfarth Shaw Intellectual Property partner Bart Lazar was quoted in Legal Biznow on April 5 in an article about social networking in light of the White House's recently released guidelines designed to improve consumer privacy.

Bart suggested five key insights, drawing from the 62-page issued guidance. They include:

1. The President is calling for collaboration among industry, privacy advocates, and consumer protection agencies to develop enforceable codes of conduct; it can be seen as a partial win for industry in that the President is moving for codification of codes of conduct into which industry will have input.

2. The FTC and state AGs also win: it's a strong endorsement of the FTC and state AGs as the means of direct enforcement.

3. The Administration is trying to align the U.S. with the laws of the EU and other countries, a good step towards the adoption of global privacy governance and codes of conduct.

4. New privacy frameworks could result in improving data flows and reducing costs for US and international businesses. Currently, the EU deems US privacy laws as inadequate. Because of that, the US negotiated a "Safe Harbor" that U.S. companies can use to transfer personal data from the EU to the U.S. By constructing a privacy framework that is comparable to the EU's, it is possible that the EU will conclude U.S. laws are adequate, cutting the need for the Safe Harbor or extra levels of concern (including administrative time and legal expense).

5. The Administration is supporting national uniformity for privacy laws and database security breach legislation. Right now there are many differences in state database security breach, privacy, and security laws and regulations which is very costly to U.S. business.

Click here to read the full article: http://www.bisnow.com/washington_dc_legal_news_story.php?p=23018

Gerald Maatman Quoted in Law360
"EEOC Must Disclose Credit Check Info In Kaplan Bias Suit"

Fri, 04 May 2012 00:00:00 -0400

Seyfarth Shaw partner Gerald Maatman was quoted in a Law360 article on April 20, about a Circuit Court ruling that the EEOC must disclose their use of credit checks as part of discovery in the complaint the EEOC is bringing against Kaplan Educational Services.

The ruling marks the first time the EEOC has had to disclose its credit check practices as part of a complaint against an employer. The EEOC argued that its internal practices were irrelevant to their case against Kaplan.

"We believe the court ruled appropriately in terms of the relevance of the EEOC's practices and conduct as it relates to the government's allegations in this litigation," Jerry said.

Classy Opinion Gives Win To Employer Resisting Class Action

Fri, 04 May 2012 00:00:00 -0400

Even after the United States Supreme Court's decision in AT&T Mobility v. Concepcion, California courts have been reluctant to enforce arbitration agreements that would have the effect of denying employees the availability of the class device to pursue claims under the California Labor Code. A break in that trend occurred recently, however, in Kinecta Alternative Financial Solutions, Inc. v. Superior Court, where the Court of Appeal held that an arbitration provision in an employment contract that neither prohibits nor authorizes class arbitration cannot be interpreted to provide for class arbitration. The Court of Appeal thus reversed a trial court decision imposing class arbitration even though the arbitration provision was silent as to that issue.

The Trial Court Decision

The plaintiff, Kim Malone, was a Branch Manager for Kinecta Federal Credit Union. Malone signed an employment agreement containing an arbitration provision. The arbitration provision expressly provided that binding arbitration would apply to all disputes arising out of Malone's employment with Kinecta. Malone later filed a putative class action on behalf of Kinecta Branch Managers claiming that the company failed to provide them with meal and rest breaks, failed to pay them overtime wages, failed to provide them itemized wage statements, failed to pay them timely termination wages, and violated the unfair competition law.

Kinecta then moved to compel arbitration of Malone's individual claims and dismiss Malone's class claims. The trial court denied Kinecta's motion to dismiss Malone's class claims, but ordered Kinecta and Malone to arbitrate all asserted claims in accordance with the arbitration agreement. In granting the motion to compel arbitration, while denying the motion to dismiss class allegations, the trial court effectively required Kinecta to arbitrate the class claims.

The Court's Holding

The California Court of Appeal reversed, ruling that the trial court had erred in effectively requiring Kinecta to arbitrate class claims when the arbitration agreement contained no express agreement for class-wide arbitration.

The Court of Appeal relied on the U.S. Supreme Court's decision in Stolt-Nielson v. Animalfeeds International Corp., which interpreted the Federal Arbitration Act to provide that a party may not be compelled to submit class claims to arbitration unless the party expressly agreed to do so. The Stolt-Nielson Court stated, "[T]he differences between bilateral and class-action arbitration are too great for arbitrators to presume … that the parties' mere silence on the issue of class-arbitration constitutes consent to resolve their dispute in class proceedings." The Court of Appeal, finding a similar silence on class claims in the arbitration agreement between Malone and Kinecta, held that Kinecta could not be compelled to arbitrate those claims.

The Court of Appeal also considered Malone's argument that, under the California Supreme Court's decision in Gentry v. Superior Court, a party may seek class arbitration whenever class relief is a more effective way of vindicating employees' rights than individual arbitration. The Court of Appeal questioned whether Gentry remains good law after the U.S. Supreme Court's decision in AT&T Mobility LLC v. Concepcion, but declined to decide that issue because Malone failed to make an evidentiary showing that the arbitration should proceed on a class basis, based on the test set forth in Gentry.

What Kinecta Means For Employers

Kinecta provides strong support for California employers seeking to enforce arbitration agreements that call for individual arbitrations while remaining silent on class arbitrations, even where a plaintiff has alleged class claims. This case provides comfort that employers will not be forced to arbitrate class claims where they have not explicitly agreed to do so.

By: Rupa Shah

Rupa Shah is an associate in Seyfarth's San Francisco office. If you would like further information, please contact your Seyfarth attorney, or Rupa Shah at rshah@seyfarth.com.

David Bizar Published in insideARM.com
"Massachusetts First State to Require Creditors to Validate Consumer Debts"

Thu, 03 May 2012 00:00:00 -0400

Seyfarth Shaw Boston Litigation partner David Bizar authored an article on insideARM.com on April 23. The article outlines the new consumer debt collection practice regulations published by the Massachusetts Attorney General on March 2, 2012. These regulations purport to govern every business and person nationwide who engages in collecting a consumer debt from a person located within Massachusetts.

Bizar explains that the rules are extraordinary in that, among other things, they impose validation and verification requirements on creditors collecting their own debts, rather than just on third party debt collectors or purchasers of defaulted debt as under the federal Fair Debt Collection Practices Act (FDCPA).

Click here to read the full article: http://www.insidearm.com/opinion/massachusetts-first-state-to-require-creditors-to-validate-consumer-debts/

Pamela Devata Quoted in BNA Human Resources Report
"EEOC Updates Enforcement Guidance on Employers' Use of Criminal Histories"

Thu, 03 May 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment attorney Pamela Devata was extensively quoted in a BNA Human Resources Report article on April 30. The article discussed the Equal Employment Opportunity Commission's (EEOC) approved, updated enforcement guidance on potential discrimination resulting from the use of arrest and conviction records by employers in the hiring and other employment decisions process.

"It's not binding guidance, however, employers would be wise to least be knowledgeable about the guidance and evaluate their policies and processes regarding the use of criminal history," Pam noted. "It's clear the EEOC guidance is going to inform EEOC investigators and may give rise to a larger number of investigations based on the use of criminal history."

The article notes the concern over individualized assessment. Pam said that the EEOC's view that a criminal background screen that does not include individualized assessment is more likely to violate Title VII could cause problems for employers, as conducting these assessments are "tremendously burdensome and logistically difficult," as they would entail "talking to the applicant and giving the applicant or employee the opportunity to provide additional evidence and/or do their own investigation."

With the new guidance, employers now must further limit the information they seek about an applicant's arrest and conviction records. She said, "Current practice for many employers is to request any and all criminal history they can legally obtain and do an analysis of that information." She added, "What the EEOC guidance seems to say is employers should only request information that is job-related…Practically speaking, that is going to be challenging on a position-by-position basis."

Emma Mata Featured by NBC Latino
"Attorney volunteers to help children avoid deportation"

Thu, 03 May 2012 00:00:00 -0400

On April 30, Seyfarth Shaw litigation attorney Emma Mata was prominently featured in an article on NBC Latino for her Pro Bono efforts and commitment to the Houston, Texas community by providing legal help to unaccompanied, undocumented minors facing deportation.

Emma was recently selected as Pro Bono Attorney of the Month by the KIND (Kids in Need of Defense) organization for her work in helping three young siblings find care and protection in the United States. With over 8,000 unaccompanied, undocumented children coming into the U.S. every year, Emma stated, “there are plenty of children in Texas who can use our help.”

Emma recently helped three children, ages 8, 9 and 11, whose parents had died and were sent by their ill grandmother in El Salvador to live with their aunt in the United States. Though these children were lucky in that they had a caring aunt who took them as her own, they still faced deportation since they came here illegally. The aunt contacted KIND, and Emma, with the help of other KIND volunteer attorneys, was able to prove the children had no one to care for them in their Salvadorian home town, which was also a region notorious for gang violence. With Emma's help and after many months of legal work, the children were granted residency status.

“If they didn’t have an attorney, I don’t think the family could have gone through the process successfully,” said Emma. ”It is very hard to navigate the immigration process, and many children or their caretakers, if they do not understand English well.”

Emma said being able to help a child stay in this country and live a safe, productive life is the best reward of all. “I love being able to help these children,” she commented. “As a mother, I can’t even imagine what they have gone through.”

For the full article, please click here. http://nbclatino.tumblr.com/post/22133109235/attorney-volunteers-to-help-children-avoid-deportation

MultiCultural Law Magazine Nationally Ranks Seyfarth Shaw for Diversity

Wed, 02 May 2012 00:00:00 -0400

Contacts:
Brian Kiefer, Director of Public Relations
(312) 460-6401, bkiefer@seyfarth.com

Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

CHICAGO (May 2, 2012) — Seyfarth Shaw LLP announced today that it has been ranked in the competitive 2012 MultiCultural Law Magazine “Top 100 Law Firms for Diversity,” “Top 100 Law Firms for Women” and “Top 50 Law Firms for Associates” listings, echoing the firm’s commitment to reflecting the greater diversity of the global workforce and to building a culture of inclusion, valuing the perspectives and experiences of our attorneys, staff and clients.

MultiCultural Law’s “Top 100” listings highlight proactive diversity initiatives implemented by law firms nationwide, considering lawyers who serve as mentors and leaders and who support pro-diversity causes at their law firms. The firms were selected based on a survey requesting data of the number of minority attorneys in a law firm compared to the overall number of attorneys in the firm with respect to their titles.

Created in 2004, MultiCultural Law publishes a blend of legal news trends and information focused on workplace diversity and improving the careers of minority and women lawyers. The magazine frequently publishes corporate profiles, acknowledges “movers and shakers” and celebrates proactive successes of law firms that make positive differences in the drive for diversity and inclusion. For more information on MultiCultural Law, visit http://multiculturallaw.com/.

Gerald Maatman Quoted in Advisen News
"Plaintiffs Bar 'Reboots' on EPL Suits"

Wed, 02 May 2012 00:00:00 -0400

Seyfarth Shaw partner Gerald Maatman recently provided a preview of his presentation on the current state of the post-Wal-Mart v. Dukes class action field to Advisen News on April 17.

Jerry notes that two significant cases, United States v. City of New York and McReynolds v. Merril Lynch et al, have both proceeded, signaling a reboot by the plaintiffs' bar with new strategies to replace those dented by Dukes. McReynolds, Jerry noted, "is the first circuit decision since Wal-Mart where a federal circuit despite Wal-Mart has nonetheless certified an employment case--this one a race discrimination case involving pay and promotions."

"Corporate America still needs to be focused on compliance compliance compliance," he said. "The best way to win a class action is to never be sued in a class action."

Richard McArdle Quoted in Law360
"Judge Denies Class Status To 9,000 ARIC Agents In Wage Suit"

Wed, 02 May 2012 00:00:00 -0400

Seyfarth Shaw Chicago partner Richard McArdle was quoted by Law360 on April 26 in a story about his recent victory on behalf of American Republic Insurance Co.

In late April, an Iowa federal judge denied certification in a putative class action lawsuit that might have involved more than 9,000 former insurance agents. The judge accepted the argument put forward by McArdle and fellow Seyfarth partners Bill Dugan and Pam Devata that the plaintiff's class definition was too broadly drawn.

"This decision is significant for employers because it demonstrates the need for plaintiffs to submit a narrowly-tailored class definition," Rich told Law360.

Valerie Hoffman Quoted in Law360
"Obama Won't Order Ban On Anti-Gay Bias By Contractors"

Wed, 02 May 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Valerie Hoffman was quoted in a Law360 article on April 13. The article discussed an April 3 letter to President Obama to adopt an executive order prohibiting federal contractors from discrimination based on sexual orientation or gender identity.

Val said that Obama has already used his executive authority to significantly expand contractors' obligations to take affirmative action for individuals with disabilities and veterans. However, "Those proposed regulations have many federal contractors very upset," she said. "Even though most contractors want to hire vets and persons with disabilities, the burden imposed by the proposed regulations is immense."

The proposed executive order would add to President Lyndon Johnson's Executive Order 11246 mandates, which prohibit federal contractors from discriminating in employment decisions based on race, color, religion, sex or national origin, as well as Obama's Executive Order 13583, which requires development of a governmentwide strategy to support diversity in the federal workforce.

Loren Gesinsky Quoted in the New York Law Journal
"Develop the 'Write' Stuff"

Wed, 02 May 2012 00:00:00 -0400

Seyfarth Shaw New York partner Loren Gesinsky was quoted in an article published in the New York Law Journal on April 23. The article discussed best practices for young lawyers, focusing on the fundamentals and improving one's writing skills.

When it comes to legal writing, the author notes that it is "a distinct skill that must be taught, practiced and reinforced." Developing these skills has a direct impact on a lawyer's professional growth and development.

According to Loren, there are two macro trends that have elevated the importance of solid legal writing: writing is shorter and more purposeful than it used to be, and there is substantially more writing, in different formats, that require to one to be adaptable and able to communicate comprehensive legal concepts in simple, concise terms.

He points out that the less revising and editing an associate's assigning attorney has to do on a particular document, the more efficient the delivery of legal services and value is brought to the client.

Does My Plan Provide Minimum Value?

Wed, 02 May 2012 00:00:00 -0400

This is the thirty-eighth issue in our health care reform series of alerts for employers on selected topics in health care reform. (Our general summary of health care reform and other issues in this series can be accessed by clicking here.) This series of Health Care Reform Management Alerts is designed to provide a more in-depth analysis of certain aspects of health care reform and how it will impact your employer-sponsored plans.

[√] Applies to grandfathered plans

[√] Applies to new health plans and plans that lose grandfathered status

Recent IRS guidance proposes three ways for employers to determine whether their plans provide “minimum value,” as required under the Affordable Care Act. In essence, employers will only be considered to have provided minimum value health care coverage if they offer plans that cover 60% of the actuarial value of four “core” benefits: physician care, hospital and emergency room care, pharmacy benefits and lab/imaging services.

Background

The Affordable Care Act requires employers with more than 50 full-time equivalent employees to either provide employees with “minimum essential coverage” or pay a penalty. Moreover, the coverage must (a) be affordable (measured by employee premium costs), and (b) provide minimum value (measured by cost sharing and benefits offered). The Affordable Care Act defined minimum value as a plan that covers at least 60% of the actuarial value of health costs.

Three Options for Measuring Minimum Value

IRS Notice 2012-31 proposed three alternative ways for employers to determine whether their group health plan provides minimum value:

Calculator. Employers can use a calculator to determine whether their plan provides minimum value. The calculator will be made available by the Department of Health and Human Services and the Department of the Treasury. The calculator will allow employers to input information regarding the benefits offered under the plan and the corresponding cost-sharing levels. The calculator will then use claims data from self-funded and large group fully-insured plans to determine whether the plan does, in fact, provide minimum value. This option will only be available for plans that do not include what the IRS terms “non-standard features” (for example, visit limits that would impact the actuarial value of the benefits offered).
Actuarial Certification. Employers sponsoring plans with non-standard features would be permitted to use a combination of the calculator and an actuarial certification to demonstrate that the plan provides minimum value. The employer would start by using the calculator, then an actuary would assess the impact of the non-standard features and adjust the plan’s actuarial value accordingly.
Safe Harbor Checklist. Employers can avoid the calculator and/or actuarial certification list through the use of a safe harbor checklist. The checklist would list the four core benefits and the minimum permissible cost-sharing levels required to reach a 60% actuarial value. If the employer offers each of the benefits at a cost-sharing level not less than what is provided on the checklist, the employer’s plan will be deemed to satisfy the minimum value requirement. This option would not be available for plans with non-standard features, or plans that do not cover all of the core benefits.

Strategies for Achieving Minimum Value

An employer who fears that its plan may not provide minimum value can take any of a number of steps to increase the plan’s actuarial value. At the outset, it is important to note that where an employer offers multiple plan options, only one of the available options has to provide minimum value to avoid a penalty. The easiest way to improve the plan’s value is to reduce participant cost-sharing (e.g., co-insurance levels). (Note that while participant premium costs do not appear to factor into the minimum value equation, employers can also be penalized if the employee premium cost for employee-only coverage exceeds 9.5% of any employee’s W-2 wages.)

An employer can also add benefits to the plan’s offerings. While employers are not technically required to offer all core benefits, the guidance indicates it would be difficult to provide minimum value without doing so. Employers may also consider adding non-core benefits (e.g., acupuncture, home health services, durable medical equipment), but the guidance indicates that these benefits do not add much value because they are utilized much less frequently by the average participant.

Finally, employers can take other steps to reduce participant out-of-pocket costs. For instance, the guidance confirms that employer contributions to a health reimbursement account or health savings account will increase a plan’s actuarial value.

Request for Comments on Minimum Value and 2014 Reporting Requirements

The IRS requested comments on its proposed method for calculating actuarial value. Specifically, the IRS requested comment on what other elements should be considered in the actuarial value determination, such as wellness programs/incentives. Comments must be submitted by June 11, 2012.

The IRS simultaneously issued guidance on new Internal Revenue Code Sections 6055 and 6056. These sections require employers to report to the government and employees information that will be used to determine (1) whether the employees obtained health coverage through their employer (which would satisfy their obligation under the individual mandate), and (2) whether the employer provided minimum essential coverage (which is required to avoid the play or pay penalty). Notably, the request for comments asked how the agency can avoid duplicate reports for fully-insured plans, and whether a multiemployer plan or contributing employers should be required to issue the reports.

Seyfarth Shaw Names New Chicago Labor & Employment Department Practice Chair

Tue, 01 May 2012 00:00:00 -0400

Contacts:
Brian Kiefer, Public Relations Director
(312) 460-4604, bkiefer@seyfarth.com

Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

CHICAGO (May 1, 2012) — Seyfarth Shaw announced today that partner William P. Schurgin has been appointed Chair of the Chicago Labor & Employment Department. In his new role, Schurgin is responsible for driving business development and client service efforts, and leading key firm-wide initiatives, such as the firm’s successful Fellows Program, while maintaining his active Labor & Employment practice.

As Chair, Schurgin leads a team of more than 100 attorneys, which represents one of the largest groups in the firm. Responsible for driving the firm’s national labor and employment initiatives at the office level, his accountabilities include leading business development activities in Chicago, ensuring delivery of high quality service to the firm’s key clients and overseeing talent management, hiring, professional development and performance evaluation activities for attorneys under his leadership. Schurgin also assists in strategic planning for Seyfarth’s national Labor and Employment platform.

Schurgin, a certified Lean Six Sigma green belt and is a member of the Department’s Steering Committee and Leadership Team. He was instrumental in implementing the firm’s Fellows Program, launched in 2011, which provides second year law school students with a demonstrated interest in labor and employment law the opportunity to develop robust, hands-on skills in employment law. The program combines an extensive, specialized training curriculum on substantive labor and employment law, ethics, client service, marketing, legal writing, communications and finance.

“I’m honored by this new role and look forward to rolling out initiatives like our successful Fellows Program that will help further cultivate our collaborative culture, which is an important element of providing the best service to our clients,” Schurgin said. “We have an incredibly strong network of attorneys in our Chicago office, and I look forward to the further development of our team as we continue to focus on new and innovative programs to support the growth of our lawyers at every level.”

One of Schurgin’s new 2012 initiatives is to expand upon the associate coaching program he started after receiving his Certificate in Coaching from the American Society of Training and Development in 2009. “I am very excited to be able to pilot an associate career coaching program that will work with attorneys to determine coaching goals, desired results and objectives to help facilitate their grow and potential. By the end of this year we hope to have a majority of our Chicago labor and employment associates actively engaged in career coaching provided by the firm.”

Schurgin, a leading labor and employment lawyer, represents clients in a broad range of labor and employment matters including labor relations, wage and hour actions, collective bargaining, corporate campaigns, union organizing and employment discrimination actions with a strong emphasis on strategic counseling. Schurgin is the current President of the Illinois Health Lawyers Association, Member of the College of Employment Lawyers, Past Chair of the Labor and Employment Committee of the American Health Lawyers Association and a member of the U.S. Chamber of Commerce Labor Law Committee. Schurgin is also a prolific writer and speaker in the field; he teaches a course of labor and employment law at Loyola University College of Law and is co-editor of the book, Guide to Employment Law Compliance (Thomson Reuters).

Ilan Barzilay Quoted in Boston Business Journal
"Akamai case tests IP law boundaries: Company says rival violated its patents on speeding Web video"

Tue, 01 May 2012 00:00:00 -0400

Seyfarth Shaw Boston office partner Ilan Barzilay was quoted in the April 27 issue of the Boston Business Journal. The article discusses the upcoming case between Massachusetts software firm Akamai Technologies, Inc. and its Arizona competitor Limelight Networks, Inc. before the U.S. Court of Appeals for the Federal Circuit. The case is expected to have far-reaching implications for IP claims in the software industry and others that depend on software methods, as well as consumer pricing.

"It's gonna be a big deal...[t]his will let us know whether the trend towards making it difficult to sue multiple parties will continue..." Ilan noted, adding that a decision against Akamai has the potential to affect anyone in the industry that depends on software methods in their IP portfolios, which would in turn have an affect on their value from a mergers and acquisitions perspective as well.

Richard Alfred Quoted in Dayton Daily News Article
"More workers suing employers over wage issues"

Tue, 01 May 2012 00:00:00 -0400

Seyfarth Shaw Boston office Labor & Employment partner Richard Alfred was quoted in an April 21 Dayton Daily News article, which discusses the significant increase in wage and hour complaints filed in U.S. federal courts, which surged to a record high of 7,006 in fiscal year 2011 from 6,081 the previous year.

Richard says that wage and hour lawsuits have increased dramatically since the economic downturn, partly because plaintiffs have received huge settlements from companies “caught in the cross-hairs.”

“These massive lawsuits create enormous risks for virtually all employers in the country as they struggle to apply the antiquated federal Fair Labor Standards Act (enacted in 1938) and similar state laws,” he remarks.

Click here to read the full article: http://www.daytondailynews.com/news/dayton-news/more-workers-suing-employers-over-wage-issues-1363686.html

Pamela Devata Quoted by the Associated Press and Picked Up by the Huffington Post, FOX News, ABC, Yahoo!, The New York Times, The Miami Herald, The Boston Globe, The Denver Post, The Fresno Bee and More
"New gov't guidance on employee background checks"

Tue, 01 May 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment Attorney Pamela Devata was quoted in an article by the Associated Press on April 25. The article discussed new Equal Employment Opportunity Commission (EEOC) updated guidance issued by the agency with respect to employer use of criminal background checks of job applicants.

The new standards urge employers to allow applicants an opportunity to explain past criminal behavior before they are rejected, and recommends that employers not ask about past convictions on job applications. Generally, an arrest without a conviction is not an "acceptable" reason not to refuse to hire someone.

"It's going to be much more burdensome," said Pam. "Logistically, it's going to be very difficult for employers who have a large amount of attrition to have an individual discussion with each and every applicant."

She added, "I think some businesses may stop doing it because it's too hard to comply with all the recommendations in the guidance."

Click here to read the full article: http://www.google.com/hostednews/ap/article/ALeqM5jXzVgh07X66QUtsXVEf35O1EiThA?docId=13d4c4a59b2c432382ac2f216420031b

Gerald Maatman and Christopher DeGroff Quoted in Inside Counsel
"EEOC's discrimination crackdown poses challenges for employers"

Tue, 01 May 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partners Gerald Maatman and Christopher DeGroff were extensively quoted in Inside Counsel on April 30. The article discussed new challenges faced by employers due to the Equal Employment Opportunity Commission's (EEOC) discrimination enforcement program, which has been becoming increasingly aggressive in its investigations and litigation strategies.

“The bottom line takeaway for employers is that being a defendant in a lawsuit brought by the EEOC today is a very different proposition than it was five years ago—you have a tiger by the tail,” said Jerry. “The EEOC is a very aggressive litigant, sometimes with a take-no-prisoners attitude.”

The article also points out that some federal district and circuit courts are taking steps to "rein in" the EEOC, with recent decisions ruling in favor of employers.

“The EEOC is using the tools of law enforcement in a very aggressive way,” Jerry remarked. “They are stretching the envelope, making them exposure laden, and some federal judges aren’t liking what is going on.”

Chris said that the EEOC's current litigation tactics have started using the plaintiffs bar tactic of seeking sanctions for e-discovery violations, thus underscoring the need for thorough e-discovery. He added that defense attorneys need quick access to the data in order to refute claims from the start.

He recommended to employers that having an early warning system for possible discrimination claims can include conducting ongoing audits of payroll procedures and hiring, pay and promotion practices.

Click here to read the full article: http://www.insidecounsel.com/2012/04/30/eeocs-discrimination-crackdown-poses-challenges-fo

OFCCP News Roundup

Mon, 30 Apr 2012 00:00:00 -0400

The Latest Clash Regarding Jurisdiction Over Healthcare Providers

The OFCCP made its next move in the continuing battle over whether it has jurisdiction over health care providers. On Wednesday, April 25, 2012, the OFCCP rescinded Directive 293, its most current guidance for assessing whether health care providers or insurers (collectively "HCPs") are federal contractors or subcontractors for purposes of OFCCP jurisdiction. Click here for more information about Directive 293. The OFCCP's move was driven by the December 31, 2011 passage of the National Defense Authorization Act of 2012 (NDAA), which provides that a TRICARE managed care support contract that includes the requirement to establish, manage, or maintain a network of providers is not a covered contract for OFCCP's purposes. Click here for more information about the NDAA.

On April 25th, the OFCCP also hosted a Webinar to discuss its jurisdiction over HCPs. Here is what you need to know:

Despite the passage of the NDAA, the OFCCP will not concede it lacks jurisdiction over TRICARE providers and is pursuing its position in the pending OFCCP v. Florida Hospital of Orlando case. (For more information about the Florida Hospital litigation, see here.) Instead, the OFCCP has merely put "on hold" all compliance evaluations for HCPs where the only basis for OFCCP's jurisdiction is a TRICARE managed care support contract.
The OFCCP made clear it will do a deep dive into the federal contracts of HCPs to determine if there is a basis independent of TRICARE for OFCCP jurisdiction (such as a contract with the Department of Health and Human Services, the Veterans Administration, or the Department of Justice). The OFCCP vowed to move forward with compliance evaluations of HCPs now if it can find a non-TRICARE hook for continuing the review.
If your organization is a HCP with a compliance evaluation that was put on hold with the passage of the NDAA, watch your mailboxes: the OFCCP will be contacting such contractors by letter beginning April 30, 2012 letting them know whether the OFCCP believes the only basis of jurisdiction is TRICARE and that the investigation is placed "on hold" or whether OFCCP believes it has an independent basis for jurisdiction and will continue its review.

The OFCCP also indicated that contractors who are subsequently selected for compliance evaluation while Florida Hospital is pending going forward will be subject to the same "on hold" or "move forward" policy depending on whether TRICARE is the only basis on which OFCCP may assert jurisdiction.

House Subcommittee Holds Hearing on Impact of OFCCP Actions

The OFCCP's aggressive approach has the attention of Congress! On April 18, 2012, the House Subcommittee on Health, Employment, Labor, and Pensions held the first oversight hearing on the activities of the Office of Federal Contract Compliance Programs (OFCCP) in more than 15 years. While the subcommittee hearing featured panelists both supportive and critical of OFCCP actions, significantly, OFCCP Director Patricia A. Shiu was not invited to participate.

Witnesses critical of OFCCP's increased enforcement activity voiced concerns about the tremendous burdens imposed by current, and especially pending, regulations. One witness suggested that OFCCP had greatly underestimated the burden and cost to contractors stemming from proposed disability regulations, pointing to a recent survey which showed that it would cost contractors at least $2 billion in first year of implementation and an additional $1.5 billion annually in subsequent years, rather than the $80.1 million estimated by OFCCP.

Another witness who is a director of human resources information systems at a research hospital, spoke of the significant resources, time, manpower, and infrastructure that goes into her organization's efforts to develop and implement its Affirmative Action Program under current regulations, and noted that such burdens make their focus "just trying to survive our next audit," not getting the best workers. Proponents of OFCCP's current and proposed regulations focused on the importance of OFCCP's mission and role in combating employment discrimination.

There was a mixed reaction of the House subcommittee members, along party lines. However, the hearing ended without indication of further action by the Subcommittee. The Subcommittee's webcast and the written testimony submitted to the Subcommittee is available here. Stay tuned for possible additional hearings in the near future.

OFCCP's 2013 Budget Justification Reveals Focus on Enforcement Activity and New Selection Process for Multi-Establishment Evaluations

The U.S. Department of Labor released its fiscal year (FY) 2013 Budget Request earlier this year. As usual, the Office of Federal Contract Compliance Programs' (OFCCP's) justification for its requested budget provides a blueprint for what lies ahead with the OFCCP. OFCCP's FY 2013 congressional budget justification is available here. The plans announced in this year's budget justification that are likely to have a significant impact on the federal contractor community.

More and Higher Quality Audits: OFCCP will set out to complete 4,530 thorough compliance evaluations in FY 2013, a 12% increase over FY 2012 levels. It also appears that OFCCP wants to pay attention to the quality of compliance investigations, not just the quantity. The OFCCP plans to conduct regular training and implement monitored operational audits in field offices. The OFCCP's efforts towards training, quality and accuracy may improve the consistency of the OFCCP compliance officers during audits, but it also may make audits more difficult if auditors are imposing additional requirements. The proposed training materials have not been released to the public so the contractor community is in the dark regarding what standards are to be applied to them.
Be Alert to Enterprise-Wide Audits; New "Strategic" Selection Process: Another big, though not surprising, development is OFCCP's plan to implement a "strategic" selection process to prioritize enforcement efforts and pinpoint multi-establishment and industry-wide deficiencies and violations. Contractors have been hearing for some time now about OFCCP's plan to crack down on those it calls "egregious violators" and enterprise-wide patterns of discrimination. It appears that OFCCP has come up with a formula that purports to find these contractors. OFCCP does not provide any specifics about its new strategic selection process, and its lack of transparency is troubling. OFCCP also remarked on its "renewed collaborative enforcement approach with the Office of the Solicitor (SOL) and other Departmental agencies," to increase its attention on those with multiple establishments and within industries of specific interest to the OFCCP. Contractors with multiple locations should anticipate greater attention and should be more vigorous in conducting self-audits and resolving apparent issues.
New Compliance Manual: OFCCP is also in the process of updating its compliance evaluation manual with revised enforcement procedures. The FY 2012 procedures are expected to support a more robust and thorough compliance evaluation process, as well as create a level of consistency across regions. Our sources tell us that the new manual is in the final stages of review.
Continued Emphasis on Eliminating the Pay Gap: It should come as no surprise to contractors that the OFCCP anticipates continuing its effort to combat pay discrimination through increasing the number and quality of its investigations of contractor pay practices. The OFCCP is more focused on pay equity than it has ever been and we expect that trend to continue.
Sharper Focus on the Construction Industry: Construction contractors should be on their toes, as the budget justification provides some specifics about the OFCCP's plans to get actively involved with federal and federally-assisted construction contractors and subcontractors at the earliest stages of construction and to encourage construction contractors' recruitment and retention efforts of women, and racial, and ethnic minorities. OFCCP states that it will be directing its enforcement efforts specifically toward so-called Mega Projects, which OFCCP defines as "federal or federally-assisted construction projects lasting longer than one year, and likely to have a major employment or economic impact on a community." According to OFCCP, a focus on mega projects will enable it to utilize its enforcement resources more efficiently because such projects "tend to involve larger contractor and subcontractor workforces." Thus, it is more important than ever for constructor contractors to be audit-ready and keep up to date on the latest developments at the OFCCP concerning the construction industry.

OFCCP Director Shiu Delivers Keynote Address at SWARM Regional ILG Conference

Director Patricia Shiu gave the keynote address at the excellent 2012 Southwest and Rocky Mountain Region ("SWARM") Industry Liaison Group ("ILG") Conference held in San Antonio, Texas from April 10 through April 13. Here are some highlights of her address and her responses to questions that she answered from the floor:

In a familiar refrain of this increasingly aggressive OFCCP, Director Shiu emphasized that good faith efforts are not enough, urging federal contractors to be proactive and "head off problems at the pass," rather than waiting until the OFCCP "comes knocking at your door" for a compliance review.
Director Shiu was tightlipped about when proposed new regulations implementing Section 503 of the Rehabilitation Act and VEVRAA/Section 4212 would be released in final form, though she indicated it would be before the end of the year. Our sources tell us that the VEVRAA/Section 4212 regulations are likely to be out first and likely prior to the election in November 2012. Director Shiu indicated there would be some amount of time built-in for contractors to come comply with the new regulations, particularly with regard to data collection requirements, though she would not provide any specifics.
Director Shiu rejected the suggestion that OFCCP consider extending the time for response to the new Scheduling Letter and Itemized Listing, when it is released in its final form. Director Shiu noted that that the continued issuance of Corporate Scheduling Announcement Letters (CSAL) was intended to provide advance notice of possible audit and that contractors should be prepared regardless of whether they receive a Scheduling Letter.
Director Shiu also reiterated OFCCP's position that current and proposed goals, particularly the proposed 7% goal for individuals with disabilities in the proposed changes to Section 503 of the Rehabilitation Act, are not quotas but rather "aspirational goals." Interestingly, when Seyfarth Shaw's own Valerie Hoffman asked if federal contractors who meet these "aspirational goals" would be relieved of some or all of the significant administrative and procedural burdens required by the proposed regulations, Director Shiu's only comment was that it was a "good question."

What This Means For Contractors

Contractors should be proactive in their compliance efforts and address compliance issues before they are selected for a compliance evaluation. As always, we will continue to monitor the status of the proposed changes to various regulations surrounding OFCCP compliance and bring you news on these important developments as they occur.

By: Valerie Hoffman, Regina Grattan, Christine Hendrickson and Annette Tyman

Valerie Hoffman is a partner in Seyfarth's Los Angeles and Chicago offices. Regina Grattan is counsel in the firm's Sacramento office. Christine Hendrickson is senior counsel and Annette Tyman is an associate in the firm's Chicago office. If you would like further information, please contact your Seyfarth attorney, any attorney on our OFCCP & Affirmative Action Compliance Team, Valerie Hoffman at vhoffman@seyfarth.com, Regina Grattan at rgrattan@seyfarth.com, Christine Hendrickson at chendrickson@seyfarth.com or Annette Tyman at atyman@seyfarth.com.

Attendance & Disability: Ninth Circuit Holds Job Presence is Essential For Some Jobs

Fri, 27 Apr 2012 00:00:00 -0400

Employers must balance their need to give reasonable accommodations with their need to require regular, dependable attendance. A recent Ninth Circuit case decided under the American with Disabilities Act ("ADA") lends some encouraging support for that effort.

Case Background

In Samper v. Providence St. Vincent, Monika Samper, a neo-natal intensive care unit ("NICU") nurse with fibromyalgia (a condition that limits sleep and causes chronic pain), sought an accommodation that would have allowed her an unlimited number of unplanned absences. Samper basically requested freedom from Providence's attendance policy, which allowed five unplanned absences per rolling 12-month period. Unplanned absences for family medical leave, jury duty, bereavement leave and other approved bases were not counted, and each unplanned absence, however long, counted as only one occurrence. Even under this generous policy, Samper could not meet attendance requirements and was eventually fired. The district court granted summary judgment in favor of Providence on Samper's claim under the ADA. The Ninth Circuit affirmed in a well-reasoned opinion, concluding that regular attendance is an essential function of neo-natal nursing positions at the medical center.

The Court's Holding

To prove a failure to accommodate under the ADA, Samper had to show that (1) she was disabled within the meaning of the ADA, (2) she was a qualified individual able to perform the essential functions of the job with reasonable accommodation, and (3) she suffered an adverse employment action because of her disability. Providence had the burden to show essential functions, because "much of the information which determines …essential functions lies uniquely with the employer." Providence met its burden by producing a detailed job description identifying attendance and punctuality as essential job functions and with a declaration from Samper's former supervisor that NICU nurses are specialized, that is hard to find replacements, and that understaffing compromises patient care. On this showing, the Ninth Circuit concluded that Samper faced "an insurmountable hurdle" in arguing that regular attendance is not an essential function of the NICU nurse position.

Samper, in the spirit of punishing a good deed, argued that Providence's generous policy of allowing unplanned absences, plus its tolerance of Samper's own past excessive absences, were proof that her regular attendance was not essential. The Ninth Circuit rejected this logic, reasoning that Providence's past patience and accommodation did not mean it had to tolerate unlimited absences going forward. In addition, Providence's "Herculean" efforts with Samper in trying alternative accommodations (such as using a part-time schedule with no days back-to-back and a history of extended leaves not counted towards the attendance policy) showed good faith participation in an interactive process with her. The Ninth Circuit observed: "Ultimately, despite Providence's patience and accommodations, 'there was literally nothing in the record to suggest that the future would look different from the past,' leaving Providence with little choice but to terminate Samper."

Samper relied on a controversial Ninth Circuit precedent, Humphrey v. Memorial Hosps. Assoc. which held that "regular and predictable attendance is not per se an essential function of all jobs." The Samper court distinguished Humphrey, which involved a mentally disabled medical transcriptionist's request to work from home: transcription can be done from home; patient care cannot. The Ninth Circuit stated: "An accommodation that would allow Samper to 'simply . . . miss work whenever she felt she needed to and apparently for so long as she felt she needed to [a]s a matter of law . . . [is] not reasonable' on its face."

What Samper Means for Employers

While the case is a positive development for employers, some notes of caution remain. First, the case was decided under the ADA, not under California's arguably stricter counterpart, the Fair Employment & Housing Act. Second, the facts were extremely favorable for the employer, as it involved a specialized nursing position where physical presence was necessary for patient care. Third, Providence was especially well prepared, establishing regular attendance as an essential job function in its written job descriptions and engaging in a robust interactive process before it administered progressive discipline to Samper. Where these critical elements are not present, the outcome may not be as favorable.

By: Dana Howells

Dana Howells is senior counsel in Seyfarth's Los Angeles office. If you would like further information, please contact your Seyfarth attorney, or Dana Howells at dhowells@seyfarth.com.

Strategy and Insights: How Should Employers Use Criminal History in Employment Now That The EEOC Has Issued Enforcement Guidance?

Fri, 27 Apr 2012 00:00:00 -0400

Introduction

Criminal history information can be a crucial tool in the employment decision process. During the past few years, federal agencies and state governments have been limiting, employers' use of criminal history information in the employment process through regulation, litigation, and legislation. Two days ago the Equal Employment Opportunity Commission ("EEOC") issued new guidance in an effort to limit employers' options with respect to their use of this tool. The EEOC's new Enforcement Guidance on Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964 (the "Guidance") passed today by a 4-1 vote of the EEOC's Commissioners. See http://www.eeoc.gov/eeoc/newsroom/release/4-25-12.cfm.

This new Guidance's roots can be traced back to the Unites States Supreme Court's 1971 opinion in Griggs v. Duke Power Company and the more recent EEOC E-RACE (Eradicating Racism and Colorism in Employment) Initiative, which seeks, among other things, to address "21st century manifestations of discrimination" under Title VII of the Civil Rights Act of 1964. According to the EEOC, studies reveal that people of certain races, colors, and national origins are arrested more frequently than others outside of those groups. In 2011 alone, 50,060 charges of discrimination alleging race/color/national origin-based discrimination were filed with the EEOC, which accounted for 50% of the charges filed that year. See http://www.eeoc.gov/eeoc/statistics/enforcement/charges.cfm. The new Guidance also supports its reasoning by citing studies finding that criminal history information is often incomplete and inaccurate.

The EEOC's Unilateral Move

The EEOC did not release a draft of this new Guidance for public notice and comment before finalizing it. Based on this unilateral move, many industry groups have protested against the issuance of new Guidance. It remains to be seen how far such challenges will go.

Some employer guidance was gleaned during a recent March 2012 conference where EEOC Commissioner Victoria Lipnic cautioned employers to avoid blanket policies on their use criminal history information (e.g., policies that prohibit individuals who have committed certain crimes from even being considered for employment). According to Commissioner Lipnic, employers with blanket policies will be targeted by the EEOC for investigation and even litigation. This statement was confirmed in the EEOC Guidance. Although not every EEOC investigation results in a lawsuit, an investigation alone can exhaust an employer's time, energy, and finances. This is especially true given that Commissioner Ishimaru stated in his remarks at the public meeting that the EEOC was currently investigating hundreds of cases where employers illegally used criminal history information in employment decisions.

The EEOC's History Of Enforcement

Because the EEOC did not allow for public comment, it is unclear whether or not the EEOC's new Guidance will be upheld by the courts. Unlike Congress, the EEOC does not have the authority to create statutes or issue non-procedural regulations under Title VII. Regardless, however, the EEOC can make it difficult and costly for employers that choose not to follow this new Guidance through its investigations, enforcement actions and subsequent litigation. Either employers will face substantial costs in following the new Guidance or fighting it in court. As part of its E-RACE Initiative, the EEOC has already filed several lawsuits against companies it believes use criminal history information in a manner that creates a disparate impact on race, color, or national origin. For example:

In January 2012, the EEOC entered into a conciliation agreement with Pepsi Beverages for $3.13 million based on allegations that Pepsi Beverages racially discriminated against African American applicants based on their criminal history information. According to its press release, the EEOC stated that its investigation revealed that Pepsi had a policy of not hiring applicants with pending criminal charges that had not resulted in convictions; and failed to hire applicants with arrests or minor conviction records.
In September 2009, the EEOC filed a complaint against Freeman Companies (Case No. 09-CV-2573) in the District of Maryland alleging that the company's use of credit histories and criminal backgrounds as selection criteria has a "significant disparate impact on [African American] applicants and that [the company's] use of criminal history information has an adverse impact on Hispanic and male applicants." This is a nationwide class action lawsuit under Title VII that is still pending.
In September 2008, the EEOC filed a complaint against Peoplemark, Inc. (Case No. 08-CV-0907) in the Western District of Michigan alleging that the company maintained a blanket no-hire policy that denied hiring or employment to any person with a criminal record and that such policy had a disparate impact on African American applicants. This was a nationwide class action lawsuit under Title VII. After many months of expensive discovery, it became clear that the EEOC did not have a statistical expert to rebut Peoplemark, Inc.'s expert, so the case was voluntarily dismissed in March 2010.

State And Local Laws Addressing Criminal History Information

Many states have their own laws concerning "job relatedness" requirements for an employer's use of criminal history information, including Hawaii, Kansas, Missouri, New York, Pennsylvania, and Wisconsin. Other states do not even permit employers to inquire about criminal history information on the initial written application form, subject to a couple of narrow exceptions. Although most of these states (California, Connecticut, Hawaii, Massachusetts, Minnesota, and New Mexico) apply this prohibition to public employers, both the Hawaii and Massachusetts laws also cover private employers. Some 27 cities and counties in California, Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, and Washington also have this prohibition. Again, while these local laws apply mostly to public employers, private employers in cities in Connecticut, Massachusetts and Philadelphia are also impacted. Some of these state and local laws, such as Hawaii's law, also prohibit employers from inquiring about an applicant's criminal history information until after a conditional offer of employment is made. Additional states, cities, and counties have similar legislation currently pending.

The New EEOC Guidance

The EEOC's new Guidance consolidates and supersedes the EEOC's 1987 and 1990 policy statements concerning employers' use of criminal history information. The following are the key highlights of the new Guidance.

What An Employer Can Ask

The EEOC recommends as a best practice that employers not ask about convictions on applications. According to the EEOC, inquiries about convictions, if made, should be limited only to those that are job-related. Many employers currently ask about convictions in a blanket fashion or with minimal exclusions required by state or local laws. Per the new Guidance, employers should review their job applications and pre-employment inquiries. Even when considering convictions to determine job-relatedness, however, it is very difficult for an employer to establish whether a given conviction is job-related, and employers may need to rely on outside experts to make such an analysis.

Arrest Records

The new Guidance makes clear that use of arrest records "is not job related and consistent with business necessity." The new Guidance goes on, however, to state that an employer may make a decision on the underlying conduct if the conduct makes the individual unfit for a position. The new Guidance does not specifically discuss how, if at all, pending records are different from arrests, except to state that a person can be placed on an unpaid administrative leave while an employer investigates the underlying facts.

Factors To Consider When Evaluating Criminal History Information

It is no surprise that the EEOC reinforced its earlier guidance that bright line policies relating to the use of criminal history information will be unlawful. The good news is that the new Guidance does not contain any rule specifically limiting how far back in time an employer may consider recent criminal history information, or only a specified list of offenses—which many thought would be contained in the new Guidance. Rather, the new Guidance gives more insight into the factors that were originally set forth in the EEOC Policy Statement on the Issue of Conviction Records Under Title VII, http://www.eeoc.gov/policy/docs/convict1.html, as well as adding some additional factors to be considered. Based on the new Guidance, employers should consider the following factors when evaluating criminal history information and making an individualized assessment to determine:

the nature and gravity of the offense or offenses (which the EEOC explains may be evaluating the harm caused, the legal elements of the crime, and the classification, i.e., misdemeanor or felony);
the time that has passed since the conviction and/or completion of the sentence (which the EEOC explains as looking at particular facts and circumstances and evaluating studies of recidivism); and
the nature of the job held or sought (which the EEOC explains requires more than examining just the job title, but also specific duties, essential functions, and environment).

Individualized Assessment

One of the biggest areas of change in the new Guidance is that the EEOC recommends that an "individualized assessment" can help employers avoid Title VII liability. Reading between the lines, although the new Guidance states that "Title VII does not necessarily require individualized assessment in all circumstances," employers may be challenged by the EEOC or private litigants if they do not do so. But, according to Commissioner Lipnic's opening statement at the public meeting yesterday, there may be instances "when particular criminal history will be so manifestly relevant to the position in question that an employer can lawfully screen out an applicant without further inquiry. A day care center need not ask an applicant to "explain" a conviction of violence against a child, nor does a pharmacy have to bend over backward to justify why it excludes convicted drug dealers from working in the pharmacy lab."

The EEOC sets forth a number of individual pieces of evidence that an employer should review when making an individualized determination including:

The facts or circumstances surrounding the offense or conduct;
The number of offenses for which the individual was convicted;
Age at the time of conviction, or release from prison;
Evidence that the individual performed the same type of work, post conviction with the same or a different employer, with no known incidents of criminal conduct;
The length and consistency of employment history before and after the offense or conduct;
Rehabilitation efforts, e.g., education/training;
Employment or character references and any other information regarding fitness for the particular position; and
Whether the individual is bonded under a federal, state, or local bonding program.

This is perhaps the most concerning area of the new Guidance. Clearly, this list is extremely burdensome and will cause employers to spend time and resources in evaluating criminal history information. One saving grace is the new Guidance indicates if the applicant does not respond to the employer's attempt to gather data, the employer can make the determination without the additional information. Employers will need to evaluate if there are any criminal offenses that have a "demonstrably tight nexus to the position in question" such that an individualized assessment may be circumvented. These will likely be in rare instances.

Compliance With Other Laws

The new Guidance acknowledges that compliance with "federal laws and regulations" disqualifying convicted individuals from certain occupations is a defense to charges of discrimination. For example, convictions of theft and fraud that disqualify in the financial services industry. Also recognized as a defense in the new Guidance: denying employment based on failure to obtain a federal security clearance—if the clearance is required for the job. However, the EEOC opines that compliance with state and local laws and regulations will not shield employers from Title VII liability due to Title VII pre-emption of state and local laws. Employers should therefore evaluate whether other laws on which they may be relying as a defense to run specific criminal history or eliminate an applicant/employee are preempted by Title VII.

Next Steps For Employers

Based on the new Guidance, employers should evaluate their pre-employment and hiring practices. Because the EEOC will be enforcing Title VII with this new Guidance in mind, employers are well advised to consider adjusting their use of criminal history information in accordance with it. Whether or not the EEOC prevails in any of its enforcement actions or lawsuits, the employers in these actions will be forced to spend substantial financial resources to defend and resolve them. The new Guidance itself sets forth a few employer "best practices:"

Employers should eliminate policies or practices that exclude people from employment based on any criminal record.
Employers should train managers, hiring officials, and decision-makers about Title VII and its prohibition on employment discrimination.
Employers should develop a narrowly tailored written policy and procedures for screening for criminal history information. The policy should: (i) identify essential job requirements and the actual circumstances under which the jobs are performed; (ii) determine the specific offenses that may demonstrate unfitness for performing such jobs (i.e., identify the criminal offenses based on all available evidence); (iii) determine the duration of exclusions for criminal conduct based on all available evidence (i.e., include an individualized assessment); (iv) record the justification for the policy and procedures; and (v) note and keep a record of consultations and research considered in crafting the policy and procedures.
Employers should train managers, hiring officials, and decision-makers on how to implement the policy and procedures consistent with Title VII.
When asking questions about criminal history information, employers should limit inquiries to records for which exclusion would be job related for the position in question and consistent with business necessity.
Employers should keep information about applicants' and employees' criminal history information confidential and only use it for the purpose for which it was intended.

By: Pamela Devata and Kendra Paul

Pamela Devata is a partner in Seyfarth's Chicago office, and Kendra Paul is an associate in the firm's Houston office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Pamela Devata at pdevata@seyfarth.com or Kendra Paul at kpaul@seyfarth.com.

Seyfarth Shaw Bolsters Benefits Practice in Atlanta

Fri, 27 Apr 2012 00:00:00 -0400

Contacts:
Brian Kiefer, Public Relations Director
(312) 460-4604, bkiefer@seyfarth.com

Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

ATLANTA (April 27, 2012) — Leading law firm Seyfarth Shaw LLP announced today that Nicole D. Bogard has joined as a partner in the firm’s Employee Benefits and Executive Compensation Department in the Atlanta office. Bogard was previously with a boutique employee benefits law firm.

With more than 17 years of experience in the health and welfare benefits arena, Bogard regularly represents clients with matters before the Internal Revenue Service, the Department of Labor and the Department of Health and Human Services, and she has represented employers on numerous health and welfare employee benefit compliance issues including COBRA administration, HRAs and HSAs. She has experience counseling clients on the design, implementation and day-to-day operations of health and welfare plans, flexible benefits plans, wellness and severance programs and Voluntary Employee Benefits Associations. She has also advised clients on compliance issues with regard to the Health Insurance Portability and Accountability Act, Patient Protection and Affordable Care Act, Internal Revenue Code and Employee Retirement Income Security Act.

“I look forward to enhancing my client relationships with the greater range of services in the Seyfarth Atlanta office, in conjunction with the firm’s broad, national platform,” said Bogard. “Seyfarth has one of the nation’s largest and most diverse Employee Benefits and Executive Compensation practices, which is incredibly attractive to my clients affected by the waves of new benefits legislation and regulation affecting them. I’m thrilled to be joining a team with the depth of experience to address more of my current clients’ needs while continuing to build my practice.”

“Nicole is a well-respected attorney within the employee benefits legal industry with a great reputation in the Atlanta community,” said Peter Miller, Seyfarth Shaw Chair of the Employee Benefits & Executive Compensation Department. “A natural leader, Nicole will be a key player in our Atlanta Benefits department as well as throughout our national teams as part of our multi-disciplinary group. We are delighted to have her on board to bolster our presence locally and nationally.”

“It is hard to imagine a better cultural fit than Nicole,” said Steve Kennedy, Seyfarth’s Atlanta Office Managing Partner. “She has an engaging and friendly manner, and she is an accomplished lawyer who operates in a very team-based way with partners and associates alike, which is a perfect match with how we work both with our clients and across offices and practices.”

Bogard received her undergraduate degree from the University of Michigan and her law degree from the Marquette University Law School, cum laude. She is admitted to the Georgia Bar, Florida Bar, Michigan Bar and Wisconsin Bar.

Gerald Maatman Quoted in The Wall Street Journal MarketWatch
"Employers advised on considering arrest records"

Fri, 27 Apr 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Gerald Maatman was quoted in an April 25 article in The Wall Street Journal's MarketWatch. The article discussed recent guidance issued by the U.S. Equal Employment Opportunity Commission (EEOC), which specifies how companies can show that their criminal record-screening policies are legal. The article points out that the EEOC did not ban the consideration of a job applicant's arrest and convictions records.

Jerry notes that many employers are concerned about the EEOC guidance concerning individual assesments. He comments, “For employers that need to hire right away, it may not be very practicable. Anything that can help to eliminate discrimination is a good thing. Anything that helps employers find the best-qualified individual is a good thing. After that, the issue is, is the government creating impediments to hiring the best people or hiring in an efficient and effective way?”

Click here to read the full article: http://www.marketwatch.com/story/employers-advised-on-considering-arrest-records-2012-04-25

Elizabeth Schrero Published in Real Estate Dispute Resolution: Leading Lawyers on Selecting and Implementing the Best Resolution Method
"Developing Effective Strategies for Resolving a Client's Real Estate Dispute"

Thu, 26 Apr 2012 00:00:00 -0400

Seyfarth Shaw New York Litigation partner Elizabeth Schrero, with assistance from Seyfarth associate Jay Cho, wrote a chapter published in the book, Real Estate Dispute Resolution: Leading Lawyers on Selecting and Implementing the Best Resolution Method, which was released in 2012 by Aspatore Books (Thomson Reuters). The book is part of a series that targets C-Level business professionals.

Real Estate Dispute Resolution provides an authoritative, insider's perspective on key tips for handling real estate disputes. Elizabeth and the other authors, partners from law firms across the nation, guide the reader through the process, from collecting important information at the outset of a dispute and deciding on the most practical resolution method, through the dispute process. These top lawyers offer specific advice on when to utilize different types of resolution forums, including arbitration, mediation, and litigation. From failed transactions to commercial lease disputes, to commercial foreclosures, these experts discuss developments in the real estate litigation arena that have stemmed from the economic climate and stress the importance of cost-effective client strategies in the current market place.

Gerald Maatman and Christopher DeGroff Published in Securities Litigation Report
“Class Action Watch: Case Law Developments in EEOC-Initiated Litigation & Trends to Watch for in 2012”

Wed, 25 Apr 2012 00:00:00 -0400

An article by Complex Discrimination Litigation practice group co-chairs Gerald Maatman and Christopher DeGroff was published in the March 2012 issue of Securities Litigation Report. The article outlines the major trends in litigation initiated by the U.S. Equal Employment Opportunity Commission (EEOC) in 2011 and makes predictions for the commission’s tactics in 2012.

The primary patterns Jerry and Chris observe for the EEOC in 2011 include aggressive systemic investigations and subpoena enforcement; federal courts’ decreasing tolerance of EEOC pleadings and tactics; and conflicting results in discovery, summary judgment and remedies decisions. For 2012, the authors predict that the EEOC will conduct even more aggressive systemic investigations; join forces with other parties, such as the Office of Federal Contract Compliance Programs; partner with private plaintiffs’ class action counsel; expand pattern or practice presence in geographic areas that usually don’t see as many of these types of cases; and strive for a larger footprint in high-profile areas.

Jerry and Chris note that the Obama administration cut the EEOC’s budget in 2011, a move which they surmise “will likely result in even more large-scale, high profile cases,” as “chasing small-scale cases just simply will not (at least in the EEOC’s view) convey the government’s message in a cost-effective way. The EEOC understands that headlines touting multi-million settlements and judgments capture employers’ attention and, perhaps just as importantly, turn the head of legislators who hold the budgetary purse-strings. Thus, the EEOC’s need to remain politically relevant makes big case filing not only probable, but also critical for the Commission.”

New Last Minute DOJ Pool Lift Requirements Call For Large-Scale Changes for Multitudes of Businesses

Tue, 24 Apr 2012 00:00:00 -0400

Businesses with public pools or spas, as well as state and local governments that operate pools and spas, need to be aware that new Department of Justice (DOJ) requirements for pool lifts have been issued. Today, the House of Representatives' Judiciary Subcommittee on the Constitution will hold a hearing on the requirements ("Guidance on Access to Pools and Spas Under the ADA"), which were issued six weeks before the March 15, 2012 compliance deadline, and did not follow the notice and comment procedures required by the Administrative Procedures Act (APA).

In September 2010, DOJ issued new regulations under ADA Titles II and III requiring public accommodations and state and local governments to retrofit their existing pools and spas to include a pool lift or ramp entry. Pool lifts are the only feasible option for most existing pools. Many in the lodging industry were prepared to meet these requirements with portable pool lifts that could be brought upon request and also shared between two pools or a pool and a spa in the same location. On January 31, 2012 -- six weeks before the March compliance deadline -- DOJ announced the following new requirements: (1) Businesses using lifts must install "fixed" or "built-in" pool lifts unless they can show that they are not readily achievable to install a fixed lift; (2) Instead of being brought out upon request, pool lifts must be next to the pool or spa and ready for use at all times when the facility is open; and (3) A pool lift cannot serve more than one pool or spa even if the two are only a few feet away from one another.

Minh N. Vu, the Chair of Seyfarth Shaw's ADA Title III Team, is among those who testified today regarding the new requirements before the House Subcommittee. She was in attendance on behalf of the American Hotel & Lodging Association (AH&LA), which represents a wide variety of hotel owners and operators, many of which are small businesses. Ms. Vu has served as AH&LA's outside counsel on Title III of the ADA since 2006.

Ms. Vu testified that the DOJ violated the APA when it issued substantive new requirements for pool lifts without proper public notice or comment. These requirements were never mentioned by the DOJ during the rulemaking process, and they do not appear anywhere in the 2010 regulations that mandated the provision of accessible entries for pools and spas. Ms. Vu also testified about some of the serious consequences of DOJ's disregard of the rulemaking process and how they adversely impact virtually all Americans. This issue affects hundreds of thousands of businesses, every state and local government, as well as all Americans who use pools and spas at recreational and lodging facilities nationwide.

To discuss whether your business is likely to be affected, or to explore legal and best practice approaches for compliance, please contact the Seyfarth attorney with whom you work, who can put you in touch with Minh or another member of our ADA Title III Team.

Seyfarth Shaw Appoints New York Litigation Practice Chair

Tue, 24 Apr 2012 00:00:00 -0400

Contacts:
Brian Kiefer, Public Relations Director
(312) 460-4604, bkiefer@seyfarth.com

Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

NEW YORK (April 24, 2012) — Leading law firm Seyfarth Shaw LLP announced today that partner Jonathan P. Wolfert has been named Chair of the New York Litigation practice.

“This is a unique opportunity to lead and further expand our litigation platform in New York, as well as nationally,” explained Wolfert. “I look forward to working closely with both our clients and our talented group of New York litigators to best navigate the challenges of today’s increasingly complex litigation environment.”

With extensive experience in a wide variety of civil litigation matters across the country, Wolfert’s practice focuses on complex insurance coverage, business torts, contract disputes, securities, intellectual property and bankruptcy litigation.

Comprised of more than 180 attorneys in offices throughout the United States, Seyfarth’s Commercial Litigation practice assists clients with every aspect of their dispute resolution needs, nationally and internationally. Seyfarth combines the dedicated focus of a litigation boutique and the resources of a national firm in a singular commitment to the client’s objectives, drawing upon a depth of resources and attorneys in a broad range of practices, from tax to healthcare, intellectual property to real estate, transportation to employee benefits.

Gerald Maatman Quoted in Law360
"EEOC Fights to Keep Method for Pursuing Large-Scale Cases"

Tue, 24 Apr 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Gerald Maatman was quoted at length in a Law360 article on April 10. The article discussed a high-stakes EEOC case that could have a major impact on how the agency litigates large-scale claims.

The agency is asking the Eighth Circuit to reconsider a ruling that requires the agency to identify all potential class members before filing a lawsuit. Previously the agency had been using the discovery process to identify class members and losing the ability to do so could significantly harm the EEOC's ability to bring large scale claims.

“If you're an employer or corporate counsel, this is a case on the short list you should be following because the implications from the Eighth Circuit's holding would force the EEOC to change its approach and the manner in which it litigates large-scale claims,” Jerry told Law360.

Dennis Greenstein Quoted in The New York Times
"Q&A When Hiring a Moonlighting Super"

Tue, 24 Apr 2012 00:00:00 -0400

Seyfarth Shaw Real Estate partner Dennis Greenstein was quoted in The New York Times on April 5 in the Real Estate Section. The Q&A section posed the question: Is a condominium legally responsible for any damage or personal injury suffered by a building employee while performing a service after hours at a resident’s request in the resident’s apartment? The resident has insurance. Would that cover liability?

Dennis said a superintendent working on his own time in a unit at that unit's owner's request would be regarded as an independent contractor. However, he said New York law may hold a condo association liable for accidents to a contractor’s employees in the building, even if the condo board was unaware that the contractor (or superintendent) was working for a unit owner.

The condo board and unit owners may protect themselves by having the unit owner obtain insurance for both workers compensation and general liability, naming the condo board, all unit owners and the managing agent as “additional insureds.” The unit owner would sign and deliver to the board an agreement accepting responsibility for liability, costs and fees not covered by that insurance. The condo’s insurance may not protect the board or unit owners against liability for personal injury or property damage to the unit resulting from the work performed by the independent contractor.

Click here for the full article: http://www.nytimes.com/2012/04/08/realestate/new-york-real-estate-question-answer.html?_r=1&ref=realestate

Bart Lazar Quoted in FTC: WATCH
“FTC in the spotlight in new Obama privacy proposal”

Fri, 20 Apr 2012 00:00:00 -0400

Intellectual Property partner Bart Lazar was quoted in an article appearing in the March 1 issue of FTC: WATCH. The article reviewed a White House proposal for a voluntary company code of conduct which would give consumers more privacy over their personal information. While the code would not be mandatory, companies who agree to follow the code would be monitored by the FTC to ensure compliance.

According to Bart, the Obama-proposed policy would bring the U.S. more in line with privacy practices in Europe. “The Obama administration is seeing the future and saying ‘Hey, this is an opportunity for us if we can develop our own codes of conduct,’” Bart observed. “If codes of conduct have the impact of eliminating disparities in state, federal and international laws and reducing the regulatory morass the companies have to deal with, that would really relieve the compliance burden on American and multinational corporations.”

Valerie Hoffman Quoted in Law360 Article
"House Dems Push Obama To Outlaw LGBT Bias In Contracting"

Fri, 20 Apr 2012 00:00:00 -0400

Seyfarth Shaw Chicago Labor & Employment partner Valerie Hoffman was quoted in a Law360 article on April 4. The article discussed how more than 70 Democrats urged President Obama to adopt an executive order prohibiting federal contractors from discriminating against employees based on their sexual orientation or gender identity. While it is prohibited in many states, such discrimination is not a federal offense. According to a letter organized by Reps. Frank Pallone, D-N.J., Barney Frank, D-Mass., and Lois Capps, D-Calif., it is still legal in 29 states to fire someone solely based on gender. The letter said that according to the Williams Institute at the UCLA School of Law, the requested executive order would protect more than 16 million federal contractor employees from employment discrimination based on sexual orientation and gender identity.

"An executive order would be an attractive proposition to Democrats, who have struggled with political barriers in moving their employment policy goals through Congress," said Valerie. She added, "the lawmakers could have cause for optimism, because the president's previous directives show a focus on employment issues."

"We see it in the area of disability, we see it in the area of veterans' employment, we see it in the area of pay equity as well," Valerie said. "The executive branch has been very clear about its desire to move the agenda ahead in each of these areas. It's also been clear that this administration is interested in expanding rights and protections against discrimination based on sexual orientation."

Valerie also noted that many contractors and many large employers already have significant policies prohibiting employment discrimination based on sexual orientation.

Richard Alfred Quoted in MSNBC.com Article
"Off the clock: Employees fighting for overtime pay"

Thu, 19 Apr 2012 00:00:00 -0400

Boston Labor & Employment partner Richard Alfred was quoted on April 18 in an MSNBC.com article, "Off the clock: Employees fighting for overtime pay. " The article discusses the highly publicized Christopher v. GlaxoSmithKline Supreme Court case whereby pharmaceutical representatives claim they are entitled to overtime pay even though their employer, GlaxoSmithKline, contends they’re sales people and not entitled to it.

This is one of many recent such cases. Overtime cases brought by the U.S. Department of Labor jumped to 11,990 in 2011 and netted $140 million in overtime wages, up from 8,788 cases and about $107 million in wages in the previous year, the agency reported Tuesday. And such lawsuits filed in federal courts rose 15 percent in 2011, compared to 2010, according to Richard, adding that wage and hour suits overall have jumped 325 percent since early 2000.

There are several factors that have contributed to this increase in suits, including confusion regarding overtime laws covered under FLSA, enacted in 1938. “The laws are difficult to apply in the modern workplace,” Richard said.

Click here to read the full article: http://bottomline.msnbc.msn.com/_news/2012/04/18/11250818-off-the-clock-employees-fighting-for-overtime-pay?lite

EEOC Guidance On The Use Of Criminal Records In Employment Is Imminent; Seyfarth To Host Webinar On New Guidance

Thu, 19 Apr 2012 00:00:00 -0400

For employers watching the media and following the Equal Employment Opportunity Commission's (EEOC) public meeting schedule, it will come as no surprise that the EEOC announced today that it will hold a public meeting next week -- on April 25, 2012 to vote on proposed EEOC Enforcement Guidance relating to employers' use of arrest and conviction records.

The EEOC has been interested in employers' use of criminal history in employment for the past 25 years. Illustrative of this longstanding concern, in 1987 the EEOC issued a policy statement whereby it presumed that any policy or practice that caused an adverse employment action to be taken solely because of an African American or Hispanic person's conviction record had a disparate impact on members of those protected classes because those groups were convicted at a rate disproportionately higher than the rest of the general population. See 1987 EEOC Policy Statement on the Issue of Conviction Records under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq. (available at http://www.eeoc.gov/policy/docs/convict1.html). Therefore, according to the EEOC, employers' selection criteria regarding criminal history information had to take into consideration the following to demonstrate business necessity:

the nature and gravity of the offense or offenses;
the time that has passed since the conviction and/or completion of the sentence; and
the nature of the job held or sought.

See 1987 EEOC Policy Statement on the Issue of Conviction Records under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq. (available at http://www.eeoc.gov/policy/docs/convict1.html).

The EEOC also issued a 1990 policy statement on employers' use of arrest records. Pursuant to that policy statement, employers must consider the following before using arrest records to make an employment decision: (i) the likelihood that the individual engaged in the conduct arrested for; and (ii) job relatedness. See 1990 EEOC Policy Statement on the Consideration of Arrest Records in Employment Decisions under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §2000e et seq. (available at http://www.eeoc.gov/policy/docs/arrest_records.html). According to the EEOC, a blanket exclusion of individuals with arrest records (without convictions) would almost never withstand scrutiny.

In 2008, the EEOC held a meeting to revisit its 1987 and 1990 guidance as it turned its focus to employment discrimination against individuals with conviction and arrest records. See November 20, 2008 Meeting on Employment Discrimination Faced by Individuals with Arrest and Conviction Records (available at http://www.eeoc.gov/eeoc/meetings/11-20-08/index.cfm). This meeting occurred shortly before it ramped up its E-RACE Initiative.

Most recently, on July 26, 2011, the EEOC had a meeting again revisiting the use of arrest and conviction records in employment, and based on the testimony, it appeared that the EEOC was contemplating issuing revised or new guidance on the topic. See Meeting of July 26, 2011 - EEOC to Examine Arrest and Conviction Records as a Hiring Barrier (available at http://www.eeoc.gov/eeoc/meetings/7-26-11/index.cfm). After hearing rumblings for the past couple of months, employer groups and other stakeholders received confirmation today that the new guidance will be issued next week. The guidance will be directed to employers as well as EEOC investigative staff and will likely impose much greater restrictions on employers using criminal history when making employment decisions.

Seyfarth Shaw will be holding a webinar on April 26 at 1:30 p.m. central to provide a comprehensive analysis of the EEOC's new guidance and steps that employers can take to mitigate their risks of challenges under Title VII. Please click here to register.

Directors Protected From Risk Monitoring Liability

Thu, 19 Apr 2012 00:00:00 -0400

Last week, Goldman Sachs agreed to pay $22 million to regulators to resolve claims that the firm had inadequate policies in place to prevent analysts from sharing nonpublic information with traders. Reportedly, these questionable “huddles” between analysts and traders were designed to increase trading commissions and influence compensation.

This settlement highlights the reality that compensation committees are increasingly scrutinized for adopting compensation programs that regulators and stockholders believe are contrary to the corporation’s interests as a result of director action involving a conflict of interest, waste, or failure to exercise business judgment. The position set forth by the Securities and Exchange Commission was that higher risk trading and business strategies required greater internal controls.

Instructive for corporate directors in this regard are the conclusions drawn by the Delaware Chancery Court in granting a motion to dismiss the claims brought in In re the Goldman Sachs Group, Inc. Shareholder Litigation against Goldman Sachs and its corporate directors. In the case, Goldman’s compensation committee was criticized for maintaining a program that rewarded executives based on a percentage of the firm’s net revenue, allegedly leading to excessive risk-taking by employees who wanted to maximize short term profits and increase their bonuses. If the risks paid off and generated profit, employees received a windfall; but if not, stockholders bore the losses.

The Court made several important points in response to these allegations:

The committee’s decision to use this compensation model was not wrong or grossly negligent simply because a different metric could have been used to evaluate performance (for example, comparing Goldman’s compensation to that of hedge fund managers rather than to other investment banks). The business judgment rule only requires that the board “reasonably inform itself; it does not require perfection or the consideration of every conceivable metric.”
The Court would not conclude that the overall compensation scheme was so one-sided that it amounted to corporate waste.
It was irrelevant that the compensation scheme did not perfectly align executive and stockholder interests, or may have encouraged employee behavior incongruent with stockholder interests. Changes to the compensation scheme should be effected by changing the directors, not by litigation.

The plaintiffs also alleged that the risky behavior encouraged by the compensation system resulted in unethical and illegal conduct. This, the plaintiffs claimed, meant that the directors failed to discharge their duty to have systems in place that monitor business risk and legal compliance, contrary to the requirements of In re Caremark International Inc. Derivative Litigation (describing a director’s duty to exercise oversight).

The Court held that substantial barriers protected directors from liability for a failure to monitor compensation systems:

Failure to monitor systems that assure legal compliance are within the framework of duties directors have under Caremark. However, actions that are risky - but legal - are within management’s discretion and are not necessarily indications of illegal conduct.
The Court wrote that “the manner in which a company evaluates the trade-off between risk and return is the essence of business judgment.” Directors would not be personally liable for making or permitting business decisions that in hindsight turned out poorly for the company.
While the Court acknowledged that a duty to monitor business risk (compared to illegal conduct) is a “theoretical possibility,” for directors to be liable they would have to consciously fail to implement any sort of risk monitoring system or consciously disregard red flags signaling that the company’s employees were taking “facially improper … and not just ill-advised or even bone-headed” risks. “Such bad faith indifference would be formidably difficult to prove.”

The Delaware courts’ continued recognition that the traditional business judgment rule applies is valuable as directors face increasing challenges to appropriately motivate and compensate executives and make other business decisions in an environment characterized by global uncertainty and risk.

By: Charles M. Modlin and Matthew I. Hafter

Charles M. Modlin is a partner in Seyfarth Shaw’s New York office. Matthew Hafter is a partner in the Chicago office. If you would like further information, please contact your Seyfarth attorney, Charles M. Modlin at cmodlin@seyfarth.com or Matthew I. Hafter at mhafter@seyfarth.com.

Immigration Inbox: News You Can Use April 2012

Wed, 18 Apr 2012 00:00:00 -0400

U.S. Immigration:

1. FY 2013 H-1B Cap Filing Season Began on April 2, 2012 – USCIS receives approximately 25,600 cap-subject H-1B visa petitions as of April 9, 2012, almost double the number of filings received by USCIS during the same time last year. Employers should forecast this year's hiring needs and accelerate preparation and filing of H-1B petitions.

2. May Visa Bulletin Retrogression for India, China EB-2 Category – The State Department announced a retrogression of priority dates in the India and China EB-2 category to August 15, 2007 effective in the May Visa Bulletin. USCIS will continue to accept Adjustments of Status Applications with priority dates before the cut-off date in the current Visa Bulletin.

3. Department of State Amends Fees for Consular Services – The Department issued an interim final rule increasing fees for consular services for nonimmigrant visa applications, border crossing card applications, and immigrant visa applications.

4. Federal Judge Chides USCIS for Denial of 'Specialty Occupation' H-1B Petition to Market Research Analyst With Related Bachelor's Degree – The judge said USCIS' errors constituted "a litany of incompetence that presents [a] fundamental misreading of the record, relevant sources, and the point of the entire petition."

5. Business Organizations Send Letter on L-1 Issues to Obama Administration – A significant concern, the letter notes, is that an "inconsistent and improperly narrowed" definition of specialized knowledge is being used to determine which employees qualify for L-1B status.

6. Visa Interview Waiver Pilot Program Expanded to New Delhi, India – The pilot program permits consular officers to waive interviews for qualified nonimmigrant applicants worldwide who are renewing their B-1/B-2 visas within 48 months of the expiration of their previously held visa, and within the same classification as the previous visa.

7. CBP Expands Global Entry to Additional Airports – By September 22, 2012, Global Entry will be implemented at St. Paul International Airport, Charlotte Douglas International Airport, Phoenix Sky Harbor International Airport, and Denver International Airport, in addition to the 20 other airports listed.

8. DOL Issues Guidance on Transition Period for Changes to H-2B Temporary Nonagricultural Labor Certification Process – DOL issued the guidance following publication of its final rule on February 21, 2012, amending and creating H-2B regulations.

9. Eleventh Circuit Blocks Additional Portions of Alabama Immigration Law – The court ruled that Alabama may not enforce provisions barring undocumented people in Alabama from obtaining a driver's license and barring courts from enforcing contracts involving the undocumented, pending a challenge to the law by the Obama administration.

10. USCIS Releases Guidance on Maximum Period of Stay for Nonimmigrant Religious Workers – The memo outlines the procedure to be used for "recapturing" time spent outside the United States by R-1 nonimmigrants when seeking an extension of their R nonimmigrant status, and discusses the concept of recapturing for nonimmigrants.

Seyfarth Workforce Authorization Team (SWATeam)

1. USCIS Seeks Public Comment on Revisions to I-9 Employment Eligibility Verification Form – The comment period ends on May 29, 2012.

Also in this issue:

Seyfarth Immigration Events and News

U.S. Immigration

1. FY 2013 H-1B Cap Filing Season Began on April 2, 2012

Beginning on Monday, April 2, 2012, employers were able to file cap-subject H-1B visa petitions on behalf of workers in Specialty Occupations for fiscal year (FY) 2013, with employment starting on or after October 1, 2012.

USCIS informed participants at the stakeholder engagement hosted by the California and Vermont Service Centers in Laguna Niguel, CA, on April 5, 2012, that 22,323 cap-subject H-1B petitions have been received as of April 4, 2012. Approximately 25% of these cases are for U.S. advanced degrees. According to USCIS, the number of filings received in the first few days of the H-1B season is almost double the number of filings received by USCIS during the same time last year. According to its website, as of April 9, 2012, USCIS received approximately 25,600 cap-subject H-1B petitions.

Employers are well advised to accelerate decisions on workforce planning and hiring of high-skilled employees and prepare to file for their forecasted need as soon as possible. If this year's H-1B quota is missed, new H-1B workers (other than for lateral hires already in H-1B status and for workers exempt from the quota). For more information, please see Seyfarth's Client Alert - "H-1B Work Permit Filings: Will You Beat the Cap?".

2. May Visa Bulletin Retrogression for India, China EB-2 Category

The State Department announced a retrogression of priority dates in the India and China EB-2 category to August 15, 2007 effective in the May Visa Bulletin. USCIS will continue to accept Adjustments of Status Applications with priority dates before the cut-off date in the current Visa Bulletin. The State Department's Visa Bulletin for April did not continue the dramatic forward movement of India and China EB-2 priority dates that has been observed for the past several months. Over the last couple of weeks, there were rumblings of a possible retrogression of priority dates in the India and China EB-2 category to a 2007 priority date, effective in the May or June Visa Bulletin.

With the publication of the May Visa Bulletin reflecting an August 15, 2007 cutoff, priority dates are not expected to advance again until October 1, 2012, at the earliest, when the new fiscal year begins.

If an I-485 Application for Adjustment of Status is filed while the person's priority date is current, it will remain pending until the priority date is current again. Because the I-485 will remain pending, the applicant can continue to apply for interim benefits, such as work authorization and advance parole, while the priority date remains retrogressed.

3. Department of State Amends Fees for Consular Services

The Department of State has issued an interim final rule amending the schedule of fees for consular services for nonimmigrant visa applications, border crossing card applications, and immigrant visa applications.

The rule increases from $140 to $160 the fee for processing most non-petition-based nonimmigrant visas (machine-readable visas, or MRVs) and border crossing cards (BCCs) for Mexican citizens 15 years of age and above. The rule also amends application processing fees for certain categories of petition-based nonimmigrant visas and treaty trader and investor visas (all of which are also MRVs), and amends tiered application processing fees for immigrant visas. Finally, the rule increases from $14 to $15 the BCC fee charged to Mexican citizen minors who apply in Mexico, and whose parent or guardian already has a BCC or is applying for one, based on a congressionally mandated surcharge.

The interim final rule is effective April 13, 2012. Written comments must be received on or before May 29, 2012. The rule, which includes instructions on submitting comments, is available here.

4. Federal Judge Chides USCIS for Denial of 'Specialty Occupation' H-1B Petition to Market Research Analyst With Related Bachelor's Degree

In Residential Finance Corporation v. USCIS, decided on March 12, 2012, Judge Gregory L. Frost of the U.S. District Court for the Southern District of Ohio criticized USCIS for agency's faulty analysis in denying an H-1B petition to a market research analyst with a bachelor's degree in that field.

The issue before the court was whether USCIS incorrectly concluded that a "specialty occupation" was not established. The court noted that a specialty occupation is one that requires attainment of a bachelor's or higher degree in the specific specialty (or its equivalent) as a minimum for entry into the occupation in the United States. A related definition provides that a specialty occupation requires theoretical and practical application of highly specialized knowledge.

Among other things, USCIS argued that although the Department of Labor's Occupational Outlook Handbook (OOH) recognizes a baccalaureate degree as the minimum educational requirement for many market and survey research jobs, the OOH does not indicate that such a degree need be in a specific specialty directly related to market research.

In this case, the beneficiary had obtained a bachelor of science degree in marketing and finance. The record indicated that a minimum requirement for entry into the position of market research analyst is the specialized course of study in which the beneficiary had engaged.

"Perhaps most bewildering is that Defendant [USCIS] rejected the evidence that [the beneficiary] would actually be performing these job duties if hired, despite no evidence to the contrary and no other apparent reason for failing to credit the evidence on this record," the judge said.

Judge Frost continued:

Defendant continues to reject this record in favor of supporting a flawed denial. What Defendant overlooks is that the illogical leaps about which Plaintiff complains in its thorough briefing cannot be separated from the process in which Defendant engaged in its decision making. Stated simply, Defendant did a poor job of keeping the record straight and its focus on the actual inquiry involved.

The judge pointed out that USCIS expressly admitted "inexplicable errors" in its briefing, such as references to the wrong sections of the OOH, and that the agency's decision appeared to identify the proffered position incorrectly as a marketing manager rather than a marketing analyst.
Judge Frost said that these errors were not the essentially inconsequential lapses that USCIS suggested. Instead, he said, they constituted "a litany of incompetence that presents [a] fundamental misreading of the record, relevant sources, and the point of the entire petition." If USCIS wants to deny a petition that will send the beneficiary to another country after 21 years of living in the United States, the judge said, "it should afford Plaintiff and [the beneficiary] a bare minimum level of professionalism, diligence, and reasoning."

According to the court, the record indicated that a market and survey researcher is a distinct occupation with a specialized course of study that includes multiple specialized fields, that the beneficiary had completed such specialized study in the relevant fields of marketing and finance, and that Residential Finance Corporation had sought to employ him in such a position. Judge Frost said that USCIS had "ignore[d] the realities of the statutory language involved and the obvious intent behind them. The knowledge and not the title of the degree is what is important. Diplomas rarely come bearing occupation-specific majors."

Judge Frost concluded that USCIS failed to meet the "fundamental threshold for rational decision-making and has instead engaged in conduct that cannot be separated from the taint of the foregoing errors." He thus found that the denial of the petition was arbitrary, capricious, and an abuse of discretion, and ordered USCIS to grant the petition and change the beneficiary's status to H-1B nonimmigrant.

The text of the case is available here.

5. Business Organizations Send Letter on L-1 Issues to Obama Administration

Sixty-four business organizations signed a letter on L-1 legal and policy issues sent on March 22, 2012, to President Obama and the Secretaries of Commerce, Homeland Security, and State. New proposed L-1 guidance is anticipated from USCIS.

Among other things, the letter notes that it has become increasingly difficult for companies to procure visas to transfer existing employees in the United States to continue work. A significant concern, the letter notes, is that an "inconsistent and improperly narrowed" definition of specialized knowledge is being used to determine which employees qualify for L-1B status. When visas for key staff already employed in an organization are inexplicably delayed or denied, such delays or denials do not enhance compliance or enforcement and "do nothing except disrupt carefully laid business plans and create significant costs to the company and the American economy," the letter states.

The letter is available here.

6. Visa Interview Waiver Pilot Program Expanded to New Delhi, India

The U.S. Embassy in New Delhi, India, announced that the Visa Interview Waiver Pilot Program has been expanded to that post, effective immediately. Under the program, certain qualified foreign visitors who were interviewed and screened in conjunction with a previous visa application may be eligible to renew their visas without undergoing another interview.

The embassy explained that the pilot program permits consular officers to waive interviews for qualified nonimmigrant applicants worldwide who are renewing their B-1/B-2 visas within 48 months of the expiration of their previously held visa, and within the same classification as the previous visa. The pilot does not entitle any applicant to a waiver of personal appearance. Consular officers retain the authority to interview any applicant whom they determine requires a personal appearance.

The announcement is available here.

For additional details on qualifying for an interview waiver, see here.

7. CBP Expands Global Entry to Additional Airports

U.S. Customs and Border Protection is adding four airports to the list of 20 participating major U.S. airports in the Global Entry international trusted traveler program. Global Entry allows pre-approved, low-risk participants expedited entry into the United States using Global Entry kiosks located at designated airports. The program is intended for frequent international travelers, but there is no minimum number of trips to qualify.

By September 22, 2012, Global Entry will be implemented at St. Paul International Airport (Minnesota), Charlotte Douglas International Airport (North Carolina), Phoenix Sky Harbor International Airport (Arizona), and Denver International Airport (Colorado), in addition to the 20 other airports listed in the notice, which is available here.

The starting dates will be announced here.

8. DOL Issues Guidance on Transition Period for Changes to H-2B Temporary Nonagricultural Labor Certification Process

The Department of Labor (DOL) has issued guidance to provide transition procedures to ensure that employers filing H-2B applications on or after April 23, 2012, have sufficient information to file appropriately. DOL issued the guidance following publication of its final rule on February 21, 2012, amending and creating H-2B regulations.

The H-2B final rule becomes effective on April 23, 2012. The guidance is available here.

9. Eleventh Circuit Blocks Additional Portions of Alabama Immigration Law

The U.S. Court of Appeals for the Eleventh Circuit has included additional provisions of a controversial Alabama immigration law in its injunction. The court ruled that Alabama may not enforce provisions barring undocumented persons in Alabama from obtaining a driver's license and barring courts from enforcing contracts involving the undocumented, pending a challenge to the law by the Obama administration. The administration argues that immigration law and regulation is a federal responsibility. In October, the court prevented Alabama from criminalizing the failure to carry documents evidencing legal resident status and requiring schools to check children's immigration status when they enroll.

Alabama's attorney general, Luther Strange, reportedly said that he hopes that "the Supreme Court's coming decision in [a similar case from Arizona] will make clear that our law is constitutional." The Southern Poverty Law Center (SPLC) noted that several of the bill's cosponsors conflated the growth in Alabama's Hispanic population with growth in "illegal immigrants." SPLC quoted a judge's decision in December citing lawmakers' comments such as their having visited a poultry plant and seen "4-foot Mexicans in there catching them chickens."

SPLC's article on the law are available here.

An SPLC report, "Alabama's Shame: HB 56 and the War on Immigrants," recounts several of the thousands of stories received on its hotline for residents established shortly after the law took effect, including accounts of its impact on legal immigrants and even U.S. citizens. The report is available here.

10. USCIS Releases Guidance on Maximum Period of Stay for Nonimmigrant Religious Workers

USCIS released a policy memorandum on March 8, 2012, for Immigration Service Officers who adjudicate religious worker (R-1) nonimmigrant petitions for those coming to the United States temporarily to perform religious work, and their dependents. The memo outlines the procedure to be used for "recapturing" time spent outside the United States by R-1 nonimmigrants when seeking an extension of their R nonimmigrant status. The guidance applies to all R-1 petitions seeking to recapture time that are currently pending with USCIS or to new petitions filed on or after March 8, 2012.

"Recapturing" is used in the memo as "short-hand" for the period of time spent outside the United States that the worker seeks to have subtracted from his or her maximum period of stay in R-1 status, to have that period of time added back ("recaptured") when he or she requests an extension of R-1 status.

USCIS explained that the R-1 nonimmigrant classification is for those seeking to enter the United States for a period not to exceed five years solely to work as a minister or in a qualifying religious occupation or vocation. In calculating the five-year maximum period of stay, USCIS has not subtracted time in which the R-1 religious worker was traveling or residing outside of the United States following his or her initial admission in R-1 status.

USCIS noted that certain nonimmigrants who have spent the maximum period of stay authorized by their nonimmigrant classification are prohibited from having a new petition in the same status filed on their behalf until they have remained outside of the United States for a specific period of time (also known as a "limitation on admission" or "limitation on total stay"). Currently, USCIS policy guidance provides that H-1B and L-1 nonimmigrants and their dependents may recapture time spent outside of the United States when calculating their maximum period of authorized stay. USCIS said the policy of allowing recapture is intended to permit a qualifying nonimmigrant to spend the maximum permitted period of time allowed by his or her classification in the United States before he or she must spend a specific period outside of the United States to file a new petition for the same status.

USCIS said it has determined that extending the recapture policy to the R-1 nonimmigrant classification is "appropriate, and that such a policy is consistent with R-1 statutory and regulatory language and the purpose and intent of the R-1 visa classification." USCIS has further determined that the spouse or minor child of a principal who recaptures periods of time spent outside the United States toward an extension of R-1 status may receive periods of R-2 stay coextensive with that of the principal.

The USCIS memo may be an effort to settle or moot a class action lawsuit filed earlier this year that challenged the agency's prior refusal to allow R-1 religious workers to recapture time spent out of the United States. See Society of the Divine Word v. Napolitano (N.D. Ill. filed Jan. 3, 2012).

The USCIS memo is available here.

Seyfarth Workforce Authorization Team (SWATeam)

1. USCIS Seeks Public Comment on Revisions to I-9 Employment Eligibility Verification Form – The comment period ends on May 29, 2012.

USCIS invites public comment until May 29, 2012, on a revised employment eligibility verification form (I-9). Employers must complete the I-9 for all newly hired employees to verify their identity and authorization to work in the United States.

Key revisions to the form include:

Expanded instructions and a revised layout.
New, optional data fields to collect the employee's e-mail address and telephone number.
New data fields to collect the foreign passport number and country of issuance. Only those authorized to work in the U.S. who have also recorded their I-94 admission number on the I-9 will need to provide the foreign passport number and country of issuance.

Until a new version is approved and posted, employers must continue to use the current version of the I-9 form, available here.

The USCIS notice, which includes a link to the revised draft form, is available here.

The Federal Register notice is available here.

Seyfarth Immigration Events and News

Recent News from Seyfarth's Immigration Attorneys

Attorney Angelo Paparelli was interviewed by CBS Radio (KNX 1070) on March 27, 2012. Angelo discussed the immigration lessons learned from a case in which a man arrested on suspicion of murdering five people in San Francisco was to be deported in 2006, and he is now staying in the United States after Vietnamese authorities failed to provide necessary travel documents. Angelo concluded that U.S. Immigration and Customs Enforcement (ICE) should focus their efforts on removing non-citizen criminals from the U.S. rather than low-level immigration violators who pose no threat. Angelo's interview is available here.

Upcoming Speaking Engagements

Seyfarth Associate Nicole Kersey will deliver a presentation titled, "Electronic I-9 Solutions: Jackpot or Crackpot?" at the National Association of Professional Background Screeners 2012 Annual Conference, to be held April 15-17, 2012 in Nashville, Tennessee.

Seyfarth Partner Angelo Paparelli will speak on April 23, 2012 to the legal department of a Fortune 500 company in the New York area on the topic "Beware the Alien Law Invasion: How Immigration Issues Permeate the Work of In-House Counsel." Angelo can be available to speak to your company's Legal or Human Resources Department on a wide array of immigration issues by contacting him through this link.

Seyfarth Senior Counsel Leon Sequeira and Associate Jason Burritt will host an April 24, 2012 Labor and Employment Breakfast Briefing on "Is Your Company At Risk?: Latest Enforcement Efforts by the Federal Government." This program will discuss the latest government enforcement efforts relating to legal work status, I-9s, and E-Verify, with a focus on the industries particularly at risk.

Seyfarth Senior Counsel John Quill will present on the topic of the PERM Labor Certification process at the Massachusetts Continuing Legal Education's (MCLE) 11th Annual Immigration Law Conference, to be held on May 18, 2012 in Boston, MA.

Recent Speaking Engagements, Liaison Activity and Advocacy

Angelo Paparelli presented at the March 16, 2012 immigration law conference at Chapman University in Orange, California. Angelo discussed issues facing undocumented Latino immigrants in a presentation titled, "Contextualizing the Immigration Debate and Making Sense of the Backlash against the Undocumented."

Angelo Paparelli met with officials of the Department of Homeland Security (DHS), Office for Civil Rights and Civil Liberties (CRCL) at a bar association liaison meeting on March 28, 2012 in Washington DC to discuss ways in which companies, individuals, nonprofit groups and bar associations can file complaints concerning potential violations of protected legal interests so that CRCL can work internally with DHS component agencies to propose new policies that might improve the legal immigration system. Information on CRCL is available here.

From left to right, lawyers Angelo Paparelli, Denise Sabagh, Cyrus Mehta and Traci Hong, Immigration Policy Chief, CRCL

In addition, Angelo Paparelli has posted several new blog entries on his Nation of Immigrators public policy blog:

Pre-Election Bipartisanship -- Except on Immigration, Where Sen. Grassley Stubbornly Obstructs

With an eye toward November and an 11% approval rating, Congress puts aside bi-partisan bickering to pass legislation such as the JOBS Act. However, Senator Chuck Grassley has been a one-man lightning rod, jolting the immigration agencies under the current and prior administration and intimidating them so that they jump to his bidding.

Musing on Immigration Liberty: If I had a son, he'd look like a DREAMer

Angelo describes his venture into the Alice-in-Wonderland-like alternative universe of Congress and the Executive branch, as he advocates for passage of the DREAM Act.

Immigration Options for DREAMers under EXISTING Law

Angelo marks the second annual "National Coming out of the Shadows Week," and the applauds the courage shown by those who publicly proclaim their undocumented immigration status. The blog post discusses possible options, some uncommon, for undocumented individuals to legalize their status and obtain work authorization.

Immigration's Private Parts Modestly Yet Shockingly Exposed

U.S. Immigration and Customs Enforcement (ICE) and the Department of State offers an eye-popping (and unflattering) view behind the veil of government data collection in the immigration space.

By: Angelo Paparelli, Gabriel Mozes, and John Quill

Angelo Paparelli is a Partner in Seyfarth's Downtown Los Angeles office. Gabriel Mozes is an Associate in the Boston and Atlanta offices. John Quill is Senior Counsel in the Boston office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Angelo Paparelli at apaparelli@seyfarth.com, Gabriel Mozes at gmozes@seyfarth.com, John Quill at jquill@seyfarth.com or any Business Immigration attorney on our website.

Securities and Exchange Commission Publishes Guidance on JOBS Act

Wed, 18 Apr 2012 00:00:00 -0400

On April 5, 2012, President Obama signed into law the Jumpstart Our Business Startups Act (the “JOBS Act”). The new law eases or eliminates several restrictions on the offer and sale of securities, expands current standards that exempt a company from becoming subject to public reporting and disclosure rules under the federal securities laws, and creates a new category of “emerging growth” companies that may now conduct initial public offerings of stock while being exempt from certain financial disclosure and governance requirements for up to five years. The Securities and Exchange Commission (the “Commission”) has published a series of Frequently Asked Questions and interpretative guidance relating to transition rules and the implementation schedule for Commission rulemaking under the JOBS Act. The Commission releases are available online at http://sec.gov/divisions/corpfin/cfjobsact.shtml. This alert summarizes the provisions of the JOBS Act and the Commission’s guidance with respect to certain transition matters.

Emerging Growth Companies

The JOBS Act defines an Emerging Growth Company (an “EGC”) to mean a public company that completes an initial public offering (an “IPO”) of its common equity securities after December 8, 2011 pursuant to a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), with “total annual gross revenues” of less than $1 billion. The Commission has issued interpretative guidance clarifying that “total annual gross revenues” means total revenues as presented in the most recent audited, annual income statement in accordance with U.S. GAAP. Foreign private issuers who report revenues in their domestic currency should calculate the amount in U.S. dollars based on the exchange in effect on the last day of the issuer’s fiscal year. In addition, the Commission has stated that a company’s IPO registration statement under the JOBS would include both a traditional IPO on Form S-1 as well as any other Securities Act registration statement, such as a Form S-8 registering securities to be issued under a compensatory benefit plan or arrangement.

Under the new law, an EGC is only required to include two years of audited financial statements in its IPO registration statement and limits any selected financial data disclosure requirements in periodic reports or registration statements after the IPO to no earlier than the earliest period covered in the IPO registration statement. An EGC also will be exempt from having to solicit advisory say-on-pay, say-on-frequency and say-on-golden-parachute shareholder votes on executive compensation under Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and may elect smaller reporting company scaled back disclosure under Item 402 of Regulation S-K with respect to executive compensation disclosures. Notably, this will reduce the number of named executive officers for whom compensation disclosure is required from five to three and also eliminates the requirement for an EGC to provide a compensation discussion and analysis in its proxy statement. The new law also exempts EGCs from the CEO pay versus performance and pay ratio disclosure rules mandated by Section 951(b)(1) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which have not yet been adopted by the Commission.

The Commission has clarified in interpretative guidance that a company that completed its first sale of common equity securities after December 8, 2011 but before April 5, 2012 will qualify as an EGC and may immediately begin to avail itself of the alternative disclosure options for EGCs. In addition, the Commission has stated that it would not object if an EGC that is required to provide 3 years of audited financial statements of a significant subsidiary or acquisition pursuant to Rules 3-05 or 3-09 of Regulation S-X instead elects to only provide two years of such financial statements.

The JOBS Act further provides that the independent auditor of an EGC will not be required to issue the audit attestation report on management’s internal control over financial reporting required by Section 404(b) of the Sarbanes-Oxley Act of 2002. In addition, the new law prospectively exempts EGCs from any future audit firm rotation rules that may be adopted by the Commission unless there is a determination by the Commission that application of such rules to EGCs is necessary.

The JOBS Act also creates a streamlined IPO review process for EGCs. Currently, a company’s initial IPO registration statement and amendments filed in response to Commission staff comments are immediately publicly available when filed with the Commission. During this 3-5 month process, a company is significantly limited in its ability to communicate publicly with shareholders and is typically inundated with investor communications regarding the timing of the transaction and the status of the registration statement with the Commission. While in registration, IPO companies are often the target of claims by competitors looking to delay or stall the registration process. The new law permits an EGC to submit to the Commission the company’s IPO registration statement and any amendments thereto for confidential review and comment prior to publicly filing the registration statement. After the EGC clears its registration statement with the Commission, it must file the IPO registration statement and all amendments thereto at least 21 days prior to commencing a road show for the offering. To safeguard the confidentiality of this process, the new law protects confidential IPO submissions from Freedom of Information Act requests.

A company will be deemed to be an EGC throughout the IPO process if it qualifies as an EGC at the time it files its IPO registration statement, even if it subsequently ceases to be an EGC prior to the registration statement being declared effective by the Commission. The Commission has published interpretative guidance stating that the confidential submission by an EGC of an IPO registration statement for review by the Commission staff is not deemed to be a filing date of the registration statement under Rule 401(a) of the Securities Act. Accordingly, an issuer will be subject to losing its EGC status until it makes a public filing of its IPO registration statement through EDGAR.

Under the new law, an EGC will cease to qualify as an EGC on the earlier to occur of:

The last day of the fiscal year in which it has total annual gross revenues of $1 billion;
The five year anniversary of the date the company completed its first sale of common equity securities pursuant to a registration statement under the Securities Act;
The date on which the company has issued at least $1 billion in non-convertible debt during the previous three-year period; or
The date the company becomes a large accelerated filer under the Exchange Act (i.e., the market value of its common equity held by non-affiliates is more than $700 million).

General Solicitation in Rule 506 and 144A Offerings

Currently, Rule 506 of Regulation D under the Securities Act permits a company to complete a private placement of an unlimited amount of securities so long as the number of non-accredited investors participating in the offering does not exceed 35 persons. Similarly, Rule 144A provides for the offer and sale of securities to only those persons who are qualified institutional investors (“QIBs”). One of the conditions of any Regulation D or Rule 144A offering is that it be completed without any general solicitation or advertisement of investors. The JOBS Act requires the Commission, within 90 days of enactment, or July 5, 2012, to amend Regulation D to allow general advertisements or solicitations in connection with Rule 506 offerings so long as the only purchasers in the offering are accredited investors. Within that same 90 day time period, the Commission also must amend Rule 144A to permit general advertisements or solicitations, including to persons who may not be QIBS, provided that sales may be made only to purchasers who are QIBs.

The new law also provides relief for so-called “angel networks” in the form of an exemption from the broker-dealer requirements for persons that do not receive compensation, do not take possession of investor funds or securities in an offering, and are not otherwise an ineligible person under applicable “bad boy” provisions. As long as the conditions are met, a person will not become required to register as a broker-dealer solely because that person (i) helps maintain a platform or mechanism that permits such offer or sale, permits general solicitation, general advertising or similar or related activities by issuers of such securities, (ii) co-invests in such securities, or (iii) provides certain ancillary services only with respect to such securities.

The new law only applies to sales to accredited investors only in a Rule 506 exempt transaction, and does not apply to other exempt transactions pursuant to Regulation D or Section 4(2) of the Securities Act. The JOBS Act also intends for new Rule 506 offerings that involve general solicitations and advertisements to be within the federal preemption of covered securities under Section 18(b)(4)(iv) of the Securities Act, which preempts state regulation of offerings pursuant to Commission rules or regulations issued under Section 4(2) of the Securities Act.

Communications in Connection with an Emerging Growth Company IPO

Title V of the Sarbanes-Oxley Act of 2002 and rules promulgated thereunder currently provide that during the time period leading up to a company’s IPO, securities analysts working for the firm performing the IPO are prohibited from publishing or distributing research reports relating to the security or the issuer of the security. The new JOBS Act exempts from this prohibition research reports relating to EGCs and also prohibits the Commission and national securities exchanges from adopting rules restricting any broker or dealer from publishing such reports or making public appearances with respect an EGC after the completion of an IPO by the EGC. The new law further prohibits the Commission and national securities exchanges from adopting any rules restricting the ability of analysts from communicating with management of an EGC or potential investors in an EGC in connection with the EGC’s IPO.

In addition, the new law provides that an EGC or any person authorized to act on its behalf (presumably, an underwriter or placement agent), either before or after the filing of a registration statement with the Commission, may engage in oral or written communications with persons who are either QIBS or accredited investors, as such terms are defined in Rules 144A and 501 under the Securities Act, respectively.

Crowdfunding

The JOBS Act creates a new Section 4A of the Securities Act for crowdfunding offerings by private companies. Current public companies subject to reporting under Sections 13 and 15 of the Exchange Act may not rely on the crowdfunding exemption. These types of offerings, which are most commonly used in connection with internet offerings, generally involve investments of small amounts of capital by large numbers of investors. The new exemption applies to offerings that do not exceed $1 million in any 12-month period. If the company is selling between $100,000 and $500,000 in securities pursuant to this exemption, then the company must provide investors with financial statements that have been reviewed by an independent auditor. Companies seeking more than $500,000 in crowdfunding would be required to provide investors with audited financial statements.

The aggregate amount of securities that may be sold to an investor in reliance on the crowdfunding exemption during any 12-month period is limited based on the annual income and net worth of the investor. If either the investor’s annual income or net worth (excluding the value of the investor’s residence) is less than $100,000, then sales to that investor under the crowdfunding exemption may not exceed the greater of (i) $2,000, or (ii) 5 percent of the investor’s annual income, or net worth (excluding the value of the investor’s primary residence). If both the investor’s annual income and net worth (excluding the value of the investor’s residence) is greater than $100,000, then sales to that investor under the crowdfunding exemption are capped at the greater of (i) $100,000, or (ii) 10 percent of the investor’s annual income, or net worth (excluding the value of the investor’s primary residence).

Investors who acquire a company’s securities pursuant to a crowdfunding exemption will be restricted from reselling those securities for a period of one year except with respect to sales to an accredited investor or the company.

In addition, the new law also expands the definition of federal covered security under Section 18(b)(4) of the Securities Act to include securities issued pursuant to a crowdfunding exemption, thereby preempting state regulation of crowdfunding offerings.

To qualify for the crowdfunding exemption, a company must not offer investment advice and must disclose on its website its interest in the offering and information about how investors may communicate with the company about the offering and how the company intends to communicate with investors about the offering. In addition, a company must:

Provide adequate disclosure of the speculative nature of investments in startups, emerging businesses and small issues and the restrictions on resale and illiquidity due to a lack of a secondary market;
Take reasonable steps to reduce the risk of fraud;
Obtain an investor questionnaire from prospective investors that will demonstrate an investor’s understanding of the investment risks;
Disclose a target offering amount;
Provide for a third party custodian to hold investment proceeds in escrow until at least 60 percent of the target amount has been raised;
Provide notice to the Commission no later than the first day a crowdfunding offering is commenced setting forth the purpose and use of proceeds, the target offering amount and the deadline to reach it, and the company’s address, website and names of principals and employees;
Provide the Commission with continuous investor-level access to the company’s website; and
Notify the Commission when the offering has been completed and indicate the number of investors and the aggregate offering amount.

If a company engages a third party intermediary to host a crowdfunding offering for the company on the intermediary’s website, then the intermediary is likewise prohibited from offering investment advice and must do the following to meet the requirements of the exemption:

Provide on its website adequate disclosure of the speculative nature of investments in startups, emerging businesses and small issues and the restrictions on resale and illiquidity due to a lack of a secondary market;
Take reasonable steps to reduce the risk of fraud;
Obtain an investor questionnaire from prospective investors that will demonstrate an investor’s understanding of the investment risks;
Provide the Commission with the intermediary’s address, website and the names of its employees;
Provide the Commission with continuous investor-level access to the intermediary’s website;
Require the issuer to disclose a target offering amount;
Provide for a third party custodian to hold investment proceeds in escrow until at least 60 percent of the target amount has been raised;
Conduct a background check on the issuer’s principals;
Provide notice to the Commission no later than the first day a crowdfunding offering is commenced setting forth the name, address and website of the issuer, the names of the issuer’s principals, the purpose and use of proceeds of the offering and target offering amount and deadline to reach the target;
Make available on the intermediary’s website a method of communication that permits the issuer and investors to communicate with one another; and
Notify the Commission when the offering has been completed and indicate the number of investors and the aggregate offering amount.

New Section 12(g) Thresholds for Registration

Currently, Section 12(g)(1) of the Exchange Act requires a company to register with the Commission and file periodic reports with the Commission if the company has assets of at least $10 million and a class of equity securities held by more than 500 shareholders of record at the end of a fiscal year. The JOBS Act preserves the $10 million asset component of this standard but amends Section 12(g) of the Exchange Act to raise the shareholder threshold to either 2,000 total shareholders of record or 500 shareholders of record that are not accredited investors. Employees who receive their shares pursuant to an equity compensation plan pursuant to a registration exemption, such as Rule 701 under the Securities Act, would not count toward these limits. The Commission has clarified in interpretative guidance that such holders would continue to be exempt from counting toward the Section 12(g) limits even after they cease to be employees of the issuer. In addition, accredited investors who hold shares that were issued pursuant to the new crowdfunding exemption under new Section 4A of the Securities Act also will not count toward these limits. It is noteworthy that the Commission’s interpretative guidance to date does not address when a company is required to determine the accredited investor status of a holder of record of its stock under the amended Section 12(g). Specifically, a company will need to know whether it can rely on a shareholder’s certification of accredited investor status at the time the person becomes a shareholder or whether the company must reassess the accredited investor status of its shareholders on an annual basis. Although the legislation covers holders of shares issued pursuant to the new exemption, as written, the exemption would apply to successor transferees in perpetuity.

In addition, currently a company is permitted to deregister its securities with the Commission and “go dark” under Section 12(g)(4) of the Exchange Act if the number of record holders of a class of its equity securities is reduced to less than 300 persons. The JOBS Act amends Section 12(g)(4) to permit banks or bank holding companies to deregister if the number of record holders of a class of its equity securities is reduced to less than 1,200 persons.

Regulation A Limit Increased to $50 million

Currently, a company may conduct an offering of up to $5 million pursuant to an abbreviated offering statement under Regulation A under the Securities Act. The Regulation A offering statement, often referred to as a “mini registration statement,” must be filed with the Commission and delivered to investors and must contain certain business and financial information about the company that is substantially less cumbersome than the comparable disclosures required in a registration statement under the Securities Act, such as Forms S-1 or S-3.

The JOBS Act increases the offering limit under Regulation A from $5 million to $50 million and amends Regulation A to permit a company to solicit offers prior to filing the offering statement with the Commission. In addition, the new law expands the definition of federal covered security under Section 18(b)(4) of the Securities Act to include securities issued in a Regulation A offering, thereby preempting States from requiring separate registration of Regulation A offerings that are often currently required.

Although a company will not become subject to periodic reporting with the Commission by virtue of completing a Regulation A offering as is currently the case, the JOBS Act will require a company to file with the Commission annual, audited financial statements after it has completed a Regulation A offering. In addition, the new law also codifies under Regulation A the “bad boy” disqualifications under Regulation D under the Securities Act that were adopted pursuant to Section 926 of the Dodd-Frank Act.

By: Michael T. Dunn

Michael T. Dunn is an associate in Seyfarth’s New York office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Michael T. Dunn at mdunn@seyfarth.com.

Richard Alfred Quoted in USA Today
"More American workers sue employers for overtime pay"

Wed, 18 Apr 2012 00:00:00 -0400

Seyfarth Shaw Boston office partner Richard Alfred was quoted in the April 15 issue of USA Today. The article discusses the recent significant uptick in wage and hour cases in the U.S., which it relates to the recession, noting that there has been an over 32 percent increase in the number of Fair Labor and Standards Act (FLSA) cases filed in federal court between 2008 and 2011. While employees cite forced overtime while being misclassified as exempt from overtime requirements and modern technology that encourages contact with their employers while away from the office, employers and the courts are faced with making significant decisions in the modern American workplace.

A reason for the significant increase in these cases is that employers find the law difficult to apply to a modern workplace. The FLSA was passed in 1938 and amended by the Portal-to-Portal Act in 1947. Richard has noted in the past that it is, "a very important law...but that in many ways it [the FLSA] fails to meet the needs of employers and employees in today's workplace."

Richard also notes, "The biggest reason for the lawsuit surge is that lucrative settlements a decade ago prompted labor lawyers to file copycat complaints, and the suits are far simpler and less costly to pursue than discrimination cases."

Click here to read the full article: http://www.usatoday.com/money/jobcenter/workplace/story/2012-04-15/workers-sue-unpaid-overtime/54301774/1?loc=interstitialskip

Massachusetts First State to Require Creditors to Validate Consumer Debts

Tue, 17 Apr 2012 00:00:00 -0400

On March 2, 2012, the Massachusetts Attorney General published onerous new consumer debt collection practice regulations, deeming their violation to be un unfair trade practice. These regulations, which became effective upon publication, purport to govern every business and person nationwide who engages in collecting a consumer debt (defined as any debt resulting from a purchase, lease or loan of goods, services or real or personal property or for a loan of money obtained for personal, family or household purposes, whether or not reduced to a judgment) from a person located within Massachusetts. A copy of the regulations is available here.

They are extraordinary in that, among other things, they impose validation and verification requirements on creditors collecting their own debts, rather than just on third party debt collectors or purchasers of defaulted debt as under the federal Fair Debt Collection Practices Act.

Specifically, 940 CMR 7.08 requires that during or within 5 days of its initial communication with a Massachusetts debtor in connection with the collection of a consumer debt that has become more than 30 days past due (unless a different period is agreed to by the debtor), the creditor (defined to mean any person or entity and their agents, servants, employees or attorneys, or a buyer of a delinquent debt who hires a third party or an attorney to collect it) must provide the debtor with (a) the amount of the debt; (b) the name of the creditor to whom the debt is owed; (c) a statement that unless the debtor, within 30 days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the creditor; and (d) a statement that if the debtor notifies the creditor in writing within 30 days after receipt of this notice that the debt, or any portion thereof is disputed, the creditor will obtain verification of the debt and provide the debtor, or an attorney for the debtor, additional materials.

If the debtor or the debtor’s attorney notifies the creditor in writing within the 30-day period that the debt is disputed, the creditor must cease collection of the debt until the creditor verifies the debt and provides the debtor or any attorney for the debtor with copies of: (a) all documents, including electronic records or images, which bear the signature of the debtor and which concern the debt being collected; (b) a ledger, account card, account statement copy, or similar record, whether paper or electronic, which reflects the date and amount of payments, credits, balances, and charges concerning the debt, including but not limited to interest, fees, charges or expenses incidental to the principal obligation which the creditor is expressly authorized to collect by the agreement creating the debt or permitted to collect by law; (c) the name and address of the original creditor, if different from the collecting creditor; and (d) a copy of any judgment against the debtor. If the creditor does not possess, have custody of, or control these materials, the creditor must cease collection of the debt until the creditor has made reasonable efforts to obtain them and provide them to the debtor.

The validation requirement poses substantial compliance challenges. Although “conduct which is not the collection of debts” is excluded from coverage (940 CMR 7.02), the regulations do not define what conduct constitutes or does not constitute the collection of debts. For example, is the validation requirement triggered when a creditor sends a monthly billing statement which requests payment to a Massachusetts debtor on a past due account? Does a creditor commit an unfair trade practice when it fails to provide a validation notice after a debtor’s initiation of the initial communication in connection with the collection of a past due debt with any one of the creditor’s employees, agents or attorneys?

Also, among other requirements and prohibitions, the regulations limit the number or telephone calls or text messages that a creditor may send to a Massachusetts consumer to two communications in each 7 day period for each debt, and to the hours of 8:00 a.m. and 9:00 p.m. Eastern. 940 CMR 7.04(f) & (g). They deem a creditor’s stating that it will take any action, including legal action, that it does not actually take or attempt to take to be an unfair trade practice, unless an additional payment or new agreement to pay has occurred within the stated time period. 940 CMR 7.04(m). They provide that it is an unfair trade practice to fail to disclose the telephone number and office hours of the creditor or his agents on all written communications with the debtor. 940 CMR 7.07(22). They impose a number of limitations regarding contact with other persons living in the debtor’s home and third parties. 940 CMR 7.05, 7.06. And they prohibit a creditor from collecting or attempting to collect from any person payment of a debt that the creditor knows or has reason to know is time-barred, or from seeking or obtaining from any person an admission, affirmation, acknowledgement of a new promise to pay, or any waiver of legal rights or defenses with respect to such a debt, unless the creditor discloses in a prescribed format that the debt may be unenforceable through a lawsuit because the time for filing suit may have expired, and that the debtor is not required by law to do what the creditor is requesting. 940 CMR 7.07(24).

DC Circuit Enjoins Enforcement of NLRB Posting Rule

Tue, 17 Apr 2012 00:00:00 -0400

On Tuesday, April 17, 2012, the United States Court of Appeals for the District of Columbia Circuit stayed the implementation of the National Labor Relations Board's rule requiring employers to post notices in the workplace regarding employees' rights to unionize. The stay will remain in effect until the D.C. Circuit Court resolves the pending appeal in NAM v NLRB, 2012 WL 691535 (D.D.C. Mar 2, 2012), wherein a D.C. District Court upheld the Board's ability to require notices be posted. This order comes just days after a United States District Court for the District of South Carolina struck down the Board's posting rule in Chamber of Commerce of the United States v. NLRB, 2:11-cv-02516-DCN (D.S.C. Apr. 13, 2012). That case no doubt also will be appealed.

Absent the stay, the posting rule had been scheduled to take effect April 30, 2012. The NLRB, which had postponed the implementation of the posting rule during the NAM district court proceedings, opposed the emergency motion for the injunction pending appeal. In granting the motion, the Circuit Court noted that the Board's position was at odds with its prior postponement, and also that the uncertainty about the enforcement of the rule in light of the Chamber of Commerce decision counseled further in favor of preserving the status quo during the appeal.

The order resolves the uncertainty as to whether and where the Board's posting rule would have been effective in light of conflicting district court decisions as to its legality. The stay will likely remain in effect for most if not all of 2012, as oral argument in NAM is not to be scheduled until September.

While employers need not post the notices for now, whether the appellate courts, if not ultimately the U.S. Supreme Court, will decide in the NLRB's favor is still much in doubt.

By: Ronald Kramer

Ronald Kramer is a Partner in Seyfarth's Chicago office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, or Ronald Kramer at rkramer@seyfarth.com.

Gerald Maatman Quoted in the Chicago Tribune
"Wal-Mart ruling that quashed many class actions helps bolster Merrill Lynch broker's case"

Mon, 16 Apr 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Gerald Maatman was quoted in a recent Chicago Tribune article on April 15 looking at the post-Dukes vs. Walmart future of class action lawsuits.

The article notes that while, according to Seyfarth's Class Action Litigation Report, Dukes vs. Walmart has been cited 260 times in less than a year, there is a recent case where the plaintiff is citing the case in support of their efforts to bring a class action.

"The reports of class actions being dead were highly exaggerated," Jerry said.

The full article can be read here: www.chicagotribune.com/business/ct-biz-0415-class-action-20120415,0,4710505.story

South Carolina District Court Rules NLRB Poster Rule is Unlawful

Mon, 16 Apr 2012 00:00:00 -0400

In a blow to the National Labor Relations Board's ("NLRB" or "Board") efforts to require employers to post notices in the workplace regarding employees' rights to unionize, the United States District Court for the District of South Carolina struck down the Board's posting rule on Friday, April 13, 2012. [Chamber of Commerce of the United States v. NLRB, 2:11-cv-02516-DCN (D.S.C. Apr. 13, 2012)]. This decision conflicts with another ruling from the United States District Court for District of Columbia which found the rule valid, but limited the potential penalties under the National Labor Relations Act ("NLRA" or "Act") for a failure to post [NAM v. NLRB, 2012 WL 691535 (D.D.C. Mar 2, 2012)]. The NLRB had ordered all employers (both union and non-union) to post these new notices by April 30, 2012.

In overturning the rule, the Court found significant the Board's admission that the posting rule diverged from the NLRB's traditional functions of issuing representation certifications and unfair labor practice orders. While the Board had asserted that it was "taking a modest step that is 'necessary to carry out the provisions' of the [NLRA] ... [in filling] a statutory gap left by Congress," the Court noted that for over 75 years the NLRB had not engaged in informational notice posting of employee rights.

The Court, therefore, concluded that the NLRA does not require employers to post general notices of employee rights under the Act. Applying Supreme Court precedent to the NLRB's rulemaking, the Court found that Congress -- in enacting the NLRA -- had not delegated authority to the Board to regulate employees in this manner. The Court determined that neither the legislative history, plain language nor the structure of the NLRA authorized notice posting independent of the NLRB's core functions of administering union representation elections or remedying unfair labor practices. While not discrediting the Board's finding that the notice-posting rule may be useful in educating employees as to their NLRA rights, the Court concluded that the NLRB simply does not possess the power to order postings of this type.

Notably, the Court indicated that if the NLRB did possess statutory authority to issue the notice-posting rule, the Board would have satisfied its legal requirement to provide a rational and satisfactory explanation of the rule -- as the District of Columbia decision likewise found.

The scope of the South Carolina decision will be unclear until the Court separately issues its mandate (i.e., whether its invalidation of the rule will be nationwide, or, given the contrary District of Columbia ruling, only limited to South Carolina).

With conflicting District Court decisions and the likelihood of appeals, it is possible that it could take years before the issue is conclusively resolved -- with the Supreme Court potentially weighing in. However, with the NLRB -- at least at the moment -- unable to enforce the rule on a consistent, national basis, it is possible that the Board could step back from its April 30 implementation. We expect that the NLRB will announce soon how it intends to respond to the South Carolina decision, and will promptly update you on significant developments.

DLSE Revises Wage Notice and FAQs: Good News and More Good News

Mon, 16 Apr 2012 00:00:00 -0400

Good news for employers: On Thursday April 12, 2012, the Division of Labor Standards Enforcement ("DLSE") issued a more streamlined, user-friendly template for California's Wage Theft Prevention Act. The new template notice can be accessed here. The DLSE also released a revised FAQ, which can be accessed here. More good news: employers need not issue a new notice to new hires who received earlier forms, unless, of course, there is some substantive change to report.

Background. As of January 1, 2012, the Wage Theft Protection Act (California Labor Code Section 2810.5; Assembly Bill 469) has required employers to provide new hires with wage notices that include specific information. The statute authorized the DLSE to add content deemed "material and necessary" to the list of eight items specifically covered by Labor Code 2810.5.

Just before the effective date, the DLSE issued a controversial template for the new wage notice. A day later, the DLSE released a set of Frequently Asked Questions (FAQs), which escalated the controversy still further. Employers objected that the DLSE's convoluted form went far beyond the statute. The DLSE subsequently revised its FAQs twice, on January 3 and again on January 23, but not in a manner employers viewed as positive. Employers were vocal about their frustrations. Although the DLSE did not necessarily make all of the changes requested by the employer community, the DLSE has moved in the right direction with its April 12 revisions.

Key Improvements. The new template omits confusing, legalistic fine print at the beginning and end of the form (e.g., deleting reference to the DLSE website where the form could be found in other languages and the list of categories of employees not entitled to the form). And there were a number of substantive and process improvements.

Signing by both sides is optional. The DLSE had initially required that the form be signed by both employer and employee. No such requirement appears in Labor Code 2810.5. The FAQ explains "As of April 11, 2012, the template has been updated to indicate that the Acknowledgment of Receipt is optional. Signatures by the employer or employee may provide assurance and confirmation that the notice was, in fact, provided by the employer and received by the employee, as intended by the Legislature. While the use of this acknowledgment thus better protects both the employer and employee, it is not required." The DLSE also added that the employer representative "may be any person the employer has authorized to sign the acknowledgment."
When the form must be provided is clarified to mean "a date determined by the employer and employee," but "in no event later than the first day services are performed by the employee." Earlier versions of the FAQs were confusing as to the meaning of "at time of hire" and implied that the form would need to be provided earlier than the first day of work in certain circumstances.
More guidance for temporary services firms, staffing agencies & professional employer organiazations (PEOs). The new template is simpler to navigate when a temporary services firm, staffing agency or professional employer organiazation (PEO) is involved. Earlier versions of the template contained confusing references to "worksite employers" and "other enitities used to hire employers or administer wages or benefits." That overbroad language gave rise to concerns that third party benefits administrators needed to be listed.

The new form asks: "Is hiring employer a staffing agency/business (e.g., Temporary Services Agency; Employee Leasing Company; or Professional Employer Organization [PEO])? ? Yes ? No." If "yes" is checked, the form asks for the name, physical and mailing addresses and telephone number of the other entity for whom the employee will perform work.

A recruiting service or simple payroll processing service is not a staffing agency or business for purposes of the notice. The FAQ states: "Identification of the other entity for whom the employee performs work does not itself establish liability among the respective businesses (staffing agency and client business for whom work is performed) but simply identifies the other entity for whom work is performed by the employee for which liability as an employer for wage payment and/or workers' compensation coverage can be determined, if necessary, with respect to the rights of the employee who performs services."

Changes in assignments. The FAQs also describe how the temp services firm/staffing agency/ PEO must update the notice after a change of work assignment. "If the staffing agency/business knows the client business (the 'other entity for whom this employee will perform work') where the employee is to be placed, the client business information must be indicated in the notice provided 'at the time of hire….'" If other placements are known at the time of initial placement, the staffing agency/business can list the other known placements. Subsequent placements are substantive changes to the information provided in the first notice. Within seven (7) calendar days, notice of the change must be given either by providing a whole new notice or reflecting the change in an itemized wage statement or other writing.
Written vs. oral contract eliminated. Employment contracts in California are typically a mixture of implied, oral and written terms. Employers were concerned about how best to handle the original template's requirement to state whether the employment contract is written or oral. The new template no longer requires stating "written" vs. "oral," but instead requires designation of whether a written agreement exists which provides for the rate(s) of pay. If the answer to the question is "yes," then the employer must check another box stating whether all rates of pay are included in the written agreement or not.

Lingering Issues of Concern

When is there a written agreement? The new formulation eliminating the "written vs. oral" dilemma is an improvement for employers, but the language still is not crystal clear. Some employers may have only part of their pay structure reduced to writing (e.g., written commission agreements) and their answer to the follow-up question about whether all rates of pay are included in the written agreement would be "no." Other employers may have a document that contains comprehensive formulas for all rates of pay (shift differentials, weekend, holiday, etc.) and their answer could be "yes," but only if they are willing to characterize that document as a written agreement. Reserving the ability to change and amend such a document will be important. Judgment calls must still be made. Reminder: all California employers must put their "commission" agreements in writing by January 1, 2013.
Multiple pay rates remain confusing. Although there are new examples in the revised FAQs, the basic problem remains that the regular rate of pay for overtime is a complex, variable calculation. According to a new example, an employer should give the lowest overtime rate (based on base pay) and indicate what factors may cause upward adjustment. "Overtime Rate: At least $13.50/hour (1½ times regular rate) & $18.00/hour (double time rate), subject to upward adjustment based upon earned commissions (10% of sales) and bonus (2% of department gross sales)."
Name of the employer. The new FAQs clarify that the employer must specify its full formal legal name including "Inc.," "Co.," "Corp.," "LLC," "Partnership" (if part of the full legal name of the business). The employer must specify any other name it is "doing business as" ("dba"). "Dba" includes both formal fictitious business names and informal names which are different from the legal name. Employers with multiple lines of business and independent subsidiaries who desire to preserve corporate separateness should take care to use the name of the specific employing entity (or entitites), not the parent or holding company's name.

In summary, the new template and FAQs are welcome, but complexities and strategic judgment calls are needed in checking the boxes and filling in blanks of the new wage notice. Employers should contact their employment law counsel for individualized advice.

By: Dana Howells

Dana Howells is senior counsel in Seyfarth's Los Angeles office. If you would like further information, please contact your Seyfarth attorney, or Dana Howells at dhowells@seyfarth.com.

Maryland First State To Ban Employers from Asking for Social Media Passwords

Fri, 13 Apr 2012 00:00:00 -0400

Maryland will become the first state to ban employers from requiring employees and applicants to disclose the passwords to their personal social media accounts. A pair of identical bills prohibiting the practice, S.B. 433 and H.B. 964, have been passed by the General Assembly and are now headed to Governor Martin O'Malley, who is expected to sign the legislation into law.

The Maryland legislation, which will take effect October 1, 2012, provides that employers, including their agents, representatives, and designees, are prohibited from requesting or requiring that applicants or employees "disclose any user name, password, or other means for accessing a personal account or service" electronically. Employers may not fail or refuse to hire an applicant for not providing access to personal accounts, nor may employers discipline, discharge, or threaten to discipline or discharge an employee who refuses employer access to personal accounts.

The legislation contains some protections for employers as well: It prohibits employees from downloading "unauthorized employer proprietary information or financial data" to personal accounts or to personal or public websites, and allows employers to investigate alleged violations of that prohibition if they receive information indicating that such unauthorized activity has occurred. Employers who receive information indicating that an employee is using personal accounts or personal or public websites for "business purposes" are permitted to conduct an investigation "for the purpose of ensuring compliance with applicable securities or financial law or regulatory requirements." The legislation also makes clear that employers may require employees to provide access to non-personal accounts that are part of the employer's information systems, which would include company email accounts. However, the legislation does not offer guidance regarding an employer's "agent" or "representative." This may pose concerns and risks for employers when conducting investigations and when in litigation with current employees.

In the wake of recent news stories regarding the practice by some employers of requiring that applicants disclose Facebook passwords, that applicants and employees "friend" hiring managers or human resources professionals, or that applicants log in to social media accounts during interviews, lawmakers in other states, including Illinois and California, have introduced legislation prohibiting the practice. Conversely, the U.S. House of Representatives recently rejected an amendment, proposed by Representative Ed Perlmutter of Colorado, that would give the Federal Communications Commission the power to stop telecommunications employers from asking job applicants for access to their social media accounts, but Senator Richard Blumenthal of Connecticut has announced his intent to introduce federal legislation barring the practice by all employers.

Some laud the Maryland law as a further necessary step in furtherance of individual privacy, while others may consider it a solution in search of a problem. Whatever the case, it imposes restrictions on employers that will need to be followed and is not likely the last word on the issue of social media for Maryland employers.

By: Virginia E. Robinson

Virginia E. Robinson is an associate in Seyfarth's D.C. office. If you would like further information, please contact your Seyfarth attorney or Virginia E. Robinson at verobinson@seyfarth.com.

Robert Milligan Published in the Intellectual Property & Technology Law Journal
"Top 10 Developments/Headlines in Trade Secret Computer Fraud, and Non-Compete Law"

Fri, 13 Apr 2012 00:00:00 -0400

Seyfarth Shaw Trade Secret partner Robert Milligan wrote an article published in the April 2012 edition of the Intellectual Property & Technology Law Journal. The article contains a list of the top 2011 developments/headlines in trade secret, computer fraud, and non-compete law.

While large jury verdicts and criminal prosecutions garnered a significant amount of attention, there were also a number of significant state and federal court decisions that have altered the landscape of trade secret, computer fraud, and non-compete law in various jurisdictions. There were also significant legislative efforts to modify trade secret, computer fraud, and non-compete law in various jurisdictions. These developments and predictions for 2012 trends are discussed in the article, and Robert's top 10 list includes significant state supreme court decisions, expanded role of the international trade commission in preventing foreign trade secret theft, continuing developments in legislation, significant jury verdicts and criminal sentences, emerging areas in social media and cloud computing, applicability of the computer fraud and abuse act in the workplace, forum-selection and choice-of-law provisions, protection for whistleblowers under the Sarbanes-Oxley Act for disclosure of company confidential information, trade secret preemption and protection of confidential information and stricter pleading requirements and pre-discovery identification of trade secrets.

Steven Pearlman Quoted in InsideCounsel
"Whistle Stoppers, Five ways to protect your company from whistleblower liability"

Fri, 13 Apr 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Steven Pearlman was quoted and cited several times in the April 2012 issue of Inside Counsel magazine. The article thoroughly discussed five broad suggestions for employers seeking to prevent liability from whistleblowing complaints by cutting off the threat at the source.

Steve's suggestions include ensuring that every employee has a one-page whistleblower protection policy at his/her desk with contact information for lodging a complaint internally. He also recommends that supervisors be thoroughly trained on what to say when an employee comes to them with a complaint.

"There are things they should say and things they should not say," he comments. "They should say thank you. It sounds basic, but they should welcome the response." He notes that, in this conversation, employers should also make clear that no retaliation will be suffered by the instigating party, the company will take the complaint seriously and that "we will get back to you to the extent practicable."

On the flip side, Steve warns against prematurely agreeing with the whistleblower that there is a problem before any investigation has taken place. "That's creating liability where none should exist," he says.

In the concluding paragraphs, Steve stresses the necessity for companies to engage in an effective, integrated response involving compliance, legal and human resources.

Click here to read the full article: http://www.insidecounseldigital.com/insidecounsel/201204?folio=45#pg45

Jennifer Kraft Quoted in Benefits Pro
"Striking individual mandate poses potential employer challenges"

Fri, 13 Apr 2012 00:00:00 -0400

Seyfarth Shaw Partner Jennifer Kraft was quoted extensively on March 30 in a Benefits Pro article on the potential ramifications to employers if the Supreme Court strikes down the invidual mandate in the Affordable Care Act.

If the court leaves most of the law intact but strikes down the individual mandate, employers could be in a position where they still have to implement the rest of the law, which could prove challenging because the mandate would have the effect of lowering overall health care costs.

“If that’s the case, I think that would be more of a challenge for employers because they would find themselves still in the position of having to implement all their health care reform changes, which drive up the cost of health care, but they wouldn’t have the offsetting impact of the individual mandate,” Jennifer says.

Christopher DeGroff quoted in Detroit Free Press
"Bias cases hit record numbers at EEOC"

Fri, 13 Apr 2012 00:00:00 -0400

Labor and Employment Partner Christopher DeGroff was quoted in a Detroit Free Press article on April 9. The article highlights a number of discrimination and retaliation suits brought by the EEOC on behalf of aggrieved employees who filed claims with the agency. Last year, the agency received a record of 99,947 complaints - an increase of more than 20% since 2007; one-third of which involved race discrimination or retaliation. While the article describes several ways that the EEOC helps its clients, it also sheds light on some of the agency's weaknesses.

Chris says, "EEOC practices differ from region to region and sometimes within the same office, making it difficult for employers to know where they stand on employment issues." He adds that federal judges are increasingly holding the EEOC accountable, citing last year's decision by a federal judge in Detroit who ordered the agency to pay an Ohio company more than $2.6 million in legal fees and costs for needlessly prolonging an 11-year gender discrimination case.

Click here to read the full article: http://www.freep.com/article/20120409/NEWS06/204090350

Richard Alfred Quoted in Law360
"Incompatibility Defense In Hybrid Wage Suits Down, Not Out"

Fri, 13 Apr 2012 00:00:00 -0400

Seyfarth Shaw Boston Labor & Employment partner Richard Alfred was quoted extensively in the Law360 article on April 4, "Incompatibility Defense In Hybrid Wage Suits Down, Not Out." The article discussed the Third Circuit’s ruling that federal wage-and-hour suits are not inherently incompatible with state class actions, but the argument that the two claims can’t coexist may still be applied in some circumstances.

“I think we have a few more innings to go on this issue before anyone can claim that it has been definitively decided,” Richard said. He also commented on the 2003 decision in De Asencio v. Tyson Foods Inc. in which the Third Circuit said that the trial court had abused its discretion by exercising supplemental jurisdiction over a Pennsylvania wage class action against Tyson, filed together with an FLSA suit.

"Last week's ruling didn't overturn De Asencio, but rather distinguished it from the Rite Aid litigation" [in which the appeals court issued a precedential opinion reversing lower court decisions that had dismissed two state law overtime class actions against Rite Aid Corp. on the grounds that they conflicted with the Fair Labor Standards Act.], Richard said. He added, "In fact, the appeals court actually pointed to two circumstances in which the incompatibility concept survives."

De Asencio “remains good law,” Richard said, adding that a federal court can still decline jurisdiction over a state-law claim if the claim raises a novel or complex state-law issue, or if it substantially predominates over the federal claim that accompanies it. "That leaves employers some room — given the right circumstances — to argue that state and federal wage and hour claims can't coexist," he said.

"If the question were to make its way to the high court, employers might fare better than they've fared at the intermediate appeals court level," Richard said. He added, “I would very much like to see the Supreme Court take up the issue, because the Supreme Court's view on this point may be considerably different than the circuits that have spoken to the issue.”

Leon Sequeira Quoted in the International Business Times
"Supreme Court Health Care Case: Do Oral Arguments Really Matter?"

Thu, 12 Apr 2012 00:00:00 -0400

Seyfarth Shaw Senior Counsel Leon Sequeira was quoted in a March 26 International Business Times article examining just how important oral arguments before the Supreme Court are.

The article, coming in the wake of six hours of oral arguments before the Court over the Affordable Care Act, notes the trend towards shorter oral arguments and the decline of their importance to Court rulings. Leon however thinks they still have a significant role. "That back and forth, both among the justices and between the counsel, presumably helps refine the issues and helps bring about some greater understanding by the justices of the parties' position," he said.

Click here to read the full article: http://www.ibtimes.com/articles/319723/20120326/supreme-court-health-care-case-oral-arguments.htm

Ninth Circuit Rejects Application of Computer Fraud and Abuse Act in Employee Theft Cases

Thu, 12 Apr 2012 00:00:00 -0400

On Tuesday, April 10, 2012, a Ninth Circuit en banc panel released its highly anticipated decision in United States v. Nosal. The Ninth Circuit affirmed the judgment of the district court dismissing criminal counts against a former employee of a headhunter firm accused of violating the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 et seq. (“CFAA”), by conspiring with employees of his former employer to log on to the employer’s confidential database and send proprietary files to a competitor.

Because the CFAA provides for both criminal and civil remedies, it has been a potentially useful tool for employers potentially damaged by employees who access employer computers and computer systems in violation of company computer access and use policies. The Nosal decision has significantly narrowed the circumstances in which CFAA civil claims may be available to employers.

The 9-2 opinion, authored by Chief Judge Alex Kozinski, is at odds with decisions by the Fifth, Seventh, and Eleventh Circuit Courts of Appeal construing the CFAA, and emphasizes the Ninth Circuit’s view that the government’s interpretation of the CFAA “would make criminals of large groups of people who would have little reason to suspect they are committing a federal crime.”

In framing this conclusion, the Court observed early in its decision that:

Computers have become an indispensable part of our daily lives. We use them for work; we use them for play. Some times we use them for play at work. Many employers have adopted policies prohibiting the use of work computers for nonbusiness purposes. Does an employee who violates such a policy commit a federal crime? How about someone who violates the terms of service of a social networking website?

This depends on how broadly we read the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030.

The Court then went on to reject the federal government’s interpretation of the CFAA, finding that the statute was meant to punish hacking, not misappropriation of trade secrets or someone who checks sports scores or logs onto Facebook from work. To find otherwise, Judge Kozinski reasoned would “criminalize any unauthorized use of information obtained from a computer” and “make criminals of large groups of people who would have little reason to suspect they are committing a federal crime.”

“Minds have wandered since the beginning of time and the computer gives employees new ways to procrastinate, by g-chatting with friends, playing games, shopping or watching sports highlights,” Kozinski wrote. “Such activities are routinely prohibited by many computer-use policies, although employees are seldom disciplined for occasional use of work computers for personal purposes. Nevertheless, under the broad interpretation of the CFAA, such minor dalliances would become federal crimes. While it’s unlikely that you’ll be prosecuted for watching Reason.TV on your work computer, you could be. Employers wanting to rid themselves of troublesome employees without following proper procedures could threaten to report them to the FBI unless they quit. Ubiquitous, seldom-prosecuted crimes invite arbitrary and discriminatory enforcement.”

Although the Court acknowledged that the Fifth, Seventh, and Eleventh Circuits permit employers to pursue CFAA claims against employees who violate computer use policies or violate duties of loyalty to their employer, the Ninth Circuit reasoned that:

“We remain unpersuaded by the decisions of our sister circuits that interpret the CFAA broadly to cover violations of corporate computer use restrictions or violations of a duty of loyalty. [Citations omitted.]. These courts looked only at the culpable behavior of the defendants before them, and failed to consider the effect on millions of ordinary citizens caused by the statute’s unitary definition of “exceeds authorized access.” They therefore failed to apply the long-standing principle that we must construe ambiguous criminal statutes narrowly so as to avoid “making criminal law in Congress’s stead.” United States v. Santos, 553 U.S. 507, 514 (2008).

We therefore respectfully decline to follow our sister circuits and urge them to reconsider instead. For our part, we continue to follow in the path blazed by Brekka, 581 F.3d 1127, and the growing number of courts that have reached the same conclusion.

The Ninth Circuit concluded that because Nosal’s accomplices had permission to access the company database and obtain the information contained within, the government’s charges fail to meet the element of “without authorization, or exceeds authorized access” under 18 U.S.C. § 1030(a)(4).

Further, discounting the government’s assertions of prosecutorial restraint, Judge Kozinski added that “The government assures us that, whatever the scope of the CFAA, it won’t prosecute minor violations.” “But we shouldn’t have to live at the mercy of our local prosecutor.”

In a powerful dissent, Judge Barry Silverman wrote:

This case has nothing to do with playing sudoku, checking email, fibbing on dating sites, or any of the other activities that the majority rightly values. It has everything to do with stealing an employer’s valuable information to set up a competing business with the purloined data, siphoned away from the victim, knowing such access and use were prohibited in the defendants’ employment contracts. The indictment here charged that Nosal and his co-conspirators knowingly exceeded the access to a protected company computer they were given by an executive search firm that employed them; that they did so with the intent to defraud; and further, that they stole the victim’s valuable proprietary information by means of that fraudulent conduct in order to profit from using it. In ridiculing scenarios not remotely presented by this case, the majority does a good job of knocking down straw men — far-fetched hypotheticals involving neither theft nor intentional fraudulent conduct, but innocuous violations of office policy.

The majority also takes a plainly written statute and parses it in a hyper-complicated way that distorts the obvious intent of Congress. No other circuit that has considered this statute finds the problems that the majority does. (emphasis added)

It remains to be seen whether the federal government will seek Supreme Court review. The clear split amongst the Circuit Courts of Appeal may be a path to such review.

The majority’s decision leaves employers in the Ninth Circuit, and particularly California, with less options than those in other circuits that recognize CFAA claims (both civil and criminal) for wrongful access to company computers to steal company data for competitive purposes.

In light of the Nosal decision, companies operating in the Ninth Circuit should continue to carefully evaluate the scope of access they provide employees to company computer systems and limit access to highly valuable information to only those who need to know.

Supreme Court Update in Christopher v. SmithKline: Will the Supreme Court Buy DOL’s Position on the Outside Sales Exemption?

Thu, 12 Apr 2012 00:00:00 -0400

Next Monday, April 16, 2012, the U.S. Supreme Court will hear oral arguments in the case of Christopher v. SmithKline, which involves application of the outside sales exemption under the Fair Labor Standards Act ("FLSA") to pharmaceutical sales representatives ("PSRs"). Also before the Court will be the question of whether the Department of Labor's ("DOL") position on the exemption, as expressed in a series of amicus briefs, is due deference. That question may have significant impact on the DOL's active amicus brief program.

The outside sales exemption applies to certain employees "[w]hose primary duty is[] making sales." The plaintiff PSRs in SmithKline claim that they do not meet this requirement because federal law prohibits the sale of any prescription drug without the authorization of a licensed physician. As a result, PSRs cannot consummate a sale of their employers' products to end-users but instead can only encourage physicians to prescribe those products. The argument will focus on whether the term "sales" requires a transfer of title or whether it must be interpreted broadly under a functional approach to include anyone who "in some sense" sells.

The argument will also focus on the degree of deference to be afforded to the amicus brief submitted by the DOL in support of the plaintiffs' position. The Court will decide whether the DOL's interpretation of its own regulations in the brief was entitled to controlling deference (as the Second Circuit held in a similar 2010 case) or whether the Ninth Circuit was correct in holding that no deference is required because the brief represents a departure from "pharmaceutical industry norms[] and the acquiescence of the Secretary [in the exempt classification of similar positions] over the last seventy-plus years," and the DOL regulations with respect to the outside sales exemption merely "paraphrase[s] the statutory language," such that the DOL has no "special authority to interpret its own words."

SmithKline sits at the intersection of a hot litigation topic, wage and hour law, and a perennial area of dispute at the Court, the limitations on a federal agency's power to regulate. As a result, the case has attracted a number of "friends of the court" ("amici"), ranging from trade groups, to PSRs, to constitutional law foundations. As often is the case in Supreme Court amici briefs, these briefs provide additional insight into the legal arguments, as they address nuances not covered in the principal briefs.

Most of the briefs in support of Respondent object to the plaintiffs' view on the deference issue. For example, the Equal Employment Advisory Counsel argues that the circumstances of the DOL's unsolicited amicus brief in this case are unlike the circumstances surrounding the amicus briefs at issue in prior Supreme Court cases that have given the DOL's positions deference. Specifically, in Auer v. Robbins, the Court sought the DOL's input on a test that was entirely the creation of the agency's notice-and-comment rulemaking. The Counsel argues that so-called "Auer deference" should be limited to such circumstances. The Center for Constitutional Jurisprudence goes even farther, arguing that Auer deference amounts to an abdication of judicial power in violation of separation-of-power principles and is unconstitutional. The NFIB Small Business Legal Center points out that affording the DOL's brief deference would have devastating impacts on small businesses, as it would result in retroactive liability and unfair surprise. Businesses already find it difficult to understand and comply with the overwhelming number of regulations published in the Code of Federal Regulations; subjecting them to regulatory changes set forth in unsolicited briefs filed in specific litigation would virtually ensure an inability to comply. The Washington Legal Foundation, Allen Educational Foundation, and Cato Institute similarly lament that allowing deference to the DOL in this case would give agencies leave to avoid the formal protections of notice-and-comment rulemaking, which could significantly undercut predictability.

The Pharmaceutical Research and Manufacturers of America ("PhRMA"), on the other hand, focuses on the impact that the Court's decision could have on the pharmaceutical industry. The group points out that if PSRs are non-exempt, that may require the industry to drastically change that position in ways that may not necessarily be beneficial to the PSRs themselves. A major benefit of the job as it currently exists is its flexibility, a characteristic that would change if PSRs were required to track their hours for overtime purposes.

In support of the plaintiffs, the National Employment Lawyers' Association and National Employment Law Project argue that the Ninth Circuit's interpretation of the outside sales exemption would dilute that exemption, introducing uncertainty and "expos[ing] a wide swath of other workers to exclusion from FLSA overtime and minim wage safeguards." The brief further argues that, from a historical perspective, employees who do not make actual sales have routinely been held to be non-exempt under the FLSA, and that the exemption should be read narrowly.

Two groups of PSRs who are or were plaintiffs in other exempt status cases filed briefs in support of the plaintiffs. A group of PSRs for Johnson & Johnson argue that all PSR work is "promotion" work, and thus falls outside of the scope of the outside sales exemption. A group of PSRs for Schering, Pfizer and Sanofi-Aventis argue that the DOL's position on PSRs has not changed, but rather that the position itself has changed over time due to regulatory changes. (PhRMA, however, interestingly points out that all of the regulatory changes that these PSRs describe occurred more than half a century ago, yet the DOL did not change its position until recently.) Finally, a group of medical professionals filed an amicus brief on the plaintiffs' behalf arguing that, as a result of physicians' ethical responsibilities, physicians cannot interact with PSRs as though they were buyers in a sales transaction, and "the role of PSRs in influencing prescription decisions [is] de minimis."

The influence that the varied views reflected in the briefs of these amici will have on the Supreme Court's reasoning remains to be seen. We will be attending the argument on Monday and will update our readers following the argument. For more information on this topic please visit The Wage & Hour Litigation Blog.

By: Richard Alfred, Alex Passantino and Jessica Schauer

Richard Alfred is a partner and Jessica Schauer is an associate in Seyfarth's Boston office. Alex Passantino is senior counsel in the firm's Washington D.C. office. If you would like further information, please contact your Seyfarth attorney, Richard Alfred at ralfred@seyfarth.com, Jessica Schauer at jmschauer@seyfarth.com or Alex Passantino at apassantino@seyfarth.com.

California Supreme Court Gives Employers a Major Break

Thu, 12 Apr 2012 00:00:00 -0400

Today, the California Supreme Court issued a unanimous 54-page opinion in its "meal and rest" case, Brinker Restaurant Corp. v. Superior Court. That case had been pending since 2008, when the Court agreed to decide whether employers must ensure that employees take meal breaks, or need only make the breaks available to the employees. The Court was also to address the required timing of meal and rest breaks, and the kind of evidence a plaintiff needs in order to justify class actions for alleged denials of meal break, rest breaks, and pay for work done off the clock.

The Court gave some surprisingly favorable results to employers. Interpreting the requirements of the California Labor Code and Wage Orders, the Court ruled:

Meal breaks. Employers must "provide" their non-exempt employees with 30-minute meal breaks in the sense of relieving the employees of all duty, but need not ensure that they actually cease to work during those breaks.
Meal break timing. Employers properly time meal breaks by providing the first break no later than the end of the fifth hour of work, and the second break no later than the end of the tenth hour of work. (The court rejected the plaintiff's proposed "rolling five-hour rule," by which a violation would occur if more than five consecutive hours of work occur without a meal break.)
Rest breaks. Non-exempt employees are entitled to a single 10-minute rest break for a shift from 3.5 to 6.0 hours in length, two 10-minute rest breaks for a shift of more than 6.0 and up to 10.0 hours, and three 10-minute rest breaks for a shift of more than 10.0 hours and up to 14.0 hours.
Rest break timing. Rest breaks ordinarily should be permitted in the middle of each four-hour work period, but need not be provided before a meal break.

Addressing issues of class certification, the Court held:

A meal break claim should not have been certified here based on the so-called "rolling five-hour rule," which was legally erroneous.
The claim for off-the-clock work during meal periods should not have been certified, because the employer's formal policy disavowed off-the-clock work, and because there was no common proof of a uniform policy or practice of off-the-clock work, just anecdotal testimony from a few witnesses.
A claim for missed rest breaks could be certified on the facts alleged here, on the theory that the employer failed to authorize a second rest break for shifts that were greater than 6.0 hours and less than 8.0 hours; the employer's defense that employees waived a rest break does not arise if the employer failed to authorize the rest break in the first place.

What Does Brinker Mean for Employers?

Meal breaks: Absent an on-duty meal-break agreement or a meal-break waiver, employers must provide an uninterrupted 30-minute meal break, during which the employee is relieved of all duty. An employer need not police meal breaks to ensure that employees are performing no work. If an employee does work during the meal break and the employer knew or has reason to know about it, then the employer would be liable only for straight pay, not the one hour of premium pay owed for a meal-break violation. A concurring opinion emphasizes the employer's duty to document the availability of meal breaks: if "an employer's records show no meal period for a given shift over five hours, a rebuttable presumption arises that the employee was not relieved of duty and no meal period was provided."

Rest breaks: Employer must permit rest breaks for any employee who works "a majority" of the four-hour period, so that an employee who works a shift longer than 6.0 hours is entitled to a second rest break. Employers must also permit rest breaks in the middle of each four-hour work period, unless practical considerations render that approach infeasible. The court did not say what practical considerations might suffice.

Off-the-clock work: Employers should have formal policies that non-exempt employees are to be paid for all time worked and are not to work off the clock.

Seyfarth Shaw is providing further guidance during its lunchtime webinar on April 18, 2012. For more details, click here.

By: Jeffrey A. Berman, Dana Peterson and Brandon R. McKelvey

Jeffrey A. Berman is a partner in Seyfarth's Los Angeles office. Dana Peterson is a partner in the firm's San Francisco office and Brandon R. McKelvey is a partner in the firm's Sacramento office. If you would like further information, please contact your Seyfarth attorney, Jeffrey A. Berman at jberman@seyfarth.com, Dana Peterson at dpeterson@seyfarth.com or Brandon R. McKelvey at bmckelvey@seyfarth.com.

Leon Sequeira Quoted in Health Data Management
"The View from Inside the Supreme Court"

Wed, 11 Apr 2012 00:00:00 -0400

Seyfarth Shaw Senior Counsel Leon Sequeira was quoted at length in a healthdatamanagement.com article on March 27, summarizing response to Supreme Court oral arguments on health care reform's individual mandate.

Leon said he was most surprised by the inability of the Obama administration to give a coherent explanation on the limits of congressional power, a failure he suspects may lead to the bill being overturned. “I have trouble giving you a good reason why they would uphold it,” he told the magazine.

For the full article, please visit the site here: http://www.healthdatamanagement.com/news/health-care-reform-affordable-care-act-supreme-court-44251-1.html?zkPrintable=true

Rebecca Woods Quoted and Featured in Law360
"Rising Star: Seyfarth's Rebecca Woods"

Wed, 11 Apr 2012 00:00:00 -0400

Seyfarth Shaw Washington, D.C. office partner Rebecca Woods was recently profiled in Law360 as one of the publication's top insurance attorneys under 40.

While many shy away from the complexities of insurance litigation, Rebecca embraced both the challenge and the variety early on in her career, dealing with from everything from Jewish burial rites to disposal of arsenic in the 1950s, the article notes. Rebecca has also embraced the principles of SeyfarthLean to become not only effective but efficient in delivering value to clients.

“I'm not interested in being a billing machine. I'm interested in doing high-quality work for our clients that gets them what they need,” Rebecca said.

The article notes her "impressive energy," citing her passion for pro bono work and also her position as president of the Board of Directors of the D.C. Rape Crisis Center.

Jennifer Kraft Quoted in Scrip Magazine
"Supreme Court justices question Congress' commerce powers in health reform case"

Tue, 10 Apr 2012 00:00:00 -0400

Seyfarth Employee Benefits Partner Jennifer Kraft was quoted recently in a Scrip magazine article examining the reaction to oral arguments at the Supreme Court over the constitutionality of the Affordable Care Act.

Jennifer, who helped write an amicus brief in the case and flew to Washington, D.C. to witness the arguments firsthand, noted that a great deal of the justices' questioning centered around possible analogies or hypotheticals. "Part of the purpose of the oral arguments is to help get at some of those key issues and analogize things in ways that maybe have not been considered in that light before," she noted.

Brian Ashe Quoted in Law360
"Clear Win or Employers Unlikely in Upcoming Brinker Ruling"

Tue, 10 Apr 2012 00:00:00 -0400

Seyfarth Shaw San Francisco office partner Brian Ashe was quoted in Law360 on April 5 in an article discussing the upcoming Supreme Court decision in the high-stakes wage and hour case against restaurant company Brinker International, Inc. If the court reverses a 2008 decision, attorneys say the fallout could be costly for employers.

“The debate over the word 'providing' in Labor Code Section 512 is more than academic — it is extremely important to California employers,” said Brian. “If they must 'ensure' that meals are taken by their nonexempt employees, then they must strictly police meal breaks to make certain that they are being taken.”

Even though Brinker appears to be slated to win concerning the most high-profile question in the case, attorneys say the justices seemed to be leaning toward the plaintiffs' position on the so-called rolling five meal break timing issue, which concerns whether employers must provide meal breaks after every consecutive five hours worked, or if they should be based on the total number of hours worked over the course of the day.

Brian said,"...a victory for the workers on the rolling five question would give plaintiffs attorneys 'a back door entrance' to the 'ensure' standard."

“If that is how the opinion is written, then employers will essentially need to 'ensure' that nonexempt employees are permitted to take meal breaks at a certain time, i.e., the middle of the shift,” he added.

Brian predicted, that if passed, "the new requirement for employers would lead to its own rash of class actions, especially because even sophisticated California employers do not currently have policies in place to ensure that meal breaks are taken in the middle of shifts."

Seyfarth Shaw Adds Labor & Employment Trio in New York

Mon, 09 Apr 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

Firm adds more than 100 attorneys to Labor & Employment group in past 18 months

NEW YORK (April 9, 2012) — Leading law firm Seyfarth Shaw LLP is pleased to announce the addition of three attorneys to the firm’s national Labor & Employment Department, fortifying the firm’s extensive group of labor lawyers, and continuing Seyfarth’s expansion of more than 100 new attorneys hired within the past 18 months in the department. Partners Cliff Fonstein and Nicholas H. De Baun and associate Tara Conroy have joined Seyfarth’s New York office from Sidley Austin LLP.

Fonstein said, “Seyfarth Shaw provided the best opportunity for the growth of my practice and the continued support of my clients. The firm’s established reputation as the go-to law firm for employment legal expertise was a huge draw, and I look forward to working with and getting to know my new colleagues.”

“The depth of Seyfarth’s capabilities in the employment law arena is unmatched in my book,” said De Baun. “Bringing my practice here was a clear choice, and it will yield several benefits for my current and future clients.”

“Our national Labor & Employment practice has been growing in all of our offices over the last 18 months with many key hires across the country,” said Seyfarth Shaw Labor & Employment Department Chair Lisa Damon. “We’ve benefitted substantially from several groups of new attorneys, each expanding our reach within the particular niches of employment law. Crucial for any firm with a New York presence, Nick and Cliff deepen our ranks of attorneys with their particular experience advising financial services clients with extensive Financial Industry Regulatory Authority (FINRA) arbitration and trial experience; they are an excellent fit for our department.”

Lorie Almon, Seyfarth Shaw’s New York Office Co-Managing partner and chair of the New York Labor & Employment group added, “Cliff, Nick and Tara are excellent employment litigators, and their reputation in our legal market is first-rate. With their addition, Seyfarth’s New York office continues aggressive yet sustainable growth, which enables us to expand the range and quality of services that our clients require.”

Cliff Fonstein has more than 25 years of experience counseling clients in all areas of employment law and has litigated a broad array of employment cases for these clients, ranging from single plaintiff whistleblower and discrimination claims to large class actions. While Fonstein’s practice has focused on representing clients in all facets of the financial services industry from hedge funds to large investment banks, he has also represented airline, manufacturing and media clients as well. On behalf of these clients, he appears regularly in state and federal courts and before FINRA arbitration panels. Fonstein received his undergraduate degree from University of California at Berkeley and his law degree from University of California at Los Angeles. He is a member of the New York and District of Columbia bars.

Nicholas De Baun has almost 20 years of experience representing employers across a broad spectrum of industries with a special emphasis on financial services. In particular, De Baun has extensive experience representing employers in virtually every sector of the financial services industry, including investment banks, broker-dealers, private equity firms, hedge funds, and accounting firms. De Baun provides a full range of employment law services, including Title VII, ADA, ADEA, FMLA and common law employment matters. He also counsels clients, investigates employment and whistleblower claims, prepares position statements, drafts employee handbooks, and negotiates and drafts severance agreements. He has represented clients in state and federal court, before state and federal administrative agencies, and in mediations and arbitration, including extensive FINRA arbitration experience. De Baun received his undergraduate degree from Oberlin College and his law degree from New York University School of Law. He is a member of the New York bar.

Tara Conroy also joins Seyfarth as part of the Labor & Employment department. She received her undergraduate degree from Georgetown University and her law degree from Cornell Law School. She is a member of the New York bar.

Katherine Perrelli Quoted and Alexander Jeffrey Mentioned in Legal Bisnow
"The Mysterious, True Story of An Art Deal"

Mon, 09 Apr 2012 00:00:00 -0400

Boston partner and national Litigation group Chair Katherine Perrelli was quoted and counsel Alexander Jeffrey was mentioned on March 29 in a Legal Bisnow article regarding the closely watched case Edelman Arts, Inc. v. Art International (UK) Ltd. in which Seyfarth client, Art International, prevailed in a long-running dispute over the purchase and sale of the 1923 Piet Mondrian painting "The Composition."

The case involved international discovery under the European Union Data Protection Act, numerous motions relating to exclusion of documentary evidence from witnesses in foreign jurisdictions, and unique issues under the Uniform Commercial Code in the context of high-end international art dealings. The issues are of critical importance to the art industry and how galleries, dealers and other players conduct sales of major works, and the litigation surrounding the proposed transaction involved multiple parties on either side from several different countries, with the ultimate seller of the painting several times removed from the entity with whom our client was dealing. Kate noted that Art International [AI] feels "vindicated," and that, "it is crucial in the art industry to be seen as trustworthy."

Click here to read the full article: http://www.bisnow.com/dc-legal/2012/03/29/the-mysterious-true-story-of-an-art-deal/

eDIGital Newsletter - April 2012

Mon, 09 Apr 2012 00:00:00 -0400

The Third Circuit Says “No” To The Taxation of E-Discovery Costs

Introduction

In Race Tires America v. Hoosier Racing Tire Corporation,¹ the Third Circuit Court of Appeals significantly limited the taxation of e-discovery expenditures as costs to the losing party. The District Court in the Western District of Pennsylvania held that more than $365,000 in charges imposed by e-discovery vendors, covering hard drive imaging, data processing, keyword searching, and file format conversion, were taxable under Federal Rule of Civil Procedure 54(d), without differentiating between those charges that constitute “fees for exemplification,” and charges that constitute “costs of making copies.”² On appeal, in Race Tires,³ the Third Circuit affirmed in part and vacated in part. After first noting conflicting decisions by other courts, the Third Circuit held that none of the activities at issue can be regarded as “exemplification” of materials and only scanning and file format conversion can be considered to be “making copies,” activities that amount to approximately $30,000 of the e-discovery charges taxed in the case.

In arriving at this decision, the Court effectively narrowed what is recoverable as an “exemplification” and “copy” expense under the statute. What follows is a summary of 28 U.S.C.§ 1920, the decisions of the lower court, the parties’ respective arguments and distinguishing cases from other jurisdictions. While binding only in the Third Circuit, the opinion is useful for both outside and in-house counsel in discussing both the role of e-discovery vendors in the discovery process and the extent to which vendor costs should be included in settlement demands.

F.R.C.P. 54(d) and 28 U.S.C. § 1920

Federal Rule of Civil Procedure 54(d)(1) provides that “[u]nless a federal statute, the rules, or court order provides otherwise, costs - other than attorney’s fees - should be allowed to the prevailing party.”⁴ By way of background, 28 U.S.C. § 1920 gives federal courts the authority to force losing parties to reimburse their winning counterparts for certain costs incurred during the course of a litigation.⁵

Section 1920(4) provides in pertinent part:

A judge or clerk of any Court of the United States may tax as costs the following:

Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.⁶

Procedural History

In Race Tires, Plaintiff, Race Tires of America, a producer and supplier of racing tires, sued Defendants, Hoosier Racing Tire Corporation and Dirt Motor Sports, also tire suppliers, asserting violations of Sections 1 and 2 of the Sherman Act.⁷ Once discovery concluded, Defendants’ motion for summary judgment which was granted by the District Court.⁸ Plaintiff appealed the judgment, but was unsuccessful.⁹

As the prevailing parties, Defendants submitted a Bill of Costs pursuant to F.R.C.P 54(d).¹⁰ The Clerk of the Court stated that this was “the first case in the Western District of Pennsylvania [where] a party ha[d] requested [e-discovery] costs be taxed.”¹¹ The Clerk subsequently awarded $367,359.36 in costs for hard drive imaging, file processing, file conversion, keyword searching and production.¹² The Court made clear that such costs were “fees for [the] exemplification and the cost of making copies of any materials where the copies [we]re necessarily obtained for use in the case” and found that “the steps the third-party vendors [took] were the equivalent of exemplification and copying.”¹³ Further, that the vendor’s “highly technical” services were not “the type of services that attorneys or paralegals [we]re trained for or capable of providing.”¹⁴

Arguments

Plaintiff argued that the e-discovery expenditures did not constitute fees for “exemplification” or “making copies” and, specifically, that the District Court erred in its interpretation of § 1920(4) by (i) including costs other than that of scanning and Tagged Image File Format (“TIFF”) imaging (ii) permitting electronic materials that were not used or produced in the litigation to be taxed and (iii) that the e-discovery costs were generally exorbitant.¹⁵

Defendants argued that the e-discovery expenditures fell within the statute’s allowances for “exemplification” and “making copies” but failed to distinguish between both.¹⁶ They further argued that the costs were reasonable based on the amount of electronically stored information (“ESI”) requested by Plaintiff.¹⁷

Applying a strict statutory interpretation of 28 U.S.C. § 1920(4) in arriving at its decision, the Court held that the work performed by the e-discovery vendors did not constitute fees for “exemplification” because the vendors “did not produce illustrative evidence or authentic[ate] public records.”¹⁸ Moreover, the Court used a strict constructionism approach to the “making copies” language used Section 1920(4). It opined that the physical activities performed by the e discovery vendors leading up to production, despite requiring technical expertise, did not amount to “making copies.”¹⁹ According to the Court:

Section 1920(4) does not state that all steps that lead up to the production of copies of materials are taxable. It does not authorize taxation merely because today’s technology requires technical expertise not ordinarily possessed by the typical legal professional. It does not say that activities that encourage cost savings may be taxed. Section 1920(4) authorizes awarding only the cost of making copies.²⁰

The Court noted that the lack of specificity by the third-party vendors and their technical jargon made it difficult to understand the expenditures.²¹ The Court ultimately held that only the scanning, file format conversion and VHS to DVD conversion could be considered “making copies” – activities that amounted to a mere $30,000.²²

Other Decisions

Contrary to the court in Race Tires, several jurisdictions have allowed for the recovery of e-discovery expenses under Section 1920. In Tibble v. Edison International, the court awarded the defendant more than $500,000 under Section 1920, holding that the costs were incurred as a direct result of responding to the plaintiff’s discovery requests.²³ The court stated that because the plaintiff aggressively sought electronic data, the defendant should be reimbursed for expenses incurred in complying with such requests.²⁴

In another case out of the Eastern District of Pennsylvania, In re Aspartame Antitrust Litigation, the defendant prevailed on summary judgment and costs were awarded under Section 1920.²⁵ In that case, the defendant was awarded $573,035.13 for the creation of a litigation database, hard drive imaging, data storage, keyword searching, data extraction, processing, hosting and the creation of Concordance load files.²⁶

Most significantly, the case heavily relied upon by the Race Tires court was CBT Flint Partners, LLC v. Return Path Inc.²⁷ In that case, the Northern District of Georgia allowed for the taxation of $243,453.02 in e-discovery expenses associated with the identification, collection, searching and producing of 1.4 million electronic records and six versions of source code.²⁸ The court stated that the e-discovery services were “the 21st century equivalent of making copies.”²⁹

Conclusion

Setting aside whether this opinion may have been wrongly decided, it is important to note that it is the first to come from a federal appellate court in any circuit. Based on the case law, we can be fairly confident that costs will be awarded under Section 1920(4) for scanning, media copies and the expenses associated with producing documents such as the creation of TIFF images. Conversely, it is unlikely that a court will reimburse attorney review costs. What is far less certain is whether taxation of expenditures associated with other essential phases of the e-discovery process will be granted.

Practitioners should ensure that their e-discovery vendor invoices are able to be clearly explained in an ultimate petition for costs. Those practicing in the Third Circuit should note that e-discovery costs, except for those enumerated above, cannot be included in final estimates when having settlement discussions. Although the Third Circuit has said a resounding “no” to a broad interpretation of taxable e-discovery costs under U.S.C. Section 1920, it is difficult to determine what the future holds for other jurisdictions. In the meantime, please do not hesitate to contact any of the ten experienced members of Seyfarth Shaw’s eDiscovery and Information Governance practice group with questions or advice regarding this or any related matter.

¹ No. 11-2316 (3d Cir. Mar. 16, 2012), rev’g 614 F.3d 57 (3d Cir. July 23, 2010), available at http://www.ca3.uscourts.gov/opinarch/112316p.pdf.

² 28 U.S.C. § 1920(4) (2006).

³ Race Tires, 614 F.3d 57

⁴ FED. R. CIV. P. 54(d)(1).

⁵ 28 U.S.C. § 1920.

⁶ Id.

⁷ Race Tires, at 6.

⁸ Id. at 9.

⁹ Id. at 10.

¹⁰ Id.

¹¹ Id.

¹² Id.

¹³ Race Tires, at 12.

¹⁴ Id.

¹⁵ Id. at 17.

¹⁶ Id.

¹⁷ Id.

¹⁸ Race Tires, at 18.

¹⁹ Id.

²⁰ Id. (emphasis added).

²¹ Id. at 20.

²² Id. at 24-25.

²³ No. CV 07-5359-SVW-AGR, 2011 WL 3759927, at *8 (C.D. Cal. Aug. 22, 2011).

²⁴ Id. at *7.

²⁵ No. 2:06-CV-1732-LDD, 2011 WL 4793239 (E.D. Pa. Oct. 5, 2011).

²⁶ Id.

²⁷ 676 F. Supp. 2d 1376 (N.D. Ga. 2009), vacated on other grounds by 654 F. 3d 1353 (Fed. Cir. 2011).

²⁸ Id. at 1380-81.

²⁹ Id. at 1381.

Amadeo Cantu Published in Law Journal Newsletters Commercial Leasing Law & Strategy
"Master Lease Boilerplates"

Fri, 06 Apr 2012 00:00:00 -0400

Real Estate Partner Amadeo Cantu recently published a spotlight article on master lease boilerplates in the April 2012 issue of Law Journal Newsletters' Commercial Leasing Law & Strategy.

The article urges attorneys to pay closer attention to boilerplate provisions, particularly in sublease agreements, in order to head off potential problems before they begin. In particular, he recommends not using a general incorporation method when incorporating master lease boilerplate, and instead using specific incorporation to reduce unintended results.

Benjamin Conley Quoted in Fox Business
"Businesses Ponder Impact of Health-Care Reform"

Fri, 06 Apr 2012 00:00:00 -0400

Employee Benefits attorney Benjamin Conley was quoted March 29 in a Fox Business article on the impact of health care reform's uncertain future.

The article examines the difficulty many businesses are encountering in dealing with health care reform, particularly in the face of the Supreme Court challenge. Ben notes that many employers hovering near the 50-employee threshold, appear to be holding off on going over it, to avoid some of the law's impact on their current health plans. He also notes that many employers are struggling with the law's requirement to provide minimum quality coverage “because it’s vague."

Click here to read the full article: http://www.foxbusiness.com/industries/2012/03/28/individual-mandate-just-half-debate/#ixzz1qbychMTz

Seyfarth Shaw Names Andrew Jurczyk New Chief Information Officer

Thu, 05 Apr 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

CHICAGO (April 5, 2012) — Leading law firm Seyfarth Shaw LLP is pleased to announce that Andrew D. Jurczyk has joined the firm as its Chief Information Officer, starting in May. He was previously Global Chief Information Officer at law firm SNR Denton.

With more than 25 years of information services experience, Jurczyk has provided innovative solutions and introduced cutting-edge technologies both in-house at SNR Denton and Sidley Austin and at global communications companies Donnelly Enterprise Solutions, Inc. and AT&T. A seasoned manager, Jurczyk has led IT teams in the design and implementation of pioneering communications and business plans while still achieving cost savings and operational consistency for the businesses.

As Seyfarth’s top information technology official, Jurczyk will oversee the department’s technology infrastructure and systems. “Andrew is a resourceful leader, and his record of success improving IT organizations will be a great asset to the firm,” said Seyfarth Shaw partner Edward Karlin. “He’s a strategic thinker, and under his leadership, our IT team will be well positioned to capitalize on emerging technologies that align with our business objectives.”

Massachusetts CORI Reform: A Wave of New Obligations For Employers Conducting Criminal Background Checks

Thu, 05 Apr 2012 00:00:00 -0400

As employers who do business in Massachusetts are aware, on August 6, 2010, Governor Patrick signed into law a bill that overhauled the Commonwealth's Criminal Offender Record Information (CORI) law. The first round of amendments, which went into effect on November 4, 2010, focused on a "ban the box" provision that prohibits employers from asking about an applicant's criminal history on an initial written application except in limited circumstances. Many employers have revised their written applications or altered their procedures to comport with this portion of the amended statute.

Round two of the CORI reform legislation is slated to go into effect on May 4, 2012, and includes numerous other requirements targeted at Massachusetts employers that conduct criminal background checks. In addition, the Department of Criminal Justice Information Services (DCJIS), the agency responsible for administering the CORI statute, recently issued proposed regulations related to the second round of requirements. DCJIS held a public hearing on the proposed regulations on March 30, 2012, and will accept written comments until April 19, 2012. Most provisions of the regulations provide clarification and guidance to employers with respect to their new obligations and also directly address the role of Consumer Reporting Agencies (CRAs) in conducting background checks in Massachusetts.

The following summary is designed to provide employers with an understanding of the requirements imposed by the new Massachusetts CORI law, the additional requirements imposed by the proposed regulations, and the steps employers need to take to ensure compliance with the CORI law.

Ban The Box

Effective November 4, 2010, the CORI law makes it unlawful for an employer to request criminal history information on an "initial written application." M.G.L. c. 151B, § 4(9½). This provision amends a portion of the Massachusetts Fair Employment Practices Law, M.G.L. c. 151B, § 4(9), which bars employers from asking questions of job applicants about arrests that did not result in convictions and convictions for certain misdemeanors.¹ As previously reported (click here), the Massachusetts Commission Against Discrimination, the agency responsible for enforcing this provision of the CORI law, has interpreted this "ban the box" requirement to prohibit employers from requesting criminal history information on any written application or form "prior to an interview." By passing this law, Massachusetts joined Hawaii and became the second state to prohibit asking about criminal history on an application. Haw. Rev. Stat. § 378-2. Many other states have additional restrictions on questions that employers may ask on an employment application. Given this trend in state law, as well as the EEOC's anticipated guidance (occurring likely in April 2012) that the use of criminal history has a disparate impact on protected groups, employers are encouraged to evaluate their employment applications as well as if, and when, they will ask about criminal history in the hiring process.

The CORI law includes two exceptions to the blanket prohibition against requesting criminal history on an initial written application. An employer may ask about criminal convictions if: (i) the applicant is applying for a position for which a federal or state law or regulation creates a mandatory or presumptive disqualification based on a conviction; or (ii) the employer is subject to an obligation under a federal or state law or regulation not to employ persons who have been convicted of certain offenses. M.G.L. c. 151B, § 4(9½). It is important to note that employers such as banks or healthcare facilities, who are exempt from the "ban the box" provision of the CORI law, are not exempt from the other provisions of the law discussed below.

Requesting & Using CORI

Increased Access to Criminal History Information Obtained Through DCJIS

Under the CORI law, most employers will have greater access to criminal record information maintained by DCJIS. Prior to May 4, 2012, most private sector employers had to be certified by DCJIS in order to receive CORI from the agency. Beginning May 4, 2012, all employers may obtain "Standard Access" to CORI for the purpose of evaluating current and prospective employees, including full and part-time employees, contract employees, interns and volunteers. M.G.L. c. 6, § 172(a)(3).

Standard Access to CORI through DCJIS will allow employers to obtain criminal record information about: (i) all pending criminal charges, including cases continued without a finding of guilt until such charges are dismissed; (ii) all felony convictions for 10 years following the date of disposition or release from incarceration, whichever is later; (iii) all misdemeanor convictions for 5 years following the date of disposition or release from incarceration, whichever is later; and (iv) all convictions for murder, voluntary manslaughter, involuntary manslaughter, and sex offenses punishable by a term of incarceration in state prison, unless such conviction has been sealed. In the event that any criminal conviction qualifies to be included on a CORI report pursuant to these criteria, an individual's prior misdemeanor and felony conviction record will also be available, regardless of when the conviction or convictions occurred. M.G.L. c. 6, § 172(a)(3) and (a)(30)(b).

In the event that an employer needs criminal record information beyond what the "Standard Access" includes to comply with a particular statute, regulation, or accreditation requirement, DCJIS will grant the "required" level of access needed. The proposed regulations specify four different levels of Required Access depending on the underlying legal basis mandating that the employer obtain CORI. 803 CMR 2.05(3)(b). The regulations do not provide detail as to how DCJIS will determine which employers may obtain information that is subject to the various levels of Required Access or how employers will become certified to obtain Required Access. Instead, the regulations state only that Required Access will be provided "depending on the language of the statutory, regulatory or accreditation requirement that mandates obtaining CORI." Id.

Nothing in the CORI law prohibits an employer from seeking criminal history from a source other than DCJIS. As discussed below, however, the CORI law imposes obligations on employers seeking such information.

Where an employer utilizes a CRA to obtain criminal record information, the CRA will have the same level of access to CORI from DCJIS as the client on whose behalf the CRA is performing the CORI check. 803 CMR 11.04(1)(b). The proposed regulations also establish guidelines for the type of criminal history information a CRA can disseminate to its clients which closely mirror the federal Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et. seq.; 803 CMR 11.11.

Finally, employers should be aware that the CORI law makes it unlawful to require a person to provide a copy of his or her own criminal offender record when applying for employment. M.G.L. c. 6, § 172(d).

Documentation and Record-Keeping Requirements For Employers Who Request CORI Information From DCJIS

The new CORI law requires employers to follow certain procedures in order to access an individual's criminal record through DCJIS. Before an employer conducts a criminal record check, it must have the subject of the criminal check sign a CORI Acknowledgment Form authorizing the employer to obtain his or her record and verify the subject's identity by reviewing a form of government-issued identification. M.G.L. c. 6, § 172(a)(30)(c). Pursuant to the proposed regulations, acceptable types of government-issued identification include: (i) a state-issued driver's license; (ii) a state-issued identification card with a photograph; (iii) a passport; or (iv) a military identification. 803 CMR 2.09(3). The proposed regulations require the employer's representative to sign and date the CORI Acknowledgment Form certifying that the subject was properly identified. In the event that an employer is unable to verify an individual's identity and signature in person, the proposed regulations allow the individual to sign an Acknowledgement Form before a notary public. 803 CMR 2.09(5). CORI Acknowledgment Forms must be maintained by the employer for at least one year.² M.G.L. c. 6, § 172(a)(30)(c).

To obtain CORI from DCJIS, the individual requesting the record must provide DCJIS with information identifying the subject (name, date of birth, and last six digits of social security number) and certify under oath that: (i) he or she is the authorized designee of the employer; (ii) the request is for the purpose of evaluating an applicant or current employee; (iii) the applicant or employee has signed an acknowledgement form authorizing the employer to obtain criminal record information; and (iv) the requestor has verified the identity of the applicant or employee by reviewing a form of government-issued identification. M.G.L. c. 6, § 172(a)(30)(c). Although not specified in the statute, the proposed regulations state that the employer must submit the subject's executed CORI Acknowledgment Form to DCJIS. 803 CMR 2.09(1)(a).

The proposed regulations also provide that the Acknowledgment Form is valid for one year from the subject's having signed the form or until the subject's employment ends, whichever occurs first. 803 CMR 2.09(9). An employer that submits a new CORI request within one year of the subject's having signed the original Acknowledgment Form must provide the subject with written notice at least 24 hours prior to submitting the request. 803 CMR 2.09(9)(a). If the employee revokes his or her authorization upon receiving such notice, the employer may not request the employee's CORI. 803. CMR 2.09(9)(c).³

Employers should be aware that DCJIS will maintain a log of all requests for criminal records, which includes the name of the requesting entity, the date of the inquiry, and the certified purpose of the inquiry. An individual may request a "self-audit" and obtain information from DCJIS regarding requests for the individual's own CORI. M.G.L. c. 6, § 172(g); 803 CMR § 2.24.

Using Consumer Reporting Agencies (CRAs) to Conduct Criminal Background Checks

While the amended CORI statute does not discuss the use of third-party consumer reporting agencies, the proposed regulations delineate how and when CRAs can access CORI information, specify a CRA's responsibilities under the law, and provide that employers may outsource decision-making functions to CRAs.⁴ Generally, these requirements track those of the FCRA, with some minor differences. 803 CMR 2.21.

The proposed regulations specifically contemplate that employers may use a third party CRA to request CORI information from DCJIS either through iCORI or in paper format.⁵ Similar to the FCRA, before a CRA can request CORI on an employer's behalf, the employer must: (i) notify the applicant in writing in a document consisting "solely" of such notice of its intent to obtain CORI, and (ii) obtain the applicant's written authorization to obtain this information. 803 CMR 2.21(1)(a)(1), (2). This requirement may differ from the FCRA, however, because the proposed regulations require that the written authorization be "separate" from the notice. Interpreting the FCRA, the Federal Trade Commission (FTC) has opined that although the FCRA also requires that an employer provide a disclosure consisting "solely" of the disclosure, such disclosure can be on the same form as the authorization. See FTC Opinion Letter (Steer, Oct. 21, 1997). The regulations prohibit an employer from substituting a CORI Acknowledgement Form for the authorization required by the FCRA. 803 CMR 2.21(1)(a)(2).

Employers utilizing a CRA must also certify to the CRA that they are in compliance with the FCRA. Additionally, the employer must provide "accurate identifying information" for the individual about whom any CORI is requested⁶ and the purpose for which the information is being requested. The proposed regulations reiterate the FCRA requirement that employers must not misuse any information in the consumer report in violation of federal or state laws or regulations. 803 CMR 2.21(b). It is unclear from the proposed regulations whether an employer certification need only contain the representation that the employer is in compliance with the FCRA, or must also include a certification with respect to the other provisions set forth in this paragraph.

As discussed below, under both the FCRA and the proposed regulations, regardless of the source of the information (DCJIS or other), an employer must comply with a detailed set of procedures before taking adverse action toward an individual based on criminal history information.

Requirements For Taking Adverse Action Based on Criminal History Information

The amended CORI statute does not prohibit employers from asking an individual about his criminal history (after the initial application), nor does it prohibit an employer from deciding not to hire a person or taking other adverse action based on a person's criminal history. M.G.L. c. 6, § 171A. In many respects, the CORI requirements on this point are very similar to the requirements under the FCRA. Similar to the FCRA, prior to questioning an applicant about his or her criminal history, the CORI statute requires that the employer provide the applicant with a copy of the criminal history record, whether obtained from DCJIS or any other source. M.G.L. c. 6, § 172(c). If an employer chooses to take adverse action based on a criminal record, the employer must notify the applicant about the potential adverse decision and provide: (i) a copy of the applicant's criminal record; (ii) a copy of the employer's criminal background check policy; and (iii) information concerning the process for correcting a criminal record.⁷ The above information must be provided to an applicant regardless of the source used to obtain the criminal history information and regardless of whether a CRA was used to obtain the information. If the employer provided the applicant with his or her criminal record prior to questioning the applicant, the employer does not need to provide the record again in connection with an adverse action decision. M.G.L. c. 6, § 172(c). Unlike the FCRA, CORI requires the additional step of providing the employer's policy and specific information on how an individual can correct his or her CORI record. As such, employers are well advised to provide a copy of the DCJIS document entitled "Information Concerning the Process in Correcting a Criminal Record" with the FCRA pre-adverse action letter.

The proposed regulations expand on the requirements regarding the use of CORI and make a distinction between employers who obtain CORI from DCJIS and employers who obtain criminal history information from a source other than DCJIS. Specifically, in addition to providing the information specified above, and similar to the FCRA, before taking adverse action, all employers must provide the applicant with an opportunity to dispute the accuracy of the information contained in the criminal record regardless of the source of information. 803 CMR 2.17(1), (6). But, where an employer takes adverse action based on information obtained from DCJIS, the employer must apprise the affected individual of the information in the applicant's CORI that is the basis for the decision. 803 CMR 2.17(5). Where an employer takes adverse action based on information from a source other than DCJIS, the employer does not have to provide such a basis, but must identify the source from which the criminal history information was obtained. 803 CMR 2.18(3). Finally, the proposed regulations require that employers "document all steps taken to comply" with the regulatory requirements.

Additionally, if an employer uses a CRA to obtain CORI, the employer must also follow the requirements of the FCRA, which include providing the individual the FTC's document entitled "A Summary of Your Rights Under the Fair Credit Reporting Act" with the pre-adverse action notice.⁸

Policy & Training Requirements

Employers Who Conduct Five or More Criminal Background Investigations Per Year Must Have a Policy

The CORI statute requires employers that annually conduct five or more criminal background investigations to maintain a written criminal offender record information policy. M.G.L. c. 6, § 171A. This requirement applies to employers whether they obtain criminal record information directly from DCJIS or through another source - including through a CRA. In addition to any obligations required by the regulations, a CORI policy must provide that the employer will: (i) notify the applicant if a potentially adverse decision may be made based on the criminal record information; (ii) provide the applicant a copy of the criminal record information obtained and a copy of the employer's criminal record policy; and (iii) provide information concerning the process for the applicant to correct his or her criminal record. Id.

The proposed regulations do not contain any additional requirements that employers must include in a policy, but do state that DCJIS will maintain a model CORI policy on its website. 803 CMR 2.15. The model policy currently on the DCJIS web-site includes the requirements set forth above, but is broader in scope. Employers should closely review their current policy or seek guidance in creating a policy that comports with the new CORI law, as well as the FCRA, and also accurately reflects their practices.

Training Required to Receive CORI from DCJIS

In conjunction with the new CORI law, DCJIS developed an internet-based system to access criminal offender record information, called iCORI. An employer must register for an iCORI account with DCJIS in order to obtain CORI from DCJIS. 803 CMR 2.04. Employers will be able to register for access to iCORI beginning on May 4, 2012. To complete registration for an iCORI account as an employer, the employer must designate an individual to complete iCORI training and agree to all iCORI terms and conditions. 803 CMR 2.04(2)(b). All iCORI registrations are valid for one calendar year. 803 CMR 2.04(6). Employers must re-register for an iCORI account each year, and the individual user must repeat the mandatory iCORI training annually. 803 CMR 2.04(6). The proposed regulations state that a registration fee may be required, but does not specify an amount. 803 CMR 2.04(2)(c) and (6)(b). Employers can allow third-party CRAs to access CORI on their behalf, but the employer still must register and maintain its own iCORI account in order to do so. 803 CMR 11.04.

Recordkeeping Requirements

Disseminating CORI Records

The new law limits an employer's right to disseminate criminal history information both within the employer's organization and to outside entities. An employer can disseminate criminal information as directed by the subject, to individuals within the employer's organization who have a need to review the information to evaluate the applicant or employee, and to certain governmental agencies charged with overseeing, supervising, or regulating the employer. M.G.L. c. 6, § 172(f). If an employer disseminates criminal history information outside of its organization, it must maintain a secondary dissemination log for one year following the dissemination which includes: (i) the subject's name, (ii) the subject's date of birth; (iii) the date of each dissemination; (iv) the name of the person to whom the information was disseminated; and (v) the purpose of the dissemination. Id. The proposed regulations specify that where criminal history information is shared with an organization, the dissemination log must include the name of the organization and the name of the individual to whom the information was disseminated. 803 CMR 2.16(2)(d). Dissemination logs may be maintained either electronically or on paper. 803 CMR 2.16(3). Employers that maintain and communicate criminal history information in the usual course of their business, such as staffing companies and recruiters, should pay particular attention to this new requirement.

Storage of Criminal Offender Record Information

Unlike the federal FCRA, the proposed CORI regulations set out stringent standards relating to the storage of CORI. 803 CMR 2.11. It is unclear from the proposed regulations whether this provision applies only to CORI received from DCJIS or criminal history information obtained by an employer from any source. The proposed regulations require that all hard copies of CORI be stored in a separate, locked and secure location, such as a file cabinet. Employers must limit access to the locked and secure location to employees who have been approved by the employer to access CORI. 803 CMR 2.11(1). Accordingly, CORI information will need to be segregated from all other personnel record information and the employer will need to clearly designate who is permitted access to this information.

With respect to electronically-stored CORI, an employer must password protect and encrypt all CORI. In addition, the employer must limit password access to only those employees whom it has approved to access CORI. 803 CMR 2.11(2). The proposed regulations also prohibit employers from using "public cloud storage" methods to store CORI, although what constitutes "public cloud storage" is not defined. 803 CMR 2.11(4).

Retention/Destruction of CORI Records

No entity may maintain a copy, in any format including electronic, of criminal offender record information obtained from DCJIS for more than seven years from the last date of employment or from the date the employer makes a final decision regarding the subject, whichever is longer. M.G.L. c. 6, § 172(f). Although the statutory language specifically limits this requirement to "criminal offender record information obtained from the department," the proposed regulations refer to an obligation not to retain "CORI" for more than the specified 7-year period. Id.; 803 CMR § 2.11(3). Accordingly, there is some ambiguity as to whether this requirement applies only to information obtained from DCJIS or to all criminal history information obtained from any source. Employers should evaluate their document retention/destruction process in light of this new requirement.

The proposed regulations also address the methods an employer must use to destroy CORI in its possession. Similar to the federal Fair and Accurate Credit Transactions Act (FACTA), employers are required to destroy all hard copies by "shredding or otherwise" prior to disposal. 803 CMR 2.12(1). With respect to electronic copies, employers must delete all copies from the hard drives on which the information is stored and from any system used to back up the CORI information. 803 CMR 2.12(2). Additionally, an employer must appropriately clean all information by electronic or mechanical means before disposing of or repurposing a computer used to store CORI. 803 CMR 2.12(3).

Enforcement

Penalties for Violations of the CORI Law

The law establishes a criminal record review board (CRRB) within DJCIS that can hear complaints and investigate incidents alleging violations of the CORI law, including allegations that an employer failed to provide an individual copies of his criminal record prior to questioning the individual about the record or in deciding to take adverse action based on the record. The CRRB's authority includes, but is not limited to, the ability to issue summonses to compel the attendance of witnesses, require employers to produce documents, and conduct hearings. In the event that an employer is found to have violated the statute, the CRRB may impose civil fines up to $5,000 for each knowing violation. The CRRB may also refer a complaint for criminal prosecution. M.G.L. c. 6, § 168(b).

Certain violations of the CORI law can carry criminal sanctions for an individual or an entity, including: (i) knowingly requesting, obtaining, or attempting to obtain criminal record information from DCJIS under false pretenses; (ii) knowingly communicating or attempting to communicate criminal record information to any other individual or entity not in accordance with the law; (iii) knowingly falsifying criminal record information; and (iv) requesting or requiring a person to provide a copy of his or her own criminal record except as authorized by the law. A conviction for these crimes is punishable by imprisonment for not more than one year and/or a fine of not more than $5,000 for each offense. In the case of an entity that is not a natural person, the amount of the fine may be up to $50,000 for each violation. M.G.L. c. 6, § 178.

Finally, individuals also have a private right of action available to them which provides for actual damages, plus attorney's fees and costs. In addition, if the individual can establish that the violation is willful, he is also entitled to exemplary damages in the amount of $100 to $1,000 for each violation. M.G.L. c 6, § 177. This is similar to the damages available for violations of the FCRA, except that punitive damages are not specifically identified.

Audits by DCJIS to Ensure Compliance

The CORI law states that certain information maintained by an employer with respect to CORI shall be subject to audit by DCJIS. M.G.L. c. 6, § 172(c), (f). The proposed regulations set forth the employer's obligations with respect to responding to an audit and the authority of DCJIS to conduct such audits. The proposed regulations require employers to respond to, and participate in, audits conducted by DCJIS. Failure to cooperate or respond may result in immediate revocation of CORI access. 803 CMR 2.22(2)(a). In addition, DCJIS may also initiate a complaint with the CRRB against an employer for failure to respond or participate in an audit. 803 CMR 2.22(2)(d).

During an audit, an employer is obligated to provide DCJIS with access to inspect certain CORI-related documents, including, but not limited to: (i) completed CORI Acknowledgment Forms; (ii) secondary dissemination logs; (iii) the employer's CORI policy; and (iv) documentation of adverse employment decisions based on CORI. 803 CMR 2.22(3). During an audit, DCJIS will assess whether an employer is in compliance with the CORI law and regulations, including, but not limited to, whether: (i) the employer is registered for the appropriate level of CORI access and provided DCJIS correct registration information; (ii) the employer is properly completing and retaining CORI Acknowledgment Forms; (iii) the employer is properly requesting CORI; (iv) the employer is properly storing and safeguarding CORI; (v) the employer is properly maintaining a secondary dissemination log; (vi) the employer is screening only those individuals permitted by law; and (vii) the employer has a CORI policy that complies with DCJIS requirements. 803 CMR 2.22(4). Audit results may be published by DCJIS. 803 CMR 2.22(5). If you are contacted about an audit, we urge you to seek legal counsel before responding.

If DCJIS determines that an employer is not in compliance with statutory or regulatory CORI requirements, it may initiate a complaint with the CRRB or refer the audit results to state or federal law enforcement for criminal investigation. 803 CMR 2.22(6), (7).

Defenses to Claims of Negligent and Discriminatory Hiring if Criminal Record Information is Obtained From DCJIS

The law contains some protections for employers related to their use of and reliance on CORI records, provided that the employer made an employment decision within 90 days of obtaining the criminal record information and followed the procedures for verifying the subject's identity as required by the statute. M.G.L. c. 6, § 172(e). First, employers will not be liable for negligent hiring where the employer relied solely on criminal record information obtained from DCJIS and did not perform additional criminal history background checks, unless otherwise required to do so by law. Id. Second, employers will not be liable for failure to hire a person on the basis of a CORI report that contains erroneous information provided by DCJIS, if the employer would not have been liable if the information had been accurate. Id.

Employers should be aware that the Massachusetts Fair Employment Practices Law does not expressly prohibit employers from refusing to hire individuals or taking adverse action based on information contained in an individual's criminal record. Some have asserted that state and federal discrimination laws may provide a cause of action where an employer's screening practices have a disparate impact on individuals in a protected classification, however. As set forth above, the law does make it an unlawful practice to ask current or prospective employees to furnish certain criminal information on a written application or in response to an oral inquiry or to take adverse action against an individual based on information obtained in violation of this provision. M.G.L. c. 151B, § 9.

Conclusion

Given the broad scope of the new CORI law and proposed interpretive regulations, Massachusetts employers and employers outside of Massachusetts seeking criminal history information about applicants or employees in the Commonwealth would be wise to review their background screening policies and procedures relating to how criminal history information is obtained, stored, retained, disseminated and used.

By: Pamela Devata, Barry Miller and Jean Wilson

Pamela Devata is a partner in Seyfarth's Chicago office. Barry Miller is a partner and Jean Wilson is counsel in the firm's Boston office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Pamela Devata at pdevata@seyfarth.com, Barry Miller at bmiller@seyfarth.com or Jean Wilson at jwilson@seyfarth.com.

1. Chapter 151B, § 4(9) makes it an unlawful practice for employers to ask applicants or employees questions about certain criminal history information, including: (i) an arrest, detention or disposition in which no conviction resulted; (ii) a first conviction for certain misdemeanors (drunkenness, simple assault, speeding, minor traffic violations, affray, or disturbance of the peace); and (iii) any misdemeanor conviction or period of incarceration resulting from a misdemeanor conviction which occurred five or more years prior to the inquiry (whichever is later). This law remains in effect, regardless of when during the screening process an employer chooses to ask about criminal history.

2. The statute provides that these forms must be maintained for one year from the date the request is submitted, while the proposed regulations state that the forms must be maintained for one year from the date of the subject’s signature. M.G.L. c. 6, § 172(a)(30)(c); 803 CMR 2.09(12).

3. An employer is not prohibited from taking adverse action against an employee who declines to provide authorization to access his or her CORI, whether in an initial screening or during the employee’s employment. 803 CMR 2.09(10).

4. The proposed regulations contemplate that an employer may outsource the decision-making function to a CRA where the employer authorizes a CRA to decide whether to hire an individual based on CORI obtained from DCJIS. 803 CMR 11.12. If a CRA undertakes this responsibility (which in itself is likely very rare), the proposed regulations impose obligations on the CRA in addition to the typical FCRA requirements. Specifically, the proposed regulations require that a CRA “decision-maker,” before notifying the client of a potential adverse decision based on the subject’s CORI report, provide the applicant or employee with a pre-adverse action disclosure, a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act,” a copy of theCRA decision-maker’s CORI policy, a copy of the CORI report, and the DCJIS information concerning the process for correcting a criminal record. 803 CMR 11.13(1). In addition, the CRA must identify the information in the CORI that provides the basis for the adverse decision, provide the applicant with an opportunity to dispute the accuracy of the CORI, and document all steps taken to comply with the regulations. Id.

5. The new iCORI system is discussed below.

6. With respect to the requirement that employers provide accurate identifying information to CRAs, the proposed regulations do not mirror the requirements in other portions of the statute which require an employer to verify an applicant’s identity by reviewing a form of government-issued identification. 803 CMR 2.09(3).

7. The proposed regulations specify that employers must provide applicants or employees with the DCJIS information regarding the process for correcting criminal records.

8. Attached at the end of this memorandum is a chart summarizing the adverse action requirements under the proposed regulations.

Adverse Action Requirements Pursuant To Massachusetts CORI Reform

Employer Obligations	Employer Obtains CORI from DCJIS	Employer Obtains Criminal History from Another Source	CRA Obtains CORI from DCJIS	CRA Obtains Criminal History from Another Source
Criminal Record Report	X	X	X	X
Employer's Criminal Background Check Policy	X	X	X	X
Information About Correcting Criminal Record	X	X	X	X
Notify Individual of Potential Adverse Action	X	X	X
FCRA Pre-Adverse Action Letter			X	X
"Summary of Your Rights Under the FCRA"			X	X
Identify the Basis for the Adverse Decision	X		X
Identify the Source of the Criminal Information		X
Opportunity to Dispute Accuracy of Report	X	X	X	X
Document All Steps Taken to Comply with Regulations	X	X	X	X

* Please note, this chart contemplates only the Massachusetts CORI statute and proposed regulations. This does not contemplate other state laws that may be applicable.

Robert Bodansky and Regina Grattan Published in Bloomberg BNA’s Federal Contracts Report
“How to Unknowingly Become a Government Contractor (The Surprise ‘Gotcha’ in Buying a Company or Real Estate)”

Tue, 03 Apr 2012 00:00:00 -0400

An article by Corporate/Real Estate partner Robert Bodansky and Labor & Employment counsel Regina Grattan was published in the December 27 issue of Bloomberg BNA’s Federal Contracts Report. In the article, Bob and Regina outline the equal employment opportunity and affirmative action obligations imposed on federal contractors, and explain how the laws change depending on the dollar amount of the contract.

According to the authors, it is not uncommon to acquire a company without knowing that it performs government contracting work, which involves many reporting obligations. They emphasize, “The lesson to be learned here is clear: you need to make sure as part of your due diligence whether the target company or property has any contract or, indirectly, a subcontract with the federal government. If it does, you need to work with someone knowledgeable in government contracting and OFCCP regulations to help structure the deal before you close, so as to minimize any unanticipated consequences.”

Preparing for Brinker!

Mon, 02 Apr 2012 00:00:00 -0400

As we eagerly await the California Supreme Court decision on Brinker Restaurant Corp. v. Superior Court, we wanted to take this opportunity to let you know our experts are evaluating the possible outcomes so we will be ready to advise our clients immediately following the ruling. We still anticipate that the Court will make their decision no later than Thursday, April 12, 2012. As soon as the decision is issued, you will receive the following communications from Seyfarth:

1) Distribution of an in depth legal update (including analysis)
2) Invitation to participate in a webinar discussing our analysis

Key clarifications from the ruling should include the following:

•   What does it mean to "provide" a meal period
•   When must the meal period be taken
•   Timing of meal and rest periods

Click here to sign up for breaking Brinker news alerts, commentary and webinar invites.

Retail Detail: Retail Employers In Massachusetts Must Now Navigate A New Criminal Record Law

Mon, 02 Apr 2012 00:00:00 -0400

On May 4, 2012, major changes are coming that will require all Massachusetts Retail employers conducting criminal background checks to reassess their practices. As we reported previously, the Massachusetts Legislature overhauled the Criminal Offender Record Information ("CORI") statute in 2010, imposing a host of new requirements for users and providers of criminal history to be phased in over time. The Department of Criminal Justice Information Services ("DCJIS") recently issued 84 pages of Proposed Regulations (see our alert here) implementing the last of the new requirements and announced a public hearing on the draft regulations scheduled for March 30, 2012. On April 11, we will host a webinar where our experts will provide an overview of the requirements which go into effect on May 4, 2012, an analysis of the proposed regulations, and an update on the DCJIS's public hearing.

Topics to be discussed at the April 11 webinar, include:

New requirements related to obtaining, storing, and destroying criminal history information.
The procedures that an employer must follow prior to discussing an applicant's criminal history with the applicant or taking adverse action based on the applicant's criminal history.
The information an employer must provide to an applicant before taking adverse action based on the applicant's criminal history.
The relationship between the Massachusetts CORI law and the Fair Credit Reporting Act.
The obligation for employers regularly conducting any kind of criminal background checks to maintain a "CORI" policy.
New obligations for employers who utilize Consumer Reporting Agencies (CRAs) to obtain criminal history information or make decisions regarding applicants.
Penalties for violating the CORI law.

By: Barry Miller and Jean Wilson

Barry Miller is a partner and Jean Wilson is counsel in Seyfarth's Boston office. If you would like further information, please contact your Seyfarth attorney, Barry Miller at bmiller@seyfarth.com or Jean Wilson at jwilson@seyfarth.com.

Adam Walsh Published in Bloomberg BNA’s Real Estate Law & Industry Report
“Green Issues to Consider in Drafting and Negotiating Office Building Leases”

Mon, 02 Apr 2012 00:00:00 -0400

An article by Real Estate partner Adam Walsh was published in the March 6 issue of Bloomberg BNA’s Real Estate Law & Industry Report. In the article, Adam discusses the finer points involved in drafting contracts for office buildings with Leadership in Energy and Environmental Design (LEED) designations and U.S. Green Building Council (USGBC) ratings.

According to the article, it is becoming increasingly common for owners of buildings to request LEED designations or USGBC ratings, both with new and older complexes. Accordingly, this shift requires owners to “green” office building standard lease forms. Adam indentifies the primary issues surrounding the contract changes as being with “construction, tenant operations and maintenance, and the ability of landlords to pass through ongoing green operating costs and expenses to tenants.”

“Although the lease provisions remain new and will require an active dialogue between the parties, the good news is that as the provisions become more common, a market set of compromise positions is developing that often works for both parties,” Adam remarks.

Gerald Maatman Quoted in Thomson Reuters' On the Case
"Supreme Court leaves the door open for classwide arbitration"

Mon, 02 Apr 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Gerald Maatman, Jr. was quoted in a Thomson Reuters' On the Case on March 21, reporting on the U.S. Supreme Court's recent decision regarding a class arbitration of employment claims case on behalf of its client, Sterling Jewelers.

The underlying opinion in the case reinforces that an arbitrator's decision is "nearly set in stone." In this particular case, the arbitrator has ruled that certification is possible, but the plaintiff's must still convince the arbitrator that the proposed class of about 20,000 should be certified, as well as resolve some discovery issues. Sterling Jewelers remains steadfast in its fight, with Jerry, Stearling's lead counsel, noting, “[S]terling remains resolute in vigorously defending itself against these allegations since they do not represent our culture or the accomplishments of our associates.”

Click here to read the full article: http://newsandinsight.thomsonreuters.com/Legal/News/2012/03-_March/Supreme_Court_leaves_the_door_open_for_classwide_arbitration/

Allegra Rich Featured in Chicago Lawyer
"Law leaders discuss need to invest in justice"

Mon, 02 Apr 2012 00:00:00 -0400

Pro Bono and Philanthropy Partner Allegra Rich was featured in Chicago Lawyer's recent roundtable discussion regarding Chicago's legal aid community and the Chicago Bar Foundation's (CBF) Investing in Justice Campaign. The discussion, featuring five local law firm and in-house lawyers, highlights the recent uptick in the community's need for legal aid and the CBF's response to government cut-backs by establishing the Investing in Justice Campaign and was featured in an article in the magazine on March 1. The Campaign partners with the law community to help raise money for local legal aid organizations. Allegra notes that, "[t]his is a cause that is unique to lawyers and if we don't step up then no one will."

“It’s a cliché but it's true, that people don't give to causes, people give to people. Right?" Allegra says. “We have an associates committee for the Investing in Justice Campaign…they went door-to-door, [a]nd percentage wise, we did better than we had ever done before."

Click here to read the full article: http://www.chicagolawyermagazine.com/Articles/2012/03/01/CBF-Roundtable.aspx

Seyfarth Shaw’s Steven Pearlman and Rebecca Woods Named 2012 “Rising Stars” by Law360

Mon, 02 Apr 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

CHICAGO and WASHINGTON, D.C. (April 2, 2012) - Seyfarth Shaw LLP is proud to announce that Chicago office Labor & Employment partner Steven Pearlman and Washington, D.C. office Commercial Litigation partner Rebecca Woods were named to Law360’s 2012 Rising Stars list. The winners were individually profiled in the publication over a series of weeks, and both Pearlman and Woods were selected as one of five attorneys in the nation in their respective categories.

In his profile in the Employment category, Pearlman spoke of Seyfarth’s Sarbanes-Oxley Whistleblower Team, which he co-chairs, and notes that the firm “really invested” in his vision for the specialty group, with now more than 50 members. He also discussed complex cases he has won for his clients, provided advice for younger lawyers and stressed that, “While winning is absolutely critical, it’s important to keep in sight the client’s business objectives,” and to “be prepared more than anyone else in the room, and far surpass…expectations to gain…trust.”

Joel Kaplan, a senior partner at Seyfarth, remarked of Pearlman, “Put to one side that he's very smart, it’s his grit and determination that truly sets him aside. You give Steve a case or a matter and you know to a certainty that no one on earth is going to do a better job, will have thought through the issues more or will put in the time and energy to make sure of a positive outcome.”

In the Insurance category, Rebecca Woods was highlighted for work successfully representing diverse clients in a wide variety of insurance disputes, “making her a sought-after advocate for clients.” Woods’ love for working in the insurance litigation arena is largely due to the opportunities to learn about several subject matters, including “everything from Jewish burial rites to disposal of arsenic in the 1950s.”

Woods, a first chair litigator on the majority of her cases and a Six Sigma Greenbelt, “is known for her efficiency.” Said Woods, “I’m not interested in being a billing machine. I’m interested in doing high-quality work for our clients that gets them what they need.”

The 2012 Rising Stars honor attorneys under the age of 40 whose “accomplishments in major litigation or transactions belie their age.” This year, Law360 received more than 1,000 submissions for its Rising Stars series, and they were reviewed by a team of eight editors. Winners were selected based on the strength of their accomplishments in their respective practice groups over the course of their careers.

Seyfarth Shaw has over 750 attorneys located in 10 offices throughout the United States, including: Atlanta, Boston, Chicago, Houston, Los Angeles, New York, Sacramento, San Francisco and Washington, D.C., as well as internationally in London. Seyfarth Shaw provides a broad range of legal services in the areas of labor and employment, employee benefits, litigation, corporate and real estate. The firm’s clients include over 300 of the Fortune 500 companies, and our practice reflects virtually every industry and segment of the economy. For more information, please visit www.seyfarth.com.

Angelo Paparelli Featured on CBS Radio

Mon, 02 Apr 2012 00:00:00 -0400

On March 27, Seyfarth Shaw Los Angeles Immigration partner Angelo Paparelli was interviewed by CBS Radio (KNX 1070) discussing immigration lessons learned from a case in which a man arrested on suspicion of murdering five people in San Francisco was to be deported in 2006, and he is now staying in the U.S. after Vietnamese authorities failed to provide necessary travel documents.

Without offering a view on whether the man is guilty or innocent, Angelo said that this case demonstrates a failure to pass immigration reform, or to take the Supreme Court's cue in 2001, to write a statute on detention of criminal aliens that satisfies the constitution's due process protections. He said it also shows why the U.S. Immigration and Customs Enforcement should focus more on removing non-citizen criminals from the U.S. rather than the low-level immigration violators who pose no threat. He suggests that the latter should be given prosecutorial discretion and deferred action.

David Baffa Quoted in CBS MoneyWatch
"Facebook: Don't give passwords to employers"

Fri, 30 Mar 2012 00:00:00 -0400

Seyfarth Shaw Employee Relations partner David Baffa was quoted in CBS MoneyWatch on March 23. The article discussed the recent controversy in the news in which job applicants in Maryland were asked to submit their social networking logins and personal passwords for use in background checks.

Facebook issued a statement saying it was "a violation of Facebook's Statement of Rights and Responsibilities to share and solicit a Facebook password," and the article posits that there are potential legal issues employers may encounter, should they access social networking accounts, which could hold employers liable in employment discrimination cases.

David said, "about half of the states have some manner of a statute of the books that would seek to protect against discrimination against lawful, off-duty conduct." He points out, "The tobacco industry drove a lot of those laws. But it is something that can be applied."

Click here to read the full article: http://www.cbsnews.com/8301-505124_162-57403482/facebook-dont-give-passwords-to-employers/?tag=mncol;lst;1

Jennifer Kraft Quoted in Modern Healthcare
"Showdown gets a head start"

Fri, 30 Mar 2012 00:00:00 -0400

Seyfarth Shaw Employee Benefits partner Jennifer Kraft, who filed a brief against the law on behalf of the National Restaurant Association, was quoted in Modern Healthcare on March 24. The article discusses the U.S. Supreme Court consideration of the Patient Protection and Affordable Care Act.

The article provided perspectives from politicians from both political parties, including House Speaker John Boehner, Health and Human Services Secretary Kathleen Sebelius and U.S. Surgeon General Regina Benjamin about the controversies surrounding the Affordable Care Act.

Jennifer told Modern Healthcare that she would be "looking for early indications as to whether the court would strike down the entire law if it finds the individual mandate unconstitutional," pointing out that "the law lacks a severability provision usually included in large bills that would allow the rest of the bill to remain if any one provision is struck down. An extended line of questions about the impact of the loss of the mandate on individual programs may indicate the justices are considering severability."

The article noted that not since 1935, when it invalidated aspects of the New Deal, has the court challenged Congress on such a broad and significant initiative.

New EEOC Regulations Subject U.S. Employers To More Scrutiny

Fri, 30 Mar 2012 00:00:00 -0400

The EEOC today issued new regulations under the Age Discrimination in Employment Act ("ADEA"), regulations that promise to intensify EEOC scrutiny of employers needing to downsize or otherwise reduce employment-related costs. The new regulations detail what an employer must prove in order to justify action that adversely affects older employees. The Supreme Court has held that such action must be based on a "reasonable factor other than age" (a phrase taken from ADEA itself). In purporting to construe that phrase, however, EEOC reads it to mean the employer must demonstrate its action is not only rational, but also reasonable in design and administered in a way that reasonably achieves the employer's intended purpose. The regulation lists five factors to be considered in deciding whether the employer has acted "reasonably." As a practical matter, few employers can be confident of satisfying EEOC's view of the law unless they comply with each and every factor. Even then, employers will be left wondering if they have done enough because, according to EEOC, whether an employer has met its RFOA burden "must be decided on the basis of all the particular facts and circumstances surrounding each individual situation." In short, employers needing to reduce costs face yet another set of regulatory hurdles, at the end of which they may or may not have reached compliance.

The Underlying Supreme Court Decisions

In Smith v. City of Jackson (2005), the Supreme Court recognized disparate impact claims under the ADEA -- a cause of action by employees age 40 or above who are adversely affected by a facially neutral employment practice (for example, a decision to terminate mid-level managers earning over $100,000, assuming that decision falls disproportionately on older managers). At the same time, the Court held that an employer would not be liable if its action was based on a "reasonable factor other than age."

Smith raised and left unanswered the question of which party has the burden of showing a RFOA. The Supreme Court answered that question in Meacham v. Knolls Atomic Power Lab. (2008), holding that RFOA is an affirmative defense as to which the employer bears the burden of proof. The Court in Meacham made clear, however, that the employer's burden under ADEA was less than under Title VII (which prohibits race and gender discrimination, among other things). In the Title VII context, disparate impact is lawful only if shown to be "job related and consistent with business necessity." All courts agree that this is a very high standard, requiring an employer to show its action is closely related to an important business purpose; even then, a plaintiff can prevail by showing that the intended purpose could have been achieved by a less impactful means.

The Regulatory Back-Drop

EEOC first promulgated proposed RFOA regulations back in 2008, before the Court decided Meacham. Those relatively straightforward regulations summarized the Court's holding and analysis in Smith, and went on to opine that the employer bore the burden of proving RFOA (in effect foreshadowing Meacham). That decision effectively mooted EEOC's then-proposed regulations.

In February 2010, EEOC legal staff under the new administration put forward a new set of proposed regulations, one altogether different from those previously proposed (and from what the Supreme Court had stated in Smith and Meacham). In November 2011, the Commission approved the regulations by a 3-2 vote and sent them on to OMB for final review and approval. The final regulations issued today differ slightly in verbiage and substance from those proposed in 2010.

The Regulations Themselves

In its comments accompanying the new regulations, EEOC says repeatedly that its RFOA analysis differs from Title VII business necessity analysis. Notably, however, the regulation itself does not say this. Moreover, the detailed scheme set forth in the final regulations imposes on employers a set of compliance steps seemingly at odds with the Supreme Court's view of "reasonableness." Among those steps (that must be taken in the event of adverse impact) are an analysis by the employer of:

The extent to which the factor is related to the employer's stated business purpose;
The extent to which the employer defined the factor accurately and applied the factor fairly and accurately, including the extent to which managers and supervisors were given guidance or training about how to apply the factor and avoid discrimination;
The extent to which the employer limited supervisors' discretion to assess employees subjectively, particularly where the criteria that the supervisors were asked to evaluate are known to be subject to negative age-based stereotypes;
The extent to which the employer assessed the adverse impact of its employment practice on older workers; and
The degree of the harm to individuals within the protected age group, in terms of both the extent of injury and the numbers of persons adversely affected, and the extent to which the employer took steps to reduce the harm, in light of the burden of undertaking such steps.

Importantly, EEOC says that no combination of the above "considerations" is required to establish a RFOA defense. The EEOC later elaborates and says an employer may not need to prove it took all the above into account. Other passages are more troubling, however, especially in the comments. For example, EEOC therein states that the list of regulatory factors is non-exhaustive, meaning EEOC reserves the right to think of others in investigating charges or in litigation. Moreover, EEOC's comments say that "cost-cutting alone would not be sufficient to establish the RFOA defense." This is surprising, to say the least, inasmuch as it was cost that motivated the defendant in Smith v. City of Jackson. Indeed, the need to reduce costs drives virtually every reduction-in-force, along with across-the-board pay cuts, benefit cutbacks, etc. One would have thought heretofore that saving money was the prime example of a RFOA. Not so, according to EEOC.

What's Next?

Although surprisingly detailed in some regards, the new regulations raise at least as many questions as they answer, for example:

Will courts defer to these regulations, and if so to what extent?
Will the regulations be challenged in court, and if so will they hold up? Employer groups may decide to challenge the regulations, either before they are applied to particular employers or when they are applied or both. As approved by OMB, the final regulations contain a requisite cost-benefit analysis that was missing from the 2010 iteration. Whether that will survive judicial scrutiny remains to be seen.
Are the new regulations retroactive (applicable to pre-March 30, 2011 conduct), or are they prospective only? EEOC will likely argue for retroactivity, on the basis that the regulations merely restate and/or explain existing law. Given the regulations' level of specificity, however, and their idiosyncratic reading of Smith and Meacham, the arguments for prospective application appear strong.
Most importantly, just what must an employer do to comply? Is the standard different for a company that employs 1,000 as opposed to 10,000? If a company conducts an adverse impact analysis, how must it measure impact?

Seyfarth Shaw will address these and other questions in a forthcoming issue of Strategy & Insights. In the meantime, if you would like more information, please contact your Seyfarth Shaw LLP attorney or Condon McGlothlen at cmcglothlen@seyfarth.com.

Steve Pearlman Quoted and Featured in Law360
"Rising Star: Seyfarth's Steven Pearlman"

Thu, 29 Mar 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Steven Pearlman was featured and quoted in Law360 on March 21. The article profiled Steve, who was selected by the publication as one of five 2012 Rising Stars in the area of Employment.

The article discusses several factors that led to Steve's recognition as a rising star, including his position as co-chair of the firm's Sarbanes-Oxley Act Whistleblower team, which he envisioned and was able to initiate with the firm's support; significant wins which were possible due to Steve's approach to his work and deep client involvement; and lessons learned throughout his career.

Said of Steve by senior partner Joel Kaplan, "Put to one side that he's very smart, it's his grit and determination that truly sets him aside. You give Steve a case or a matter and you know to a certainty that no one on earth is going to do a better job, will have thought through the issues more or will put in the time and energy to make sure of a positive outcome."

Click here to read the full article: http://www.seyfarth.com/dir_docs/publications/RisingStarSeyfarthStevenPearlman.pdf

Leon Sequeira Quoted in Scrip Magazine
"SCOTUS takes on tax/penalty issue in opening health reform arguments"

Thu, 29 Mar 2012 00:00:00 -0400

Seyfarth Shaw attorney Leon Sequeira was quoted on March 26 in an article in Scrip magazine. The article discussed the first of three days of the U.S. Supreme Court oral arguments on the Patient Protection and Affordable Care Act, which dealt with the issue of whether the 1867 enacted Anti-Injunction Act (AIA) bars the court from making a decision until later.

Hearing 90 minutes of oral arguments, the court considered whether or not a lawsuit can be brought before the tax under the individual mandate has been levied on anyone.

Leon told Scrip that with two courts on one side of the AIA question and another on the other side, the Supreme Court determined it needed to confront the issue.

He said he was surprised that that all of the justices seemed to be "hostile" to the idea that the AIA applies to the Affordable Care Act penalty. He pointed out that even though U.S. Solicitor General Donald Verrilli argued on the first day for the government that the monetary fine taxpayers failing to buy health insurance must pay is a penalty, on the second day, he will go before the court and argue that Congress was exercising its taxing power by including the penalty.

Five Key Labor And Employment Issues Hospitality Employers

Mon, 26 Mar 2012 00:00:00 -0400

DOL Releases New H-2B Program Regulations That Will Cause Headaches For Hospitality Employers

National Restaurant Association Files Amicus Brief in Supreme Court Health Care Reform Case

Recent Cases May Lead to More Hospitality Union "Negotiation" Through Local Legislation

Hospitality Industry Be Warned: OFCCP Proposed Disability Regulations will be a "Game-Changer"

Arbitration Agreements and Class Action Waivers: A Leaky Bucket That May Yet Hold Water

Hospitality Team Updates

DOL Releases New H-2B Program Regulations That Will Cause Headaches For Hospitality Employers

By: Leon R. Sequeira

The Department of Labor recently published new regulations that will substantially increase the complexity and cost associated with the H-2B temporary worker visa program. These regulatory changes follow DOL's effort last year to change the methodology for setting wages in the H-2B program.

As a result of the latest regulations published on February 21 and set to take effect on April 23, employers that have traditionally relied on workers with H-2B visas to supplement their domestic workforce will now be required to navigate additional bureaucratic and compliance challenges in order to continue using the program.

Overview of Significant Requirements

Registration and Temporary Need

The new program regulations impose significant new obligations on employers and change several longstanding elements of the program. DOL has created a new multi-step application process that first requires employers to register with DOL and prove a temporary need before the employer is permitted to file an application for labor certification.
Under the new regulations, an employer's "temporary or seasonal need" can only last for a maximum of 9 months, unlike the current regulations which permit a temporary or seasonal need to last up to 10 months. An employer's registration with DOL will be valid for 3 years, during which time the employer will presumably not be required to re-prove temporary need, provided that the employer does not increase its request for workers by more than 20% (or more than 50% if requesting fewer than 10 workers).

Application Process and Recruiting

DOL has changed numerous elements of the application process, including requiring employers to file their application for labor certification 75-90 days before the date on which they will need the workers. In the future, employers will recruit US workers after filing their application with DOL, rather than before. The State Workforce Agency will keep an employer's "job order" open and active until just 21 days before the employer's date of need for workers. This is a particularly significant change because the employer will be obligated to hire additional U.S. applicants even though DOL will have already approved the Labor Certification and the employer will have spent significant time, effort, and money arranging for H-2B workers to come to the job site.

As part of the recruiting obligations, an employer may also be required to undertake additional undefined recruiting "as directed" by DOL. The State Workforce Agency will also notify labor unions of the employer's job opening and have the job opening posted on DOL's national registry of H-2B available positions.

Wage Rates and Pay Requirements

The regulations that will take effect on April 23 do not contain any changes to the calculation of wage rates in the H-2B program. DOL issued new regulations in 2011 to fundamentally change the wages required in the H-2B program, but Congress has blocked those rules from taking effect before October 1, 2012. In addition, H-2B employers and trade associations have filed two federal lawsuits challenging the Department's wage methodology regulations.

The new regulations, however, do contain important changes relating to the payment of H-2B workers. DOL will in the future require that as part of the H-2B program all visa and related expenses be reimbursed to workers in the first workweek. DOL also will require employers to provide a worker with a pay statement on payday, provide advance notice of all deductions, and be paid at least once every two weeks. The most significant change relating to pay is a new "three-fourths guarantee." Employers will be required to guarantee that an H-2B worker will receive pay for at least three-fourths of the hours described in the job order over every 12-week period. If the term of work is 16 weeks or less, the guarantee applies every 6 weeks. When that provision is combined with the new requirement that H-2B workers be provided at least 35 hours of work per week, many employers could see significantly higher labor costs associated with H-2B workers.

Corresponding Employment

In what is perhaps the most far-reaching and expensive change in the new rule, DOL has imposed wide-ranging new obligations on employers with workers in so-called "corresponding employment." This concept, which is borrowed from the H-2A agricultural program, requires employers to extend the DOL-mandated wages, benefits, and working conditions for H-2B workers to non-H-2B workers (existing or newly hired U.S. workers) that perform the "substantially the same work" as an H-2B worker.

Because the hospitality industry utilizes the H-2B program to supplement its U.S. workforce during seasonal periods of increased business, virtually all employers will have other U.S. workers performing substantially the same work as H-2B workers. Indeed, the hospitality industry utilizes H-2B workers in a number of positions where U.S. workers are also present, including housekeepers, wait staff, dining room attendants, and kitchen staff. As a result, employers may now find that scores of U.S. workers must be provided a guaranteed number of hours and other additional benefits. This requirement will decrease an employer's ability to respond to changes business volume over the course of a season and is likely to create significant accounting, management and financial challenges.

Outlook

DOL's new H-2B regulations are set to become effective on April 23. Importantly, the new requirements will apply only to applications submitted on or after that date. Therefore, any H-2B labor certification application submitted to DOL before April 23, that is subsequently approved, will be governed by regulations currently in effect, rather than the new regulations. With litigation over DOL's 2011 H-2B wage regulations continuing in two federal courts, however, it is possible that these new comprehensive H-2B program regulations will also be challenged before they take effect. Thus, hospitality employers that need to supplement their domestic workforce with the H-2B program face a great deal of uncertainty in the immediate future and will need to carefully monitor their compliance with these new regulations - should they take effect.

Note: Leon R. Sequeira, Senior Counsel in Seyfarth Shaw's Washington D.C. office, assisted the National Restaurant Association in preparation of their comments opposing DOL's proposed changes to the H-2B program. To review those coments, please click here. (Please note date on attached should state 2011 and not 2010)

National Restaurant Association Files Amicus Brief in Supreme Court Health Care Reform Case

By: Jennifer Kraft

Numerous legal challenges to the Patient Protection and Affordable Care Act (PPACA) have been filed since the health care reform law was enacted in March, 2010 arguing that Congress exceeded its Constitutional authority in adopting the law. This Constitutional challenge has finally worked its way up to the United States Supreme Court. On January 6, 2012, The National Restaurant Association, in an amicus brief prepared by Seyfarth Shaw, has urged the Supreme Court that if it finds PPACA's individual mandate to be unconstitutional, the entire statute should be struck down.

The PPACA includes a minimum coverage provision, referred to as the individual mandate, which requires most individuals to maintain a minimum level of health insurance coverage beginning in 2014. Those individuals who fail to maintain this coverage would be required to pay a penalty under the law. The lawsuits brought challenging PPACA argue that Congress exceeded its authority under the Constitution's Commerce Clause in enacting this individual mandate.

Under the Commerce Clause, Congress can regulate any economic activity that is in the stream of or substantially affects interstate commerce. The PPACA challengers argue that a decision to not purchase health insurance constitutes inactivity, not activity and that Congress has no Constitutional authority to regulate inactivity. In defending PPACA, the federal government has argued that because everyone will need health care at some point in their lives, and hospitals may not turn away people in need of emergency care, the cost of health care for uninsured people is shifted to individuals who currently have health care through increased costs and premiums. As a result, the federal government argues, individuals' decisions to not purchase health insurance places a substantial burden on interstate commerce. Therefore, the federal government reasons, enacting PPACA was within Congress's Constitutional authority under the Commerce Clause.

In the consolidated cases currently on appeal before the Supreme Court, the district court held that Congress did, in fact, exceed its Constitutional authority in adopting the individual mandate in PPACA. The district court also found that as the individual mandate was central to the enactment of PPACA, it could not be severed from the rest of the act, and all of PPACA must be struck down. On appeal, the Eleventh Circuit Court of Appeals agreed that Congress exceeded its Constitutional authority in enacting the individual mandate under PPACA, but disagreed with the district court's decision regarding severability. The Eleventh Circuit Court of Appeals instead ruled that the individual mandate could be severed from the rest of PPACA such that only the individual mandate would be struck down.

If the Supreme Court agreed with the Eleventh Circuit, the individual mandate would be struck down, but the rest of PPACA, including the provisions applicable to employers such as the employer "pay or play" mandate, and the elimination of pre-existing condition exclusions and lifetime limits in employer health plans would remain in effect.

The National Restaurant Association's amicus brief does not take a position as to whether or not the individual mandate was Constitutional. The brief argues, however, that if the individual mandate is found to be unconstitutional, then it cannot be severed from the rest of the Act and all of PPACA must be struck down.

Generally speaking, when courts find a provision of a law unconstitutional, they try to limit the solution to striking down as little of the law as possible. The National Restaurant Association brief argues that this rule is not absolute, and that determining whether an unconstitutional provision can be severed from the remainder of the statute hinges on whether the provisions that would remain can function "in a manner consistent with the intent of Congress" in passing the act. The brief argues that PPACA was designed and intended by Congress as an integrated remedy to the shortcomings of the national health care coverage system. As such, congressional intent would not be served by severing the individual mandate and leaving in place the remainder of Act such as the employer mandate.

In fact, the brief argues, if the other provisions of PPACA remain in effect without the individual mandate, the Act would actually exacerbate many of the very problems Congress sought to ameliorate, and the cost of health care coverage would significantly increase. The brief highlights particular features of PPACA, such as the ban on preexisting condition exclusions, the ban on lifetime and annual limits, and the requirement for coverage of adult children that would, in the absence of the individual mandate, result in increased health insurance costs for employers and individuals seeking insurance coverage. As a result, the brief reasons, many restaurant industry employers would no longer be able to afford to provide any health care coverage to their employees, forcing those employees to seek coverage from government-subsidized sources, which will increase the burden on federal and state taxpayers, and undermine the private employer-based health insurance system.

Rather than the Supreme Court attempting to determine congressional intent with regard to whether each particular provision of PPACA could stand without the individual mandate in place, the National Restaurant Association brief argues the entire interrelated Act should be invalidated, so that Congress may exercise its proper role and determine whether any of the remaining provisions should be enacted absent the individual mandate. Click here to read the brief.

The Supreme Court will hear six hours of oral arguments on these cases on March 26th through March 28th. Seyfarth Shaw will be hosting a webinar on Thursday, March 29, 2012 to provide a debriefing of the oral arguments themselves. To register for the webinar, click here.

Recent Cases May Lead to More Hospitality Union "Negotiation" Through Local Legislation

By: Ron Kramer

In the past few months two decisions have issued that could incentivize unions that cannot achieve their demands at the bargaining table to get them through local, industry-specific legislation instead. This is not a new phenomena, but every court decision that supports such an action only will encourage it.

On December 2, 2011, in Rhode Island Hospitality Association v. City of Providence, 2011 U.S. App. LEXIS 23915 (1st Cir. 2011), the First Circuit Court of Appeals upheld a Providence ordinance that requires companies that acquire, lease, or take over the management of hotels to employ the predecessor's employees for the first three months of operations. The new company need not hire everyone if it does not need the assistance, can still fire employees for just cause, and also is entitled to set initial terms and conditions of employment. Nevertheless, the ordinance basically insures that, for the first three months, the successor employer's workforce will consist of the predecessor employer's employees. The City adopted this ordinance on the theory that transfers of hotel operations in New England had caused "immeasurable damage to the reputation of the tourist industry," and that the law was needed "to promote the stability of Providence's hospitality and tourism business." One can only assume a driving force behind the legislation was organized labor's goal of protecting the jobs of existing employees and forcing successor employers into a position of having to recognize any existing unions.

The local hotel association and two local hotels sued, claiming that this ordinance was unlawful for a variety of reasons, including in particular that it was preempted by the National Labor Relations Act on Machinists preemption grounds. Under Machinists preemption, courts will exclude state regulation of conduct neither arguably protected nor arguably prohibited under the National Labor Relations Act (NLRA), but nevertheless intended by Congress to be left unregulated so that it may be controlled by the free play of economic forces. Plaintiffs argued the ordinance was preempted for three reasons, each of which the court rejected.

First, plaintiffs argued that the ordinance creates the risk that a new employer taking over the operation of a hotel will be considered to be a legal successor under the NLRA, such that it would have to recognize and bargain with the union representing the predecessor's employees. By forcing new employers to hire most, if not all, of their staff from the predecessor's operations, a key factor in the successorship test, the ordinance had an impermissible impact on the successorship doctrine. The court disagreed, primarily because it understood the successorship doctrine to be based upon a conscious, voluntary decision of the new employer to maintain the same business and to hire a majority of its employees from the predecessor. As such, the court did not believe that a ordinance mandating employment could trigger the successorship doctrine. The court also cited to an administrative law judge's decision, M&M Parkside Towers LLC, 2007 WL 313429 (NLRB ALJ 1/30/2007), finding, in the case of a similar ninety-day hire ordinance, that the appropriate time to make the successorship determination was at the time employment decisions are made sometime after the expiration of the ninety-day period. The court acknowledged that, were the National Labor Relations Board (NLRB) to apply the successorship doctrine in a way that the ordinance would impact the decision, preemption could be a defense -- and the concurring judge declared that such a claim would prevail.

Second, plaintiffs argued that, by providing employees with benefits for which they would otherwise have to bargain, the ordinance impermissibly, enhanced employee and union bargaining power. The court rejected that argument, as the Supreme Court has recognized that states and local governments can adopt minimum labor standards that are not inconsistent with the general legislative goals of the NLRA. Although this ordinance applied only to one industry, the court did not see that as sufficient to raise preemption concerns. The court distinguished this ordinance, which covered all employees in a particular industry, from 520 S. Mich. Ave. Assocs. v. Shannon, 549 F.3d 1119, 1130 (7th Cir. 2008). In Shannon, the Seventh Circuit found an Illinois state mandatory break statute preempted where it only applied to housekeepers in Cook County (Chicago). The First Circuit distinguished Shannon as a situation where the law was to apply only to one occupation, in one industry, in one county.

Third, plaintiffs argued that the Machinists doctrine protects a new employer's "right" to make hiring and firing decisions free of state interference. The court found nothing in the Machinists preemption doctrine or federal labor law to indicate such a right existed. Indeed, the NLRA limits employer rights to refuse to hire or to fire for discriminatory purposes, and courts have upheld ordinances and laws placing restrictions on an employer's ability to fire employees. After rejecting the Plaintiffs' other arguments as well, the court upheld the ordinance.

While this was only an appellate court decision, the U.S. Supreme Court on January 23, 2012, declined to take up a similar challenge to a Los Angeles ordinance that required the purchaser of grocery stores to employ the predecessor's workers for ninety-days. In so doing, the Court let stand a California Supreme Court decision upholding the ordinance and rejecting plaintiffs' preemption claims. California Grocers Ass'n v. City of Los Angeles, 52 Cal. 4th 177, 127 Cal. Rptr. 3d 726, 254 P.3d 1019 (July 18, 2011), cert. denied, January 23, 2012. As did the First Circuit, the California Supreme Court: (1) did not believe successorship could be based upon the involuntary retention of employees pursuant to an ordinance; (2) rejected the theory that the ordinance impermissibly interfered with an employer's right under the NLRA to, in a nondiscriminatory fashion, refuse to hire a predecessor employer's employees (a theory accepted by the state appellate court); and (3) believed that single industry legislation could qualify as a generally applicable employment standard, for there was nothing that would indicate Congress intended to prevent states and localities from attacking employment problems industry by industry.

While Providence and Los Angeles were not the first cities to impose such "successor hire" ordinances, Rhode Island Hospitality and California Grocers give unions and local governments significant legal precedent to support the adoption of these ordinances across the country. Hospitality employers must be cognizant of the possibility of such ordinances when acquiring, leasing or taking over the management of properties. From a practical standpoint, the impact of these ordinances, depending upon how written, may be minimal. Most employers taking over an existing operation hire a majority of the predecessor's employees and become a successor under the NLRA anyway. For those employers wishing to come in and start anew, however, that will be difficult. While, in theory, compliance with such ordinances will not make an employer a successor under the NLRA, it will be difficult for an employer at the end of the ninety-day time period to justify firing most if not all of its staff, many of whom no doubt have performed well, simply because it never wanted to hire any of the old employees anyway.

Perhaps a greater concern with these decisions is the apparent willingness of the courts to accept with little debate the idea that single industry legislation is not preempted. No doubt certain industries have particular employment issues (e.g., mining) for which industry-specific legislation is completely appropriate. But were these two ordinances really designed to address an industry-specific issue, or were they designed to "fix" in one industry for bargaining leverage purposes a common issue general to all industries? If so, how is this any different from the mandatory Cook County-only housekeeper-only break law held preempted by the Seventh Circuit? The courts may not have heard the end of this issue.

In the meantime, hospitality employers should expect and be prepared to fight more attempts at industry specific legislation at the state and local level to basically set a new floor for collective bargaining on various terms and conditions of employment.

Hospitality Industry Be Warned: OFCCP Proposed Disability Regulations will be a "Game-Changer"

By: Christine Hendrickson

The tens of thousands of hospitality employers who provide a threshold amount of goods or services to the government are under the jurisdiction of the Office of Federal Contract Compliance Programs (OFCCP), the division of the Department of Labor responsible for federal contractors and subcontractors. On December 9, 2011, the OFCCP delivered proposed revisions to the OFCCP's regulations addressing affirmative action for individuals with disabilities (the "Section 503" regulations). OFCCP Director Patricia Shiu warned the contractor community last summer that these new Section 503 regulations would be a "game-changer" and indeed they are, especially for hospitality industry employers who are frequently the target of compliance evaluations and audits. Some of the biggest changes are outlined below.

Hospitality Employers Would be Responsible for Ensuring that 7% of its Workforces are People with Disabilities

One of the biggest "game-changers" in the proposed rule is the establishment of workforce composition goals. The OFCCP proposes that all employers, in all industries, and nationwide adopt a goal that 7 percent of its workforce be composed of individuals with disabilities. This 7 percent utilization goal would apply uniformly to each job group; the calculation cannot be aggregated across job groups.

Must Solicit Information from Applicants and Employees with Disabilities Early and Often

The proposed regulations make significant, substantive changes to a contractor's responsibilities and the process through which applicants are invited to voluntarily self-identify as an individual with a disability. The proposed rule requires that contractors ask applicants to voluntarily self-identify their disability status both pre- and post-offer; the current regulations only require contractors to solicit disability status post-offer. The proposed rule also adds a new requirement that contractors annually survey their employees' disability status, permitting employees who are, or subsequently become, an individual with a disability to voluntarily self-identify as such in an anonymous manner. This will also put particular burden on hospitality industry employers who often hire in large numbers, and seasonally, making the additional solicitation requirements additionally burdensome.

Over One Million Additional Individuals with Disabilities Could be Covered

The proposed regulations adopt the ADA Amendments Act's (ADAAA's) very broad definition of who is considered to be a person with a disability. This will greatly increase the number of individuals with disabilities who are covered by the OFCCP's mandate. Even utilizing the EEOC's conservative estimate, over one million more Americans will meet the definition of disability because of the ADAAA.

More, More, More: More Data Collection, More Analysis and More Recordkeeping

If the proposed rule is implemented in its current form, all contractors, including those in the hospitality industry, will be required to conduct a significant number of statistical analyses, far more than currently required by Section 503 and even more than currently required by Executive Order 11246, which covers women and people of color. Contractors will also be required to keep this information for five years.

For example, contractors would be required to engage in an annual review of "personnel processes" and identify the vacancies and training programs for which applicants and employees with disabilities are considered; provide a statement of reasons explaining the circumstances for rejecting any individual with a disability for any vacancy or training program; and describe the nature and type of accommodations for individuals with disabilities who were selected for hire, promotion, or training programs. Contractors will also be required to analyze the total number of referrals from state employment services and other organization with whom the contractor has linkage agreements and track the total number of applicants for employment, the number of applicants who are known to be individuals with disabilities, and the "applicant ratio" of known applicants with disabilities to total applicants. Then contractors will be required to develop a report showing the total number of job openings, the number of jobs filled, the number of known individuals with disabilities hired, and the "hiring ratio" of hires with known disabilities to total hires.

The burden of this requirement is staggering for all employers. It is particularly burdensome for hospitality industry clients that operate in multiple locations, as they will be required to track and organize this information for each linkage agreement at each establishment.

Reasonable Accommodation Procedures Must be Specific and Well-Documented and Accommodations Must be Processed Quickly

Another of the biggest "game-changers" in the proposed regulations is the imposition of significant additional obligations on federal contractors with respect to the procedures for providing reasonable accommodations to applicants and employees with disabilities. Unlike most EEO regulations, these proposed regulations require not only that contractors comply with the equal employment, nondiscrimination, and affirmative action requirements but that they do so in a specific way. This will require most hospitality industry contractors to scrap their reasonable accommodation process and adopt the OFCCP's new process, which will include a requirement that most reasonable accommodation requests be processed within 5 to 10 business days! This will be especially burdensome on smaller hospitality employers with limited human resources staff.

What Should Hospitality Industry Employers Do Now

Complying with the regulations, as proposed, would require contractors to engage in a major alteration of their outreach and recruiting activities; human resources policies, procedures and systems; referral and applicant tracking processes and systems; promotion and training practices and recordkeeping; self-audit processes; documentation practices; record retention policies and practices; and substantial revision of their Section 503 affirmative action plan. Some smaller hospitality employers may opt not to be a federal contractor. Those that plan to remain a federal contractor should start preparing now. We are here to help.

It is critical to be aware that a contractor's failure to have accurate and complete data, documents and records of its efforts and other activities can be misinterpreted by the OFCCP to be discrimination and can result in very expensive litigation and/or settlements. These new proposed requirements present a host of opportunities for the OFCCP to find "discrimination," when the issue may simply be a failure to maintain adequate data (such as applicant tracking), documents and other records.

Arbitration Agreements and Class Action Waivers: A Leaky Bucket That May Yet Hold Water

By: Dave Baffa

Many hospitality employers have long considered implementing arbitration programs as a means for resolving workplace disputes. For years, the effectiveness of arbitration programs against class and collective action lawsuits, however, was an area of uncertainty in many states -- especially California. While the possibility of obtaining a waiver of class or collective actions in court has existed for years, the possibility of ending up with a class action in an arbitral forum was a risk most employers were unwilling to take.

In the wake of the Supreme Court's decisions in 2010 and 2011 -- Stolt-Nielsen v. AnimalFeeds and AT&T Mobility v. Concepcion -- arbitration has re-emerged a possible way for employers to insulate themselves against employment-related class and collective actions in any forum throughout the United States, including California.

The prospect of avoiding class or collective actions has sparked employer interest. As of October 2011, based on a survey conducted by Seyfarth Shaw among retail and hospitality employers, roughly 40% of respondents indicated that they are considering seriously the implementation of mandatory arbitration with class action waivers in the wake of Concepcion, and many more have since given thought to such a program.

The decision to implement such a program is not an easy one, and employers must understand the advantages and disadvantages -- both real and perceived. In addition, employers must understand where the mines are buried, and understand the various ways in which mandatory arbitration may come under attack.

It has been nearly a year since Concepcion, and the vast majority of courts that have applied Concepcion to arbitration agreements containing a class or collective action waiver have enforced those agreements and compelled arbitration. Selected courts, however, continue to find arbitration clauses unenforceable, particularly when attempting to reconcile the FAA with federal statutes that arguably give rise to substantive right to proceed on collective basis. For example, federal judges in the Southern District of New York are split as to the enforceability of collective action waivers under the Fair Labor Standards Act ("FLSA"). Federal and state courts in California differ as to the ability to waive the right to file claims under the Private Attorney General's Act ("PAGA").

Perhaps the biggest post-Concepcion obstacle to class and collective action waivers was erected in January 2012 by the National Labor Relations Board. The Board in D.R. Horton ruled that a mandatory class and collective action waiver imposed by an employer is illegal and unenforceable under the National Labor Relations Act ("NLRA") because -- in the Board's view -- class or collective actions constitute "protected concerted activity" within the meaning of Section 7 of the NLRA. Many of these decisions are currently subject to appeal, and many employers are eagerly waiting and hoping for reversal.

As employers await the appeal of these decisions, they must also predict the upcoming political landscape, including the threat of legislative action, as well as other challenges to arbitration agreements based on generally applicable contract defenses. Despite the challenges, however, employers remain interested in mandatory arbitration and class action waivers as a means for potentially staving off the threat of class and collective actions.

The Supreme Court's Strong Support of Mandatory Arbitration

One thing is clear: The Supreme Court of the United States has long interpreted the Federal Arbitration Act (FAA) to require courts to honor the parties' expectations and enforce arbitration agreements according to their terms. A string of decisions -- starting with Gilmer v. Interstate/Johnson Lane (1991) and continuing most recently in CompuCredit Corp. v. Greenwood (2012) and Marmet Health Care Center v. Brown (2012), have emphasized that under the FAA, arbitration agreements are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. This, according to the Court in Marmet and Concepcion, reflects an "emphatic federal policy in favor of arbitral dispute resolution." State laws, the Court made clear, that seek to prohibit outright the arbitration of a particular type of claim "[are] displaced by the FAA." Likewise, in CompuCredit, the Court made clear that even when federal statutory claims are at issue, arbitration agreements must be enforced by their terms.

State Laws Prohibiting Class Action Waivers Clearly Preempted by the FAA

Since Concepcion, a string of federal courts have routinely struck down state laws that seek to prohibit class action waivers in arbitration agreements. Most recently, on March 14, 2012, the Third Circuit in Quilloin v. Tenet Healthsystem Philadelphia, overturned a district court decision and noted that while Pennsylvania law may find class action waivers to be unconscionable, such law is "surely preempted by the FAA under Concepcion." In 2011, the Third Circuit also held a similar New Jersey law to be preempted by the FAA, in Litman v. Cellco P'ship. Even the Ninth Circuit has followed suit, holding most recently on March 7, 2012 in Kilgore v. KeyBank, that even claims solely for injunctive relief under California's Unfair Competition Law may be preempted by an arbitration agreement, because California's law prohibiting arbitration of injunctive relief claims is preempted by the FAA under Concepcion.

Not all courts, however, have fully given over to this position. Specifically, California state courts -- even post Concepcion -- have continued to suggest that the arbitration of certain state law claims is prohibited. Notably, the California Court of Appeal in Brown v. Ralph's Grocery held that claims under California's Private Attorney General Act ("PAGA") may not be compelled to arbitration. Unfortunately, the California Supreme Court declined to review Brown. Several California federal district courts, however -- notably Quvedo v. Macy's (C.D. Cal) and Grabowski v. CH Robinson (S.D. Cal) -- have explicitly held that Brown got it wrong, and found that PAGA claims may be compelled to arbitration. The Ninth Circuit, based on its decision in Kilgore, presumably would agree.

Conflicting Federal Rights to Proceed Collectively or as a Class

The National Labor Relations Act. Perhaps the biggest setback for employers post-Concepcion was dealt in January, 2012, by the Board in D.R. Horton. In a closely watched decision ultimately penned by Member Craig Becker, the Board held that class action waivers are a per se violation of Section 7 of the National Labor Relations Act, and therefore unlawful. The Board argued that employees' rights to engage in concerted activity includes the right both to file and to pursue a class action, and that an arbitration agreement that disallowed such activity unlawfully chilled employees' Section 7 rights. The Board's order is before the Fifth Circuit Court of Appeals, which will be a closely watched decision in the coming months. Unless it is reversed, this decision presents a challenge for employers looking to implement a new program because of the ease with which an employee can challenge implementation by filing a charge with the NLRB.

The FLSA. While the preemptive effect of the FAA vis-à-vis state law prohibitions of class action waivers is reasonably clear, a more recent and troubling trend is the proper balancing of arguably conflicting federal substantive rights to proceed on a class or collective basis. Chief among these, of course, is the Fair Labor Standards Act, which at least according to one Federal District Court Judge in the Southern District of New York -- in Ranieri v. CitiGroup -- includes the substantive right to proceed collectively. Accordingly, according to the court in Ranieri, FLSA collective action claims cannot be compelled to individual arbitration.

The Ranieri decision, however, is an outlier. Every other district court to consider the issue has held that FLSA claims and collective actions may be compelled to single-plaintiff arbitration. Indeed, even a sister court in the Southern District of New York, in LaVoice v. UBS, expressly declined to follow Ranieri (or, for that matter, the NLRB's decision in D.R. Horton). The Ranieri decision, which has been appealed and briefed before the Second Circuit, is another decision-to-watch for employers.

EEOC Pattern and Practice Claims. Another decision out of the Southern District of New York -- Chen Oster v. Goldman Sachs -- adopts a similar view, arguing that the right to proceed as a class or group is so inherently bound up in Title VII that such claims may not be compelled to single-plaintiff arbitration, notwithstanding the FAA. Perhaps unsurprisingly, the EEOC also shares this view.

Unconscionability Challenges

While courts generally have adopted a broad view of Concepcion, and have preempted any state law and most federal laws prohibiting arbitration, agreements are still subject to challenge. The Supreme Court specifically noted that the FAA "permits agreements to arbitrate to be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability."

Accordingly, several courts have analyzed arbitration agreements with class action waivers and refused to enforce them as unconscionable, despite Concepcion. The most common reasons that agreements are found to be unconscionable include:

Providing that the prevailing party must pay the other sides' attorneys fees, or refusing to permit attorneys fees to shift, as compared to the fee-shifting that would be available to a prevailing plaintiff in an employment lawsuit in court. See, for example, In Re Checking Account Overdraft Litigation (S.D. Florida); Mayer v. Volt Mgmt (Ct. App. Cal. - 4th Dist.)
Shortening the statute of limitations as compared to what would be available by statute. See, for example, Kanbar v. O'Melveny & Myers (N.D. California)
Failing to make the arbitration rules clear, most notably by failing to include a clear reference to the applicable rules and a copy of the applicable rules. Mayer v. Volt Mgmt (Ct. App. Cal. - 4th Dist.)

Other Issues and Carve-Outs

Employers who are considering implementation of mandatory arbitration should consider other important potentially applicable carve-outs. For example, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, certain types of whistleblower claims may not subject to mandatory pre-dispute arbitration.

Strategic carve-outs should also be considered, such as reserving the right to seek emergency or temporary injunctive relief in court for disclosure of trade secrets. Another example of a strategic carve-out would be situations in which an employer maintains different types of ERISA plans -- such as Severance Pay Plans or Short-Term Disability Plans -- that call for different types of dispute resolution procedures.

Wait-And-See

Many companies view Concepcion as a way to avoid costly class actions by implementing arbitration agreements that include class action waivers. While the D.R. Horton decision works its way through the Fifth Circuit, and employers await and hope for the reversal of the Ranieri decision in the Second Circuit, many employers are continuing to design mandatory arbitration programs with class and collective action waivers, so they can be ready to implement. For many employers, the prospect of avoiding even one class or collective action is well worth the risk.

Hospitality Team Updates

Jennifer Kraft and David Weiner of our Chicago office and Leon Sequeira of our Washington, D.C. office were retained by the National Restaurant Association to submit an amicus brief in the health care reform appeal in the U.S. Supreme Court (National Federation of Independent Business v. Sebelius and Florida, et al., v. Health & Human Services Department). The brief focuses on the burden on employers, and those employers in the restaurant industry in particular, if they are required to comply with all the health care reform provisions without the individual mandate being in effect. The brief argues that if the individual mandate is unconstitutional then it cannot be severed from the rest of the Act and the entire law must be invalidated. Click here to read the brief.

Ron Kramer, Molly Eastman and Isabel Lazar of the Chicago Office along with Jack Toner from the DC Office presented a webinar entitled "The Year That Was And Will Be: National Labor Relations Board Update For Hospitality Employers" on January 18, 2012. If you are interested in a copy of the webinar, please click here.

We want to hear from you! Do you want to know more about these or any other topics? Want to see something reported on? Have an idea for an article or webinar? Looking for a speaker for your group? Please feel free to contact your Seyfarth attorney.

Steven Pearlman Published in Financial Executive
“Hit Parade: Countdown of Key Whistleblower Decisions”

Mon, 26 Mar 2012 00:00:00 -0400

An article by Employment partner Steven Pearlman was published in the March issue of Financial Executive. In the article, Steve outlines ten key whistleblower cases from 2011, equating them to a Top 10 “greatest hits” list of musical classics, with references to legendary performers and bands such as Boston, The Beatles, Cole Porter, Journey, and Diana Ross. The cases focus on interpretations of the Sarbanes-Oxley whistleblower provision, the Dodd Frank Wall Street Reform and Consumer Protection Act, the Federal Credit Union Act, and the Racketeer Influenced and Corrupt Organizations Act.

Proposed CORI Regulations Impose a Host of New Requirements on Employers Conducting Criminal Background Checks in Massachusetts

Fri, 23 Mar 2012 00:00:00 -0400

Register Now For Seyfarth's Breakfast Briefing on April 4, 2012: Navigating the New Massachusetts Criminal Record Law

On May 4, 2012, major changes are coming that will require all Massachusetts employers conducting criminal background checks to reassess their practices. As we reported previously, the Massachusetts Legislature overhauled the Criminal Offender Record Information ("CORI") statute in 2010, imposing a host of new requirements for users and providers of criminal history to be phased in over time. A few days ago, the Department of Criminal Justice Information Services ("DCJIS") issued 84 pages of Proposed Regulations implementing the last of the new requirements and announced a public hearing on the draft regulations scheduled for March 30, 2012. A few of the most important points in these new regulations are noted below. Seyfarth Shaw also invites you to join us at 8:00 a.m. on April 4, 2012, for a Breakfast Briefing, where our experts will provide an overview of the requirements which go into effect on May 4, 2012, an analysis of the proposed regulations, and an update on the DCJIS's public hearing. Seyfarth Shaw will also host a webinar on the topic on April 11, 2012 at 1:00 p.m.

Proposed Regulations: Key Points For Employers

Notification To Applicant Prior to Potential Adverse Decision

Employers who intend to take adverse action based on criminal history information must notify the applicant, provide the applicant with several specific pieces of information, afford the applicant an opportunity to dispute the accuracy of the criminal history at issue, and document all steps taken to comply with these requirements. Unlike with the federal Fair Credit Reporting Act, the new CORI requirement exists regardless of whether a third party is used to obtain the criminal history information.

Using a Consumer Reporting Agency ("CRA") to Make Employment Decisions

Employers using CRAs to collect criminal history information on employees or applicants are required to make certifications to the CRA regarding the employer's CORI compliance measures, in addition to providing disclosures to the individuals being screened both before the employer requests a criminal history report from the CRA and before taking any adverse action based on information that the CRA provides.

The regulations also provide a separate set of requirements that apply when an employer outsources the decision-making process regarding an employee's eligibility for hire to the CRA, rather than merely requesting criminal history information from the CRA.

Obtaining CORI from DCJIS

Employers who obtain criminal record information from DCJIS must submit acknowledgement forms for each applicant, verify the identity of the applicant by examining a government-issued identification, and certify that the applicant was properly identified. These acknowledgement forms must be maintained by the employer for one year from the date the applicant signs the form.

Training Required

Before requesting CORI, employers or CRAs must register for an account on the Commonwealth's new iCORI system, complete a training, and adhere to annual renewal and re-training requirements.

CORI Policy Requirement

Employers who submit five or more CORI requests annually must maintain a CORI policy and provide it to applicants if the employer takes adverse employment action based on the applicant's CORI. These requirements apply whether the employer (or a CRA on the employer's behalf), obtains criminal history information from DCJIS or another source.

Strict Recordkeeping Requirements

Employers must store all hard copies of CORI in a separate, locked and secure location and limit access to the location to employees who the employer has approved to access CORI. Electronic CORI records must be password-protected and encrypted and may not be stored using public cloud storage methods.

Employers are prohibited from retaining CORI for longer than seven years and are required to implement effective means of destroying or deleting such information, including scrubbing computer hard drives and deleting CORI from any back-up computer system.

If an employer disseminates CORI outside of its organization, the employer must keep a detailed dissemination log, which must be maintained for at least one year.

Audits by DCJIS

Employers who request CORI from DCJIS are subject to audit. During an audit, DCJIS staff can inspect CORI-related documents, including documentation of adverse employment decisions based on CORI. DCJIS may initiate a complaint with the Criminal Records Review Board (CRRB) against an employer for failure to participate in an audit or in the event that DCJIS determines the employer is not in compliance with the CORI law.

Penalties for Violations of the CORI Law

The CRRB has the authority to impose civil fines of up to $5,000 for each knowing violation of the CORI law. Certain violations may also subject an employer to criminal prosecution.

Strategy and Insights for Compliance with the Massachusetts CORI Reform Act

In addition to our upcoming Breakfast Briefing and webinar, Seyfarth Shaw will soon publish an Insights & Strategies piece providing a comprehensive analysis of the new CORI requirements and the steps that employers can take to avoid liability under the revised statute.

Seyfarth Shaw is hosting a Breakfast Briefing to outline the changes and their impact on April 4, 2012. To register for this event, click here

Plan Sponsors May Be Able to Issue Fewer SBCs than Originally Expected

Fri, 23 Mar 2012 00:00:00 -0400

This is the thirty-seventh issue in our series of alerts for employers on selected topics in health care reform. (Click here to access our general summary of health care reform and other issues in this series.) This series of Health Care Reform Management Alerts is designed to provide an in-depth analysis of certain aspects of health care reform and how it will impact your employer-sponsored plans.

The Affordable Care Act requires group health plan sponsors (employers and insurers) to provide participants with a short Summary of Benefits and Coverage (SBC) for each benefit package offered. Recent guidance in the form of FAQs provides some relief to plan sponsors by limiting the number of SBCs that plan sponsors must issue to participants. This issue supplements Issues 24, 30 and 33 of our Health Care Reform Management Alert Series, which addressed earlier guidance from the IRS, DOL and HHS (the “Agencies”) on the SBC requirement.

Background: Employers Sought Relief Following Final Regulations

In the wake of the final regulations on the SBC requirement, three primary complaints emerged:

Plan sponsors were not provided with sufficient time following the final regulations to prepare the SBCs before the effective date;
Plan sponsors were required to produce and provide participants with mostly duplicative SBCs to reflect different coverage tiers (i.e., employee, employee plus one, family, etc.); and
The rigid structure of the SBC template did not provide enough flexibility for sponsors with unique plan designs.

The new guidance provides some relief on the second two items, but the effective date remains: SBCs must be issued during open enrollments beginning on or after September 23, 2012. However, the guidance indicated that during the initial year of the SBC requirement, the Agencies will not impose penalties on plans that have worked “diligently and in good faith” to provide an SBC that is consistent with the final regulations. Instead, the Agencies will work with plans to achieve uniform compliance.

New Guidance Suggests Fewer SBCs and Relaxed Enforcement Standard

The new guidance clarifies that plans may combine information for multiple coverage tiers in one SBC, assuming the SBC is still understandable to participants. In these instances, if cost-sharing varies across tiers, the plan sponsor should use the cost for self-only coverage (and the SBC should note this assumption).

Plan sponsors may use the same general approach for unique plan structures that do not translate well to the SBC template (e.g., a build-your-own plan design that allows participants to select among different copays, deductibles, etc.). Again, in these instances the SBC should note any assumptions used in completing the template.

As noted above, the guidance notes that the Agencies’ focus is on compliance assistance rather than enforcement. The guidance also reiterates that plan sponsors should use good faith efforts to complete the template in a manner that is as consistent as possible with the instructions while still accurately reflecting plan terms.

Other Clarifications

The new guidance also addressed other unique issues raised by sponsors following the final regulations, including:

Carve-Outs for Specific Benefits. The guidance acknowledges that any given SBC may require collaboration between a number of different entities (e.g., plan administrator, insurer, pharmacy benefit manager, managed behavioral health organization). As a result, the guidance provides that the Agencies will not take enforcement action against a plan that contracts with a provider to satisfy (all or a portion of) the SBC requirement, as long as the plan (1) monitors the provider’s performance and (2) acts quickly to correct the SBC if the plan becomes aware of any misinformation or variations from the SBC instructions. If the plan does not have access to the information necessary to correct the provider’s mistake, it must notify participants of the mistake separately and take steps to avoid a recurrence.
FSA, HSA & HRA Coverage. Plans may combine the SBC for major medical coverage with any information relating to an “add-on” benefit, such as a flexible spending account, health reimbursement arrangement or a health savings account. The SBC should identify any assumptions used in this process. Plan administrators may want to consider this approach, as these benefits are likely to impact participant costs.
Electronic Delivery, Template Changes, Etc. The guidance contained a number of other clarifications regarding delivery timing, electronic delivery, template changes, application to COBRA beneficiaries, and non-English SBCs. While a discussion of these details is beyond the scope of this alert, the Agencies’ FAQs are available here.

Employer Action Steps

Determine which benefit packages and coverage levels may be consolidated in a single SBC.
Coordinate and contract with service providers to determine who will prepare and distribute the SBC.
Complete the SBC template for each benefit package and prepare for distribution no later than the first open enrollment period following September 23, 2012 - generally for the 2013 plan year.
Determine whether to distribute electronically or to provide paper copies of the SBC.

Richard Alfred Quoted in Corporate Counsel
"Wage and Hour Litigation is Big - and Getting Bigger"

Fri, 23 Mar 2012 00:00:00 -0400

Boston partner Richard Alfred was quoted in the March 19 issue of Corporate Counsel. The article discusses the recent significant uptick in wage and hour cases in the U.S., noting that there has been an over 15 percent increase in the number of Fair Labor and Standards Act (FLSA) cases filed in federal court between 2010 and 2011. Most of these cases are large collective actions, but both single-plaintiff cases and collective actions have increased more than 325 percent over the last 10 years. "At the federal level, the cases have been skyrocketing," notes Richard, who is the head of the firm's national wage and hour practice.

Richard notes that a reason for the significant increase in these cases is that employers find the law difficult to apply to a modern workplace. The FLSA was passed in 1938 and amended by the Portal-to-Portal Act in 1947. Richard notes that it is, "a very important law...but that in many ways it [the FLSA] fails to meet the needs of employers and employees in today's workplace." Richard recently testified before the House of Representatives in a hearing related to the FLSA's current applicability and edited the Wage & Hour Collective and Class Litigation, co-authored by firm colleagues Noah Finkel, Brett Bartlet and Andrew Paley.

Click here to read the full article: http://www.law.com/jsp/cc/PubArticleCC.jsp?id=1202546026856&Wage_and_Hour_Litigation_is_Bigmdashand_Getting_Bigger

Essential Health Benefits To Be Defined by “Benchmark” Plans

Thu, 22 Mar 2012 00:00:00 -0400

This is the thirty-sixth issue in our series of alerts for employers on selected topics in health care reform. (Click here to access our general summary of health care reform and other issues in this series.) This series of Health Care Reform Management Alerts is designed to provide an in-depth analysis of certain aspects of health care reform and how it will impact your employer-sponsored plans.

The Affordable Care Act prohibits group health plans from imposing lifetime dollar limits and requires plans to phase out annual dollar limits on “essential health benefits” by 2014. The Act did not define the term “essential health benefits.” Instead, it outlined ten broad categories of benefits, to be further defined by the Secretary of Health and Human Services (HHS) at a later date. Instead of providing a uniform national definition, HHS announced that it intends to propose that “essential health benefits” be defined by a benchmark plan to be selected by each state.

Background: Dual Significance of Essential Health Benefits

Beginning in 2014, non-grandfathered insured plans in the individual and small group markets (including those offered in a state-based health insurance exchange) must cover “essential health benefits.” Nothing in the Act, however, requires self-funded plans or insured plans in the large group market to cover essential health benefits. Instead, group health plans (including grandfathered plans) and insurers must phase out dollar limits on the essential health benefits they do offer.

[√] Applies to grandfathered plans

[√] Applies to new health plans and plans that lose grandfathered status

As we reported in Issue 7, Interim Final Rules issued in June, 2010 indicated that until regulations are issued defining essential health benefits, the Departments of Treasury, Labor and Health and Human Services would take into account good faith efforts to comply with a reasonable interpretation of essential health benefits. Although regulations have not been issued, HHS has issued a Bulletin and Frequently Asked Questions proposing that each state will be permitted to define essential health benefits by selecting one of the following four benchmarks:

the largest plan by enrollment in any of the three largest insurance products in the state’s small group market (generally, the “small group market” includes group health plans with fewer than 100 participants);
any of the largest three state employee health benefit plans by enrollment;
any of the largest three national Federal Employee Health Benefit Plan options by enrollment; or
the largest insured commercial non-Medicaid HMO operating in the state.

Under this guidance, states would have to select one of the benchmarks by the third quarter of 2012, and the benefits and services included in the selected benchmark plan would be the essential health benefits package in that state for 2014 and 2015. Plans would be permitted to modify coverage within a benefit category, provided that the plan was substantially equal to the benchmark plan in both scope of benefits and limitations on those benefits (e.g. visit limits).

Impact of Benchmarks on Self-Funded Plans

Essential Health Benefits

The Affordable Care Act listed ten general categories of essential health benefits, including:

Ambulatory patient services
Emergency services
Hospitalization
Maternity and newborn care
Mental health and substance use disorder services, including behavioral health treatment
Prescription drugs
Rehabilitative and habilitative services and devices
Laboratory services
Preventive and wellness services and chronic disease management
Pediatric services, including oral and vision care.

As stated above, by 2014, self-funded group health plans must remove all dollar limits on essential health benefits covered under the plan. The HHS guidance provides that the Departments will consider these plans to have used a permissible definition of essential health benefits if they select a benchmark plan as described in the guidance. Under the benchmarking approach, every benefit offered within the benchmark will be considered an essential health benefit, regardless of whether it fits cleanly into any of the previous ten categories of essential health benefits, and regardless of whether the benchmark actually includes a dollar limit on the benefit.

Unanswered Questions

While the guidance brings greater clarity in determining exactly what constitutes an essential health benefit, it still leaves much uncertainty, including:

Good Faith Interpretation. The Interim Final Rules indicated that a good faith interpretation of “essential health benefits” would suffice until regulations defining essential health benefits were issued. Now that HHS has issued guidance, it is unclear whether a good faith interpretation is sufficient if it is not based upon a benchmark. (There is some indication that the good faith interpretation standard continues to apply until final regulations are issued, but the agencies have not officially opined on this.) If plans must choose a benchmark, it is unclear by when the benchmark must be chosen. Cautious plan sponsors may consider shifting to a benchmark as early as third quarter of 2012.
Using a Benchmark. While states have the option to choose between four different benchmarks, it isn’t clear whether employer-sponsored plans have the same flexibility or whether an employer plan must choose the option selected by a state. Also, it isn’t clear what options are available to plans covering participants in multiple states. The guidance simply suggests that the Departments will use enforcement discretion assuming the plan sponsor makes a “good faith effort” to use a definition of essential health benefits authorized by HHS, including any available benchmark option.

Seyfarth Shaw will continue monitoring developments and issue an alert when the agencies issue further guidance.

Christopher DeGroff Quoted in Human Resource Executive Online
"The EEOC’s 'Worrisome' Four-Year Plan"

Wed, 21 Mar 2012 00:00:00 -0400

Employment partner Christopher DeGroff was quoted in an article appearing in the March 12 online edition of Human Resource Executive. The article provided highlights for a 2012-2016 strategic plan recently released by the Equal Employment Opportunity Commission (EEOC).

According to Chris, who is also co-chair of Seyfarth’s complex discrimination practice group, the plan would combine the EEOC’s investigation and litigation arms, a move he says would result in an “integrated, holistic approach to enforcement from beginning to end, without separating the investigation and conciliation stage of the EEOC’s work from its litigation stage.” In effect, this would erase the line between the two, with investigations likely serving as “launching pads for future litigation,” Chris remarked. This would be a departure from what the EEOC was originally intended to do, he said, which was to “allow employers to look at policies and issues [that may be discriminatory] and informally resolve them before litigation.”

Another component of the plan aims to have increasing, yearly target percentages of the agency’s litigation docket be systemic cases. Chris comments that this essentially establishes a quota for litigating systemic discrimination cases, and the results could be far reaching. “Cases of alleged systemic discrimination are very high stakes, they can sometimes be nationwide, they’re very expensive for employers, and I would not want to see the EEOC bringing these types of cases to meet some sort of internal metric,” he said.

To read the entire article, click here: http://blog.hreonline.com/2012/03/12/the-eeocs-worrisome-four-year-plan/

Seyfarth Shaw’s Bennett Greenberg Presented with Martin Luther King, Jr. National Memorial Replica

Wed, 21 Mar 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

WASHINGTON, D.C. (March 21, 2012) - Seyfarth Shaw LLP is pleased to announce that Washington, D.C. office partner Bennett Greenberg was recently granted a replica of the Martin Luther King, Jr. National Memorial for his representation of the Washington, D.C. Martin Luther King, Jr. National Memorial Project Foundation, Inc., in all phases of the historical project.

Bennett’s work included mediating the separation between the Foundation and the original design builder, serving as lead contract negotiator for the Foundation in its negotiations with the replacement design builder, and negotiating performance terms with the National Park Service. Negotiations concluded 30 minutes prior to ground breaking ceremonies, which were presided over by Secretary of the Interior, Kenneth Salazar, and numerous members of Congress.

The replica is one of 200 designed and constructed by the sculptor of record, Master Lei Yixin, of the memorial honoring Dr. King’s legacy. It stands two feet tall, weighs 30 pounds and is mounted on a base made of the same granite used in the actual sculpture. Click here to see Bennett and photos of the replica.

The Martin Luther King, Jr. Memorial was officially opened in August 2011. The Washington, D.C. Martin Luther King Jr. National Memorial Project Foundation is a 501 (c)(3) organization that led the collaborative effort to complete the memorial honoring Dr. Martin Luther King, Jr. on the National Mall. For more information, visit www.buildthedream.org.

Marshall Babson Quoted in Law360
"NLRB Ruling Opens Door to More Off-Site Union Elections"

Tue, 20 Mar 2012 00:00:00 -0400

Seyfarth Shaw New York Labor & Employment partner Marshall Babson was quoted in Law360 on March 9. The article discussed a National Labor Relations Board (NLRB) decision which marks a departure from NLRB practice and is said to minimize employers' influence during union elections.

Marshall said, "The Dec. 29 decision is troubling for business because it comes against the backdrop of NLRB moves— including the expedited election rule slated to go into effect April 30 — that limit employers' ability to take part in the union election process."

"The idea that you're going to effectively oust the employer from any role at all in a process that the Supreme Court has so clearly and unambiguously said that the employer has a right to participate vigorously and fully in is pretty breathtaking, in my view,” he added..

The NLRB issued four factors that a union regional director should consider when picking an election site: 1) the petitioner's objection to having the rerun election on the employers' premises against the employer's request that it be held on-site; 2) the employer's "prior unlawful and objectionable conduct"; 3) the advantage the employer would have should the election be held on premises it owns or controls; and 4) potential alternative sites.

"One would have to have exceedingly narrow vision to not understand how the four factors ... might be applied generally to justify off-site elections in the first instance," Marshall said.

Given former NLRB member Craig Becker's view that all mandatory union election campaign meets conducted by the employer between filing of the petition and election are impermissibly coercive, Marshall remarked, "Whether the argument will gain traction with the current NLRB remains unclear, but the dissent teed the question up in a clear and bold way that begs for attention."

“It certainly is a hypothesis that's been set down fully and in a manner that's never been done before,” he said.

Gerald Maatman Quoted in The Wall Street Journal
"Your Posts Can Be Used Against You"

Mon, 19 Mar 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment Partner Gerald Maatman was quoted in The Wall Street Journal on March 11. The article discussed how employees should be discreet on social media platforms and should pay attention as company policies continue to change. The writer notes that there should not be an expectation of privacy, especially when in the workplace and using company equipment, and this applies to all levels of workers at a company.

While Jerry said, "Most employers aren't in the business of policing electronic communications unless there is a cause, a legitimate reason to search someone's email," according to a recent report referenced several times throughout the article, it is also likely that a coworker may be the one to notify a supervisor about another employee's questionable postings.

Click here to read the full article: http://online.wsj.com/article/SB10001424052970204603004577267242579231760.html?mod=WSJ_Careers_CareerJournal_7_1

Gerald Maatman Published in Bloomberg BNA's Class Action Litigation Report
"Workplace Class Actions in 2011: Trends and Developments"

Thu, 15 Mar 2012 00:00:00 -0400

An article by Employment partner Gerald Maatman was published in the March 9 edition of Bloomberg BNA's Class Action Litigation Report. In the article, Jerry describes the major workplace class action trends of 2011, and provides predictions for the class action landscape of 2012.

Among the significant events of 2011, Jerry emphasizes the importance of the U.S. Supreme Court's rulings in Wal-Mart Stores, Inc. v. Dukes; AT&T Mobility v. Concepcion; and Smith v. Bayer Corp.; all of which had a major impact on complex litigation. Other trends included an increase in government enforcement litigation, particularly with the Equal Employment Opportunity Commission; an increase in class action and collective action litigation, fueled by the state of the economy; wage & hour litigation continuing to out-pace other types of workplace class actions; developments in Rule 23 and 216(b) case law causing evolution in case theories; and an increase in the financial stakes of workplace class action litigation.

"The lesson to draw from 2011 is that the private plaintiffs' bar and government enforcement attorneys are apt to be equally, if not more, aggressive in 2012 in bringing clas action and collective action litigation against employers," Jerry concludes. "These novel challenges demand a shift of thinking in the way companies formulate their strategies. As class actions and collective actions are a pervasive aspect of litigation in Corporate America, defending and defeating this type of litigation is a top priority for corporate counsel. Identifying, addressing, and remediating class action vulnerabilities, therefore, deserves a place at the top of corporate counsel's priorities list for 2012."

Click here to read the full article.

Immigration Inbox: News You Can Use March 2012

Wed, 14 Mar 2012 00:00:00 -0400

U.S. Immigration:

1. FY 2013 H-1B Filing Season Rapidly Approaches - Beginning on April 2, 2012 (because April 1 is a Sunday), employers may file cap-subject H-1B petitions for fiscal year (FY) 2013, for employment starting on October 1, 2012, or later.

2. March Visa Bulletin Continues Advances for India, China EB-2 Category – The category has advanced well over a year in just a few months.

3. Passenger Pre-Screening Initiative Expands to Additional Airports – More than 336,000 passengers have been screened through TSA PreCheck™ lanes.

4. House Judiciary Committee Approves Bill Adding Israel to Nonimmigrant Investor Visa Eligibility List – The bill would allow Israelis to apply for E-2 visas if similarly situated U.S. nationals are eligible for such visas in Israel.

5. U.S. Embassy in London Discusses Visa Availability for Olympics, Expansion of Visa Reissuance Program for H-1, H-4 Applicants – Visa services will be limited during July and August for all nonimmigrant visa categories; the Embassy encourages applications during the spring and early summer.

6. DOL Publishes Final Rule on Labor Certifications for H-2B Temporary Nonagricultural Employment – The final rule revises the process by which employers obtain a temporary labor certification to employ a nonimmigrant worker in H-2B status.

7. USCIS Launches 'Entrepreneurs in Residence' Initiative at Silicon Valley Summit – A tactical team will identify ways to enhance USCIS policies, practices, and training across a range of existing nonimmigrant visa categories used by entrepreneurs.

8. EB-5 Investor Lawsuit Could Threaten Construction of South Dakota Beef Facility – A new lawsuit could threaten construction of a Northern Beef Packers cattle processing facility in South Dakota.

9. DS-230 Expires for Certain Applicants, Online Forms Launched – The online forms eventually will be implemented worldwide and required for all immigrant visa applications.

10. USCIS Ombudsman Recommends Improving Adjudication Quality for Extraordinary Ability and Other Employment-Based Adjudications – Recent concerns have focused on the subjective nature of final merits determinations.

11. Witnesses Discuss Controversial DHS OIG Report at House Hearing – The report, which indicates that adjudicators are pressured to approve applications quickly with insufficient scrutiny, was based on testimonials and not empirical data; some say the data tell a different story.

Seyfarth Workforce Authorization Team (SWATeam)

1. Over One Million Employers Use E-Verify; USCIS Announces Expansion of Self-Check – Employers are now using E-Verify at more than one million worksites. Also, USCIS announced that Self Check is now available in all 50 states; Washington, DC; Guam; Puerto Rico; the U.S. Virgin Islands; and the Commonwealth of the Northern Mariana Islands.

Also in this issue:

Seyfarth Immigration Events and News

U.S. Immigration

1. FY 2013 H-1B Filing Season Rapidly Approaches

Beginning on Monday, April 2, 2012 (because April 1 is a Sunday), employers may file cap-subject H-1B petitions for fiscal year (FY) 2013, for employment starting on October 1, 2012, or later.

On November 22, 2011, U.S. Citizenship and Immigration Services (USCIS) received a sufficient number of petitions to reach the statutory cap for FY 2012. USCIS also received more than 20,000 H-1B petitions on behalf of persons exempt from the cap under the advanced degree exemption as of October 19, 2011. With the improving economy, H-1B numbers could be exhausted earlier this year. Seyfarth Shaw recommends that employers file early and allow for processing of the labor condition application with the DOL. Contact your Seyfarth attorney now for guidance and help with the process.

2. March Visa Bulletin Continues Advances for India, China EB-2 Category

The March 2012 Visa Bulletin shows that the priority date for the India and China employment-based second preference (EB-2) categories is May 1, 2010, which is a four-month advance over the February cut-off date of January 1, 2010. In January, the date was January 1, 2009, so the category has advanced well over a year in just a few months. The Department of State's Visa Office explained:

The China and India Employment Second preference cut-off date has been advanced at a rapid rate in recent months. As previously noted, this action was intended to generate significant levels of new filings for adjustment of status at U.S. Citizenship and Immigration Services (USCIS) offices. USCIS has reported that the rate of new filings is currently far below that which they had anticipated, prompting an even more aggressive movement of the cut-off date for January and possibly beyond. While this action greatly increases the potential for an eventual retrogression of the cut-off at some point during the year, it also provides the best opportunity to utilize all numbers available under the annual limit.

The March bulletin is available here.

3. Passenger Pre-Screening Initiative Expands to Additional Airports

The Department of Homeland Security (DHS) announced in February 2012 the expansion of TSA PreCheck™, a passenger pre-screening initiative, to additional airports across the country following its launch at seven pilot locations.

More than 336,000 passengers have been screened through TSA PreCheck™ lanes. Under this initiative, the Transportation Security Administration (TSA) focuses its efforts on passengers the agency knows less about while providing expedited screening for travelers who volunteer information about themselves before flying.

TSA PreCheck™ is currently operating with American Airlines at airports in Dallas, Miami, Las Vegas, Minneapolis, and Los Angeles, and with Delta Air Lines at airports in Atlanta, Detroit, Las Vegas, and Minneapolis. US Airways, United Airlines, and Alaska Airlines are all opting in new passengers and will begin operations later this year. TSA will continue expanding TSA PreCheck™ to additional airlines and airports as they are ready.

Eligible participants include certain frequent flyers from participating airlines as well as members of U.S. Customs and Border Protection's Trusted Traveler programs (Global Entry, SENTRI, and NEXUS) who are U.S. citizens and fly on a participating airline. If TSA determines a passenger is eligible for expedited screening following the TSA PreCheck™ vetting process, information will be embedded in the barcode of the passenger's boarding pass. TSA will read the barcode at the security checkpoint and then may refer the passenger to a TSA PreCheck™ lane, where they will undergo expedited screening, which could mean no longer removing certain items, such as shoes, laptops, light outerwear, belts, and 311-compliant bags from carry-ons.

The announcement, which includes a list of airport locations where TSA PreCheck™ will be implemented in 2012, is available here. Those interested in participating in the pilot may apply via Global Entry here.

4. House Judiciary Committee Approves Bill Adding Israel to Nonimmigrant Investor Visa Eligibility List

On February 28, 2012, the U.S. House of Representatives' Committee on the Judiciary approved legislation that would add Israel to the E-2 nonimmigrant visa eligibility list of countries. The bill would allow Israelis to apply for E-2 visas if similarly situated U.S. nationals are eligible for such visas in Israel. Rep. Howard Berman (D-Cal.), said the legislation would bring Israeli business and innovations in "security and defense technologies, medicine, agriculture, high-tech, and clean energy" to the United States.

Last May, the Senate introduced a companion bill but has not yet moved it through the Senate Judiciary Committee.

5. U.S. Embassy in London Discusses Visa Availability for Olympics, Expansion of Visa Reissuance Program for H-1B, H-4 Applicants

The U.S. Embassy in London recently released a notification of limited nonimmigrant visa services during the Olympics and an expansion of the Visa Reissuance Program to include H-1B and H-4 visa applicants.

The embassy noted that visa services will be limited during July and August for all nonimmigrant visa categories. The embassy encourages applicants "to apply for visas during the spring and early summer as appointment availability cannot be guaranteed." Appointments are scheduled through the Operator Assisted Information Service.

Also, the embassy noted that travelers planning on entering the United States visa-free under the Visa Waiver Program by air or sea carrier who do not have travel authorization approval under the Electronic System for Travel Authorization (ESTA) are encouraged to register now for summer travel. If registration is denied, visas will be required.

The embassy also said that the Visa Reissuance Program has been expanded to include H-1 visa applicants and their derivatives who are renewing a visa of the same classification that has expired in the last 12 months. Other qualifying criteria apply and can be found here. The Program continues to be available to O, P, J and C-1/D visa applicants. Applicants must be physically present in the United Kingdom to use the Visa Reissuance Program, and a consular officer reserves the right to request that an applicant appear in person for an interview after reviewing his or her application.

Callers within the United Kingdom should dial 09042-450-100. Calls to this line are charged at £1.23 per minute plus network extras. Callers from the United States should dial 1-866-382-3589. U.S. callers are charged a fixed rate of $16 payable by credit card (Visa, MasterCard, or American Express only).

6. DOL Publishes Final Rule on Labor Certifications for H-2B Temporary Nonagricultural Employment

The Wage and Hour Division (WHD) of the Department of Labor's (DOL) Employment and Training Administration published a final rule effective April 23, 2012, revising the process by which employers obtain a temporary labor certification from the DOL for use in petitioning the Department of Homeland Security (DHS) to employ a nonimmigrant worker in H-2B status. WHD chose to revert to a compliance-based rather than the current attestation-based certification process. The regulations are also intended to provide increased worker protections for both U.S. and foreign workers.
The final rule creates a national registry for all H-2B job postings and increases the recruitment period for U.S. workers. The rule also requires the rehiring of former employees when available. In addition, the rule extends H-2B program benefits, such as transportation costs and wages, to U.S. workers performing substantially the same work as H-2B workers.

The final rule was published in the February 21 edition of the Federal Register. The H-2B program is limited by law to a cap of 66,000 visas per year.

The final rule is available here and the announcement is available here. Fact sheets and other information are available here and here.

7. USCIS Launches 'Entrepreneurs in Residence' Initiative at Silicon Valley Summit

On February 22, 2012, U.S. Citizenship and Immigration Services (USCIS) Director Alejandro Mayorkas met with more than 150 Silicon Valley entrepreneurs, academics, and government officials at NASA Research Park in Moffett Field, California, to launch the Entrepreneurs in Residence (EIR) initiative and gather information.

USCIS said that the panel discussions and breakout sessions held at the summit would inform the work of a newly formed EIR tactical team, which will "work collaboratively over the next several months to ensure that immigration pathways for foreign entrepreneurs are clear and consistent, and better reflect today's business realities. The tactical team will identify ways to enhance USCIS policies, practices and training across a range of existing nonimmigrant visa categories used by entrepreneurs."

USCIS's announcement is available here.

8. EB-5 Investor Lawsuit Could Threaten Construction of South Dakota Beef Facility

A new lawsuit could threaten construction of a Northern Beef Packers (NBP) cattle processing facility in South Dakota. NBP decided not to pay a $50,000-per-investor commission (with potentially up to double that as a "success fee") for recruiting EB-5 investors to Henry Global Consulting Group because it did not bring in as many investors as it had agreed to recruit. According to reports, Henry Global then persuaded several investors to sue the regional center. The lawsuit alleges that investors did not receive crucial facts about the project and were not included in key decisions as agreed upon. Almost six years after developers purchased the site, the project has been delayed continually by lawsuits, liens, and tax problems.

The compliant is available here.

9. DS-230 Expires for Certain Applicants, Online Forms Launched

A new DS-260 form has replaced the DS-230 for certain applicants. The DS-260, Online Immigrant Visa Application & Registration, and DS-261, Choice of Address and Agent, are electronic visa application forms completed and submitted online to the Department of State via the Internet through the Consular Electronic Applications Center. The forms may be partially completed, saved online to finish, and submitted later; or they can be completed and submitted in a single session.

The forms eventually will be implemented worldwide and required for all immigrant visa applications. Additional information, such as the current conditions and limitations on applicability of the forms, is available here.

10. USCIS Ombudsman Recommends Improving Adjudication Quality for Extraordinary Ability and Other Employment-Based Adjudications

In a recent report, the U.S. Citizenship and Immigration Services (USCIS) Ombudsman noted that stakeholders have raised concerns about consistency in adjudications of extraordinary ability and other employment-based petitions. Recent concerns have focused on the subjective nature of final merits determinations. Stakeholders report that an I-140 policy memo that USCIS issued in December 2010 has not resulted in a clearer adjudicatory standard. The Ombudsman noted that USCIS has been challenged in identifying an objective standard and application for a final merits determination, and some Immigration Services Officers (ISOs) report that the I-140 policy memo did little to change their analysis of I-140 petitions.

The Ombudsman made the following recommendations to USCIS to improve fairness, consistency, and transparency in adjudications of these petitions:

Conduct formal rulemaking to clarify the regulatory standard and, if desired, explicitly incorporate a final merits determination into the regulations;
In the interim, provide public guidance on the application of a final merits determination; and
In the interim, provide ISOs with additional guidance and training on the proper application of the "preponderance of the evidence" standard when adjudicating EB-1-1, EB-1-2, and EB-2 petitions.

The Ombudsman gave the following reasons for these recommendations:

Stakeholders are concerned that the current I-140 policy memo allows for too much subjectivity for adjudicative petitions.
Stakeholders presented in an amicus curiae briefing to USCIS's Administrative Appeals Office that the decision in Kazarian v. USCIS, 596 F. 3d 1115 (9th Cir. 2010), does not require USCIS to implement a two-part review as provided for in the I-140 memo, and that application of the I-140 policy memorandum has not resulted in a clearer adjudicatory standard.
ISOs lack guidance that clearly demonstrates the nature and type of evidence that typically establishes whether an individual possesses "extraordinary ability," may be classified as an "outstanding professor or researcher," or has "exceptional ability."
USCIS has not clearly explained the objective factors that USCIS adjudicators should consider when conducting a final merits determination.

The report and recommendations are available here. The December 2010 I-140 policy memo, which the Ombudsman noted rescinded and superseded all previously published USCIS policy guidance regarding EB-1 adjudications, is available here.

11. Witnesses Discuss Controversial DHS OIG Report at House Hearing

The House of Representatives' Subcommittee on Immigration held a hearing on February 15, 2012, "Safeguarding the Integrity of the Immigration Benefits Adjudication Process," at which witnesses discussed a new report by the Department of Homeland Security's (DHS) Office of Inspector General (OIG). Judiciary Committee Chairman Lamar Smith (R-Tex.) opened the hearing. Witnesses included Alejandro Mayorkas, Director, USCIS; Charles K. Edwards, Acting Inspector General, Department of Homeland Security (DHS); Mark Whetstone, President, National Citizenship and Immigration Services Council and American Federation of Government Employees, AFL-CIO; and Bo Cooper, Partner, Berry Appleman and Leiden LLP.

Chairman Smith noted that DHS's Inspector General responded with a report in January 2012 based on a request from Sen. Chuck Grassley (R-Iowa) about whether "senior [USCIS] leaders are putting pressure on employees to approve more visa applications, even if the applications might be fraudulent or the applicant is ineligible." The OIG report, Rep. Smith noted, states that "nearly 25 percent of immigration service officers who responded to the IG survey 'have been pressured to approve questionable applications.' " He said, "This rubberstamp process leaves an ink trail of fraud and abuse."

Inspector General's report. In response to Sen. Grassley's request, the Inspector General interviewed 147 managers and staff, received 256 responses to an online survey, and reviewed USCIS policies related to the effort to detect benefit fraud. The report was based on testimonials, not empirical data. The report recommended process improvements, such as instituting more training and collaboration to improve the fraud referral process; developing additional quality assurance or supervisory review procedures to strengthen identification of names and aliases of those seeking an immigration benefit; performing nationwide onsite outreach efforts to discuss the performance management system with Immigration Service Officers (ISOs); developing standards to permit more time for an ISO's review of case files; revising policy on requests for evidence (RFEs) to clarify the role that the requests play in the adjudication process; and developing a policy to "establish limitations for [USCIS] managers and attorneys when they intervene in the adjudication of specific cases." The report stated that "special treatment of complainants fosters a sense among ISOs that USCIS inappropriately grants benefits in certain cases."

Chairman Smith's opening statement and witness testimony are available here.

The U.S. Chamber of Commerce's letter is available here.

The National Foundation for American Policy's February 2012 brief, from which Mr. Cooper and the Chamber drew data analyses, is available here.

The OIG report, "The Effects of USCIS Adjudication Procedures and Policies on Fraud Detection by Immigration Services Officers," includes USCIS's response to the OIG's recommendations. It is available here.

Seyfarth Workforce Authorization Team (SWATeam)

1. Over One Million Employers Use E-Verify; USCIS Announces Expansion of Self-Check

U.S. Citizenship and Immigration Services (USCIS) recently announced that in December 2011, E-Verify reached a milestone: employers are now using E-Verify at more than one million worksites.

Also, USCIS announced on February 9, 2012, that Self Check, a free online service of E-Verify that allows workers to check their own employment eligibility status, is now available in all 50 states; Washington, DC; Guam; Puerto Rico; the U.S. Virgin Islands; and the Commonwealth of the Northern Mariana Islands. Launched in March 2011, Self Check was developed through a partnership between the Department of Homeland Security (DHS) and the Social Security Administration (SSA) to provide a tool for workers to check their own employment eligibility status and guidance on how to correct their DHS and SSA records. It is the first online E-Verify service offered directly to workers. A Spanish version was added in August 2011.

The E-Verify announcement is available here. The Self Check announcement is available here. Self Check is available here. A "Self Check Information Toolkit" is available here. E-Verify is available here.

Seyfarth Immigration Events and News

Recent News from Seyfarth's Immigration Attorneys

Angelo Paparelli co-authored an article that was published in the February 22, 2012 edition of the New York Law Journal. The article, entitled, "No More Waiting on Legal Immigration," discusses President Obama's American Jobs Act, and offers suggestions on how to spur the U.S. economy by reforming the immigration administration system. The article can be found here.

Recent and Upcoming Speaking Engagements

Angelo Paparelli spoke on March 3, 2012 in Irvine, CA, He addressed legislative and media strategies promoting comprehensive immigration reform to the National Council of Catholic Women, San Francisco Province, as part of a panel that included Reverend Alexia Salvatierra and Hilda Cruz, both faith-based immigrant advocates.

Angelo Paparelli will serve as Discussant at a March 16-17, 2012 Chapman University Public Sociology Conference entitled Faceless Latino/a Immigrants: Pathways to Resistance. Angelo's panel will discuss: "Contextualizing the Immigration Debate and Making Sense of the Backlash against the Undocumented." Topics and speakers for his panel include:

Media Portrayals of the Undocumented and the Impact of Labeling. Jennifer Merolla, Claremont Graduate University and Chris Haynes, UC Riverside
Immigrants in a Globalized World and the Role of Foreign Policy. Karina Macias, Chapman University
The `New' Civil Rights: Is the `New' Birmingham the Same as the `Old Birmingham'? Kevin Johnson, UC Davis
Understanding the Plight of Unaccompanied Minors, the Detained Immigrant and the 'Justice' System They Encounter. Lisa Ramirez, Immigration Policy Center

Information on registering for the conference is available here.

The complete conference program is available here.

Attorney Nicole Kersey will deliver a presentation titled, "Electronic I-9 Solutions: Jackpot or Crackpot?" at the National Association of Professional Background Screeners 2012 Annual Conference, to be held April 15-17, 2010 in Nashville, Tennessee.

In addition, Angelo Paparelli has posted several new blog entries on his Nation of Immigrators public policy blog:

Stop the Immigration Profling. Angelo describes his epiphany as a high school student in Detroit, when he realized that despite his Italian-American heritage he is just as American as those around him. Unfortunately, our U.S. immigration system is still rife with discrimination based on country of birth and ethnicity.

Stumbling through Parallel Immigration Universes. Angelo compares American political ambivalence toward immigration to the parallel universes described in Japanese fiction writer Haruki Murakami's novels.

By: Angelo Paparelli, John Quill and Elaine Walsh

Angelo Paparelli is a partner in Seyfarth’s Los Angeles Office. John Quill is senior counsel and Elaine Walsh is counsel in Seyfarth’s Boston office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Angelo Paparelli at apaparelli@seyfarth.com, John Quill at jquill@seyfarth.com or Elaine Walsh at ewalsh@seyfarth.com.

Minh Vu and Laura Robinson Published in the Washington Business Journal
"Businesses to Feel $8.5B Price Tag of Revised Disabilities Regulations"

Wed, 14 Mar 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment attorneys Minh Vu and Laura Robinson wrote an article published in the Washington Business Journal on March 9. The article addressed the new rules associated with the Americans with Disabilities Act (ADA) that will become effective as of March 15, 2012.

The article addresses some of the changes that local public venues should expect, notably retrofits to recreational facilities, which include swimming and wading pools; spas; saunas; steam rooms; exercise machines and equipment; children's play areas; fishing piers and platforms; recreational boating, golf, mini-golf and shooting facilities; amusement rides; team or player seating; and accessible routes in bowling lanes and sport-court facilities.

The article also notes that those in the banking industry will need to upgrade automatic teller machines (ATMs) with features to guide blind customers through audio instructions, tactile keypads and instructions in Braille.

The lodging industry will feel the greatest impact of the new regulations. In addition to the requirements state above, a lodging provider's reservation system has to provide more information about accessible rooms and common areas, and accessible rooms must be able to be reserved, blocked and guaranteed. The authors point out that millions of dollars have already been spent by hoteliers on modifications to their systems and websites, data gathering and employee training, but in the Justice Department's $8.5 billion estimate, those costs were excluded.

The authors conclude that when the Justice Department proposes more rules regarding the regulation of equipment, furniture and websites used in public accommodations, even more billions of dollars will be spent by businesses, and additional work for attorneys and consultants will undoubtedly ensue.

Ninth Circuit Finds California Arbitration Law Preempted

Wed, 14 Mar 2012 00:00:00 -0400

Relying on the U.S. Supreme Court's decision in AT&T Mobility LLC v. Concepcion, the Ninth Circuit Court of Appeals recently held that California's rule against compulsory arbitration of claims for public injunctive relief was preempted by the Federal Arbitration Act ("FAA"). The Court also underscored the key points of an enforceable arbitration clause. Kilgore v. KeyBank (March 7, 2012).

Case Background

Plaintiffs Matthew Kilgore and William Fuller, former students at a bankrupt helicopter vocational school, filed a putative class action against KeyBank, the school's preferred tuition lender. Plaintiffs alleged that KeyBank was aware the school was moving toward bankruptcy, but continued loaning tuition money to students in violation of California's Unfair Competition Law ("UCL"). Plaintiffs sought exclusively injunctive relief, including an order preventing KeyBank from enforcing the student loan agreements Plaintiffs and other students had signed with KeyBank. The agreements contained an arbitration clause, as well as language on how to opt out of the arbitration provision. Neither Plaintiff opted out of arbitration.

KeyBank first removed the case to federal court, then moved to compel arbitration under the arbitration clause. The District Court denied the motion, holding that California's rule prohibiting arbitration of injunctive relief claims rendered the arbitration clause unenforceable. The District Court issued its ruling prior to the U.S. Supreme Court's Concepcion decision. The District Court also declined to address whether the arbitration clause was unconscionable, having first determined that the Plaintiffs' claims were not arbitrable.

KeyBank appealed, arguing that the District Court erred in denying its motion to compel arbitration. The parties also invited the Court of Appeals to address the concsionability of the arbitration clause.

The Court's Holding

The Ninth Circuit reversed the District Court. In doing so, it recognized that the District Court properly decided the issues before it based on pre-Concepcion law. Under prior California precedent, arbitration agreements were not enforceable in cases where a plaintiff was seeking injunctive relief as a "private attorney general" on behalf of the general public or public injunctive relief under California's UCL. These decisions were premised on the assumption that the California Legislature could avoid FAA preemption if it did not intend the type of injunctive relief provided for in the legislation to be arbitrated. These decisions were also based on criticisms of private arbitration in cases where there was something at stake for the general public. In 2007, the Ninth Circuit adopted this reasoning in Davis v. O'Melveny & Meyers, holding that actions seeking public injunctions cannot be subject to arbitration, even under a valid arbitration clause.

The U.S. Supreme Court's decision in Concepcion mandated a new analysis and a new result, however, according to the Ninth Circuit. The panel held that California's rule could not survive Concepcion because it "prohibits outright the arbitration of a particular type of claim." The Court reasoned that such a blanket rule violated the principles of Concepcion. Concepcion rejected state laws that prohibit arbitration in particular kinds of cases – there class action cases – because they create schemes inconsistent with the principles of the FAA favoring arbitration.

In further support of its position, the Court also cited the U.S. Supreme Court's recent decision in Marmet Health Care Center, Inc. v. Brown. There, the Supreme Court held that the FAA preempted a state law prohibiting arbitration of patient/nursing home disputes on public policy grounds because the state law impermissibly excluded a specific kind of claim from arbitration.

Kilgore and Fuller argued that the California Legislature's decision to allow individuals to bring injunctive relief claims on behalf of the public was not preempted by the FAA, so long as the primary purpose of the injunctive relief was to protect the public. Plaintiffs alleged that to hold otherwise would violate California's public policy of allowing litigants to enforce public rights in a public venue, not through a private arbitrator. In rejecting those arguments, the Court cited Concepcion's dismissal of public policy arguments, noting "states cannot require a procedure that is inconsistent with the FAA, even if it desirable for unrelated reasons."

The Ninth Circuit also upheld the arbitration clause against Plaintiffs' argument that it was unconscionable. It stated that the following points rendered it permissible under California law: (1) the clause was in a conspicuous place, in its own section of the agreement; (2) borrowers were allowed to opt out of the arbitration provision; (3) the agreement provided clear instructions regarding how to opt out; (4) the agreement stated more than once and in plain language the rights borrowers would waive if they did not opt out; and (5) the agreement warned borrowers to read the agreement carefully before signing it and requested a promise from the borrower to read the agreement, even if advised not to.

What Kilgore Means for Employers

Kilgore provides a strong basis for California employers to move to compel arbitration in line with Concepcion, even in cases where employees are exclusively seeking public injunctive relief, such as under California's UCL. Kilgore also provides additional guidance regarding the features that should be included in arbitration agreements to prevail in the face of employee arguments regarding unconscionability.

However, the Ninth Circuit's decision in Kilgore seems inconsistent with a recent Court of Appeal decision last year in Brown v. Ralph's Grocery Co., in which a split appellate panel of three justices refused to enforce an arbitration agreement that provided for waiver of claims under the California Private Attorneys General Act ("PAGA"). The majority in Brown held that the U.S. Supreme Court's opinion in Concepcion does not affect PAGA actions, because PAGA actions are essentially public actions to enforce a public policy. The California Supreme Court has declined to review the Brown case, but eventually will have to address whether it was correctly decided. (We think it was not.)

By: Hayley Macon

Hayley Macon an associate in Seyfarth's Los Angeles office. If you would like further information, please contact your Seyfarth attorney, or Hayley Macon at hmacon@seyfarth.com.

Supreme Court Ready for Oral Argument; Seyfarth to Host Webinar

Tue, 13 Mar 2012 00:00:00 -0400

Three crucial days at the end of March, when the Supreme Court hears oral arguments on legal challenges to the Patient Protection and Affordable Care Act (PPACA), may determine the future scope of government involvement in healthcare in the United States. Immediately following the Supreme Court oral arguments taking place March 26-28, members of Seyfarth Shaw’s Health Care Reform Team will provide analysis on the arguments in a webinar, which we invite you to attend.

Webinar: Health Care Reform Supreme Court Oral Argument Debriefing: Implications for Employers

Thursday, March 29, 2012

12:00 p.m. to 1:00 p.m. Eastern
11:00 a.m. to 12:00 p.m. Central
10:00 a.m. to 11:00 a.m. Mountain
9:00 a.m. to 10:00 a.m. Pacific

Speakers:

Jennifer Kraft
Leon Sequeira
David Weiner

Registration:

There is no cost for attending this webinar, however, registration is required.

Final briefs by the parties and others interested in the case are due to the Supreme Court today, March 13, 2012. The Supreme Court has set aside an unprecedented six hours for oral arguments in the landmark case challenging various elements of the health care reform law:

Individual Mandate. Whether Congress acted within its Constitutional authority by requiring individuals to either obtain a minimum level of health insurance coverage beginning in 2014 or be penalized.

Under the Constitution’s Commerce Clause, Congress can regulate economic activity that is in the stream of, or substantially affects, interstate commerce. The PPACA challengers argue that a decision to not purchase health insurance is not activity, but rather inactivity, which Congress has no Constitutional authority to regulate. In defending PPACA, the federal government argues that a decision to not purchase health insurance substantially affects interstate commerce because everyone will need health care at some point in their lives and the cost of health care for the uninsured is shifted to the government and insured individuals through increased costs and premiums.

Severability. Whether, if the individual mandate is found unconstitutional, all of the rest of PPACA must be struck down, or only the individual mandate.

PPACA challengers argue this issue hinges on whether the remaining provisions of the law can function “in a manner consistent with the intent of Congress” in passing the law. The challengers argue that PPACA was designed by Congress as an integrated remedy to the shortcomings of the national health care coverage system, and striking down only part of the law would leave in place an unbalanced regime that would not function as intended and would likely exacerbate the very problems Congress sought to resolve. Seyfarth Shaw submitted an amicus brief to the Supreme Court on behalf of the National Restaurant Association in support of this position. Click here for a copy of the brief.

The federal government now concedes that if the individual mandate is found to be unconstitutional, the guaranteed-issue and community-rating requirements of PPACA, which impact insurers, should also be struck down. But the federal government also argues that the remainder of the PPACA provisions (which would include the employer mandate) should remain, arguing these other provisions can operate independently of the individual mandate and would still advance Congress’s core goals of expanding coverage, improving public health, and controlling costs.
Medicaid Expansion. Whether Congress exceeded its Constitutional authority in expanding Medicaid under PPACA to require states to offer benefits to anyone under 65 with income up to 133% of the poverty level.
Timeliness. Whether the Supreme Court can even decide this issue now under the Anti-Injunction Act, which generally provides that individuals who wish to challenge a federal tax first pay the tax and then bring suit for a refund.

These issues will be discussed in-depth at the webinar scheduled on Thursday, March 29, 2012.

This is the thirty-fifth issue in our health care reform series of alerts for employers on selected topics in health care reform and supplements Issue 29. (Our general summary of health care reform and other issues in this series can be accessed by clicking here.) This series of Health Care Reform Management Alerts is designed to provide a more in-depth analysis of certain aspects of health care reform and how it will impact your employer-sponsored plans.

Seyfarth Shaw’s James Yu Selected as 2012-2013 Fellow of the Leadership Council on Legal Diversity

Tue, 13 Mar 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

NEW YORK (March 13, 2012) - Seyfarth Shaw LLP is proud to announce that New York office Litigation Department partner James Yu was recently selected as a 2012-2013 Fellow of the Leadership Council on Legal Diversity (LCLD).

Focused on mentoring the next generation of leaders in the legal industry, the LCLD Fellows program connects General Counsels and Managing Partners from top organizations with Fellows through a series of meetings, discussions, corporate visits, and individual coaching. The year-long professional development program centers on building relationships and leadership skills, as Fellows are able to network and learn from established legal professionals.

“I’m honored to be included among the 2012-2013 class of Fellows,” said Yu. “LCLD has an outstanding reputation for fostering true growth and development within the diverse legal community, and this program is an excellent opportunity that will undoubtedly contribute to my practice as well as to my firm.”

Laura Maechtlen, a Seyfarth Shaw partner and Co-Chair of the Firm’s Diversity Action Team Executive Committee, recently completed the successful first year of the program as a Fellow. She added, “What makes the LCLD Fellows program such a success is that the bonds that we form with through the program are lasting and beneficial. The community created by sharing experiences and knowledge is invaluable in developing our understanding of successful leadership within an organization and the profession. I know that James will benefit from the program, and that it will serve him well throughout his career.”

The program employs training methods which include in-person training on core topics of relationship-building, team development and personal leadership. The Fellows program also includes the “personal journey series” in which LCLD member leaders engage in frank discussions concerning topics including career turning points, wake-up moments and lessons learned, high points and setbacks, sources of inspiration, personal mentors, areas of growth and development, perspectives on top performance, vision of the future and personal call to action.

Fellows are nominated by LCLD members and are attorneys with at least five years of experience. Candidates selected have demonstrated high levels of initiative, focus on delivering value, a deep sense of engagement in their organizations and a trajectory directed to leadership positions in their organization. The kick-off meeting for this year’s Fellows will take place March 27-29 in Philadelphia. To learn more about the Leadership Council on Legal Diversity and its Fellows Program, visit www.lcldnet.org.

The U.S. EPA Intends to Slash Federal Enforcement Programs and End Support of Voluntary Disclosures Under its Audit Policy

Mon, 12 Mar 2012 00:00:00 -0400

The U.S. EPA's Office of Enforcement and Compliance Assurance has issued its draft guidance on the Fiscal Year 2013 enforcement program (FY 2013 Draft Guidance). The FY 2013 Draft Guidance identifies EPA's intent to significantly cut back traditional federal enforcement strategies across all major federal environmental programs, and to eliminate the voluntary disclosure program long relied upon by industry to disclose violations discovered during compliance audits.

Change in Enforcement Focus

Although the tone of the guidance suggests that federal enforcement will continue to be strong, the details underscore a significant change in the EPA's traditional enforcement strategy. The EPA intends to rely less on on-site inspections and more on non-physical investigations in the form of Requests for Information, administrative subpoenas, and electronic montoring and reporting. The EPA also intends to focus enforcement "in communities that are disproportionately affected by pollution" and other vulnerable communities, mainly urban areas and areas identified as "Environmental Justice"("EJ") communities.

In addition to focusing on industry in EJ areas, the EPA intends to continue to pursue enforcement initiatives nationwide against: (1) mining and mineral processing activities, (2) concentrated animal feedlot operations; (3) facilities using flares to control emissions; (4) facilities subject to Clean Air Act Leak Detection and Repair ("LDAR") programs, (4) and companies having excess emissions associated with startups, shutdowns and malfunctions ("SSM"). Other industrial enforcement targets include the "usual suspects": (1) facilities that are considered large sources of air pollution (the coal-fired utility, acid, cement, glass and natural gas industries); (2) waste disposal and recycling facilities; (3) manufacturers and users of "high concern chemicals"; and (4) facilities subject to the Clean Air Act Risk Management Program.

Major Program Emphasis Areas

The EPA announced its focus in the major programs to be as follows:

RCRA enforcement will focus on: financial assurance, surface impoundments, and TSDs; EPA will target corrective action sites that have not made meaningful progress; EPA will scale back UST enforcement and will rely on states to address USTs;
TSCA enforcement will focus on: lead based paint affecting children in schools and housing, reducing exposure to pesticides, and the formaldehyde rule;
CAA enforcement will focus on: the Section 112(r) Risk Management Plan (RMP) program, flares used to control HAPS, compliance with LDAR provisions, and excess emissions during SSM; EPA indicated that other program areas, such as GHG reporting and CFCs, will be "addressed" in settlements of New Source Review and other CAA enforcement cases; EPA indicated that the Regions should focus enforcement efforts on major sources and those that are 80% synthetic minors.
CWA enforcement will be directed mainly at municipalities and municipal sewer systems and will focus on keeping raw sewage and contaminated stormwater out of rivers, streams and lakes; Regions 2, 3, 4 and 5 are directed to continue efforts to protect the Chesapeake Bay from water as well as air pollution; EPA indicates that it will target industrial facilities that have spills into waterways;
FIFRA enforcement will focus on: worker safety, fumigants, retail marketing, and container labeling and management;
CERCLA and EPCRA enforcement will be practically nonexistent; EPA is minimizing the Brownfields program, insisting that "CERCLA's self-implementing landowner liability protections" replace the need for the Brownfields program.

Inspection/Enforcement Numbers

To illustrate the diminished level of federal enforcement identified by the FY 2013 Draft Guidance, EPA indicates that each Region is expected to evaluate 20 facilities for EPCRA Section 313 non-reporting using Requests for Information. Similarly, EPA indicates that nationally there will be 12 inspections of mineral processing facilities, and that each region is to inspect 6 hazardous waste LQGs (even though thousands of LQGs exist). EPA indicates that 90% of TSCA enforcement resources at the Regional level should be spent on lead based paint.

EPA's Audit Policy

The EPA's Audit Policy offers incentives for companies to audit their facilities and to promptly disclose and correct violations. In 2008, the EPA also issued an Interim New Owner Audit Policy providing even greater incentives for new owners to audit, self disclose, and promptly correct potential environmental violations. The Executive Summary for the FY 2013 Draft Guidance describes significant changes from the FY 2012 guidance, including specific changes regarding the Audit Policy which can only be described as negating the benefits of self-disclosure to the EPA under the Audit Policy.

The FY 2013 Draft Guidance explains that the Audit Policy "is one of the areas where OECA will reduce its program work to a minimal national presence." The FY 2013 Draft Guidance instructs the EPA Regions to "consult with Headquarters before initiating any new work in response to self-disclosures." The only explanation provided by OECA is that, "Although the Audit Policy/Self-Disclosure program has yielded a significant number of annual disclosures, the environmental benefit from those disclosures is estimated to be significantly less than from traditional enforcement, and the disclosures have generally not focused on the highest priority areas." What this conclusion overlooks, of course, is the fact that issues identified by companies making self disclosures under the Audit Policy and the Interim New Owner Audit Policy would not have been identified by the EPA in the first place under its traditional inspection and enforcement approaches. With the announced cuts to the EPA's traditional enforcement programs, it appears unlikely that the EPA will focus resources to identify potential environmental violations unless the violations are in program areas on which the EPA is focusing.

The EPA is taking comment from the Regions, States and Tribes on the FY 2013 Draft Guidance and related program guidance until March 19, 2012. The process for providing comments is described here.

By: Eric Boyd and Jeryl Olson

Eric Boyd and Jeryl Olson are both partners in Seyfarth's Chicago office. If you would like further information, please contact your Seyfarth attorney, Eric Boyd at eboyd@seyfarth.com or Jeryl Olson at jolson@seyfarth.com.

District of Columbia Revises New Withholding Rule For Retirement Plan Distributions

Mon, 12 Mar 2012 00:00:00 -0400

The District of Columbia has revised its recent requirement regarding increased withholding from retirement plan distributions to D.C. residents, making this rule applicable only to lump sum distributions. In our prior One Minute Memo dated January 27, 2012, we discussed a new D.C. law that required retirement plans to withhold taxes from distributions to D.C. residents at the highest D.C. individual tax rate (currently 8.95%). A D.C. Council member sponsoring the revised law explained that the earlier legislation (adopted December 22, 2011) was always intended to apply only to lump sum distributions, not to annuity or other partial payments. The rule applies to lump sum distributions from retirement plans (including 401(k), defined benefit, defined contribution, and 403(b) plans) and IRAs.

The new law clarifies that the requirement to withhold at the highest tax rate applies only to taxable distributions of the payee’s “entire account balance.” The requirement does not apply to amounts that are not subject to federal tax withholding, such as rollovers or any portion of the distribution that constitutes after-tax distributions. Distributions in any form other than a lump sum (annuities, installments, etc.) remain subject to withholding under the normal withholding rates.

Steven Pearlman Quoted in Lawyers USA
“Whistleblower claims fueled by unemployment”

Fri, 09 Mar 2012 00:00:00 -0400

Seyfarth partner Steven Pearlman was quoted in the February issue of Lawyers USA in an article discussing the upswing in whistleblower claims.

“It’s white hot - this is as hot of an area as you can get in right now,” Steve remarked.

According to the article, the uptick in claims can be attributed to media attention, stronger laws supporting those who report corporate rule-breaking, and the increased amount of time workers are spending out of work, between jobs. Another factor in the popularity of whistleblower claims, according to Steve, is that many people can relate to them.

“These cases can really get a jury incensed and pose a very substantial risk,” Steve observed. “Retaliation and retribution is a concept that isn’t that foreign to many people in their daily lives.”

H-1B Work Permit Filings: Will You Beat the Cap?

Wed, 07 Mar 2012 00:00:00 -0400

This Management Alert is intended to enable employers to identify any current employees and employment candidates who may require H-1B work permit sponsorship before October 1, 2013. We recommend that employers identify any such candidates as soon as possible, as on April 2, 2012, United States Citizenship and Immigration Services (USCIS) will begin accepting H-1B petitions for the fiscal year 2013 H-1B quota (which begins on October 1, 2012). It is possible that, as in previous recent years, USCIS could receive H-1B requests far in excess of the annual quota within the first weeks of filing eligibility, in effect resulting in a random lottery-type selection process. Although the 2012 H-1B cap was not reached until November 2011 and the 2011 H-1B cap was not reached until January 2011 (likely due to economic conditions), the most conservative approach is to submit all 2013 cap cases as early as possible.

Background

There is an annual limit on the number of H-1B petitions that USCIS can approve during the government's 2013 fiscal year (beginning October 1, 2012 and ending September 30, 2013). The H-1B cap for fiscal year 2013 is 65,000 (of which about 6,800 are reserved for nationals of Chile and Singapore under Free Trade Agreements with those countries). USCIS will begin accepting petitions for FY 2013 on April 2, 2012.

There is an additional quota of 20,000 H-1Bs that are reserved for persons holding a master's degree or higher awarded by a college or university in the United States. To be eligible for the master's cap, the employee must have completed the master's degree program prior to the filing date. This additional quota of 20,000 H-1Bs has historically not been exhausted as early as the general H-1B quota of 65,000.

If USCIS receives more than 20,000 H-1B petitions towards the so-called "master's cap," a separate lottery process is applied. USCIS will apply the random selection process to the master's cap petitions prior to conducting the regular H-1B lottery. Any master's cap petitions not selected in the master's lottery will be eligible for selection in the regular H-1B lottery, effectively being granted two opportunities at an H-1B visa.

Exceptions

With some exceptions, current H-1B workers are not subject to the annual cap. Non-cap cases include H-1B workers extending their status, changing from one H-1B employer to another, changing the terms of existing H-1B employment, or filing for a second (concurrent) H-1B position. In addition, foreign nationals seeking to work for an institution of higher education, for a related or affiliated nonprofit entity, or for a nonprofit research organization or a government research organization are not subject to the H-1B cap.

Anticipated Unavailability of H-1B Work Permits Means Filing Early

In 2008, USCIS announced that it would apply the lottery process to all H-1B petitions received during the first five days of the cap period, even if enough petitions were received to fill the annual quota on the first day of the filing period (i.e., April 1). We do not know how quickly the H-1B numbers will be exhausted for this year, but the most conservative strategy is to assume that the H-1B numbers will be unavailable after the first day of filing. Once the H-1B numbers are exhausted, new H-1B work permits will not be available until October 2013.

Thus, to maximize the likelihood that affected employees will obtain an H-1B number effective as of October 1, 2012, employers must be in a position to file the H-1B petition with the government on Friday, March 30, 2012 for USCIS receipt on Monday, April 2, 2012. We are preparing "cap-subject" H-1B petitions at this time and recommend that employers begin the process now for any employees or candidates who need an H-1B.

Persons Affected

The persons who need to file an H-1B include any current employees who hold F-1 student status and who will thus need H-1B status to continue working once their F-1 Employment Authorization (known as Optional Practical Training or "OPT") expires. In addition, any pending hires should be assessed to determine whether an H-1B will be needed for eventual continued employment, including those in J-1 academic programs with limited practical training time as well as those who currently reside outside the United States. Further, any current employees who hold TN status and who are beginning the green card process may need to convert to H-1B status.

"Cap-Gap" Relief for F-1 Students

Under a rule issued in 2008, DHS grants "cap-gap" relief to F-1 students whose employers have filed H-1B petitions on their behalf. Such students will be given a bridge of both status and work authorization until October 1, 2012. This means that individuals currently in F-1 status who are completing OPT and whose employers have filed H-1B "change of status" petitions on their behalf will have their work authorization automatically extended until October 1, 2012 (the required start date on the H-1B petition), providing that the H-1B petition is approved. Such individuals will not experience the gap in employment eligibility or in status that may otherwise have occurred. If the petition is rejected or denied prior to October 1, 2012, the "cap-gap" employment eligibility ends immediately.

The 2008 "cap-gap" rule also grants certain students up to 29 months of employment authorization, allowing them as many as three opportunities to apply for H-1B status before exhausting their work authorization. This special provision is known as the "STEM" provision. It applies to students who have pursued programs in science, technology, engineering, and math if their employers are registered for and in good standing with the federal government's E-Verify program.

Alternatives to the H-1B Work Permit

In some cases, there may be alternatives to the H-1B work permit. If an affected employee falls into one of the following categories, that employee may not need to file for an H-1B work permit in April:

Citizens of Canada or Mexico who are eligible for a TN visa. Please note, however, that not all H-1B eligible Canadian or Mexican employees will qualify for TN status.
Citizens of Australia, Chile, or Singapore.
The spouse of an L or E work permit holder, who is eligible for spousal employment authorization (EAD).
J-1 nonimmigrants who have at least 18 months of academic training available as of April 1, 2011.
With limited exceptions, H-1B employees who have held H-1B status at any time during the last six years.
A foreign national who is married to a U.S. citizen and has received or will receive an Employment Authorization Document in connection with the pending green card process.
Certain other foreign nationals who may qualify for O, E, or L visas.

Conclusion

Employers must act now to begin H-1B processing for candidates or current employees who require sponsorship and who do not meet one of the above exceptions. If an employer misses the filing deadline for an employee who requires H-1B sponsorship, the employee can lose legal status in the United States, including permission to work.

By: Jim King, Gabriel Mozes and Jason Burritt

Jim King is a partner and Gabriel Mozes is an associate in Seyfarth's Atlanta office. Jason Burritt is an associate in the firm's New York office. If you would like further information, please contact your Seyfarth attorney, Jim King at jking@seyfarth.com, Gabriel Moszes at gmozes@seyfarth.com, Jason Burritt at jburritt@seyfarth.com or any Business Immigration attorney on our website.

Meal And Rest Break Premium Payments Are Wages, Right? Guess Again

Wed, 07 Mar 2012 00:00:00 -0400

On February 27, 2012, in Thurman v. Bayshore Transit Management, Inc., the California Court of Appeal affirmed a trial court's award of underpaid "wages" – i.e., premium payments for violations of California's meal and rest period laws and regulations – as a penalty under California Labor Code section 558. The Court of Appeal also held that such underpaid wages may also be recoverable under California's Private Attorneys General Act of 2004 ("PAGA").

In The Trial Court

Thurman was filed as a representative PAGA action. The operative complaint alleged two causes of action involving the employer's alleged failure to comply with California's meal and rest period requirements. The first was based on the theory that the employer's meal and rest period practices violated the Labor Code and the applicable Wage Order. The second cause of action, which was based on the same meal and rest period allegations, claimed that the employer had engaged in unfair business practices in violation of California's Unfair Competition Law ("UCL"), based on the same violations.

Shortly prior to trial, in light of the California Supreme Court's decision holding that a labor union does not have standing to pursue either unfair competition or PAGA claims, Thurman requested a trial continuance in order to file a motion for class certification. The trial court denied the request.

On the fourth day of trial, Thurman filed a motion for class certification. The trial court denied the motion, but entered a judgment awarding $358,588.22 in civil penalties under PAGA to Thurman and other aggrieved employees, $28,605 in restitution to Thurman under the UCL, and $10,253 to Thurman in prejudgment interest.

The civil penalties award under PAGA included premium pay for missed meal and rest periods as underpaid "wages" (in addition to statutorily prescribed civil "per-pay-period" penalties).

The Court Of Appeal Affirms The Award Of Underpaid Wages As Civil Penalties

On appeal, Bayshore contended that the trial court erred in awarding underpaid wages as a part of the civil penalty provided for under California Labor Code section 558 and recovered on behalf of other aggrieved employees under PAGA.

Section 558 provides that an employer "who violates . . . a section of this chapter or any provision regulating the hours and days of work in any order of the Industrial Welfare Commission shall be subject to a civil penalty." The statute then provides a per-pay-period penalty for initial and subsequent violations. Section 558, however, also indicates that the per-pay-period penalties are "in addition to an amount sufficient to recover underpaid wages" and explicitly states that "[w]ages recovered pursuant to this section shall be paid to the affected employee."

Bayshore contended that Section 558 distinguishes between the recovery of civil penalties and underpaid wages. In sum, Bayshore argued that the underpaid wages recovered were not civil penalties but were in addition to, rather than a part of, the civil penalties provided for by section 558.

The Court of Appeal disagreed. The Court suggested that the proper interpretation of section 558 is that the civil penalty provided in that statute consists of both per-pay-period penalties and any underpaid wages. This conclusion was supported by dicta within the California Supreme Court's decision in Reynolds v. Bement, in which the Supreme Court stated that section 558 may subject employers to "a civil penalty, payable to the affected employee, equal to the amount of any underpaid wages."

In applying this conclusion to the PAGA context, the Thurman Court further explained that the inclusion of underpaid wages in the section 558 civil penalty creates an express exception to the general rule that 75% of civil penalties recovered pursuant to PAGA are distributed to the Labor and Workforce Development Agency ("LWDA"), while the remaining 25% is distributed to the aggrieved employees. Again, the Thurman Court turned to Reynolds to support its conclusion and noted that the concurring opinion in Reynolds indicated that PAGA "in time, may provide workers with a mechanism for recovering unpaid overtime wages through private enforcement of section 558, which authorizes civil penalties for violations of the wage laws that include unpaid wages."

The Court also noted that Bayshore's argument that underpaid wages are not a part of section 558's penalty would necessarily imply that the LWDA, which is authorized to collect civil penalties on behalf of aggrieved employees, may not recover underpaid wages. The Court rejected this reasoning and concluded that the Legislature authorized the LWDA to recover underpaid wages as a section 558 civil penalty. As a result, because employees pursuing claims under PAGA are acting as proxies for the LWDA, employees pursuing section 558 civil penalties pursuant to PAGA may recover any underpaid wages as a civil penalty.

What Thurman Means For Employers

Unless and until the issue is clarified by the California Supreme Court, Thurman is a troubling development for employers facing PAGA claims. The decision seems to incentivize employees with meal and rest period claims to pursue stand-alone PAGA claims. This is because PAGA does not provide prevailing employers a means of recovering attorney's fees, thereby enabling employees to avoid the risk of paying prevailing employers' attorney's fees pursuant to California Labor Code section 218.5, while still recovering underpaid wages.

This decision reignites confusion regarding the nature of premium wages for meal and rest period violations. Although the California Supreme Court has held that such payments are "wages" for statute of limitation purposes, the Thurman Court's opinion suggests that the determination of whether premium wages for meal and rest period violations are penalties or wages is contextually dependent. Such a determination may result in longer limitation periods being available to employees to recover on such claims, thereby exposing employers to greater potential liability.

By: Simon L. Yang

Simon L. Yang is an associate in Seyfarth's Los Angeles office. If you would like further information, please contact your Seyfarth attorney or Simon L. Yang at syang@seyfarth.com.

Charles Walters Published in Bloomberg BNA’s Federal Contract Report
“New Rule Governing DOD, GSA and NASA Contractors’ Labor Relations Will Negatively Impact Non-Union Contractors”

Wed, 07 Mar 2012 00:00:00 -0400

An article by Employment partner Charles Walters was published in Bloomberg BNA’s February 28 Federal Contracts Report. In the article, Charles details Executive Order 13494, Economy in Government Contracting, which went into effect for the Department of Defense, General Services Administration and National Aeronautics and Space Administration in December. The rule prevents federal contractors from being reimbursed for the costs of engaging in lawful "activities undertaken to persuade employees, of any entity, to exercise or not to exercise, or concerning the manner of exercising, the right to organize and bargain collectively through representatives of the employees’ own choosing."

According to Charles, although the new rule attempts to save the federal government money, it could result in increased unionization of non-union contractors, or in driving companies away from contracted work altogether due to the expense of complying with employees’ rights to exercise their rights under the National Labor Relations Act (NLRA). Charles also expresses concern that the order does not provide sufficient guidance on what are and are not allowable expenses, or the formal record-keeping measures that companies need to take. In the end, he surmises, non-unionized contractors will be at a disadvantage compared to their unionized counterparts.

“By effectively tilting the playing field in favor of unionized contractors, the rule (in conjunction with E.O. 13495 and 13496) will make it more difficult for non-union contractors to continue operating in the DOD, GSA and NASA space,” Charles posits. “This undoubtedly will increase the amount of such work done by unionized contractors which, in turn, may well create ripple effects such as the increased labor costs and threat of work stoppages that typically accompany unionization. Therefore, while certainly good news for organized labor and those contractors with unionized workforces, the rule very much is bad news for non-union contractors and, in the end, perhaps even DOD, GSA and NASA.”

Seyfarth Shaw’s Richard Loebl Authors Chapter in Supplement to BNA’s ERISA Fiduciary Law

Tue, 06 Mar 2012 00:00:00 -0400

NEW YORK (March 6, 2012) - Seyfarth Shaw LLP is delighted to announce that New York office Employee Benefits Department attorney Richard Loebl recently co-authored an important chapter in the 2011 Cumulative Supplement to accompany the second edition of BNA’s book on Employee Retirement Income Security Act (ERISA) Fiduciary Law.

Loebl’s chapter on “Individual prohibited Transaction Exemptions” includes a discussion of the Department of Labor’s recently-modified procedures for issuing exemptions, the Department’s new index of granted exemptions, trends in the exemptions granted and developments such as those regarding captive reinsurance arrangements and the effects of consolidation in the financial industry. Loebl has co-authored this chapter since the original publication of the first edition of this book in the mid 1990’s.

Applicable to any legal practitioner dealing with ERISA’s numerous requirements, ERISA Fiduciary Law clarifies the evolving body of plan fiduciary case law, with analyses on ERISA fiduciary topics covering ERISA, the Internal Revenue Code, Department of Labor regulations and the federal courts.

Steven Pearlman Quoted in Law360
"Berkshire Dodges Former Exec's Whistleblower Suit"

Tue, 06 Mar 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Steven Pearlman was quoted in Law360 on February 23. The article discussed the dismissal of a suit filed against Warren Buffet's Berkshire Hathaway Inc. unit, Forest River Inc., in which the plaintiff brought negligent misrepresentation and Sarbanes-Oxley Act (SOX) claims.

The court said that the plaintiff failed to file the complaint within 90 days of firing, Berkshire did not commit negligent misrepresentation by adopting a business code of ethics code under which it promised not to take any retaliatory action against whistleblowers, and the plaintiff's employment agreement stated he was an at-will employee and could be fired without cause. Additionally the Berkshire employee handbook was not, under Indiana law, a unilateral contract.

Steve said the court was right in dismissing the SOX claims. "The court rolled up its sleeves and took a look at the core legal issues,” he said. “In analyzing the facts, the court concluded that the 90-day statute of limitations had clearly elapsed.”

Seyfarth Shaw’s Cleve Glenn and Emma Mata Selected Pro Bono Attorneys of the Month by Kids in Need of Legal Defense

Mon, 05 Mar 2012 00:00:00 -0400

HOUSTON (March 5, 2012) - Seyfarth Shaw LLP is pleased to announce that Houston office Litigation attorneys Cleve Glenn and Emma Mata were recently selected by Kids in Need of Legal Defense (KIND) as February 2012 "Attorneys of the Month."

Glenn and Mata did pro bono work for the organization, helping three young siblings find care and protection in the United States. To read more about their work with KIND, click here.

Founded by Angelina Jolie and the Microsoft Corporation KIND aids refugee and immigrant children who come to the United States without parents or legal guardians by providing pro bono legal services. To learn more about the organization, click here.

California Court Sidesteps The Supreme Court's Decision In Concepcion

Mon, 05 Mar 2012 00:00:00 -0400

On February 27, 2012, in Mayers v. Volt Management Corp., the California Court of Appeal upheld an order denying a defendant's motion to compel arbitration. In doing so, the court limited the application of the United States Supreme Court's recent decision in AT&T Mobility LLC v. Concepcion.

Case Background

Stephen Mayers sued his former employer, Volt Management, on various discrimination claims under the California Fair Employment and Housing Act ("FEHA"). Volt moved to compel arbitration based on an agreement to submit employment-related claims to arbitration, as evidenced by various employment documents reciting that the Federal Arbitration Act ("FAA") governed the agreement to arbitrate.

Mayers resisted arbitration on the ground that the arbitration provisions contained unconscionable elements, even though they were featured prominently in the employment application, the employment agreement, and the employee handbook. Specifically, Mayers argued that the arbitration provisions were procedurally unconscionable because (a) Volt drafted the provisions and gave them to Mayers on a "take-it-or-leave-it" basis and (b) the provisions stated that the "applicable rules of the American Arbitration Association in the state where [Plaintiff] was last employed" would govern the arbitration, yet Mayers was never provided with a copy of the applicable rules, nor information about how to access them. He also maintained that the arbitration provisions were substantively unconscionable because they permitted the arbitrator to award attorney fees to the prevailing party on FEHA claims, thereby placing Mayers at a greater risk for paying the defendant's attorney fees in arbitration than he would face if he pursued such claims in court.

Volt did not dispute that the arbitration agreement was a mandatory condition of employment. It maintained that Mayers would have received a copy of the applicable American Arbitration Association ("AAA") rules had he only requested them, and that he had one week to consider the employment agreement before signing it. Volt argued that the court should sever any offending portions of the arbitration provisions and direct the parties to resolve their dispute in arbitration.

When the trial court denied Volt's motion to compel arbitration, Volt appealed.

The Court's Holding

The Court of Appeal affirmed the trial court's denial of the motion to compel arbitration. The court distinguished this case from AT&T Mobility LLC v. Concepcion, the recent decision in which the United States Supreme Court, citing the FAA, upheld an arbitration provision in the context of a consumer class action. Although Mayers and the company stipulated that the FAA governed their arbitration agreement, the Court of Appeal reasoned that the FAA was consistent with general principles of unconscionability under California law. The court stated that Concepcion did not foreclose the application of general contract defenses to arbitration agreements, provided that doing so would not present an obstacle to the accomplishment of the FAA's promotion of arbitration.

The Court of Appeal, applying California principles concerning unconscionability, concluded that the arbitration provisions were unenforceable, agreeing with Mayers that the arbitration provisions were procedurally unconscionable. Volt's failure to identify the particular set of AAA rules that governed the arbitration agreement subjected Mayers to "unreasonable surprise and oppression."

The Court of Appeal also deemed the arbitration provisions substantively unconscionable. Under California law, a prevailing FEHA defendant may recover attorney fees only where the plaintiff's action was frivolous or brought in bad faith. The arbitration agreement, by contrast, empowered the arbitrator to award prevailing-party attorney fees to a defendant without limitation. Thus, Mayers would have faced a greater risk of suffering an adverse fee award by pursuing his claims in arbitration rather than in court.

Last, the court likewise affirmed the trial court's refusal to sever the unconscionable portions of the arbitration agreement, determining that the provisions were permeated with unconscionability in light of the failure to identify the applicable AAA rules, as well as the improper fee-shifting clause.

What Mayers Means For Employers

Mayers confirms that California courts will find ways to distinguish the arbitration-friendly Concepcion decision, by concluding that Concepcion permits plaintiffs to rely on general contract defenses against the enforceability of arbitration agreements even where the agreements are expressly governed by the FAA. Thus, the viability of California contractual defenses to employment-related arbitration agreements, such as unconscionability, arguably remains unchanged in light of Concepcion.

Mayers also emphasizes that California employers must ensure that their arbitration agreements clearly set forth all terms of the parties' agreement to arbitrate employment-related disputes. Specifically, employers should (a) identify the applicable rules of the arbitration services provider in their arbitration agreements and (b) attach copies of these rules to the arbitration agreements, or at a minimum, ensure that the arbitration agreements direct employees to a website where the rules can be accessed.

Finally, Mayers reinforces that California employers should ensure that fee-shifting clauses in their arbitration agreements specifically exclude FEHA claims, or expressly provide that the same standards for awarding attorney fees apply in arbitration that would apply in court.

By: Eric Lloyd

Eric Lloyd is an associate in Seyfarth's San Francisco office. If you would like further information, please contact your Seyfarth attorney or Eric Lloyd at elloyd@seyfarth.com.

Angelo Paparelli Published in the New York Law Journal
"No More Waiting on Legal Immigration"

Mon, 05 Mar 2012 00:00:00 -0400

An article co-authored by Immigration partner Angelo Paparelli was published in the February 22 edition of the New York Law Journal. In the article, the authors discuss President Obama’s American Jobs Act, and offer their own suggestions for jumpstarting the United States’ economy by reforming the administrative system behind immigration.

The authors laud Obama’s efforts to promote travel and tourism to the U.S., but feel that more can be done. “While the fruits of the President's laudable efforts are yet to be enjoyed, his encouragement to foreigners—in essence, that they heed George W. Bush's post-9/11 suggestion to ‘go shopping’ here—will not likely succeed unless existing immigration, visa and entry barriers are eliminated or reduced,” they comment. “Under current law and regulations, notwithstanding the new executive order, tourists and business visitors still face a host of legal obstacles before they can appear with dollars or plastic in hand at the nearest Bloomingdale's or Walmart.” The authors enumerate various additional tourist-friendly measures that could be taken, and also go on to suggest further immigration reforms that could create American jobs by attracting highly skilled foreign workers.

Of their suggestions, the authors emphasize, “None of these executive orders would reduce existing safeguards that require in-depth screening of foreign citizens on national-security grounds and for prior criminal history. None of these directives requires a single vote or committee hearing in Congress. If the president truly means what he says (if ‘an increasingly dysfunctional Congress…won't act, I will.’), the time is now for the White House to introduce economy-stimulating legal immigration changes.”

Georgia Court of Appeals Holds That Legal Malpractice Claims Are Assignable

Fri, 02 Mar 2012 00:00:00 -0400

On October 27, 2011, the Georgia Court of Appeals issued an opinion that directly affects all title insurers issuing policies in Georgia. In Villanueva v. First American Title Ins. Co., the Court explicitly held, for the first time, that legal malpractice claims are assignable under O.C.G.A. § 44-12-24 and Georgia law.

The underlying facts in Villanueva are as follows: When a closing attorney, Villanueva, failed to satisfy several outstanding mortgages as part of a real estate closing, the lender’s title insurer, First American, was forced to pay off those outstanding loans. Prior to the closing, First American issued a closing protection letter to the lender that stated, in part, if First American reimbursed the lender for any loss, First American would be “subrogated to all rights and remedies [the lender] would have had against any person or property.” After satisfying the outstanding mortgages, First American filed suit in its name against the closing attorney and his law firm, asserting claims for both legal malpractice and breach of contract.

Villanueva filed a motion for summary judgment on First American’s malpractice claim, alleging that professional malpractice claims are not assignable in Georgia. The trial court denied the closing attorney’s motion, and the Court of Appeals affirmed. In its ruling, the Court held that “[l]egal malpractice claims often involve injury to property in the form of financial loss, rather than personal injury, and therefore may be assignable under O.C.G.A. § 44-12-24.” It also noted that “since its enactment in 1895, the legislature has never amended O.C.G.A. § 44-12-24 to exclude legal malpractice claims from assignability. Consequently, we decline to hold that allowing the assignment of legal malpractice claims violates public policy.”

Villanueva resolves the previous ambiguity that existed in Georgia regarding whether a title insurer could bring a legal malpractice claim directly in its name after making payment on behalf of an insured lender. The “lack of assignability” defense was often raised by defendants, and typically required extensive briefing on part of title insurers who asserted malpractice claims. The Villanueva opinion should now streamline this issue and make recovery of losses easier for title insurers in such situations.

Robert Milligan and Jeffrey Oh Published in Law360
"Protecting Confidentiality in the Era of Social Media"

Fri, 02 Mar 2012 00:00:00 -0400

Seyfarth Shaw Intellectual Property partner Robert Milligan and Los Angeles office clerk Jeffrey Oh wrote an article published in Law360 on February 24. The article discussed social media's impact on employers--both challenges and benefits--and the legal limitations in setting parameters for appropriate use.

The authors point out that "companies must align their policies with the National Labor Relations Act (NLRA)," in order to ensure that they do not apply overly broad policies which may open them up to litigation, since employees are protected and may discuss issues ranging from terms and conditions to complaints of unfair treatment, and they may author public posts about a company if it can be considered as a step toward self-organization.

For employers worried about trade secret protection, the authors point out that the NLRB has made clear what is permissible social media policy, ruling that "employees would reasonably interpret to the policy to apply only to communications that might implicate security regulations," and they do not have a protected right to disclose embargoed information such as trade secrets or confidential information."

Robert and Jeff suggest that employers maintain an up-to-date social media policy and educate employees on what is and is not permissible social media use regarding company information. They also say that taking out any ambiguities or outdated information can help with future protection.

Federal Court Rules That NLRB Can Require Employers To Post “NLRA Rights” Notice

Fri, 02 Mar 2012 00:00:00 -0400

In a widely anticipated decision, National Association of Manufacturers, et al. v. NLRB et al, Civil Action No. 11-1629 (ABJ), today the United States District Court for the District of Columbia held that the National Labor Relations Board ("NLRB" or "Board") has the authority to require employers covered by the National Labor Relations Act ("NLRA" or "Act") to post a workplace notice regarding employee rights under the Act (see alert). This requirement would apply to most of the private sector employers in the United States. Prior to the decision, the NLRB had announced that it would put this requirement into effect on April 30, 2012.

While upholding the NLRB's right to require the notice, the District Court's decision overturns other important aspects of the Board's intended rule. The Court struck down the portion of the NLRB's rule which would make it an unfair labor practice (violation of Section 8(a)(1) of the Act) to fail to post the notice. Rather, the Court concluded that the Board would need to make a specific finding based on the facts and circumstances in an individual case that failure to post the notice interfered with an employee's exercise of their rights under the Act. Essentially, the Court held that the Board cannot make a "blanket advance determination" in that regard.

The District Court also struck down the portion of the Board's intended rule which would permit it to toll the NLRA's 6-month statute of limitations in any future unfair labor practice action involving a job site where the notice was not posted. Here, as well, the Court would allow the NLRB to consider equitable tolling based on a failure to post a notice on an individual basis.

Among other reasons for its decision, the District Court rejected a challenge based on a contention that posting the rights notice violated the First Amendment as "compelled speech." The Court contrasted recent Supreme Court decisions in which a violation was found because a speaker, such as a religious organization, had its own message materially affected by the government's requirement. Here, the District Court held that the NLRA rights notice was not suggesting that employers favor collective bargaining, or restricts what they may say about the NLRA or unions. (However, under the NLRA, an employer cannot engage in threatening or coercive conduct in this regard).

The District Court's decision may be appealed. Moreover, there is a separate lawsuit challenging the notice posting rule which is pending in the United States District Court for South Carolina. Accordingly, it is quite likely that the last word has not been heard in this area. Nonetheless, this is the strongest indication yet that employers covered by the NLRA will need to post a required employee rights notice as of April 30, 2012.

By: Joshua Ditelberg and Jack Toner

Joshua Ditelberg is a partner in Seyfarth's Chicago office and Jack Toner is senior counsel in the firm's D.C. office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Joshua Ditelberg at jditelberg@seyfarth.com or Jack Toner at jtoner@seyfarth.com.

Leah Rochwarg Quoted in Door & Window Manufacturer Magazine
"Guest Blog: Weighing in on the FTC Decision"

Fri, 02 Mar 2012 00:00:00 -0400

Seyfarth Shaw attorney and member of the firm's Green Marketing Compliance Team, Leah Rochwarg, was quoted on February 23 in Door & Window Manufacturer Magazine. The article discussed the Federal Trade Commission (FTC) bringing cases against five window companies regarding truthful environmental marketing. The author suggested that companies rethink any messages perceived as typical, not optimistic.

Leah commented, “If their marketing materials contain these representations, it behooves them to immediately confirm that they aren’t based on exaggerated or unsupported claims about energy efficiency or cost savings. Such claims should not be misleading. They must be accurate and supported by competent and reliable scientific evidence that all or almost all consumers are likely to achieve the maximum savings claimed.”

Click here to read the full article: http://www.dwmmag.com/index.php/guest-blog-weighing-in-on-ftc-decision/

Richard Mendelson Quoted in Law360
"Firms Expand in Calif. as They Forecast Real Estate Growth"

Fri, 02 Mar 2012 00:00:00 -0400

Seyfarth Shaw Real Estate Department partner Richard Mendelson was quoted in Law360 on February 24. The article discussed the recent trend in Los Angeles law firms to "bulk up" their real estate groups.

The article notes that Seyfarth Shaw has added more than 24 new commercial real estate attorneys in 2010 and 2011, and mentions a recent group of attorneys joining the Los Angeles office to do workouts and restructuring, as well as acquisitions, joint ventures and financings.

Rich said in reference to other firms, as demand for real estate and land use services grows, some of the traditional law firms no longer have the resources to meet it because they've turned their focuses to other areas. Growth in sectors such as intellectual property, technology and health care leads to an increased demand for real estate services, he noted.

“They'll all need real estate. It's such an integral part of every company,” said Rich. “Even with the increase in online business, you can't get away from the fact that you need a place to put people. You need stores, you need distribution centers. It's cyclical, but it's always there.”

Robert Bodansky Quoted in Washington Business Journal
"Paragon Technology Group and former GTSI CEO Scott Friedlander join forces with aggressive plans for growth"

Wed, 29 Feb 2012 00:00:00 -0400

Seyfarth Shaw partner Robert Bodansky was quoted in the Washington Business Journal on February 3. The article discussed former CEO of GTSI Corp., Scott Friedlander, and his joining Paragon Technology Group Inc. and LLR Partners Inc., establishing a "major new player on the local federal contracting scene," despite his departure from GTSI which prevented the company from bankruptcy.

Bob said of Friedlander's legacy, "The former agencies that dealt with him [during his tenure at GTSI] could scrutinize him more to avoid the political embarrassment of getting burned twice. But the fact that some of the existing management at Paragon as well as LLR will maintain a degree of oversight, might give people an added comfort level. It's not one individual going out there and running the show."

Steven Pearlman Quoted in Bloomberg
"Buffett's Berkshire Hathaway Dropped From Ex-Employee's Suit Over Firing"

Wed, 29 Feb 2012 00:00:00 -0400

Seyfarth Labor & Employment partner Steve Pearlman was quoted in Bloomberg on February 23. The article discussed a recent case against Warren Buffet's Berkshire Hathaway Inc.'s Forest River unit in which whistleblower claims were dismissed.

Steve said of the Sarbanes-Oxley whistleblower claims, "The company believes that the court conducted a thorough and accurate analysis of the legal issues and correctly concluded that it lacked subject-matter jurisdiction."

Click here to read the full article: http://www.bloomberg.com/news/2012-02-23/buffett-s-berkshire-hathaway-is-dismissed-from-ex-employee-suit.html

Robert Nobile and Howard Wexler Published in HR Advisor
“Tips on Limiting Employer Liability at Company Parties”

Fri, 24 Feb 2012 00:00:00 -0400

An article by Employment attorneys Robert Nobile and Howard Wexler was published in the January/February edition of HR Advisor regarding the legal concerns involved with company-sponsored parties at which alcohol is served. Bob and Howard provide tips for employers to reduce their liability, but most significantly to ensure employee safety.

According to the authors, some of the risks from company parties include claims of sexual harassment, negligence, and workers’ compensation. To minimize exposure to liability, some of the tips they suggest include: prior to the party, circulating the company sexual harassment, social media, and dress code policies, noting that they include company events outside the office; considering limiting the number of drinks provided to each employee at parties; providing non-alcoholic beverages and food; reminding the wait staff not to serve drinks to anyone appearing intoxicated; and ensuring that all employees who appear intoxicated arrive safely at home, whether through designated drivers or public transportation.

Bob and Howard emphasize the importance of company parties, as “The much more relaxed atmosphere at company social events (in comparison to the normal workplace) can certainly add to increasing employee morale.” However, they warn that “Despite a company’s best intentions, there are many negative situations that can result from company parties as well. Employers now more than ever before are under a microscope in this regard due to the advent of various social media platforms such as Facebook, YouTube and Flickr which enable employees to post pictures and videos of incidents that occur at such events, and share them with the world.”

Noah Finkel Quoted in Inc.com
"Hourly Wages? There's a Lawsuit for That"

Thu, 23 Feb 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner and one of the editors of the book, Wage & Hour Collective and Class Litigation, Noah Finkel, was quoted on February 21 in Inc.com in an article discussing various issues regarding wage and hour lawsuits.

Noah points out that, while most might think these lawsuits are against big companies, 90 percent of the filings are actually against small- and medium-sized companies, which can be crippling to those businesses.

He says a major factor contributing to these filings is a "horrendously complex" wage and hour law which can vary state-to-state and the lack of personnel equipped to understand the intricacies of the law, such as how it pertains to companies using computer technology, support staff classification as exempt or non-exempt and employees who receive tips.

Noah suggests that companies have a knowledgeable outside attorney or "savvy" human resource staff member or consultant. He adds "People said initially that the wage hour litigation boom [would be] the flavor of the month. Well, it's been the flavor of the month for 10 years now."

Click here to read the full article: http://www.inc.com/erik-sherman/small-businesses-at-risk-hourly-wages-lawsuit.html

Seyfarth Shaw’s Linda Schoonmaker Honored by the Fort Bend Regional Council with The Helen Cordes Award

Thu, 23 Feb 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

HOUSTON (February 23, 2012) — Seyfarth Shaw LLP is pleased to announce that Houston office Labor & Employment partner Linda Schoonmaker has been selected by the Fort Bend Regional Council on Substance Abuse (FBRC) to receive the Helen Cordes Award for her dedication and giving of her time, experience and pro bono legal expertise to the council. The award was presented by the Flour Corporation, Roberta K. Randall Charitable Foundation and Marion and David Young at the Third Annual Helen Cordes Award Luncheon on February 23 in Richmond, Tex.

Board Certified by the Texas Board of Legal Specialization in Labor and Employment Law, Schoonmaker focuses her practice on representing companies in disputes and issues relating to the employer-employee relationship. In addition to representing employers in litigation, arbitration, administrative hearings and other forms of dispute resolution, Schoonmaker provides counseling and training to her clients regarding employment policies, state and federal laws impacting the employment relationship and other employment issues.

Schoonmaker is a dedicated community volunteer who served on FBRC’s Board of Directors from 2004 to 2010 and as the Board President from 2006 to 2008. She is steadfast in her devotion to FBRC’s mission, programs and projects and is a trusted partner in substance abuse prevention in our community.

The Helen Cordes Award Luncheon was founded on the community achievements of Helen Cordes who served on the Board of Directors of Fort Bend Regional Council from 1991-1997 and was the President of the Board from 1992-1995. During that time and long afterward, Helen served FBRC with a passion for its mission and inspired that same passion in so many who were privileged to work with her. In recognition of Helen’s leadership and long years of dedicated service to FBRC, the Helen Cordes Award was established.

Molly Eastman Quoted in Law360
"NLRB Wrong On Union Ruling, Grocery Chain Tells DC Circ."

Wed, 22 Feb 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Molly Eastman was quoted in Law360 on February 16. The article discusses a recent decision by the National Labor Relations Board (NLRB) in which it found that grocer Fresh & Easy was in violation of the National Labor Relations Act when it "unlawfully interfered with union activities, and imposed too punitive a remedy."

Molly said that the grocer, which had a no-distribution rule forbidding employees from distributing literature on company premises, including those dealing with union activities, "cured any technical violation by revising the policy and communicating the change to its employees."

She also pointed out that what the NLRB deemed as an illegal interrogation was not protected activity, as it was about the union's harassment of employees, and the board's order to post a notice at all of the grocer's Las Vegas stores is "punitive and impermissible," when it would have been appropriate to do so at the store where those in question worked.

Rebecca Bromet Published in Diversity Executive Magazine
"Tapping Discrimination Data"

Wed, 22 Feb 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Rebecca Bromet authored an article published in the January/February issue of Diversity Executive magazine. The article discusses complaints to the Equal Employment Opportunity Commission (EEOC) as ripe with data for revealing diversity issues at companies.

Often overlooked pieces of information, Rebecca points out that EEOC complaints are usually ignored once employers either get the charge dismissed or resolved. She notes there is a missed opportunity: "A discrimination charge -- regardless of the merits -- is a barometer of employees' perception of fairness in the workplace."

She suggests to employers that they collect information in a database and conduct analyses, including: benchmarking against national trends; geographical/operational trends; and year-to-year comparisons. Once these trends are realized, employers can construct a plan to address workplace diversity issues.

Click here to read the full article: http://www.nxtbook.com/nxtbooks/mediatec/de_20120102/#/50/OnePage

Delay for Automatic Enrollments and Helpful Guidance on Play or Pay Penalty

Tue, 21 Feb 2012 00:00:00 -0400

This is the thirty-fourth issue in our health care reform series of alerts for employers on selected topics in health care reform. (Our general summary of health care reform and other issues in this series can be accessed by clicking here.) This series of Health Care Reform Management Alerts is designed to provide a more in-depth analysis of certain aspects of health care reform and how it will impact your employer-sponsored plans.

Issue 20 of our Health Care Reform Management Alert Series addressed Notice 2011-36 whereby the Internal Revenue Service requested comments on several provisions of the Patient Protection an Affordable Care Act (PPACA) designed to expand access to health coverage, including (1) the penalties for failure to offer affordable coverage (the “Play or Pay Penalty”), (2) the prohibition of waiting periods in excess of 90-days, and (3) the requirement that large employers automatically enroll full-time employees for health coverage. On February 9, 2012, the Departments of Labor, Health and Human Services and the Treasury (Departments) issued additional guidance in the form of Frequently Asked Questions (FAQs) to respond to inquiries the Departments have received and to identify approaches that the Departments are considering proposing.

Play or Pay Penalty

Background. Starting in 2014, employers with 50 or more full-time equivalent employees may be subject to a penalty if any full-time employee is certified to receive an applicable premium tax credit or cost-sharing reduction payment. Generally, this may occur where either:

The employer does not offer full-time employees the opportunity to enroll in minimum essential coverage (MEC) under an eligible employer-sponsored plan; or
The employer offers its full-time employees the opportunity to enroll in MEC that either is unaffordable or does not provide minimum value.

Current Employees. The IRS has previously indicated that a “full-time” employee will be defined as one who works an average of 30 hours per week or 130 hours per month. (See Issue 20 for more details.) For purposes of determining whether an employee (other than a newly-hired employee) is a full-time employee, the FAQs indicate that future regulations will allow employers to use a look-back and stability period not exceeding 12 months. In other words, if an employee is determined to be a full-time employee during a look-back period of up to 12 months, he or she would be treated as a full-time employee for a subsequent stability period of up to 12 months.

New Hires. For purposes of determining whether a newly-hired employee is a full-time employee, the FAQs indicate that future regulations will provide that, in certain circumstances, employers will have 6 months to determine whether a new hire is a full-time employee.

If a newly-hired employee is reasonably expected to work full-time on an annual basis and does work full-time during the first 3 months of employment, the employee must be offered coverage as of the end of that period. The FAQs specifically provide that an employer will not be penalized for failing to offer coverage during the first 3 months following an employee’s date of hire.
If it cannot reasonably be determined that a new hire will work full-time, the following rules will apply:

If the employee works full-time during the first 3 months of employment and the employee is expected to work a similar number of hours on an annual basis, the employee will first be considered a full-time employee as of the end of the first 3 month period.
If the employee works full-time during the first 3 months of employment, but the employee is not expected to continue to work a similar number of hours on an annual basis, the plan is permitted an additional 3 month period to determine the employee’s status. No penalty will apply with respect to that employee during the first or second 3 month period.

90-Day Waiting Period

Starting in 2014, employers are prohibited from imposing a waiting period for health coverage that exceeds 90 days. The FAQs state that the Departments do not intend to require employers to offer coverage to any particular employee or class of employees, including part-time employees. If an employee is eligible for coverage, however, an employer may not require the eligible employee to wait more than 90 days before coverage is effective.

Automatic Enrollment

PPACA requires employers with 200 or more full-time employees to automatically enroll all new full-time employees in health coverage and to continue the enrollment of current employees. Employees must receive adequate notice and the opportunity to opt-out of any coverage in which the employee was automatically enrolled.

The FAQs provide that the Department of Labor’s automatic enrollment guidance “will not be ready to take effect by 2014,” and until final regulations are issued, employers are not required to comply.

Employer Comment Requested

Comments on these FAQs (which may be submitted anonymously) are requested by April 9, 2012.

Ben Conley, Mitchel Whitehead and Nanette Zamost Published in Benefits Magazine
"Health Exchanges and Multiemployer Plans--Can They Exist in Harmony?"

Tue, 21 Feb 2012 00:00:00 -0400

Seyfarth attorneys Ben Conley, Mitchel Whitehead and Nanette Zamost wrote an article published in the February issue of Benefits Magazine. With the most significant and potentially far-reaching changes made by the Patient Protection and Affordable Care Act (PPACA) on their way for 2014, the article explains the basics as to how the exchanges, mandates and subsidies will operate, how they will apply to the delivery of health care and how they can affect the future of multiemployer plans.

The authors identify the main issues multiemployer plan trustees should be thinking about now in order to remain competitive in the shifting health care delivery marketplace, and they offer four takeaways:

Regulators are looking into determining whether health care reform legislation can be interpreted to allow multiemployer plan participants to access credits and subsidies that would reduce the cost of coverage.
Regulatory agencies are considering whether multiemployer plans might serve as a multistate plan offered through the exchanges.
Collective bargaining might result in increased wages in lieu of health coverage, which would further cut into any potential employer savings from dropping health coverage.
Even if multiemployer plans cannot operate within the exchanges, bargaining parties have good reasons to continue to maintain multiemployer plans.

They conclude that, based on the limited information currently available, multiemployer plans "can continue to play a crucial role in the health care system, regardless. Most experts believe a strong private marketplace will still exist in 2014 and beyond. In that environment, multiemployer plans should be able to continue serving the needs of collectively bargained employees."

Joel Rubin Featured in Law360
"Q&A With Seyfarth's Joel Rubin"

Tue, 21 Feb 2012 00:00:00 -0400

Seyfarth Shaw partner and chair of the Chicago Real Estate Department Joel Rubin was featured in a Q&A in Law360 on February 9. Joel was asked about the most challenging transaction he had worked on; which aspects of his practice area were in need of reform; an important deal or relevant issue to his practice area; a mistake he made early in his career and learned from; and he was asked to name an attorney outside of his firm, in his field, who has impressed him.

Describing one of his most challenging cases, Joel mentioned the split of the Chicago partners from the Trammell Crow Company and the formation of one of the biggest commercial developers in the Chicago suburbs, Hamilton Partners, as having involved major litigation.

He also mentioned working on developing a scheme for a major corporate pension fund to acquire assets and avoid a built-in tax during an acquisition of several apartment projects in New York City.

Joel said that the approach of both clients and lawyers to the transaction are in need of reform, and there needs to be more focus on the goals to be achieved and an attempt on all sides to work together to achieve such goals.

Especially relevant to Joel's practice is understanding the relationship among issues of real estate, partnership and limited liability company laws, tax laws and pension investor and REIT requirements. Joel notes that all of these come into focus as he is called upon to complete complicated transactions, where one or more of these issues impacts one or more parties to the transaction. "Without a dedicated team approach," he says, "failure is more likely than not."

Over the years, Joel learned that there is sometimes a difference between what "win" means to a lawyer and what it means to a client. He also learned to pay special attention to what the parties say and to ask questions in a way which helps him understand the parties' motivations.

Joel named partners John Gearen at Mayer Brown and Jordan Krasnow at Goulston Storrs as lawyers "who are smart, practicable and share" his thinking.

Seyfarth Shaw Mentioned in New York Law Journal
"Law Firms Join Network to Explore New Ways to Make Practice 'Green'"

Tue, 21 Feb 2012 00:00:00 -0400

Seyfarth Shaw was mentioned in the New York Law Journal on February 6 as being one among nearly 40 law firm members of the recently formed Law Firm Sustainability Network, a group dedicated to developing "green" law offices.

New York environmental consulting firm catering to the legal industry, ecoAnalyze, launched the network in August of 2011 with 18 firms, including Seyfarth Shaw.

The purpose of the group is to get law firms communicating with one another during monthly conference calls in order to share ideas about the best sustainability practices. Each month, members study a sustainable project that one of the firms has implemented, and they speak freely about how to cut power consumption, diminish a firm's carbon footprint and involve staff with green initiatives--and how they did or didn't work.

According to the article, law firm focus on sustainability is not only being driven by a desire to be more environmentally friendly and efficient, but also by outside sources, and it behooves them to show an alignment of values while contributing to sustainability, benefitting the business in many ways.

To learn more about ecoAnalyze, click here: http://www.ecoanalyze.com/resources/LawFirmSustainabilityNetwork.aspx

Pamela Devata Quoted in HR Magazine
“Criminal Background: Consider the risks—and rewards—of hiring ex-offenders”

Fri, 17 Feb 2012 00:00:00 -0400

Employment partner Pamela Devata was quoted in an article appearing in the February 1 issue of HR Magazine. The article covers the benefits and risks of hiring ex-offenders, and provides advice on some of the legal intricacies of the employee screening process. In particular, the article notes that U.S. Equal Employment Opportunity Commission officials have been examining the barriers ex-offenders face to employment, and that policy changes are likely with respect to how information gathered from criminal background checks can be used in the hiring process.

When criminal background reports are used, Pam recommends keeping them out of personnel files. “The only person who needs to know what information was on the person’s background report is the person who made the hiring decision,” she remarks.

To navigate changing rules and regulations, Pam advises employers to continually monitor relevant rules and rulings, both federally mandated and company specific. “You should not create a policy and then leave it on the shelf,” she cautions.

Katherine Perrelli Quoted and Alexander Jeffrey Mentioned in Art Daily
"NY federal court finds for Art International in Edelman Arts' suit over multimillion-dollar Mondrian painting"

Thu, 16 Feb 2012 00:00:00 -0400

Seyfarth Shaw Litigation partner Katherine Perrelli was quoted and counsel Alexander Jeffrey was mentioned on January 28 in an Art Daily article regarding the closely watched case Edelman Arts, Inc. v. Art International (UK) Ltd. in which Seyfarth client, Art International, prevailed in a long-running dispute over the purchase and sale of the 1923 Piet Mondrian painting "The Composition."

“The issues in this case are of critical importance to the art industry and how galleries, dealers and other players conduct sales of major works,” said Kate. “The extensive litigation surrounding the proposed transaction involved multiple parties on either side from several different countries, with the ultimate seller of the painting several times removed from the entity with whom our client was dealing. We are extremely pleased that the court rejected Mr. Edelman’s attempt to bind Art International to a deal that was clearly never consummated.”

Click here to read the full article: http://artdaily.com/index.asp?int_sec=2&int_new=53272&b=Perrelli

Gerald Maatman Quoted in NPR's Morning Edition
"Age Discrimination Suits Jump, But Wins Are Elusive"

Thu, 16 Feb 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Gerald Maatman was interviewed on National Public Radio's (NPR) Morning Edition on February 16. The program discussed Supreme Court Case Gross v. FBL Financial Services Inc., in which the ruling stated that a plaintiff must prove, with a preponderance of evidence, that age was the reason for discrimination, increasing the burden of proof for plaintiffs.

While Jerry points out that the monetary damages involved in these suits are typically higher than in other claims, he admits, "Those claims are very, very difficult to prove, in that the smoking gun evidence that needs to exist to prove a successful claim is very difficult to find in those circumstances."

Click here to listen to the program: http://www.npr.org/2012/02/16/146925208/age-discrimination-suits-jump-but-wins-are-elusive

Daniel Schwartz Quoted in Law360
“USPTO Regs Could Impose Steep Fees on Patent Challengers”

Thu, 16 Feb 2012 00:00:00 -0400

Intellectual Property partner Daniel Schwartz was quoted extensively in the February 8 edition of Law360. The article covered the U.S. Patent and Trademark Office’s (USPTO) recently released proposed rules for administrative procedures to challenge issued patents as required by patent reform law. Part of the proposed rules for contested cases include guidelines for post-grant and inter partes reviews. According to the article, post-grant reviews allow parties to contest the validity of a patent within nine months of issuance by the USPTO, whereas inter partes reviews can contest patents issued more than nine months ago. The USPTO plans to impose fees for each procedure, with the size of the fee corresponding to the number of claims involved.

According to Dan, the amount of time involved for both post-grant and inter partes reviews could be lengthy. Post-grant and inter partes reviews will involve a sequencing of discovery, in which the patent owner will be able to identify the parties it wants to depose and then address a petition, the petitioner will follow up with a response, and the patent owner will then get a chance to reply, he said. “A lot of things have to happen in a relatively short period of time. The rules appropriately provide for some expanded discovery, but the sequencing of the discovery may make it hard for the USPTO board to meaningfully rule within the 12 to 18 months as required by the AIA.”

Dan worries that there may be a larger influx of these proceedings than the USPTO is able to currently handle. “If there really is an explosion in the number of cases filed, I don’t think the USPTO will have the man power and brainpower to address all the issues,” he remarked. “Just like how it has taken the agency a while to deal with the backlog of patent applications, the same could happen here if increased proceedings are filed.”

Ninth Circuit Declines To Enforce Contractual Choice Of Law Provision And Applies California’s More Pro-Plaintiff Employment Law

Thu, 16 Feb 2012 00:00:00 -0400

In Ruiz v. Affinity Logistics Corporation, the Ninth Circuit Court of Appeals held on February 8, 2012 that a contractual choice of law provision was unenforceable as to whether furniture truck drivers were independent contractors or employees. The Ninth Circuit reversed a decision by a California federal district court that had applied Georgia law to find that California truck drivers were properly classified as independent contractors. The district court had honored the choice of law provision in the contract between the drivers and the company.

The District Court Decision

Ruiz worked as a furniture truck driver in California for Affinity Logistics Corporation, a Georgia-based company. Affinity provides home delivery and logistical support services to various home furnishing retailers. Plaintiff signed an agreement with Affinity expressly providing that he was an independent contractor and that Georgia law would govern any dispute.

Ruiz then filed a class action under California wage and hour law, contending that he was really an employee, and not an independent contractor as provided for in his agreement with Affinity. The district court, in a bench trial, applied Georgia law under the contract's choice of law provision. Georgia law applies a presumption of independent contractor status where the parties have agreed to that status. Applying that law, the district court held that Plaintiff was properly classified as an independent contractor.

The Ninth Circuit Opinion

The Ninth Circuit Court of Appeals reversed the district court holding, finding that it erred in concluding that Georgia law, not California law, applied to the independent contractor question. In determining the governing law, the Ninth Circuit acknowledged that the district court had properly determined the parties had a substantial relationship to Georgia. Nonetheless, the Ninth Circuit continued, the district court failed to determine (1) whether applying Georgia law was contrary to a fundamental public policy of California; and (2) whether California has a materially greater interest than Georgia in resolution of the issue.

The Ninth Circuit held that Georgia law is contrary to a fundamental public policy of California protecting workers. Under Georgia law, a contract designating an individual service provider as an independent contractor creates a presumption that the individual is an independent contractor, until proven otherwise. The Ninth Circuit stated that under California law, by contrast, an individual service provider is presumed to be an employee, and the employer must prove that the individual really was an independent contractor. Thus, "the starting point from which the drivers begin their lawsuit is vastly different depending on whether California or Georgia law applies."

As to the second prong of the test, which the district court failed to reach, the Ninth Circuit held that California has a materially greater interest than Georgia in the outcome of the case. The court analyzed five factors: (1) the place of contracting, (2) the place of negotiation for contract, (3) the place of performance, (4) the location of the subject matter of the contract, and (5) the domicile, residence, nationality, place of incorporation, and place of business of the parties. Applying those factors, the Ninth Circuit found that California has a materially greater interest than Georgia in determining whether the drivers are independent contractors or employees. The court also noted that Affinity did not produce any evidence demonstrating that Georgia had a material interest in the outcome of the case.

The Ninth Circuit therefore held that the parties' choice of Georgia law was unenforceable, and remanded the case to the district court to determine the Plaintiff's status as an employee or independent contractor under California law.

What Ruiz Means For Employers

Ruiz has important implications for employers based outside of California, but conducting business with workers in California. The holding in Ruiz is a cautionary tale as to the enforcement of an out-of-state choice of law provision in California. For a non-California choice of law provision to be upheld, the parties must have a substantial relationship to the non-California state, the non-California law must not be contrary to a fundamental public policy of California, and California must not have a materially greater interest than the non-California state in the outcome of the case.

This framework is particularly significant in the independent contractor arena, which has recently seen increased enforcement at the state and federal levels, new California legislation, and increasing class action and single plaintiff litigation.

By: Rupa Shah

Rupa Shah is an associate in Seyfarth's San Francisco office. If you would like further information, please contact your Seyfarth Shaw LLP attorney or Rupa Shah at rshah@seyfarth.com.

Alex Drummond and William Miles Published in Law360
"Expanding the Protections of the 4th Amendment"

Wed, 15 Feb 2012 00:00:00 -0400

Seyfarth Shaw Atlanta partner Alex Drummond and senior counsel William Miles wrote an article published in Law360 on February 3. The article discussed the recent decision in Bank of America v. Hilda L. Solis, in which the court extended the protections of the Fourth Amendment to the U.S. Constitution, which guarantees the "right of the people to be secure in their persons, houses, paper and effects against unreasonable searches and seizures," to the Office of Federal Contract Compliance Programs (OFCCP). The authors note, "The ruling underscores the stakes -- and considerable legal issues -- underlying governmental workplace enforcement actions."

When the OFCCP contacted Bank of America for a desk audit, the bank cooperated, requesting that the OFCCP first demonstrate how the agency selected the bank's specific North Carolina facility. The OFCCP complied, and then proceeded to ask for an on-site review. When the bank asked for evidence to show why the OFCCP requested an on-site review, the agency filed an enforcement action with the U.S. Department of Labor. It was discovered that the OFCCP had not complied with its initial, neutral selection process, violating Fourth Amendment rights. While the DOL rejected the bank's arguments, the U.S. District Court for the District of Columbia ruled that the OFCCP was not entitled to the information requested as part of the desk audit under the Fourth Amendment. However, the court determined that the OFCCP had legally obtained the information as part of the desk audit because the bank voluntarily produced the documents initially requested by the OFCCP.

They write, "The Bank of America decision is a positive development for employers because it extends the Fourth Amendment's probable cause requirement to the government's requests for documents during workplace investigations." When the OFCCP selected Bank of America for a desk audit, the bank asked that the government prove that it was selected through the agency's selection process, and it was not chosen arbitrarily.

Alex and William point out that "the decision makes clear…that an employer must be diligent in protecting these Fourth Amendment rights or else it risks a ruling in a future enforcement action that it has waived those rights."

Massachusetts Regulations Requires Service Provider Contracts To Include Security Provisions By March 1, 2012

Wed, 15 Feb 2012 00:00:00 -0400

Companies that provide “personal information”¹ regarding Massachusetts residents in electronic or written form to a service provider will need to make sure that their service contracts require the service provider to use appropriate security measures to protect the information.

Massachusetts’ “Standards for the Protection of Personal Information of Residents of the Commonwealth,” 201 CMR 17, originally went into effect in 2010 and required companies handling personal information regarding Massachusetts residents to establish a comprehensive information security program. One final aspect of the regulation goes into effect on March 1, 2012, and provides that a company must require “third-party service providers by contract to implement and maintain such appropriate security measures for personal information.” (201 CMR 17.03 (2)(f)2) While the regulation is not precise as to the specific provisions a contract must contain, we believe that reasonable measures a service provider may implement include maintaining appropriate technical, physical and organizational security measures to protect the personal information against unauthorized or accidental destruction, alteration or disclosure; accidental loss; unauthorized access; misuse; unlawful handling; or damage.

While this is a Massachusetts regulation, it applies to any business that processes personal information regarding a Massachusetts resident, so it would apply to any company that employs Massachusetts residents (wherever they work) and many companies that do business with Massachusetts residents.

¹Personal information, a Massachusetts resident’s first name and last name or first initial and last name in combination with any one or more of the following data elements that relate to such resident: (a) Social Security number; (b) driver’s license number or state-issued identification card number; or (c) financial account number, or credit or debit card number, with or without any required security code, access code, personal identification number or password, that would permit access to a resident’s financial account; provided, however, that “Personal information” shall not include information that is lawfully obtained from publicly available information, or from federal, state or local government records lawfully made available to the general public. (201 CMR 17.03 (2)(f)2)

Paul Mattingly and Seyfarth Shaw Featured in Atlanta Business Chronicle

Wed, 15 Feb 2012 00:00:00 -0400

Seyfarth Shaw's national Real Estate Practice chair and Atlanta office partner Paul Mattingly was recently featured in an Atlanta Business Chronicle supplement on Law & Accounting. The supplement ran a profile of Paul, noting him as a "true thought leader in the real estate law industry." Under his leadership as the former Atlanta office managing partner, the office grew significantly and started making its mark in the local community.

Paul was also praised for prompting and implementing the firm's Six Sigma methodology as applied to law, or as it's know at Seyfarth, the "SeyfarthLean" approach.

The firm was highlighted for strengthening the connection between values and fees for clients, going beyond pricing to impact the way the attorneys deliver services.

Christopher Robertson Quoted in InsideCounsel Magazine
"Citigroup-SEC settlement rejected: Pending appeal could affect business and regulators alike"

Wed, 15 Feb 2012 00:00:00 -0400

Seyfarth Shaw Boston office partner Christopher Robertson was quoted in the February issue of InsideCounsel magazine. The article discusses the ruling made on November 28, 2011, by Judge Jed S. Rakoff of the U.S. District Court for the Southern District of New York, rejecting a settlement between the Securities and Exchange Commission (SEC) and Citigroup Global Markets, which directly challenges the practice of negotiated settlements—the primary mechanism for resolving corporate regulatory violations. The decision is now pending appeal. It is noted that "the sweeping language of the opinion does more than reject the Citigroup settlement—it calls into question the process by which companies are penalized without admitting guilt. The pending appeal could have far-reaching ramifications for business and regulators alike."

If Judge Rakoff's decision is upheld, then the public's outcry for corporate accountability will be answered, as companies and regulators would have to begin explaining how they arrive at their settlements. “A case like this elevates the public policy aspect of what the SEC does, front and center…[putting] new scrutiny on how settlements are structured and approved[,]” notes Chris, co-chair of Seyfarth's securities litigation group and a former senior counsel with the SEC's Division of Enforcement.

Another risk that would come out of overturning the decision on appeal is the potential for less judicial ability to countermand the SEC when presented with settlement consent orders. Chris, however, is not sure that the 2nd Circuit will be one sided, noting that, "...even if they overturned his decision, they would remand it and direct the SEC to provide more information...they may pull back a little bit on what [Judge Rakoff has] done, but at the same time make a pretty clear statement to the government that if they’re going to come into a court with a settlement, they need to embed it with more detail about how they got there and their rationale.”

Chris also notes that Dodd-Frank has placed a large workload on the SEC and that once the SEC has completed the rules, "he expects the Commission to shift its focus back to monitoring securities transactions, identifying regulatory gaps in the market, stopping market manipulations and improper trading, and developing an investor-focused rulemaking agenda."

Immigration Inbox: News You Can Use - February 2012

Tue, 14 Feb 2012 00:00:00 -0400

U.S. Immigration:

1. State Dept. Announces More Forward Movement in China-Mainland Born and India EB-2 Categories – USCIS previously reported that the rate of new filings is currently far below that which they had anticipated, prompting continued aggressive movement of the cut-off dates.

2. USCIS Announces Several Thousand EB-5 Investor Green Cards Issued So Far in First Quarter of FY 2012, Releases Latest Stats – Between October and mid-January, DOS issued 2,364 EB-5 green cards. At that rate, DOS could issue more than 9,000 EB-5 visas this fiscal year, very close to the statutory cap of 10,000.

3. USCIS Announces 58 Countries Whose Nationals Are Eligible for H-2A and H-2B Participation – In addition to the 53 countries currently on the list, DHS designated Haiti, Iceland, Montenegro, Spain, and Switzerland for the first time this year.

4. U.S. Consulate in Chennai Stops Processing Immigrant Visa Petitions – Only the U.S. Embassy in New Delhi and U.S. Consulate in Mumbai now process immigrant visa applications in India.

5. DHS Extends TPS Designation for El Salvador – The 18-month extension will remain in effect through September 9, 2013. The 60-day re-registration period began January 9, 2012, and will remain in effect until March 9, 2012.

6. DOS Launches 90-Day Pilot Program Allowing Online U.S. Passport Card Applications – The U.S. passport card costs $30 for current passport book holders, and is valid for land and sea travel to and from Canada, Mexico, the Caribbean, and Bermuda. It is not valid for international air travel.

Seyfarth Workforce Authorization Team (SWATeam)

1. DOJ’s Office of Special Counsel Lists Employer Best Practices During Worksite Enforcement Audits – The Department of Justice’s Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC) released best practices for employers facing audits by U.S. Immigration and Customs Enforcement (ICE).

2. OSC Settles with University of California San Diego Medical Center – The Justice Department unit had alleged that the medical center subjected newly hired non-citizens to excessive demands for documents to verify their employment eligibility.

Also in this issue:

Seyfarth Immigration Events and News

U.S. Immigration

1. State Dept. Announces More Forward Movement in China-Mainland Born and India EB-2 Categories

The Department of State’s Visa Bulletin for March 2012 reveals that the China and India employment second preference cut-off date have continued to advance at a rapid rate in recent months.

While this continued forward movement increases the potential for an eventual retrogression of the cut-off at some point during the year, it also provides the best opportunity to use all numbers available under the annual limit.

The bulletin for March 2012 is available here.

2. USCIS Announces Several Thousand EB-5 Investor Green Cards Issued So Far in First Quarter of FY 2012, Releases Latest Stats

The Department of State issued 2,364 EB-5 employment-creation investor green cards between October 1, 2011, and mid-January 2012, U.S. Citizenship and Immigration Services (USCIS) announced at its quarterly EB-5 stakeholders meeting on January 23, 2012. At that rate, DOS could issue more than 9,000 EB-5 visas this federal fiscal year, which is very close to the annual statutory cap of 10,000.

USCIS refused to discuss how it would handle pending EB-5 petitions if Congress fails to renew the regional center pilot program by September 30, 2012. Approximately 92 percent of I-526 petitions (Immigrant Petition by Alien Entrepreneur) filed each year are filed by investors in regional centers. Historically, USCIS approves about 80 to 85 percent of I-526 and I-829 EB-5 petitions each year. The USCIS California Service Center (CSC) now has four teams of EB-5 adjudicators, an increase from one team a year ago. Despite the increased staffing, case adjudication times have not improved because of the increase in case filings.

USCIS also announced that it would defer to state determinations on what constitutes a targeted employment area (TEA) for EB-5 purposes. However, the agency will check the data behind states’ methodology. USCIS did not say whether a single census tract may qualify as a geographic area. USCIS said that would be covered in written materials not yet available publicly, and referred stakeholders to its December 2009 memorandum for further details (available here).

USCIS acknowledged that many regional center applications are being held up at headquarters pending resolution of economic methodology issues. The USCIS hopes to resolve those issues soon. USCIS is analyzing all the I-924A forms submitted by regional centers and will draft a report that includes regional center-specific information sometime this year. USCIS acknowledged growing pains in determining what constitutes a "shovel-ready" project for EB-5 purposes. It hopes to address the issue later this year when it revises the I-924 form to provide greater consistency.

USCIS also released its latest data on EB-5 filings and regional centers (RCs):

RC approvals continue to increase. As of January 28, 2012, there are 217 approved RCs operating in 40 states, including the District of Columbia and Guam.
The agency reported 41 initial RC proposal filings in the first quarter of fiscal year (FY) 2012, compared to 192 initial filings in all of FY 2011 and 110 initial filings in all of FY 2010. The number of amended RC proposal filings was 17 by the end of the first quarter; there were 86 filings received for all of FY 2011 and 42 filings received for all of FY 2010.
In the first quarter of FY 2012, the agency approved 14 of the 41 initial RC proposals and denied 22, an approval rate of 39 percent. In FY 2011, when USCIS approved 80 and denied 51, an approval rate of 61 percent. The approval rate of amended RC proposals in the first quarter of FY 2012 was 57 percent, with 4 approvals and 3 denials. By comparison, in FY 2011 USCIS approved 43 amended RC proposals and denied 7, an approval rate of 86 percent.
USCIS also reported significant increases in individual I-526s and I-829s (Petition by Entrepreneur to Remove Conditions). In the first quarter of FY 2012, USCIS received 1,293 I-526 petitions, compared to 3,805 for all of FY 2011. USCIS received 250 I-829 petitions in the first quarter of 2012. By comparison, USCIS received 2,345 I-829 petitions in all of FY 2011.
In the first quarter of FY 2012, the agency approved 1,076 I-526 petitions and denied 222, an approval rate of 83 percent, while in all of FY 2011 USCIS approved 1,563 and denied 11, an approval rate of 93 percent. USCIS approved 1,067 I-829 petitions and denied 46 in all of FY 2011, an approval rate of 96 percent.

The full list of RCs by state is available at http://www.uscis.gov/eb-5centers/.

The next USCIS stakeholder engagement meetings are scheduled for May 1, 2012 (general EB-5 discussion); July 26, 2012 (regional center discussion); and October 18, 2012 (general EB-5 discussion). See the link here for additional details on the engagement meetings.

3. USCIS Announces 58 Countries Whose Nationals Are Eligible for H-2A and H-2B Participation

U.S. Citizenship and Immigration Services (USCIS) announced that the Department of Homeland Security (DHS), in consultation with the Department of State, has identified 58 countries whose nationals are eligible to participate in the H-2A (temporary agricultural) and H-2B (temporary nonagricultural) programs for the coming year. Each country’s designation remains valid for one year from the date of publication.

USCIS generally may only approve H-2A and H-2B petitions for nationals of countries the Secretary of Homeland Security has designated as eligible to participate in the programs. USCIS may approve H-2A and H-2B petitions for nationals of countries not on the list if it is determined to be in the interest of the United States.

In addition to the 53 countries currently on the list, DHS designated Haiti, Iceland, Montenegro, Spain, and Switzerland for the first time this year.

Effective January 18, 2012, nationals of the following 58 countries are eligible to participate in the H-2A and H-2B programs: Argentina, Australia, Barbados, Belize, Brazil, Bulgaria, Canada, Chile, Costa Rica, Croatia, Dominican Republic, Ecuador, El Salvador, Estonia, Ethiopia, Fiji, Guatemala, Haiti, Honduras, Hungary, Iceland, Ireland, Israel, Jamaica, Japan, Kiribati, Latvia, Lithuania, Macedonia, Mexico, Moldova, Montenegro, Nauru, the Netherlands, Nicaragua, New Zealand, Norway, Papua New Guinea, Peru, Philippines, Poland, Romania, Samoa, Serbia, Slovakia, Slovenia, Solomon Islands, South Africa, South Korea, Spain, Switzerland, Tonga, Turkey, Tuvalu, Ukraine, United Kingdom, Uruguay and Vanuatu.

This new list does not immediately affect the status of beneficiaries who are currently in the United States in H-2A or H-2B status, unless they apply to change or extend their status.

The notice is available here.

4. U.S. Consulate in Chennai Stops Processing Immigrant Visa Petitions

As of January 1, 2012, the U.S. Consulate General in Chennai, India, no longer processes immigrant visa petitions. The U.S. Embassy in New Delhi and U.S. Consulate in Mumbai are now the only acceptance centers in India for immigrant visa applications. Applicants currently in the process of petitioning for an immigrant visa may e-mail ChennaiIVU@state.gov for clarification of their status.

5. DHS Extends TPS Designation for El Salvador

The Department of Homeland Security (DHS) has extended the designation of El Salvador for temporary protected status (TPS) for 18 months from its current expiration date of March 9, 2012. The 18-month extension of the TPS designation of El Salvador is effective March 10, 2012, and will remain in effect through September 9, 2013. The 60-day re-registration period began January 9, 2012, and will remain in effect until March 9, 2012.

The notice sets forth procedures necessary for nationals of El Salvador (or those having no nationality who last habitually resided in El Salvador) with TPS to re-register and to apply for an extension of their employment authorization documents (EADs) (Forms I-766) with USCIS. Re-registration is limited to persons who previously registered for TPS under the designation of El Salvador and whose applications have been granted or remain pending. Certain nationals of El Salvador (or those having no nationality who last habitually resided in El Salvador) who have not previously applied for TPS may be eligible to apply under the late initial registration provisions.

USCIS said it will issue new EADs with a September 9, 2013 expiration date to eligible Salvadoran TPS beneficiaries who timely re-register and apply for EADs under this extension. DHS recognizes that all re-registrants may not receive new EADs until after their current EADs expire on March 9, 2012. Accordingly, the notice automatically extends the validity of EADs issued under the TPS designation of El Salvador for six months, through September 9, 2012, and explains how TPS beneficiaries and their employers may determine which EADs are automatically extended and their impact on the I-9 and E-Verify process.

The notice is available here.

6. DOS Launches 90-Day Pilot Program Allowing Online U.S. Passport Card Applications

On January 24, 2012, the Department of State’s Office of Passport Services launched a 90-day pilot program allowing adult U.S. citizens living in the United States and Canada to apply for a passport card online. Those applying online are not required to mail in their current passport book. The wallet-sized U.S. passport card costs $30 for current passport book holders, and is valid for land and sea travel to and from Canada, Mexico, the Caribbean, and Bermuda. It is not valid for international air travel.

To participate in the program, applicants must currently possess a valid 10-year U.S. passport book with at least 12 months of validity remaining, upload an acceptable digital photograph, and make an online payment in U.S. dollars via Pay.gov. Applications accepted through the program will be subject to the same adjudication standards as in-person or mail-in applications.

The Department of State began producing the passport card in 2008 in response to travel document requirements imposed by the Western Hemisphere Travel Initiative. Since then, more than 4.5 million cards have been issued.

The notice is available here.

To apply for the passport card using the online application, go to the link here.

Seyfarth Workforce Authorization Team (SWATeam)

1. DOJ’s Office of Special Counsel Lists Employer Best Practices During Worksite Enforcement Audits

The Department of Justice’s Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC) released the following do’s and don’ts for employers facing audits by U.S. Immigration and Customs Enforcement (ICE):

DO:

Develop a transparent process for interacting with employees during the audit, including communicating with employees that the employer is subject to an ICE audit.
Provide all workers with a reasonable amount of time to correct discrepancies in their records identified by ICE. Treat all workers in the same manner during the audit, without regard to national origin or citizenship status. This means that all workers with like discrepancies who are asked to present additional documents are provided with the same timeframes and the same choice of Form I-9 documents to present.
If your workers are represented by a union, inform the union of the ICE audit and determine whether a collective bargaining agreement triggers any obligations.
Inform employees from whom you seek specific information that you are seeking this information in response to an ICE audit.
Communicate in writing with employees from whom you seek information, and describe the specific basis for the discrepancy and/or what information you need from them. Follow the instructions on the ICE notice and the instructions for the Form I-9 when seeking to correct Form I-9 defects, including the Lists of Acceptable Documents and the anti-discrimination notice.

DON’T:

Selectively verify the employment eligibility of certain employees based on their national origin or citizenship status based on the receipt of an ICE Notice of Inspection.
Terminate or suspend employees without providing them with notice and a reasonable opportunity to present valid Form I-9 documents.
Require employees to provide additional evidence of employment eligibility or more documents than ICE is requiring you to obtain.
Limit the range of documents that employees are allowed to present for purposes of the Form I-9.
Treat employees differently at any point during the audit because they look or sound foreign, or based on assumptions about whether they are authorized to work in the U.S.

The list is available here.

2. Justice Dept. Settles Document Discrimination Complaint Against University of California San Diego Medical Center

The Department of Justice reached an agreement on January 4, 2012, with the University of California San Diego Medical Center, resolving a complaint filed on December 6, 2011, alleging that the medical center failed to comply with proper employment eligibility verification processes for noncitizens authorized to work in the United States.

Specifically, the Department’s complaint alleged that the medical center subjected newly hired non-U.S. citizens to excessive demands for documents to verify their employment eligibility but did not require the same of U.S. citizens.

Under the terms of the settlement agreement, the medical center agreed to implement new employment eligibility verification policies and procedures that treat all employees equally regardless of citizenship status. In addition, the medical center agreed to pay a civil penalty of $115,000, conduct supplemental training of its human resources personnel on their responsibilities to avoid discrimination in the employment eligibility verification process, and work with the Department to ensure compliance with proper employment eligibility verification processes across all University of California campuses, medical centers, and facilities.

The Department’s announcement is available here.

Seyfarth Immigration Events and News

Recent News from Seyfarth’s Immigration Attorneys

Upcoming Speaking Engagements

Attorney Nicole Kersey will deliver a presentation titled, "Electronic I-9 Solutions: Jackpot or Crackpot?" at the National Association of Professional Background Screeners 2012 Annual Conference, to be held April 15-17, 2010 in Nashville, Tennessee.

Seyfarth Partner Angelo Paparelli spoke New York International, an association serving "local, global citizens," on January 23 in Manhattan on "U.S. Immigration Law Opportunities and Challenges for Foreign Entrepreneurs, Professionals & Investors: Reaping Rewards While Avoiding the Landmines."

In addition, Angelo Paparelli has posted several new blog entries on his Nation of Immigrators public policy blog:

Faint Immigration Praise

Angelo criticizes a host of Obama Administration actions to fix America’s broken immigration system (while Congress "remains comatose") as "more like vaporware than tangible solutions."

"I Hate [Bleep]ing Immigration Law" -- Whenever I Get an Unjust Request for Evidence

In Angelo’s words: "A roguish, stupid or intellectually dishonest RFE, however, will cause me to erupt into silent, internal conniptions. . . . Living in California, the land of holistic therapies, I know that anger swallowed often morphs into depression. To avoid that dreadful fate, I pen this post as a way to release outrage, stay healthy, and light a candle on RFE avoidance and response."

Powdered Wig Immigration with the Lawyer as Potted Plant

Angelo proposes expanded procedural due process rights and access to legal counsel in immigration matters involving USCIS

The DHS Inspector General Report on Fraud Detection at USCIS: Pious Immigration Baloney

Angelo challenges a recent report finding widespread fraud and legal ineligibility in requests for immigration benefits submitted to USCIS.

By: Angelo Paparelli, Jason Burritt, and John Quill

Angelo Paparelli is a Partner in Seyfarth’s Downtown Los Angeles office. Jason Burritt is a Senior Associate in the New York office. John Quill is Senior Counsel in the Boston office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Angelo Paparelli at apaparelli@seyfarth.com, Jason Burritt at jburritt@seyfarth.com, John Quill at jquill@seyfarth.com or any Business Immigration attorney on our website.

Final Summary of Benefits & Coverage Rule Delays Effective Date, Modifies Requirement

Mon, 13 Feb 2012 00:00:00 -0400

This is the thirty-third issue in our series of alerts for employers on selected topics in health care reform. (Click here to access our general summary of health care reform and other issues in this series.) This series of Health Care Reform Management Alerts is designed to provide an in-depth analysis of certain aspects of health care reform and how it will impact your employer-sponsored plans.

The Affordable Care Act requires group health plan sponsors (employers and insurers) to provide participants with a short Summary of Benefits and Coverage (SBC) for each benefit package offered. This issue supplements Issues 24 and 30 of our Health Care Reform Management Alert Series, which addressed IRS, DOL and HHS (the “Agencies”) proposed guidance and a template SBC released on August 22, 2011.

The Agencies have recently released their final rule governing the SBC requirement. Most notably, the final rule includes a six-month delay in the SBC delivery requirement to allow plans to coordinate the SBC with their open enrollment materials. This means an SBC will be required to be distributed beginning not earlier than September 23, 2012. For calendar year plans, the plan administrator and issuer will generally be required to issue an SBC for benefit packages offered for 2013 and later plan years, beginning with any open enrollment period that starts on or after September 23, 2012. Although several commentators asked that the Agencies exempt large group health plans or self-insured group health plans from the SBC requirement due to the “wealth of useful information” already provided, the Agencies determined not to do so, and felt that the SBC still serves a useful purpose to allow individuals to easily compare coverage across different plans and products.

The final rule includes a number of other changes and clarifications to the earlier proposed guidelines, as described in the chart below.

Requirement	Proposed Rule	Final Rule
Providing the SBC	An SBC must be issued for each benefit package.	Clarifies that “benefits package” includes group health plans but does not include HIPAA excepted benefits. This means an SBC is not required for stand-alone dental and vision, most health FSAs, most HSAs, etc.
Providing the SBC	The SBC must be provided upon participant request as soon as possible, but no later than seven calendar days following request.	The SBC must be provided no later than seven business days following a participant request.
	For plans with automatic enrollment/re-enrollment, the SBC must be provided at least 30 days prior to the start of the new plan year.	There are no changes to this provision of the proposed rule for self-funded plans For fully-insured plans, if the terms of coverage for the new plan year have not been finalized 30 days in advance, the SBC must instead be provided as soon as practicable, but no later than seven business days after the earlier of (1) issuance of the new policy, or (2) receipt of written confirmation of the intent to renew.
	Both the sponsor of a group health plan sponsor and the insurer (if applicable) are required to provide an SBC for each benefit package to all eligible participants and beneficiaries.	The SBC requirement is considered satisfied for all entities if the SBC is provided to participants by any entity. A single SBC may be provided to a participant and any beneficiary at the participant’s last known address. For participants who are already enrolled in coverage, the plan or issuer must only provide the SBC for the coverage in which the individual is enrolled. The plan or issuer does not need to automatically provide SBCs for the other benefit packages for which the participant is eligible. The participant may still request SBCs for other benefit packages though.
	The SBC must be provided within seven calendar days of a request for special enrollment.	The SBC must be provided to special enrollees no later than 90 days from enrollment (consistent with the timing for delivering an SPD following special enrollment). If a special enrollee requests an SBC sooner, it must be provided within seven business days.
Content	See “What Must Be Included in the SBC?” from Issue 24.	The SBC is no longer required to include participant premium costs. This change will allow many plans to significantly reduce the number of SBCs that need to be issued. The requirement to include a statement regarding whether the plan provides “minimum essential coverage” is delayed until 2014. Future guidance will be issued to address this aspect of the SBC. For coverage provided outside of the United States, plans may simply provide contact information for obtaining such benefit and coverage information in lieu of an SBC.
Content	The SBC must include coverage examples describing costs under the plan for breast cancer, baby delivery and diabetes.	The SBC must no longer include a coverage example for breast cancer. The Agencies reserve the right to add additional coverage examples in the future.
Appearance	The SBC must be presented to participants as a stand-alone document.	SBCs issued in connection with group health plan coverage may be provided either as a stand-alone document or in combination with other summary materials (SPD, SMM, etc.), as long as the SBC is prominently displayed at the beginning of the materials.
Appearance	The SBC template format must be followed.	If a plan’s terms cannot be described in the form of the template, for example where a wellness program results in different cost sharing, then the plan must use its best efforts to describe the plan terms in as consistent a manner as possible.
Form	The SBC may be delivered to participants electronically only if the DOL’s e-disclosure safe harbor is met.	Retains the proposed rule for participants and beneficiaries already covered under a group health plan. For individuals eligible for but not enrolled in coverage, the SBC may be provided electronically if the format is accessible and a paper copy is available upon request. If the e-disclosure is a website posting, the plan must advise the individual in paper form (e.g., a postcard) providing the website and notifying the individual that a paper copy is available upon request.
Notice of Mid-year Material Modifications	Plans must notify participants at least 60 days in advance of any material changes.	Changes to the SBC resulting from changes in regulatory requirements do not require advanced notice.
Effective Date	Plans must issue SBCs for each benefit package: For any open enrollment beginning on or after March 23, 2012, and For new hires, special enrollments and upon participant request, beginning on or after March 23, 2012.	Plans must issue SBCs for each benefit package: For any open enrollment beginning on or after September 23, 2012, and For new hires, special enrollments and upon participant request, beginning as of the first day of the plan year beginning on or after September 23, 2012.

Employer Action Steps

Determine which benefit packages and coverage levels are subject to the SBC requirement.
For fully-insured plans, coordinate with the insurance provider to determine who will prepare and distribute the SBC.
Complete the SBC template for each benefit package and prepare for distribution no later than the first open enrollment period following September 23, 2012 - generally for the 2013 plan year.
Determine whether to distribute electronically or to provide paper copies of the SBC.

California Court of Appeal Follows Dukes And Rejects “Trial By Formula” In Class Action Trials

Fri, 10 Feb 2012 00:00:00 -0400

On February 6, 2012 the California Court of Appeal, First District, issued its opinion in Duran v. U.S. Bank. In a matter of first impression, the Court of Appeal considered whether class action plaintiffs may use statistical sampling and representative evidence to establish liability on a class-wide basis. In an extremely thorough opinion, the court gave a resounding "no" to that question, reversing a $15 million judgment on the basis that the trial plan had unconstitutionally deprived U.S. Bank of due process. The Court of Appeal also ordered that the class should be decertified, because the trial court had erred in assuming that liability for a class of 260 members could be extrapolated from findings based on testimony from a trial sample of 20 plaintiffs.

Background Facts

Plaintiffs filed the case in Alameda County Superior Court , alleging that U.S. Bank's Business Banking Officers ("BBOs") were misclassified as exempt employees. After class certification, Judge Robert Freedman granted Plaintiffs' motion for summary adjudication on the Bank's defenses of administrative exemption and commission sales exemption. The case then went to a bench trial on the Bank's remaining defense under the outside sales exemption.

Over the Bank's repeated objections, the trial court conducted the liability phase of the trial based on a purportedly random sample of 20 class members. The Bank attempted to proffer evidence from 70 BBOs who signed declarations that they spent more than 50% of their time outside of the office (and therefore were properly classified as exempt employees). The court, however, prohibited the Bank from presenting any evidence from class members (or BBOs who opted out) other than those selected to be in the trial sample. The court determined that the Bank had misclassified 19 of the 20 class members in the sample, and then extrapolated from that result to a conclusion that all 260 class members had been misclassified.

The court then conducted a damages phase in which it adopted the view of plaintiffs' expert that, with a 95% confidence level, the average class member worked 11.87 hours of overtime per week, with a margin of error of 43%—in other words, the actual average overtime could fall anywhere in the range of 6.7 hours to almost 17 hours per week. The trial court entered judgment against the Bank in the amount of approximately $15 million.

The Ruling

The Court of Appeal reversed the judgment because it found that Judge Freedman's trial plan did not reflect a statistically significant and reliable methodology. Although the Court of Appeal stopped just short of issuing a bright line rule, the court came close to holding that statistical extrapolation cannot determine collective liability in a wage and hour class action. The decision also recites numerous trial court errors that deprived the Bank of fundamental due process. (The Court of Appeal noted that the trial court conceived of the unprecedented trial plan entirely on its own, without relying on the advice of expert witnesses.)

The Court of Appeal further faulted the trial plan for denying the Bank a chance to put on any evidence outside of the trial sample, including the testimony of class members that they were properly classified. This evidence, if admitted and credited, would have established that at least one-third of the class was properly classified. The Court of Appeal was troubled that the judgment awarded an average of over $50,000 to each of the 239 absent class members, while the Bank was precluded from putting on evidence that may have prevented at least one-third of them from any recovery: "fundamentally, the issue here is not just that USB was prevented from defending each individual claim but also that USB was unfairly restricted in presenting its defense to class-wide liability."

In reaching this conclusion, the Court of Appeal cited the U.S. Supreme Court's disapproval in Wal-Mart Stores v. Dukes of "trial by formula:" "the same type of 'trial by formula' that the U.S. Supreme Court disapproved of in Wal-Mart is essentially what occurred in this case."

In the Phase II damages trial, the trial court compounded its statistical errors in constructing the trial sample utilized in Phase I. The trial court failed to follow acceptable statistical principles in Phase I, and then utilized those improper liability findings as the basis for restitution calculations in Phase II. The improper sampling methodology in Phase II resulted in a 43.3% margin of error in determining the Bank's more than $14 million aggregate liability on restitution, which the Court of Appeal identified as a separate due process violation. Although the Plaintiffs cited Bell v. Farmers Insurance Exchange as precedent for using statistical sampling to prove liability and damages, the Court of Appeal distinguished Bell on the grounds that in Bell the sampling methodology was agreed to by the parties, and that the sampling was used only to determine collective damages, not liability.

What Duran Means For Employers

The Duran decision is unquestionably welcome news for employers defending class actions in California. No California appellate court has ever held that statistical sampling may be used to prove liability, and now Duran confirms that such a proposition is highly dubious, while stopping just short of categorically repudiating it. Any trial court attempting to craft a class action trial plan will have to be very careful to avoid the statistically improper methodologies employed by this trial court, both as to liability and as to damages.

Another key lesson from Duran is that employers should object at every opportunity to trial schemes that lack statistical support and that may offend due process. The decision also contains excellent language and analysis supporting decertifying a wage and hour class action in appropriate circumstances. Employers can only hope that the California Supreme Court will not disturb this well-reasoned, favorable ruling.

By: Andrew McNaught

Andrew McNaught is a partner in Seyfarth's San Francisco office. If you would like further information, please contact your Seyfarth attorney, or Andrew McNaught at amcnaught@seyfarth.com.

John Napoli and Blake Hornick Quoted in Directorship Magazine
"Becoming More Active Managers and Overseers"

Fri, 10 Feb 2012 00:00:00 -0400

Seyfarth's Real Estate practice round table on the issues facing directors of real estate investment trusts was covered in the January/February issue of the National Association of Corporate Directors magazine, Directorship.

Moderated by Seyfarth co-managing partner of the firm's New York office and Chair of the firm's national Tax practice John Napoli and included Seyfarth partner Blake Hornick, the panel examined the current state of REITs, the impact of Dodd-Frank on the funds, and the unusual challenges the funds face in today's marketplace.

"If you go back and number of years, Hornick says, "REITs were supposed to be a nice, stable dividend, a chance for capital appreciation--a sort of a hybrid if you will between bonds and a pure equity play. Well, the world has now turned upside down and shareholders want more equity appreciation because interest rates are so low, but what you need to do to increase the stock price may require an investment that might lower your dividend yield."

Click here to read the full article.

Alexander Passantino Quoted in Law360
"DOL Enforcement of Breastfeeding Law Breeds Uncertainty"

Thu, 09 Feb 2012 00:00:00 -0400

Seyfarth Shaw Washington, D.C. attorney and former acting administrator of the U.S. Department of Labor (DOL) Wage & Hour Division, Alexander Passantino, was quoted on January 30 in Law360. The article discussed the Fair Labor Standards Act nursing mothers provisions that require employers to provide break times and a private place for nursing mothers to express breast milk, and the confusion among employers due to the lack of final rules implementing the law.

“The guidance the [DOL] gave on whether the break should be paid or not paid is not as clear as it should be because the law itself says it is an unpaid break, and then the [DOL's] guidance references what an employer does with respect to other breaks that are paid,” said Alex.

“Without regulations, no one really understands how exactly the department is saying employers should comply with that provision,” he added.

The DOL has yet to set a date for when it will hand down the final rules, and lawyers say there is room to debate exactly what "constitutes an appropriate space, what conditions make an employer exempt and what circumstances necessitate compensation for the breaks."

First Circuit Adopts McDonnell Douglas Burden-Shifting Analysis For False Claims Act Whistleblower Cases

Thu, 09 Feb 2012 00:00:00 -0400

On February 7, 2012, the First Circuit, in Harrington v. Aggregate Industries-Northeast Region, Inc., Case No. 11-1511, adopted the McDonnell Douglas burden-shifting framework in the context of a False Claims Act (“FCA”) whistleblower retaliation case. The First Circuit, recognizing that its decision was a case of first impression, is the first federal appellate court to do so in a published opinion. The plaintiff had alleged that his employer, Aggregate Industries-Northeast Region, Inc. (“Aggregate”) terminated him in retaliation for bringing a qui tam action against Aggregate under the FCA. The district court granted Aggregate’s motion for summary judgment. On appeal, the First Circuit adopted and applied the McDonnell Douglas burden-shifting framework to the plaintiff’s retaliation claim and, based on that analysis, vacated and remanded the case.

Background

The plaintiff and a fellow employee filed an FCA suit under 31 U.S.C. § 3730(h)(1) against Aggregate based on Aggregate’s unlawful supply of substandard concrete to the “Big Dig” highway project in Boston, a project that was largely supported by federal funds. The federal government intervened in the qui tam action and reached a settlement with Aggregate. A few days after the plaintiff signed the settlement agreement, Aggregate fired him for refusing to take a drug test. The plaintiff sued Aggregate, alleging that Aggregate’s explanation for terminating the plaintiff was pretextual, and that true reason for his dismissal was retaliation for his whistleblowing activities.

The district court granted summary judgment against the plaintiff on the grounds that the plaintiff had failed to present evidence of a causal connection between his whistleblowing activities and Aggregate’s decision to terminate his employment.

McDonnell Douglas Burden-Shifting Analysis Applies To FCA Anti-Retaliation Claims

The First Circuit, recognizing that no prior appellate court had articulated the standard to be applied in FCA retaliation cases, applied the McDonnell Douglas burden-shifting framework that has been applied to claims under Title VII, among other anti-retaliation statutes. The First Circuit reasoned that this framework “provides a principled mode for analyzing retaliatory intent.” As applied to the FCA’s anti-retaliation provision, the First Circuit stated that a plaintiff must initially establish a prima facie case of retaliation, which can be met by establishing the employer’s knowledge of protected activity (i.e. the filing of an FCA claim by the employee), an adverse employment action, and a causal connection between the two. Once the plaintiff establishes a prima facie case, the burden then shifts to the defendant to set forth a legitimate, nonretaliatory reason for the adverse employment action. Once the defendant proffers a legitimate, nonretaliatory reason, the burden shifts back to the plaintiff to show that the defendant’s reason is pretextual, and that the actual motive was retaliation. “In such circumstances, an inquiring court looks to the record as a whole to determine whether there is sufficient evidence of ‘pretext and retaliatory animus’ to make out a jury question.”

As applied to Harrington, the First Circuit concluded that the first two prongs of the McDonnell Douglas test were satisfied. Furthermore, the First Circuit concluded that the record as a whole, including Aggregate’s multiple and questionable efforts force the plaintiff to take a drug test and the temporal proximity between the date the plaintiff signed the settlement agreement and the date he was terminated, raised triable issues about whether Aggregate’s proffered reason for firing the plaintiff was pretextual. Accordingly, the First Circuit vacated the entry of summary judgment and remanded the case to the district court for further proceedings.

Medical Loss Ratio Rebates Expected in August 2012 - Could Constitute Plan Assets

Thu, 09 Feb 2012 00:00:00 -0400

This is the thirty-second issue in our health care reform series of alerts for employers on selected topics in health care reform. (Our general summary of health care reform and other issues in this series can be accessed by clicking here.) This series of Health Care Reform Management Alerts is designed to provide a more in-depth analysis of certain aspects of health care reform and how it will impact your employer-sponsored plans.

Employers sponsoring a fully-insured group health plan or benefit option (e.g., an HMO option) could receive a rebate from the insurance policy issuer as soon as August of this year, under the Affordable Care Act’s new medical loss ratio (MLR) rules. DOL guidance confirms that at least a portion of these rebates are likely “plan assets.” As a result, the DOL issued guidance discussing plan sponsors’ use of these plan assets, as described below.

Background - Affordable Care Act Requires Medical Loss Ratio Reporting and Refunds

The Affordable Care Act requires health insurers to monitor and report to HHS their MLR, which generally means the ratio of health care claims paid to premiums received (health care claims ÷ premiums). If the MLR drops below a certain percentage (85% for large group health plans, 80% for small group health plans), the insurer must refund the excess as a rebate to the insured individual or group health plan sponsor by August 1st of the following year.

Rebates Will Usually Constitute Plan Assets

Employers sponsoring fully-insured group health plans will receive the rebate directly. In most instances though, a portion of these rebates will constitute plan assets. While the determination of which portion constitutes plan assets will vary depending on the terms of the plan document, insurance policy and other factors, the following guidelines generally apply:

Premiums Paid Entirely by Employer. If the insurance premiums are 100% paid by the employer, with no participant premium contribution, the rebate probably will not constitute plan assets and can revert to the employer. Employers should still verify that this treatment is consistent with the terms of the insurance policy and plan document.

Premiums Paid Entirely by Participants. If the insurance premiums are 100% paid by the participant, with no employer contribution, the entire rebate will constitute plan assets. In this scenario, ERISA’s general standards of fiduciary conduct will govern use of the assets, as discussed below.

Premiums Paid Partially by the Employer, Partially by Participants. Most employer-sponsored plans fall into this category. While the rules vary depending on the contribution structure, generally the percentage of the rebate that constitutes plan assets will correspond to the ratio of the premium paid by participants. If participants pay a fixed amount though (as opposed to a percentage), the amount of the rebate that constitutes plan assets will never exceed the fixed cost paid by the participants. The reverse is also true. If the employer only pays a fixed amount (as opposed to a percentage), the amount of the rebate that may revert to the employer can never exceed the fixed amount the employer pays.

Fiduciary Rules Govern Use of Plan Assets

If any portion of the rebate is determined to be plan assets, ERISA’s general fiduciary obligations apply when allocating those assets. Generally, this means the rebates must be used to benefit both current and, in some instances, former participants. Most importantly, plan sponsors should apply the rebates within three months of receipt, otherwise ERISA’s trust requirement applies (which can be costly).

Employer Action Steps

Review insurance policies to determine whether they address use of rebates.
Consider amending plan documents (and SPDs) to provide that MLR rebates will revert to the employer, to the greatest extent permitted by law.
Determine how to use rebates in advance, to ensure all plan assets are allocated within the 90 day time limit.

Department of Labor Issues Final Rules on Fee Disclosures From Service Providers

Wed, 08 Feb 2012 00:00:00 -0400

Executive Summary

On February 2, 2012, the Department of Labor (“DOL”) issued final regulation section 2550.408b-2(c) (the “Regulation”), regarding required disclosure of fee-related information by service providers to plan fiduciaries. Generally, a service provider must disclose the services provided, its status as a fiduciary or registered investment adviser, compensation received, and certain information with respect to services provided to individual account plans. The new disclosure requirements are effective as of July 1, 2012 and will apply to both existing and future contracts or arrangements.¹

Section 408(b)(2) of the Employee Retirement Security Act of 1974, as amended (“ERISA”) provides an exemption from the prohibited transaction rules for certain contracts and arrangements for services between a plan and a party in interest. In general, the requirements for the exemption are that: (i) the service is necessary for the operation of the plan;² (ii) the service is furnished under a contract or arrangement which is reasonable; and (iii) no more than reasonable compensation is paid for the service.³ The Regulation provides guidance with respect to item (ii), specifically indicating what service provider disclosures must be made to a plan fiduciary for a contract or arrangement to be reasonable.

The Regulation, except as specifically indicated, is independent from the regulations and other rules under section 404 of ERISA, which provide guidance related to the information a fiduciary must consider when engaging and monitoring a service provider, as well as the new regulations regarding participant-level fee disclosures.⁴

A failure to meet the requirements of the section 408(b)(2) exemption could cause the payment of compensation to a service provider to a plan to be a prohibited transaction under ERISA and the corresponding provisions of the Internal Revenue Code of 1986, as amended (the “Code”).⁵ The consequences of a prohibited transaction can include punitive excise taxes, disgorgement of fees, and other potential liabilities for the service provider and personal liability for the plan fiduciary. Therefore, it is critical for service providers, including those that provide advice to private funds, hedge funds, or other investment vehicles that hold plan assets and plan fiduciaries that are subject to the Regulation, to make sure they are in compliance by July 1, 2012.

This Management Alert is intended to provide plan sponsors and plan fiduciaries with an understanding of what they need to receive in order to avoid a prohibited transaction. It is also intended to provide service providers with a roadmap of the disclosures they are required to provide under the Regulation.

Covered Plans and Covered Service Providers

The disclosure requirements apply to services provided to “covered plans” by “covered service providers” for “compensation”.

A “covered plan” is an employee pension benefit plan (also referred to as a pension plan), within the meaning of section 3(2)(A) of ERISA. This generally includes both defined benefit plans and defined contribution plans, but does not include:

Governmental plans;
Church plans not subject to ERISA;
Ex-US plans maintained primarily for non-resident aliens;
Unfunded excess benefit plans;
Individual retirement accounts and annuities and those employer established plans which utilize IRAs, such as SEPs and SIMPLEs;
Pre-2009 issued annuities and custodial accounts under a 403(b) plan for which the employer ceased to have any obligation to make contributions, including salary deferral contributions, before 2009 (all rights and benefits under such contracts or accounts must be enforceable solely by the individual owner of the annuity/account and the individual must be fully vested in the account);
Welfare plans; or
Plans with no employees (i.e., Keogh plans covering only owners and their spouses).

A “covered service provider” (“CSP”) is a service provider that (i) enters into a contact or arrangement with a covered plan and (ii) reasonably expects to receive $1,000 or more⁶ in direct and/or indirect compensation (see Disclosure Requirements for definition of compensation) for providing the types of services listed below (regardless of whether the services are performed or compensation is received directly by the CSP or by an affiliate or a subcontractor of the CSP).

Services as a Fiduciary or Registered Investment Adviser

This category of service includes: (i) services provided directly to a covered plan as an ERISA fiduciary; (ii) services provided as a fiduciary to an investment contract, product or entity that holds plan assets⁷ (a “plan asset vehicle”) in which the covered plan has a direct equity investment; and (iii) services provided directly to a covered plan as an investment adviser registered under either the Investment Advisers Act of 1940 or state law (an “RIA”).

Recordkeeping or Brokerage Services

This category of service includes recordkeeping or brokerage services provided solely to an individual account plan (defined contribution-type plan) that permit participants to direct the investment of their accounts, provided that one or more designated investment alternatives (“DIA”) will be made available in connection with such recordkeeping or brokerage services. Thus, a service provider who provides recordkeeping or brokerage services to a defined benefit plan is not a CSP. A DIA is an investment alternative on a menu of investment options from which a plan participant may choose to invest his or her account’s assets, but does not include brokerage windows or accounts. Therefore, a CSP need not furnish investment-specific information for each possible investment available through brokerage windows. However, the CSP is required to describe the services available to participants who elect to use the brokerage window and any fees or other compensation the CSP may receive directly or indirectly.

Other Services for Indirect Compensation

The final category of services covers accounting, auditing, actuarial, appraisal, banking, consulting, custodial, insurance, investment advisory, legal, recordkeeping, securities or other investment brokerage, third party administration, or valuation services for which the CSP, an affiliate of the CSP, or a sub-contractor of the CSP reasonably expects to receive “indirect compensation” (as described below) or certain compensation from related parties (as described below).

Notwithstanding the list of services above, there are two exceptions – no person will become a CSP solely by providing services (i) to a vehicle in which the covered plan invests that is not a plan assets vehicle or in which the covered plan’s investment is not a direct equity investment and (ii) as an affiliate or a subcontractor under the contract or arrangement with the covered plan (i.e., the entity entering into the contract or arrangement is the CSP).

Disclosure Requirements

A CSP must disclose in writing⁸ certain information regarding its services to a responsible plan fiduciary reasonably in advance of entering into, extending, or renewing a contract for services with a covered plan. Below are descriptions of the types of disclosure that must be made by a CSP.

Services to be Provided and Status of CSP

The CSP must describe the services to be provided to the covered plan pursuant to the contract or arrangement in detail and in a manner that is clear and understandable to the responsible plan fiduciary.⁹ If applicable, the disclosure must indicate whether the CSP will or reasonably expects to provide services as (i) an ERISA fiduciary and/or (ii) an RIA. No statement is required if the CSP is not either a fiduciary or an RIA.

Compensation and How it is Received

“Compensation” is anything of monetary value (e.g., money, gifts, awards, and trips), but does not include non-monetary compensation valued at $250 or less, in the aggregate, during the term of the contract or arrangement. The Regulation separates compensation into four categories that must be disclosed: (i) direct compensation; (ii) indirect compensation; (iii) compensation paid among related parties; and (iv) compensation at termination of a contract.

In each case, the CSP must disclose how compensation will be paid (i.e., whether the plan will be billed or whether the compensation will be deducted directly from the plan’s accounts). Compensation may be expressed as a cost, monetary amount, formula, percentage of the covered plan’s assets, per capita charge for each participant or beneficiary, or range. If the CSP cannot otherwise describe compensation or cost, the description may include a reasonable and good faith estimate provided the CSP explains the methodology and assumptions used to prepare the estimate.

Direct Compensation

Direct compensation is compensation received directly from the covered plan. The description must include all direct compensation, either in the aggregate or by service, that the CSP reasonably expects to receive in connection with services provided to the covered plan. If a plan sponsor pays the compensation, but is reimbursed by the covered plan, that is still considered to be direct compensation.

Indirect Compensation

Indirect compensation is compensation received from any source other than directly from the covered plan, the plan sponsor, the CSP, or an affiliate. For example, indirect compensation typically includes the 10 basis points of 12b-1 and sub-transfer agency fees a recordkeeper collects from a mutual fund in which the covered plan invests. According to the DOL, in an example provided in the Preamble of the Regulation, a CSP that has a relationship with a financial institution that subsidizes the cost of attendance at a conference that the CSP offers to its clients is considered to have indirect compensation in the form of such subsidies.

The description must include all indirect compensation that the CSP, an affiliate, or a subcontractor reasonably expects to receive in connection with services; including identification of the services, identification of the payer, and a description of the applicable arrangement between the payer and CSP (or affiliate or subcontractor). According to the Preamble of the Regulation, the description of the applicable arrangement should be sufficient to allow the plan fiduciary to identify any conflicts of interest.

Compensation Paid Among Related Parties

The CSP’s description must include compensation that will be paid among the CSP, an affiliate, or a subcontractor which is determined on a transactional basis (e.g., commissions, soft dollars, or finder’s fees) or is charged directly against the covered plan’s investment and reflected in the net value (e.g., Rule 12-b1 fees). In addition, the CSP must identify the services for which such compensation will be paid and identify the applicable payers and recipients, including the status (as a fiduciary or RIA) of the recipients.

Compensation at Termination of a Contract or Arrangement

The CSP must provide a description of any compensation that it, an affiliate, or a subcontractor reasonably expects to receive in connection with the termination of the contract or arrangement, as well as how any prepaid expenses will be calculated and refunded at termination.

Recordkeeping Services

If recordkeeping services are to be provided to the covered plan, the CSP must provide a description of all direct and indirect compensation it reasonably expects to receive in connection with recordkeeping. If, however, the CSP expects recordkeeping service to be provided in whole or part, without explicit compensation or to be rebated based on other compensation, the CSP must give a reasonable and good faith estimate of the cost to the covered plan of recordkeeping services. In such a case, the CSP will be required to explain the methodology and assumptions used in the estimate.

Investment Disclosure - Fiduciary Services

CSPs of fiduciary services to a plan asset vehicle must provide certain additional investment disclosures if the covered plan has a direct equity investment. First, the CSP must describe compensation charged directly against the investment (e.g., commissions, sales loads, sales charges, deferred sales charges, or redemption fees) that are not included in the annual operating expenses. Second, the CSP must describe the annual operating expenses if the return is not fixed and any ongoing expenses in addition to annual operating expenses (e.g., wrap fees or mortality and expense fees). However, if the investment is a DIA, the total operating expenses must be expressed as a percentage and calculated in accordance with the DOL’s participant level fee disclosure rules. Finally, with respect to a DIA, the CSP must give any other information or data about the DIA that is in the control of, or reasonably available to, the CSP and is required to be disclosed by a plan administrator to comply with the participant level fee disclosure rules.

Investment Disclosure- Recordkeeping and Brokerage Services

CSPs of recordkeeping services or brokerage services to an individual account plan that permits participants to direct investments are also required to provide the same investment disclosures as required by a fiduciary (as described above) if one or more DIA is made available in connection with the recordkeeping or brokerage services. However, the CSP may comply with these requirements by providing in good faith current disclosure materials of certain regulated issuers that are not affiliates of the CSP.

Timing and Form of Disclosure

Initial Timing

The CSP generally must make the applicable disclosures reasonably in advance of the date the contract or arrangement is entered into, extended, or renewed. If an investment’s status changes (i.e., begins to hold plan assets or becomes a DIA), the CSP must make the applicable disclosures as soon as practicable, but not later than 30 days after becoming a plan assets vehicle, and not later than the date an investment becomes a DIA.

Timing Relating to Changes

A CSP must disclose a change to services, status, compensation, recordkeeping services, or the manner of receipt of compensation as soon as practicable, but not later than 60 days from the date on which the CSP is informed of such change (except in extraordinary circumstances). Also, a CSP must disclose changes to investment disclosure at least annually.

Form of Disclosure

Other than the disclosure being in writing, the Regulation does not require a certain method of disclosure. However, the DOL did release a guide along with the Regulation that can be used by CSPs to indicate where specified information can be found in existing documents. Although this guide is not currently required, the Preamble of the Regulation indicates that the DOL may issue a proposed regulation requiring the use of a similar guide.

Requests for Additional Information

Under the Regulation, CSPs must furnish, upon written request of the responsible plan fiduciary or covered plan administrator, any other information relating to the compensation received in connection with the contract or arrangement that the covered plan needs in order to comply with the reporting and disclosure requirements of ERISA. The information must be furnished reasonably in advance of the date upon which the responsible plan fiduciary or covered plan administrator states that it must comply with the applicable reporting or disclosure requirements, unless the disclosure is precluded due to extraordinary circumstances beyond the CSP’s control, in which case the information must be disclosed as soon as practicable.

Disclosure of Errors

If the CSP discovers an error or omission in its initial or subsequent disclosure, the CSP must disclose the correct information to the responsible plan fiduciary as soon as practicable, but not later than 30 days after discovery of the error or omission. Provided that the CSP acted in good faith and with reasonable diligence, the error or omission will not cause the contract or arrangement to fail to be “reasonable”, as long as the corrective measures are taken.

Prohibited Transaction Exemption for Responsible Plan Fiduciary Who Does Not Receive Required Information

Under the Regulation, a responsible plan fiduciary and a CSP will be deemed to have engaged in a prohibited transaction if the CSP fails to disclose required information. Recognizing that the responsible plan fiduciary must necessarily rely on the CSP to make the proper disclosures to avoid engaging in a prohibited transaction, the DOL included a prohibited transaction exemption in the Regulation. The exemption provides relief solely to the responsible plan fiduciary from certain of the prohibited transaction provisions of ERISA and the Code, notwithstanding any failure by a CSP to comply with its disclosure obligations, provided certain conditions are satisfied:

The responsible plan fiduciary did not know that the CSP failed or would fail to make required disclosures and reasonably believed that the CSP disclosed the information required by the final rule.
Upon discovering that the required information was not disclosed, the responsible plan fiduciary must request in writing the applicable information.
If the requested information is not furnished, the responsible plan fiduciary must notify the DOL not later than 30 days following the earlier of: (i) the CSP’s refusal to furnish the requested information; or (ii) the date which is 90 days after the date the written request is made. However, providing this notice to the Department does not relieve a plan administrator of the obligation to report a prohibited transaction on the covered plan’s Annual Report Form 5500.

To take advantage of the exemption, the responsible plan fiduciary must determine the extent to which the contract or arrangement at issue can be continued consistent with the fiduciary’s duty of prudence under section 404 of ERISA without the required disclosures. Further, the Regulation requires that if the requested information relates to future services and is not disclosed, then the responsible plan fiduciary must terminate the contract or arrangement promptly.

If these conditions are satisfied, the responsible plan fiduciary will not be deemed to have engaged in a prohibited transaction and will not be subject to the excise taxes that normally result from participation in a prohibited transaction under the Code.

__________________________________

¹The Department had previously issued interim regulations on the same topic, which were to become effective April 1, 2012. The new Regulation takes the place of the interim regulations.

²A service is considered necessary if it is appropriate and helpful to the plan in carrying out the purposes for which the plan is established and maintained.

³DOL regulation §2550.408c-2 contains provisions relating to what constitutes reasonable compensation; generally, it is a matter of facts and circumstances.

⁴It should be noted, however, that certain of the changes from the earlier interim final regulation have been made to increase the consistency of the Regulation with the participant level fee disclosure rules. For more information regarding the new participant level fee disclosure rules, see our Management Alert entitled Plan and Investment Disclosure Requirements, dated July 26, 2011. For information relating to how the DOL postponed requirements relating to participant level fee disclosure in this Regulation, see our One Minute Memo entitled Deadline for New 401(k) Plan Disclosures Postponed to August 30, dated February 2, 2012.

⁵All references to section 408(b)(2) of ERISA and the corresponding regulations are intended to be read to include references to the parallel provisions of section 4975(d)(2) of the Code.

⁶Note that the time period over which the $1,000 (see discussion of “covered service providers” above) and the $250 is to be determined is the term of the contract or arrangement, which in the case of an evergreen arrangement means that the relevant amount is for an indeterminate time period.

⁷The term “plan assets” has the meaning set forth in the DOL regulation §2510.3-101, the so-called “Plan Asset Regulation”, as amended by section 3(42) of ERISA.

⁸Although the DOL has indicated that the written disclosure need not be given in the form of a formal contract. Consequently, mutual fund disclosure documents, such as prospectuses and statements of additional information, can be used in satisfying the written disclosure requirement.

⁹In the Preamble of the Regulation, the DOL has suggested that the level of disclosure may differ depending on the sophistication of a given plan fiduciary.

Seyfarth Shaw Attorneys Author Definitive Guide to Litigating Wage & Hour Lawsuits

Wed, 08 Feb 2012 00:00:00 -0400

Seyfarth’s Wage & Hour Collective-Class Litigation is the “essential resource” for practitioners; “first-of-its-kind” treatise offers insight on litigation strategy through all phases of wage/hour lawsuits

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

NEW YORK (February 8, 2012) – It’s become the hottest area of workplace litigation, surpassing discrimination, harassment and pay-and-promotion lawsuits. Now, leading employment law firm Seyfarth Shaw has produced a unique new handbook to help companies defend against wage and hour lawsuits. Co-authored by three Seyfarth partners and edited by the chair of the firm’s national wage-hour practice, Wage & Hour Collective and Class Litigation is the most comprehensive guide published to date focused on this burgeoning area of litigation. It promises to quickly become an indispensable companion for those battling wage-hour suits in courts across the country.

The new book is published by American Lawyer Media’s Law Journal Press and available online at www.lawcatalog.com. It examines how employers in multiple industries are targeted for wage-hour lawsuits and provides substantive procedural and practical considerations that determine the outcome of such actions in today’s courts. Principally designed to assist employment litigators and in-house counsel, Seyfarth’s book should also prove useful to senior management seeking to fend off wage-hour actions before they strike.

The guide has already received praise. The Honorable Elaine L. Chao, the 24th U.S. Secretary of Labor, states: “Given the recent explosion of wage and hour litigation, both management- and plaintiff-side attorneys will find this publication to be an invaluable reference. With its painstaking attention to the law and procedure, this treatise will certainly be the go-to resource when practitioners ponder questions of strategy and substance in the context of wage and hour cases.”

The 800-page volume was authored by Seyfarth employment partners Noah Finkel, Brett Bartlett and Andrew Paley, who practice in the firm’s Chicago, Atlanta and Los Angeles offices respectively. Richard Alfred, Boston-based Chair of Seyfarth’s national Wage & Hour Litigation Practice, served as senior editor. All are experienced litigators who have handled numerous class actions alleging wage and hour violations under both state and federal law.

Alfred notes that the book is the first of its kind to blueprint the mechanics of wage and hour cases, which have recently outpaced all other types of workplace class actions. Seyfarth estimates that wage/hour lawsuits have surged by more than 325 percent since the early 2000s, to which Alfred testified before the U.S. House of Representatives at a congressional hearing on the Fair Labor Standards Act in 2011.

“Wage and hour litigation has exploded in the last decade and settlements have frequently amounted to tens of millions of dollars,” said Alfred. He notes that workers have aggressively used wage-hour claims to bring suits against employers in dozens of industries, including hospitality, real estate, insurance, health care, manufacturing, food and beverage, and others where overtime charges, minimum wage or commissions are at stake. Many cases have been fought over claims that hourly workers were denied compensation for meal breaks, travel times or even the few moments it takes to put on a uniform or boot up a computer.

“Wage-hour has become the dominant battleground in the American workplace, and disputes have increased dramatically since the economic downturn and also as plaintiffs’ counsel have extracted huge settlements from companies caught in the crosshairs,” Alfred added. “We hope our new book becomes a go-to reference and standard text not only for employment defense litigators, but also in-house general counsel, government agencies and all employers confronting wage and hour matters,” said Alfred. He explained that the book discusses the entire life cycle of wage-hour cases, from complaint to certification to trial and subsequent verdict, settlement or dismissal.

Wage & Hour Collective and Class Litigation takes up 27 chapters and covers the complex rules surrounding all types of wage and hour lawsuits. These include claims under the Fair Labor Standards Act, claims under state wage and hour laws, or hybrid cases involving both, as well as special issues involving government contractors. It advises employers on: how to respond to a wage and hour complaint; what to consider when deciding whether to remove a case to federal court; how to assess the particular merits of a claim; whether to settle; how to oppose plaintiffs' motion to facilitate notice for conditional certification; what kinds of affirmative defenses are best; and how to tilt the odds in favor of the defense.

Among topics covered by the book:

The certification process and the impact of conditional certification
Decertification and its sometimes unexpected consequences
Defending against state law wage and hour class actions brought under Federal Rule of Civil Procedure 23
Discovery issues and strategies in class and collective actions
Special considerations under California law, one of the country's leading venues for wage-hour cases
Issues raised by ERISA claims in wage and hour cases
Coordinating or consolidating multiple simultaneous class actions
Meeting the duty to preserve information, including electronically stored information
The pros and cons of arbitration
Motions for summary judgment and the optimal time to file
Civil remedies, including calculation of unpaid overtime and liquidated damages
Actions by the Secretary of Labor to recover unpaid wages and overtime
Defending "independent contractor" cases
Calculating the "regular rate" for purposes of the FLSA

The authors will update the book regularly to stay abreast with developments in wage and hour law.

Author backgrounds:

Noah Finkel has represented companies in more than 75 collective or class action matters under the FLSA and state wage-and-hour laws. He regularly advises employers on compliance with the FLSA and state wage-and-hour laws, including performance of exempt status reviews and pay practice audits. Finkel also participated in drafting of public comments to the U.S. Department of Labor on its proposed regulatory changes to the FLSA’s white-collar exemptions on behalf of the Society for Human Resources Management and the Public Sector FLSA Coalition.

Brett Bartlett, chair of Seyfarth’s Labor & Employment group in Atlanta, has defended more than 80 class and collective actions brought by employees alleging entitlement to unpaid overtime and minimum wage across a broad span of industries. Bartlett provides preventative counseling and change management assistance to employers wishing to limit their exposure to investigation and litigation under the FLSA and the state laws that require employers to pay overtime and minimum wages to their employees.

Paley has litigated numerous class and collective actions for alleged wage and hour violations under both state and federal law for clients in the financial services, retail, hospitality, telecommunications, automobile, and insurance industries. Paley’s experience includes the defense of large nationwide collective actions and multi-district litigations. He also advises clients on conducting pre-litigation wage and hour audits.

Camille Olson Quoted in The New York Times "Room for Debate"
"Do Unpaid Internships Exploit College Students?"

Tue, 07 Feb 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Camille Olson was quoted on February 6 in The New York Times' "Room for Debate," in which knowledgeable outside contributors are invited to discuss news events and other timely issues. The article posed the question, "Do unpaid internships exploit college students?"

According to Camille, "While students may be willing to accept unpaid internships or volunteer work in exchange for on-the-job experience and a potential connection to a future job, it is critical that employers follow applicable laws that closely regulate the circumstances under which a for-profit employer can accept these offers without paying at least minimum wage for the worker’s services."

Camille noted that there is demand for both paid and unpaid interns, and she encourages employers to make sure that "those opportunities stay within both the spirit and the letter of the law."

Read the full feature here: http://www.nytimes.com/roomfordebate/2012/02/04/do-unpaid-internships-exploit-college-students

Gerald Maatman and Christopher DeGroff Quoted in BNA Daily Labor Report
"Seyfarth Shaw Report Warns Employers of EEOC's Continued Focus on Systemic Bias"

Tue, 07 Feb 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partners Gerald Maatman and Christopher DeGroff were quoted in a February 2 BNA Daily Labor Report article. The article discussed the firm's recently released report, EEOC-Initiated Litigation: Case Law Developments in 2001 and Trends to Watch for in 2012.

According to Jerry and Chris, the 79 decisions examined in the report range "from substantive rulings on thorny legal issues to technical subpoena enforcement and EEOC regulation disputes." Organized into five sections, the report covers EEOC investigation tactics and administrative subpoenas; procedural and jurisdictional attacks on EEOC pleadings; discovery in EEOC cases; motions for summary judgment in EEOC pattern or practice cases; and remedies in EEOC litigation. It also includes editors' notes on significant cases.

A Steep Learning Curve For Companies That Hire Unpaid Interns

Tue, 07 Feb 2012 00:00:00 -0400

Many employers in today's business environment have had to make do with fewer employees to meet the constraints of smaller budgets. As the economy shows signs of rebounding, many companies face pressure to grow their business in spite of a lack of resources to support increased hiring. At the same time, competition for entry-level professional jobs, especially among recent college graduates, has become fierce. Many unemployed professionals see working for free as a way to build their resumes, gain experience, get their feet in the door, and stay current in their field. Both groups – employers and those seeking work – have increasingly turned to unpaid internships to provide educated and eager help for employers and opportunities for those in the entry-level job market.

Employers considering unpaid internship programs, and those that already have them, however, should beware – the Department of Labor and plaintiffs' employment counsel are watching. Two new lawsuits in the Southern District of New York by interns against high-profile employers demonstrate this trend. In Wang v. The Hearst Corp., filed this week, a former intern for the fashion magazine Harper's Bazaar claims that the publisher violated state and federal wage law by making her work as many as 55 hours per week without pay. The plaintiff claims that interns "are a crucial labor force" for the magazine and that she spent her time coordinating deliveries of samples, maintaining records of the contents of the magazine's sample trunks, and processing reimbursement requests – activities for which she claims she should have been paid. Hearst has told the press that its internship program is educational in nature and conforms to legal requirements. A similar lawsuit filed last fall, Glatt v. Fox Searchlight Pictures, Inc., alleges that the defendant violated wage laws when it used unpaid interns during production of the 2010 film "Black Swan." These are only two examples of what may be a growing litigation trend.

The fact that an unpaid intern performs work voluntarily is not enough, by itself, to avoid violations of the Fair Labor Standards Act; for-profit employers are prohibited from using volunteers. However, for-profit employers can hire unpaid interns without running afoul of the FLSA, so long as they meet the stringent test for "trainees." An individual who meets this test is not considered an employee and thus is not covered by the minimum wage or overtime provisions of the FLSA. Many states have analogue laws that may also apply and should be considered.

The Department of Labor has identified six criteria to determine whether an unpaid internship meets this test: (1) the internship is similar to training which would be given in an educational environment; (2) the experience is primarily for the benefit of the intern; (3) the intern does not displace regular employees, and works under close supervision of existing staff; (4) the employer that provides the training derives no immediate advantage from the activities of the intern; (5) the intern is not necessarily entitled to a job at the conclusion of the internship; and (6) the employer and the intern understand that the intern is not entitled to wages for the time spent in the internship. The test is more likely to be satisfied where the internship has a classroom component and participants learn skills applicable to multiple employment settings.

Given growing attention to internship and volunteer programs, as demonstrated by the Hearst and Fox Searchlight lawsuits, employers should carefully evaluate programs of this kind that they have in place or are considering to ensure compliance with the FLSA and applicable state laws.

By: Richard Alfred and Jessica Schauer

Richard Alfred is a partner and Jessica Schauer is an associate in Seyfarth's Boston office. If you would like further information, please contact your Seyfarth Shaw LLP attorney or Richard Alfred at ralfred@seyfarth.com or Jessica Schauer at jschauer@seyfarth.com.

David Blake, Christa Dommers and Michael Bauer Published in Bloomberg BNA’s Real Estate Law & Industry Report
“Developments in ‘Green’ Litigation at the Dawn of the Era of Sustainability”

Tue, 07 Feb 2012 00:00:00 -0400

An article by Seyfarth attorneys David Blake, Christa Dommers and Michael Bauer was published in Bloomberg BNA’s January 24 Real Estate Law & Industry Report. In the article, the authors outline several significant lawsuits on green building for the commercial real estate sector. The topics of cases covered include challenges to laws when local and federal policies conflict, bid protests by general contractors, the failure to obtain LEED certification, LEED certification obtained with deviations standards, the effect of delay on required environmental standards, and the concept of irreparable harm with respect to green projects.

In sum, the authors conclude that the cases covered in the article “are likely the tip of the iceberg, as it seems that ‘green’ disputes will only increase as the real estate and construction industries climb out of the ‘Great Recession’ and sustainability becomes the rule instead of the exception. The outcomes of these cases and others that continue to arise will assist all professionals involved in green development, construction, leasing and lending with appropriate predicates for contract drafting and remedies in the event things go wrong in the process.”

Chambers & Partners Women in Law Awards Select Seyfarth Shaw National Labor & Employment Chair Lisa Damon "U.S. Employment Lawyer of the Year"

Mon, 06 Feb 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

NEW YORK (February 6, 2012) – Leading law firm Seyfarth Shaw LLP announced that Lisa J. Damon, Chair of the firm’s national Labor & Employment Department, has been selected by global legal directory publisher Chambers & Partners as Employment Lawyer of the Year at the inaugural Chambers USA Women in Law Awards.

The awards, which honor outstanding female professionals in the U.S. legal community, were presented on February 2 at the Plaza Hotel in New York City. The short list of 11 potential honorees was a Who's-Who of the nation’s leading management-side labor & employment lawyers, including prominent litigators and trial lawyers, legal scholars, and law firm leaders. Damon’s candidacy was distinguished by outstanding legal results for clients, many innovations in client service, including leading the development and application of Six Sigma methodologies to the practice of law at Seyfarth, known firmwide as SeyfarthLean.

Seyfarth is perhaps the only law firm to have trained its workforce – including non-lawyer staff – in Lean Six Sigma-style techniques. Over the last several years, Damon has become a leading – and outspoken – advocate of applying Lean methodologies to the practice of law. SeyfarthLean, the firm's award-winning client service model, utilizes a mix of technology, process management and project management techniques to devise innovative client-focused solutions to the delivery of legal service. Damon has actively made Lean an integral part of her employment practice, with extraordinarily successful results.

Seyfarth Chairman and Managing Partner J. Stephen Poor said, "We are tremendously proud of Lisa and all of her accomplishments, in both her substantive legal practice and the leadership and inspiration that she provides to the lawyers of our firm. This well-deserved award by Chambers is an honor and testament to her indelible mark on Seyfarth, on labor and employment law and, indeed, on the practice and business of law in general."

The award continues an illustrious start to the year for Seyfarth’s 350-lawyer Labor & Employment practice, which was recognized in January by Law360 as a 2011 “Practice Group of the Year.” The publication noted the practice group’s contribution of two amicus briefs to the U.S. Supreme Court that helped shape its historic Wal-Mart v. Dukes decision, and the firm’s subsequently being the first to successfully employ the Dukes ruling in a Fair Labor Standards Act case.

Damon was a founding partner of Seyfarth’s Boston office and has overseen its growth from seven lawyers to more than 80, with practice groups in real estate, corporate, and litigation, as well as labor & employment. An ABA Journal article, “Legal Rebels,” named her one of the country’s 10 most innovative attorneys. She is the mother of three sons, ages 21, 17 and 12.

“I’m deeply honored to have been singled out by Chambers as their selection of Employment Lawyer of the Year – and to stand alongside a group of the most eminent women practicing labor and employment law in the U.S., as named by our own professional peers,” Damon said. “Those of us who work in this space know that the issues and challenges our clients face in employment matters touch every facet of their business and have enormous consequences for all stakeholders – not only employees, but customers, investors, outside suppliers, the media. I absolutely love helping our clients work through their toughest workplace concerns and am so pleased to be able to share this recognition with them, as with my colleagues at Seyfarth.”

Damon’s honor is the latest in a string of recent accolades for individual Seyfarth lawyers. Earlier this month, partners Gerald Maatman (New York and Chicago) and Nick Geannacopulos (San Francisco) were named 2012 BTI Client Service All-Stars, a selection based on interviews with corporate counsel conducted by law-firm ranking service BTI. This past November, the firm was honored by the Financial Times as a "Top Innovative Law Firm," with Steve Poor singled out as the U.S. legal industry’s "Legal Innovator of the Year." Seyfarth has also been recently named to BTI’s Client Service A-Team, a short list of law firms recognized for superior attention to client service.

Seyfarth Shaw Continues Real Estate Expansion with Six-Lawyer Los Angeles Team

Mon, 06 Feb 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

LOS ANGELES (February 6, 2012) — Leading law firm Seyfarth Shaw LLP has announced a significant addition to the firm’s Real Estate practice in California with a six-attorney group joining its Los Angeles office. The group is led by partner Richard C. Mendelson and includes partners Andrew E. Shiner and Stacy N. Paek and three associates. All were previously practicing at DLA Piper.

“We are happy to welcome this exceptionally talented group of lawyers to our national real estate practice,” said Seyfarth Shaw Real Estate Department Chair Paul Mattingly. “Richard’s team provides us with exceptional depth for our California Real Estate team, deepens our institutional real estate bench and further validates Seyfarth Shaw’s position as a premier real estate practice nationally. From a market perspective, we are committed to having a top tier Real Estate Department, and the recovering market provides us with opportunities to have a major impact not only in California, but across the country.”

Ray Kepner, Seyfarth Shaw’s Downtown Los Angeles Office Managing Partner added, “The firm remains committed to continued growth in Southern California across the broad spectrum of our national practices. Richard and Andrew are highly regarded real estate attorneys with a reputation for performing sophisticated work at the highest level. The added presence of their team will allow us to better serve clients with diverse skill sets, and we are happy to have them join our roster of Los Angeles attorneys.”

“A cohesive firm that runs more like a true partnership, Seyfarth possesses a proven national platform to engage our practice,” said Mendelson. “We are delighted to join one of the largest real estate practices in the country, allowing us to play a significant role on the West Coast market and elsewhere.”

Attorney Biographies

Richard Mendelson (partner) is an experienced lawyer with a depth of knowledge in the areas of acquisitions, joint ventures and financing transactions, in addition to workouts and restructurings. He represents domestic and international banks and other financial institutions, insurance companies, pension funds and major commercial and residential property developers.

Andrew Shiner (partner) works on a diverse portfolio of commercial real estate transactions for financial institutions, insurance companies, pension funds, private equity investors and other businesses, consisting of purchases and sales of office buildings, shopping centers, hotels, industrial properties, apartment buildings, other commercial properties and vacant land; commercial real estate secured transactions, including loan assumptions, workouts and restructurings; permanent, construction and securitized mortgage loans; joint venture and mezzanine financing; and covenants, conditions and restrictions, easements, title, land use and survey matters. Shiner also advises his clients on the organization, formation and restructuring of business entities, including special purpose, and bankruptcy remote entities.

Stacy Paek (partner) is an experienced attorney who handles a variety of commercial real estate transactions on behalf of real estate fund, pension fund, developer, insurance company and other institutional clients. Her practice includes acquisitions and dispositions of commercial, industrial, retail, hospitality, multi-family residential and development properties and on all aspects of commercial real estate secured financing, including, permanent, construction and securitized mortgage loans, joint venture and mezzanine financing, loan workouts and restructurings, credit facilities, multi-property loan portfolios, loan modifications, defeasances of conduit loans and loan assumptions. Paek's practice includes the organization, formation and restructuring of business entities, comprising special purpose, and bankruptcy remote entities, as well as all components of due diligence matters.

Associates Stephen Shiu, Christine Kim, Galina Krivitsky will also join Seyfarth’s Los Angeles office as part of the firm’s Real Estate Department and practicing in real estate and commercial finance.

About Seyfarth Shaw’s Real Estate Department

Seyfarth Shaw’s national Real Estate Department provides a full range of services including development, construction, leasing, acquisitions, dispositions, financing, joint ventures, hospitality and leisure, representing individuals, corporations and other entities to maximize the value and return on their real estate investments and assets.

Seyfarth Shaw has more than 130 lawyers in Los Angeles with considerable experience in business transactions, intellectual property, trust and estates, commercial litigation, employee benefits and employment law.

Seyfarth Shaw Partners Gerald Maatman and Nicholas Geannacopulos Named BTI’s “Client Service All-Stars”

Fri, 03 Feb 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

CHICAGO/SAN FRANCISCO (February 3, 2012) — Seyfarth Shaw LLP, one of America’s leading full-service law firms, announced that Labor & Employment partners Gerald L. Maatman, Jr. (Chicago and New York) and Nicholas Geannacopulous (San Francisco) have been recognized by BTI Consulting Group as part of its elite “2012 Client Service All-Stars,” demonstrating “exactly what it takes to earn client loyalty during a time of dropping client satisfaction and spending.”

In its 11th iteration, this year’s All-Star list includes 272 attorneys, including only 28 labor and employment attorneys, who have impressed corporate counsel and have been lauded for having a keen understanding of business issues, thought-leading approaches to legal services and total commitment to client needs. BTI reaches out to general counsel at world-leading companies to name which attorneys are responsible for “superior” client relationships.

According to BTI, the research revealed that five factors have consistently driven client service: client focus, which comprises understanding both legal and business objectives of the client, recognizing and demonstrating mutual interest in achieving client goals and providing innovative and effective solutions specific to the client’s desired outcome; exceptional understanding of the client’s business; outstanding results; outsized value and legal skills.

“I’m flattered by this tremendous honor,” said Maatman. “This is an encouraging reflection of the work that we do, and it speaks to the great importance we place on delivering first-rate client-focused service, a core value of the firm.”

“Being named to the Client Service All-Stars list is an incredible privilege,” said Geannacopulos. “The fact that this survey is 100% unsolicited demonstrates to us that the work we’re doing is not only being recognized, but appreciated, and we’ve established true partnerships with our clients; We get to know their businesses to best meet their needs.”

Seyfarth Shaw was also recently recognized in BTI’s cream-of-the-crop Client Service A-Team report, named to the "Client Service 30” list. The firm was praised in nearly every category, delivering a "level of responsiveness and sophistication that is first-rate," and known for its "collaboration," efficiency" and the "way they provide services in relation to the client’s needs."

For more information on BTI’s Client Service All-Stars, click here.

Seyfarth Shaw Partner Laura Maechtlen Elected to Board of LGBT Bar Foundation

Fri, 03 Feb 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

SAN FRANCISCO (February 3, 2012) — Seyfarth Shaw LLP is proud to announce that Labor & Employment partner and member of the firm’s Diversity Action Team Executive Committee, Laura Maechtlen, has been elected to serve on the Board of Directors of the Lesbian, Gay, Bisexual and Transgender (LGBT) Bar Foundation beginning February 2012. Over the course of her one-year term, Maechtlen will focus coordinating activities for corporate counsel.

The LGBT Bar Foundation is associated with the LGBT Bar Association. In 1992, the LGBT Bar became officially affiliated with the American Bar Association (ABA) and now works closely with the ABA’s Section on Individual Rights and Responsibilities and its Committee on Sexual Orientation and Gender Identity.

The LGBT Bar Association is a membership-based organization, open to all legal professionals and law students without regard to age, race, religion, gender, color, national origin, ancestry, disability, political affiliation, sexual orientation or gender identity. The LGBT Bar embraces the involvement of individuals from every segment of our diverse community and welcomes participation of people of color and persons with disabilities. Maechtlen was involved with the LGBT Bar Association Board from 2002-2011.

Seyfarth Shaw Issues New Report Reviewing EEOC-Initiated Litigation in 2011, Forecasts Increased Enforcement for 2012

Thu, 02 Feb 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

Past year saw record in EEOC-led investigations; Seyfarth report analyzes 79 EEOC cases from 2011 and concludes employers “will see even more high-impact litigation” in 2012; authors highlight “five most intriguing EEOC cases” of the year

CHICAGO (February 2, 2012) – On the heels of last week’s news of record job discrimination filings with the U.S. Equal Employment Opportunity Commission (EEOC) in 2011, leading employment law firm Seyfarth Shaw LLP has issued a new special report: EEOC-Initiated Litigation: Case Law Developments In 2011 And Trends To Watch For In 2012. The report takes a close look at the recent legal landscape surrounding cases pursued by the EEOC in the past year, as well as trends in the EEOC’s litigation strategy which will be relevant in the year ahead.

The 95-page report, co-authored by Seyfarth attorneys Gerald L. Maatman Jr. and Christopher J. DeGroff, discusses the key trends in EEOC litigation for 2011 and what to expect in 2012. The report, which also analyzes the 79 major decisions involving the EEOC of the past year, can be downloaded here.

Seyfarth’s report notes that the EEOC is more committed than ever to its Systemic Initiative launched in 2006. The authors note that the agency's systemic program - which emphasizes the investigation and litigation of discrimination claims affecting large groups of alleged victims - continues to grow. In 2011, for the second year in a row, the EEOC filed a record number of systemic investigations, with the filing of 261 lawsuits.

Noting 2011’s mix of case wins and losses for employers that amounted to a “rollercoaster year for employers,” Maatman and DeGroff detail the EEOC’s investigation tactics and subpoenas. Their report also examines the federal courts’ increasing intolerance of some these tactics as observed in the mixed results in discovery, summary judgment, and remedies decisions.

“We see judges questioning the EEOC’s interpretation of the statutes it is charged with enforcing, rejecting the EEOC’s demands for an all-purpose pass on procedural rules, and outright hostility for an agency taking a ‘shoot first, aim later’ view of high stakes and costly litigation when employers are already besieged by a struggling economy,” the authors write.

Maatman and DeGroff also report that they anticipate that employers “will see even more high-impact litigation” in 2012. They point to the agency’s own fiscal-year report for 2011 that predicted that the quantity of systemic lawsuits and their representation on the total docket is expected to steadily increase. The authors also note that, in the agency’s released draft last month of its plan outlining its key strategic objectives from 2012 through 2016, the EEOC proposed a measure to achieve a minimum quota of systemic cases on the agency’s litigation docket each year -- a percentage the EEOC has not yet set.

“[E]mployers can be confident that the EEOC will ensure that the number of systemic cases it files will swell in 2012 and beyond,” Maatman and DeGroff write.

From the dozens of cases highlighted in their report, the authors have also selected what they believe to be the five most intriguing EEOC decisions in federal courts from the past year. They note in Seyfarth Shaw’s Workplace Class Action Blog that since 2006, the EEOC’s public strategy has been to further its agenda through prosecution of large-scale cases that will attract media attention, “with the hope that this brand of high-stakes litigation will channel employers’ behavior.” Maatman and DeGroff observe that, to that end, 2011 saw a mixture of judicial rulings in EEOC cases that range from “refreshingly employer-friendly decisions to those that sent chills through the employer community.”

Their post counting down their top five picks can be viewed here.

Maatman is co-chair of Seyfarth Shaw’s Complex Discrimination Litigation practice, and a partner in the firm’s Chicago and New York offices. He is currently lead defense counsel in three of the five biggest EEOC pattern or practice lawsuits presently pending in the United States. Maatman also led a number of winning class action defense cases in 2011, including a historic turn in a lawsuit brought by the EEOC in which he won the right to depose EEOC officials about the agency’s own personnel practices.

DeGroff is co-chair of Seyfarth’s Complex Discrimination Litigation practice, and a partner in the firm’s Chicago office. His practice is focused on employment litigation, with a particular emphasis on EEOC pattern or practice lawsuits and class actions. He has extensive experience litigating against the EEOC, both at the early charge stage and in large-scale EEOC pattern or practice litigation, and his trial experience includes a rare pattern and practice trial fought against the EEOC that resulted in a full defense verdict.

Eric Barton Quoted in the Daily Report
“Calhoun Bank Owes $207K for Breach of Contract”

Thu, 02 Feb 2012 00:00:00 -0400

Commercial Litigation attorney Eric Barton was quoted extensively in an article appearing in the January 9 Daily Report. The article covered DS Waters of America Inc. v. North Georgia National Bank, a breach of contract case in which Eric represented DS Waters. In the case, DS Waters claimed that it did not receive all of the items agreed upon in a deal with Georgia National Bank. The transaction involved assets of the defunct Cohutta Water Co. The court ruled in favor of DS Waters, awarding them $207,000.

"The bank could not escape the fact that there was a signed written agreement that lists specific items that we testified we did not receive," commented Eric. "DS Waters is obviously very happy with the verdict. We knew to take it all the way—depositions, summary judgment, everything—this would potentially cost more than the amount of the controversy. But they were confident."

Deadline for New 401(k) Plan Disclosures Postponed to August 30

Thu, 02 Feb 2012 00:00:00 -0400

The Department of Labor has postponed from May 31, 2012, to August 30, 2012, the date by which 401(k) plans must begin providing participants with detailed new disclosures regarding the plan’s fee structure and investment options. For a more detailed description of the new disclosure requirements, see our Management Alert called Plan and Investment Disclosure Requirements, dated July 26, 2011.

The new effective date is a direct result of the Department’s issuance of revised regulations under ERISA Section 408(b)(2) requiring service providers to provide more detailed disclosures concerning their fees to qualified retirement plans (details in a soon to be released One Minute Memo). In connection with the revisions and to provide time for compliance with the changes, service providers must now comply with the disclosure requirements by July 1, 2012 (postponed from April 1, 2012).

Since the deadline for providing the participant disclosures was previously set at 60 days after the effective date of the service provider regulations, the effect of postponing the effective date of the service provider regulations is to postpone the participant disclosure deadline as well. For calendar year plans, the initial annual disclosure must now be provided by August 30, 2012 (previously May 31, 2012). The initial quarterly disclosure of fees and expenses charged to individual accounts must be provided by November 14, 2012 (previously August 14, 2012), reflecting fees and expenses deducted from a participant’s or beneficiary’s account during the third calendar quarter of 2012 (July through September).

Illinois Announces Civil Union Partner Benefits Not Taxable

Thu, 02 Feb 2012 00:00:00 -0400

Beginning June 1, 2011, the Religious Freedom Protection and Civil Union Act (the “Civil Union Act”) required sponsors of fully-insured plans in Illinois that cover spouses to offer coverage to civil union partners. For more information on the Civil Union Act, click here. Notably, though, early guidance indicated that benefits provided to civil union partners (under insured or self-funded plans) would be taxable, in most instances. Recently the Illinois Department of Revenue changed course, noting that coverage provided to civil union partners will not be taxable, for state income tax purposes.

As background, federal law does not recognize same-sex marriages, domestic partnerships or civil unions. As a result, employer-sponsored health coverage provided to a civil union partner is taxable to the employee, unless the civil union partner qualifies as the employee’s “dependent” under the Internal Revenue Code. Premiums or contributions paid by the employer for coverage are imputed in income, and amounts paid by the employee must be paid with after-tax dollars. The result is that employer and employee contributions are reflected in the employee’s taxable wages on Form W-2.

While Illinois generally follows federal law for state tax purposes, in January the Illinois Department of Revenue published a Q&A addressing how civil union partners should complete their Illinois tax returns. The Q&A indicates that civil union couples will be treated the same as married couples for Illinois income tax purposes. For example, the Q&A states that the premiums an employee paid for a same-sex civil union partner coverage “will be included in [the employee’s] taxable wages” shown on the W-2, but should be excluded from taxable income for Illinois income tax purposes. Although the Q&A does not mention employer contributions, these contributions should be excluded from taxable income as well, to further the general principle that civil union partners should be treated the same as married couples.

The Q&A also explains the mechanics of excluding these amounts. Civil union partners must file a joint Illinois income tax return, either using “married filing jointly” or “married filing separately” status. Where the Illinois return asks for information from the federal return, civil union partners should enter information from a mock federal “as-if-married” return, completed only for purposes of preparing the Illinois return. In completing the mock return, the premiums the employee paid for a same-sex civil union partner’s coverage should be excluded from taxable income. The Q&A indicates that individuals should contact their employer to determine the amount of imputed income that should be excluded from gross income.
This change only impacts the taxation of premiums paid for medical, dental, vision and other benefits that would be excluded from income for federally-recognized dependents under Internal Revenue Code Section 105(b). Individuals are still prohibited from seeking reimbursement through a flexible spending account or health savings account for expenses incurred by non-dependent civil union partners.

While the Q&A places the onus on individuals to request information from employers regarding imputed income, employers with employees in Illinois may wish to restructure payroll to automatically remove this amount from gross income for state tax purposes.

New Jersey Enacts Trade Secret Law

Thu, 02 Feb 2012 00:00:00 -0400

With Governor Chris Christie’s signature on January 9, 2012, New Jersey became the 47th state to adopt a form of the Uniform Trade Secrets Act (UTSA). Previously governed by common law, trade secrets of persons or entities in New Jersey will now have statutory protection under the New Jersey Trade Secrets Act (S-2456/A921). The new statute went into effect immediately after its signing, and applies to all new claims which arise on or after January 9, 2012.

To read the full text of the law, please visit this website.

Effects of the Act on Trade Secret Protection in New Jersey

The New Jersey Trade Secrets Act (NJTSA) sets forth clear statuatory language for trade secret protection for the first time in the state, including defining what a trade secret is as well as what acts constitute misappropriation of a trade secret. Prior to the Act, trade secret analysis relied on the Restatement of Torts, pursuant to New Jersey cases such as Sun Dial Corp. v. Rideout (1954), making protection somewhat inconsistent as varying interpretations of the common law were applied.

Protections afforded to persons and entities with valid trade secret claims under the NJTSA include injunctive relief for “actual or threatened misappropriation,…a reasonable royalty” for misappropriation, and monetary damages (compensating for both actual losses as well as “unjust enrichment caused by the misappropriation”). In addition, for cases of “willful and malicious misappropriation,” attorney fees may be recovered and punitive damages may be awarded for up to two times the damages otherwise awarded. There is also no statutory requirement to identify trade secrets prior to commencing discovery unlike some jurisdictions.

Variations between the UTSA and NJTSA

Despite being based on the UTSA, the New Jersey legislature did make certain adjustments in drafting its state’s trade secret statute. One such adjustment was the exclusion of a clause present in the UTSA which directs courts to take trade secret rulings in other states into account when handing down decisions. Another key difference between the UTSA and NJTSA is the NJTSA’s explicit mention that the provisions of the act are “in addition to and cumulative of any other right, remedy or prohibition provided under the common law or statutory law of this State.” In practice, this allows confidential and proprietary information that does not satisfy the trade secret requirements set forth by the act, but was previously protected under the state’s common law, to remain protected. This in contrast to some states who have adopted adapted versions of the UTSA, many of which take the stance of preemption of common law claims. Finally, the NJTSA contains more robust protections for the preservation of trade secrets in the court system than in the standard UTSA. Courts are directed to use “reasonable means” to ensure the protection of trade secrets during litigation, including sealing court records when necessary, limiting disclosure of trade secrets to attorneys’ eyes only, and granting protective orders during discovery. This is particularly significant because some jurisdictions are reluctant to seal court records even in trade secrets cases.

Advice for Employers

The NJTSA offers companies statutory protections for trade secrets, though it is their responsibility to ensure this protection by making “efforts that are reasonable under the circumstances to maintain its secrecy.” To accomplish this, companies should have explicit policies preventing disclosure of their trade secrets while also being vigilant in educating employees of their responsibilities. Any suspicion of trade secret misappropriation by an employee or competitor should be investigated immediately in order to prevent the loss of rights in trade secret protection. Under the NJTSA, the statute of limitations for bringing a misappropriation claim has been reduced from six years, to three years from discovery of the misappropriation. An attorney with knowledge and experience in litigating trade secret claims is best suited to guide companies through this process.

Questions for the Future

With New Jersey joining the other 46 states who have passed some form of trade secret protection legislation, just three states, Texas, New York and Massachusetts, have yet to adopt a variation of the UTSA. It will be interesting to se how the New Jersey courts construe the new law, including "threatened misappropriation" and preemption of common law claims. How long these hold-outs will remain reliant on common law protections is an important discussion moving forward. Part of the UTSA’s goal when drafted in 1979 was to address the disparity in trade secret protection across state lines, and to that end there has been some interest in Congress in instituting federal civil trade secret protections, but the scope and preemptive effect of such legislation is entirely uncertain.

Congress Hears Contractor Concerns, Calls on OFCCP to “Clarify Issues” Raised by NPRM Proposing Changes to Disability Regulations

Wed, 01 Feb 2012 00:00:00 -0400

Congress is listening to its constituents in the contractor community and taking very seriously contractors’ well-publicized concerns about the burdensome and expensive proposed changes to Section 503 of the Rehabilitation Act ("Section 503") disability regulations.

On January 27, 2012, the House of Representatives’ Committee on Education and the Workforce ("Committee") sent a letter to U.S. Department of Labor Secretary Hilda L. Solis requesting additional information and documentation to clarify issues raised by the Office of Federal Contract Compliance Programs’ (OFCCP) December 9, 2011 Notice of Proposed Rulemaking (NPRM), which proposed extensive, unprecedented changes to the regulations addressing affirmative action for individuals with disabilities. The Committee also requests a 90-day extension of the public comment period to allow for a review of the additional information and documentation and a "thorough review" of the NPRM. The current deadline for submission of public comment is February 7. 2012. Click here for a copy of the letter.

By OFCCP Director Patricia A. Shiu’s own description, the NPRM represents a "sea change" and one of the "most significant" developments to affect federal contractors’ nondiscrimination and affirmative action obligations under Section 503. Concern over the cost and burden associated with the proposed changes has reverberated through the contractor community, and the Committee’s letter addresses many of the contractor community’s key concerns. Click here for a detailed discussion of the proposed changes to the disability regulations.

Committee Raises Three Main Concerns

Taking aim at one of the most significant proposed changes -- the requirement that contractors establish a goal of having 7% of their workforce made up of employees with disabilities -- the Committee’s letter questions OFCCP’s legal authority under Section 503 to establish a numerical hiring standard and raises concerns that such a hiring standard would be tantamount to a quota, which has been met with great scrutiny by the Supreme Court.

Echoing another concern of contractors, the Committee also recognizes that a contractor’s ability to meet a numerical hiring standard would be dependent upon accurate self-identification and disclosure during the applicant process, which could "create more problems than solutions."

Moreover, the Committee raises the potential burdens associated with "the NPRM’s myriad new paperwork and recordkeeping requirements." Quoting President Obama’s caution from January, 2011 that "[s]ometimes, [rules and regulations] have gotten out of balance, placing unreasonable burdens on business -- burdens that have stifled innovation and have had a chilling effect on growth and jobs," the Committee opines that a "number of the NPRM’s new paperwork and recordkeeping requirements could create a burden for employers with questionable benefits for individuals with disabilities." Thus, the Committee urges the OFCCP to weigh closely the related concerns of affected stakeholders [to wit: the contractor community], who are best able to quantify proposed burdens and anticipate unintended consequences.

Finally, the Committee raises questions about the NPRM’s requirement that federal contractors ask job applicants to self-identify as having a disability prior to receiving an offer of employment. The Committee suggests this requirement may conflict with statutory language of the Americans with Disabilities Act (ADA) permitting only post-offer self-identification. While it remains to be seen whether the Committee’s interpretation will be accepted -- ADA and Section 503 regulations could be interpreted to permit pre-offer inquiry into disability status if made pursuant to a federal, state or local law requiring affirmative action for individuals with disabilities -- the request for pre-offer self-identification is duplicative, burdensome, and unnecessary.

Request for Response to Six Specific Inquiries and All Related Documents and Communications

Requesting a response by February 10, 2012 (assuming an extension of the comment period 90 days beyond February 7, 2012), the Committee seeks response to six (6) comprehensive and detailed "inquiries," as well as "all documents and communications" related to the inquiries, aimed at addressing the three concerns raised by the Committee.

Identify and explain OFCCP’s statutory authority under Section 503 to establish a numerical hiring standard.
Identify and explain the basis for OFCCP’s decision that federal contractors’ good faith efforts are insufficient affirmative action under Section 503.
Identify and explain the basis for OFCCP’s assumption that job applicants and contractors’ current employees would understand the legal definition of "disability," as defined in the NPRM’s prescribed self-identification notice.
Under proposed section 60-741.44(b), OFCCP assumes contractors would spend 30 minutes per year to draft written "statement[s] of reasons explaining the circumstances for rejecting individuals with disabilities for vacancies and training programs. Simple math would suggest the amount of time required would far exceed this estimate. Explain how OFCCP determined the 30 minutes per year estimate.
Under proposed section 60-741.44(d), OFCCP failed to consider the costs federal contractors would incur to make their "electronic or online job application systems [] compatible with assistive technology commonly used by individuals with disabilities, such as screen reading and speech recognition software." Likewise,
Under proposed section 60-741.44(g), OFCCP failed to consider the economic burdens associated with discussing the NPRM’s new affirmative action requirements with all employees, during, for example, orientation and training events. Explain why OFCCP failed to consider the costs of contractors’ compliance with these provisions of proposed sections 60-741.44(d) and (g).

Included with the Committee’s letter are instructions and definitions for responding to the Committee’s Document Requests.

Congress Gets Involved Again

Notably, this is not the first time in recent history that Congress has jumped in to curtail an ambitious, and possibly overzealous, OFCCP. After an Administrative Law Judge (ALJ) affirmed OFCCP’s assertion of jurisdiction over medical institutions, pharmacies, or other health care providers who participated in a health care provider network for TRICARE, the Department of Defense’s health care program for active and retired military members and their families, Congress added a provision to the National Defense Authorization Act for Fiscal Year 2012, which was signed by President Obama on December 31, 2011, that effectively removed medical institutions, pharmacies, or other health care providers who participated in a health care provider network for TRICARE from the ambit of the OFCCP’s jurisdiction. For a more detailed discussion of this legislation and its impact on federal contractors, click here.

What This Means For Contractors

This is a significant and encouraging development for the federal contractor and subcontractor community, as it indicates that Congress is paying attention to the concerns of the contractor community and understands the vast repercussions that are associated with the massive changes to the disability regulations as proposed by the OFCCP. At the very least, it appears that the period for public comment may be extended beyond February 7, 2012. We continue to encourage contractors to make their voices heard about how the proposed regulations will impact their business. If you would like your comments to be included, with or without attribution, in Seyfarth’s comments, please forward them to Christine Hendrickson at chendrickson@seyfarth.com or Regina Grattan at rgrattan@seyfarth.com.

We will be closely monitoring OFCCP’s response to the Committee’ request for information and documentation and we will continue to keep contractors updated on the latest developments regarding proposed changes to Section 503.

If you have questions about this One Minute Memo, please contact the Seyfarth attorney with whom you work or any attorney on our OFCCP and Affirmative Action Compliance Team.

By: Regina Grattan and Christine Hendrickson

Christine Hendrickson is senior counsel in Seyfarth’s Chicago office and Regina Grattan is counsel in the firm’s Sacramento office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Christine Hendrickson at chendrickson@seyfarth.com, Regina Grattan at rgrattan@seyfarth.com, or any attorney on our OFCCP & Affirmative Action Compliance Team.

John Sherrill Published in the Georgia Bar Journal
“Ethical Considerations in Arbitration”

Wed, 01 Feb 2012 00:00:00 -0400

An article by Commercial Litigation partner John Sherrill was published in the December 2011 edition of the Georgia Bar Journal. In the article, John outlines the ethical regulations—both on a federal level and confined to the state of Georgia—that apply to those participating in arbitration proceedings.

According to John, many businesses are turning to alternative dispute resolution (ADR) procedures to resolve disputes, as federal and state court litigation can be costly and time consuming. Of the various ADR methods, John explains that mediation is the preferred method, for reasons including “the relative finality of the result in arbitration, the higher level of confidentiality involved [and] the ability to select qualified neutral arbitrators.”

John details the regulations given in the Federal Arbitration Act and the Georgia Arbitration Code; rules from the most common administering agencies, the American Arbitration Association and JAMS; and highlights from the AAA/ABA Code of Ethics for Arbitrators in Commercial Disputes and applicable guidelines from the Georgia Rules of Professional Conduct.

“Arbitrators must take primary responsibility for policing ethical violations that could affect the fairness of arbitration proceedings,” John emphasizes. “In short, the great discretion that arbitrators have over the process necessarily includes an obligation to promote ethical, professional conduct by parties and their counsel. This is a heavy responsibility that cannot be taken lightly by those of us who serve as arbitrators. The very integrity of the arbitration process depends upon the arbitrator’s willingness, power and ability to keep the process fair and civil.”

NYSE Further Limits Broker Discretionary Voting For 2012 Proxy Season

Tue, 31 Jan 2012 00:00:00 -0400

On January 25, 2012, the New York Stock Exchange (NYSE) published an information memorandum, No. 12-4, addressing the NYSE’s recent examination of broker voting in light of the Dodd-Frank Wall Street Reform and Consumer Protection Act and recent public policy trends. Based on this review, the NYSE has determined to further limit discretionary voting by brokers under Rule 452. Rule 452 provides for discretionary voting by brokers with respect to certain routine matters submitted to a vote by shareholders and identifies specific corporate actions that are deemed by the NYSE to not be routine.

Under the new interpretative guidance issued by the NYSE, certain corporate governance proposals submitted for shareholder approval will no longer be designated as routine matters under Rule 452 such that brokers will now be prohibited from casting a discretionary vote without client instruction with respect to such matters. The information memorandum identifies several corporate governance proposals as non-routine matters. Although not an exhaustive list, brokers will now be prohibited from casting a discretionary vote on proposals relating to the following matters:

De-staggering the board of directors;
Majority voting in the election of directors;
Eliminating supermajority voting requirements;
Providing for the use of consents;
Providing rights to call a special meeting; and
Certain types of anti-takeover provision overrides.

The information memorandum was issued without notice and is not subject to any comment period. Accordingly, the new restrictions on broker discretionary voting are effective immediately with respect to all votes that were not previously ruled on by the NYSE prior to January 25, 2012.

USEPA Publishes Rulemaking Notice Affecting Air Pollution Controls for the Chemical Manufacturing Sector

Tue, 31 Jan 2012 00:00:00 -0400

On January 30, 2012, USEPA published in its Notice of Reconsideration of the October 29, 2009 Final Rule for the Chemical Manufacturing Area Source ("CMAS") Rule for 9 area source categories in the chemical manufacturing sector. At the same time, a corresponding new Proposed Rule for the CMAS was published. The reconsideration and proposed rule have been published in response to petitions for reconsideration filed last February by various representatives of the chemical industry. The January 2012 reconsideration rule not only responds to concerns raised by the affected chemical industry, but further proposes new provisions relating to malfunctions, and new requirements for Metal Hazardous Air Pollutants (HAP) Process Vents.

Highlights of the reconsideration/proposed rule are as follows:

A. Proposed CMAS Rule:

1. Title V Permitting - In the proposed rule, Title V permits will be required for "synthetic area sources"2 that control emissions from at least one chemical manufacturing process unit (CMPU) in order to maintain synthetic area source status at the facility. There will still be an exemption from Title V permitting requirements for "natural" area sources.

2. Overlapping Requirements - The proposed rule is seeking comments on approaches for addressing situations where facilities are subject both to the CMAS and to another rule or rules. USEPA originally proposed that a facility subject to multiple rules can either comply with all the rules or can elect to comply with the most stringent rule. Industry has identified several problems with the election to comply with the most stringent rule, and therefore USEPA is seeking comment on approaches to addressing overlapping rules.

3. Direct and Proximal Leak Inspections - Industry challenged, as unsafe to inspectors, the rule that required intimate, thorough inspection of all areas of potential leaks within a CMPU. As a result, USEPA has deleted the requirement for direct and proximal inspections and instead is proposing quarterly sensory inspections (detection by sight, sound or smell) of all equipment and process vessels, provided the inspections are capable of detecting leaks within the CMPU. USEPA is seeking comment on both the direct and proximal, as well as sensory, alternatives.

4. Covers and Lids on Process Vessels - Industry objected to language in the final rule that required process vessels in HAP service to be equipped with a cover lid that would remain in place at all times the vessel contains HAPs, except for during material addition and sampling. Industry argued that the standard could not be met because it does not address the removal of material from a vessel, and does not address maintenance and routine cleaning operations. USEPA has proposed revised language that applies to organic HAPS as well as metal HAPS, and requires a cover or lid be closed during organic HAP service or metal HAP service except during manual operations that require access, including "…material addition and removal, inspection, sampling, and cleaning".

5. Leak Inspections when Equipment is in HAP Service - Industry requested clarification of the requirement that equipment must be in HAP service when leak inspections are conducted, and in the proposed rule USEPA has responded by requesting comments on several issues. First, USEPA is seeking comment on how sources which change the configuration of process vessels and CMPU should track the equipment configurations and use. Second, USEPA is seeking comment on how inspections of equipment in volatile organic compound (VOC) service for different configurations would be relevant to checking leaks from CMPU. Third, USEPA is seeking comment on the use of Method 21, versus sensory inspections, for VOCs.

B. Startups, Shutdowns and Malfunctions:

Consistent with other recent New Source Performance Standards (NSPS) and National Emission Standards for Hazardous Air Pollutants (NESHAPS) rulemaking, USEPA has proposed provisions for addressing excess emissions during malfunctions.

USEPA is proposing, in 40 CFR Section 63.11502, an affirmative defense to civil penalties for exceedences of emission limits or other violations of applicable standards that are caused by malfunctions. As an affirmative defense, the defendant will have the burden of proof demonstrating that it has met all of the elements of a "malfunction" which elements are specifically set forth in the rulemaking. USEPA is proposing in 40 CFR 63.11501(e) that to establish the affirmative defense associated with a malfunction, excess emissions associated with the malfunction must be:

caused by a sudden, infrequent and unavoidable failure of equipment or a process;
could not have been prevented through careful and proper planning or design or better O& M practices;
did not stem from an event that could have been foreseen, avoided or planned for;
were not part of a recurring pattern indicative of inadequate design or inadequate O&M;
repairs were promptly made (and off-shift and overtime labor were used to the extent practicable to make repairs);
frequency, amount and duration of emissions were minimized;
if emissions resulted from a bypass, it was unavoidable to prevent loss of life, personal injury or severe property damage;
all steps were taken to minimize impacts on ambient air and human health and the environment;
all emissions monitoring and control systems were kept in operation;
all response actions were documented in signed operating logs;
good practices were utilized; and
a written root cause analysis has been prepared.

The malfunction elements set forth in proposed 40 CFR 63.111501(e) will not be used solely to determine the sufficiency of the affirmative defense for malfunctions; the rule adds notification, recordkeeping and reporting requirements for malfunctions. Notice of an exceedence associated with a malfunction must be provided to USEPA within 45 business days of the initial occurrence of the exceedence, and must include all of the information required by USEPA to establish the affirmative defense.

C. Metal HAPS Process Vents:

In the January 30, 2012 rulemaking, USEPA seeks comment on the definition of, and standards for, Metal HAP Process Vents and the applicability of the definition of equipment from which metal HAPS are emitted.

The definition of Metal HAP Process Vent as it currently exists under the final rule is: "The point of discharge to the atmosphere (or inlet to a control device, if any) of a metal HAP-containing gas stream from any CMPU at an affected source". USEPA is particularly interested in comments as to how the definition, as it applies to chemical manufacturing processes comports with similar definitions for batch and continuous process vents and other Maximum Achievable Control Technology (MACT) standards including the Non-Organic Chemical NESHAP (NON) and Miscellaneous Organic Chemical Manufacturing NESHAP (MON).

USEPA is also seeking comments to assist it in clarifying how the VVVVVV rule will apply to metal HAPS emitted as gaseous organo-metallic compounds, as compared to metal HAPS emitted as particulate matter. USEPA wants to determine whether Generally Available Control Technology ("GACT") for processes that emit gaseous metal HAPs should be different than GACT for those metal HAPS as particulate.

Comments are due on or before March 30, 2012; please contact Jeryl Olson or Eric Boyd if you would like to submit, or contribute to, comments.

By: Jeryl Olson

Jeryl Olson is a partner in the firm's Chicago office. If you would like further information, please contact your Seyfarth attorney or Jeryl Olson at jolson@seyfarth.com. You may also access our blog, Environmenal and Safety Law Update at www.environmentalsafetyupdate.com.

1 The nine affected area source chemical manufacturing categories are: Agricultural Chemicals and Pesticides, Cyclic Crude and Intermediates Production, Industrial Inorganic Chemicals, Industrial Organic Chemicals, Inorganic Pigments, Miscellaneous Organic Chemicals, Plastic Materials and Resins, Pharmaceutical Production and Synthetic Rubber Manufacturing.

2 Synthetic Area Sources are those that are considered "area sources" rather than "major sources" because emmissins are controlled by pollution controls installed after 1990, and which limit emissions to below major source thresholds.

District of Columbia Issues Notice Regarding Tax Treatment of Mortgage Refinancings and Modifications

Tue, 31 Jan 2012 00:00:00 -0400

On January 6, 2012, the District of Columbia Office of Tax and Revenue issued an official notice relating to the recent controversy over the recordation tax treatment of refinancings and modifications of security interest instruments. Based on the notice, the Recorder of Deeds shall tax any instrument evidencing a security interest in real property, and reflecting a refinance or modification, on the difference between the face amount of such instrument and the outstanding principal amount of existing debt under the prior security interest instrument, provided, of course, that the full amount of any tax due on the prior instrument was paid or the prior instrument was exempt from taxation. The Recorder of Deeds has established a process for taxpayers to substantiate and claim credits for those taxes previously paid on any security interest instruments relating to a refinancing or modification.

The Recorder of Deeds generally deems a refinance to consist of a new loan that is used to pay off and extinguish an existing loan (whether with the original or a new lender) and is secured by the same property (and additional property) as in the original loan. The sale or assignment of a security interest instrument from one lender to another on the secondary market, where there are no changes in the terms or conditions provided in the instrument and the borrower has taken no steps to refinance, is not considered a refinance by the Recorder of Deeds. The Recorder of Deeds deems a modification to have occurred when the terms of a pre-existing security interest instrument are changed in some manner, but the obligation imposed by the preexisting instrument is preserved and the loan secured by that instrument it is not paid off, extinguished or retired. Pursuant to District of Columbia law, a supplemental instrument that modifies a prior recorded instrument without additional consideration is not taxed. However, if a modification increases the total amount of the debt secured, tax is imposed on the increase in the face amount of the modification over the face amount of the pre-existing instrument, provided that any tax due with respect to the pre-existing instrument was paid or the pre-existing instrument was exempt. Any transaction concerning residential real property containing five (5) dwelling units or less, and for which a proper Security Affidavit is on file, is exempt from tax under District of Columbia law.

The Council of the District of Columbia is currently considering legislation to address the recordation tax treatment of transactions discussed in the notice, and the enactment of such legislation may affect the taxation of the transactions addressed by the notice. As currently drafted, the proposed legislation provides, as does the notice, that the Recorder of Deeds shall tax any instrument with respect to a refinancing or modification on the difference between the face amount of such instrument and the outstanding principal amount of existing debt under the prior security interest instrument. At a first hearing on the proposed legislation, the Attorney General of the District of Columbia testified that it was the position of the Mayor under current law that the full balance of any refinancing should be taxed at recordation. The proposed legislation has not been moved out of the District of Columbia Council Committee on Finance and Revenue, but is expected to be taken up early in 2012.

EEOC-Initiated Litigation: Case Law Developments In 2011 And Trends To Watch For In 2012

Tue, 31 Jan 2012 00:00:00 -0400

Seyfarth’s Complex Discrimination Litigation Practice Group has prepared a special report entitled EEOC-Initiated Litigation: Case Law Developments In 2011 And Trends To Watch For In 2012. The Report draws on the 79 major decisions of the past year to analyze key trends in EEOC litigation and forecast what employers can expect in 2012. The Report guides companies through case decisions involving EEOC-initiated litigation and enables corporate counsel to make sound and informed decisions while minimizing risks.

The EEOC promised to file bigger, higher-profile cases in 2011 and delivered on the promise, with a second straight year of a record number of class-like federal court filings. Indeed, for the past five years, the EEOC’s public strategy has been to further its agenda through prosecution of large-scale cases that will attract media attention, with the hope that this brand of class litigation will channel employers’ behavior. To that end, 2011 saw a mixture of judicial rulings in EEOC cases that range from refreshingly employer-friendly to those that sent chills through the employment community.

Looking ahead to what employers can expect in 2012, it is virtually certain that employers will see even more aggressive systemic investigations (and related subpoena enforcement actions) in the coming year. With recent wins on the scope of the EEOC’s investigative power, we expect the EEOC to undertake broader and deeper investigations that will help avoid repeat performances of the sanctions the Commission absorbed in 2011 in cases where federal judges called the EEOC to task for not doing its homework. Furthermore, despite the EEOC’s questionable position that it serves as a "neutral" in the investigation stage, its 2012-2016 public strategic plan states that it will pursue "an integrated, holistic approach to enforcement from beginning to end, without separating the investigation and conciliation stage of the EEOC’s work from its litigation stage."

We also foresee the EEOC joining forces with other parties to achieve its objectives. As one example, in November 2011, the EEOC and the OFCCP promised to coordinate their enforcement efforts and share discrimination claim information. We also observed an unprecedented amount of coordination between the EEOC and the private plaintiffs’ class action bar in 2011, and only expect that trend to continue into year ahead.

Finally, employers also can expect disability discrimination to figure significantly in the EEOC’s 2012 agenda. The Commission has stated publicly that enforcing ADA claims is a key goal, and the number of ADA cases in 2011 demonstrates that goal is well on its way to becoming a reality.

EEOC-Initiated Litigation: Case Law Developments In 2011 And Trends To Watch For In 2012 is authored by Seyfarth Shaw partners Gerald L. Maatman, Jr. and Christopher DeGroff, co-chairs of the firm’s complex discrimination practice group. Both led a number winning defense strategies in 2011 in government enforcement litigation, including Maatman’s historic turn in a lawsuit brought by the EEOC in which he won the right to depose EEOC officials about the agency’s own personnel practices.

The Report can be downloaded here.

Click here to download our press release regarding the report.

Immigration Inbox: News You Can Use - January 2012

Tue, 31 Jan 2012 00:00:00 -0400

U.S. Immigration:

1. State Dept. Announces Forward Movement in China-Mainland Born and India EB-2 Categories – USCIS reported that the rate of new filings is currently far below that which they had anticipated, prompting an aggressive movement of the cut-off date for February and possibly beyond.

2. State Dept. Implements Fee Increases for Certain Consular Services – Affected services include nonimmigrant visas and border crossing cards.

3. Sen. Grassley Puts 'Hold' on Per-Country Limits Legislation – Sen. Grassley said that he has "concerns about the impact of this bill on future immigration flows."

4. Senate Judiciary Committee Holds Hearing on EB-5 Regional Center Program – Sen. Patrick Leahy, noting that current authorization for the program expires at the end of September 2012, advocated a permanent authorization.

5. ICE Issues Memo on Next Steps in Prosecutorial Discretion and Immigration Enforcement – Over the course of six weeks, an intra-agency team of attorneys will review cases on the non-detained dockets in the Denver and Baltimore immigration courts.

6. Justice Dept. Accuses Arizona Sheriff of Civil Rights Violations; Federal Judge Issues Ruling – A Civil Rights Division investigation found that the Maricopa County Sheriff's Office engages in racial profiling of Latinos and unlawfully retaliates against individuals who criticize MCSO's policies or practices; and a federal judge ruled that MCSO's deputies may not detain people based solely on the suspicion that they may be in the U.S. illegally.

7. USCIS Ombudsman Now Requires Form DHS 7001 for EAD Cases - Those who have already submitted an EAD case inquiry do not need to submit the DHS 7001, but the form must be completed for all future inquiries.

8. USCIS Changes Stand-Alone I-130 Filing Locations - USCIS has changed the filing locations for Form I-130, Petitions for Alien Relative.

9. Transition Period for N-Form Processing Changes Ends - Beginning December 5, affected forms received locally will be returned to the individual with instructions on how to re-file at a designated USCIS Lockbox facility.

10. USCIS Seeks Business Experts for 'Entrepreneurs in Residence' Initiative - The application period ends on December 31, 2011.

Seyfarth Work Authorization Team (SWATeam)

1. California Steel Foundry Fires a Third of Its Workers After I-9 Audit - California Steel Foundry Fires a Third of Its Workers After I-9 Audit – The audit had identified about 200 employees allegedly working without legal status.

2. Labor Dept. Issues Round 4 FAQ on H-2A Final Rule – Among other things, the FAQ notes that the results of a background check or drug test may not be used to automatically reject a U.S. worker for agricultural work.

3. ETA Announces 2012 Adverse Effect Wage Rates for H-2A Workers – The AEWRs range from a low of $9.30 per hour in Mississippi and Louisiana to a high of $12.26 per hour in Hawaii.

Also in this issue:

U.S. Immigration

1. State Dept. Announces Forward Movement in China-Mainland Born and India EB-2 Categories

The Department of State's Visa Bulletin for February 2012 notes that the China and India employment second preference cut-off date has advanced at a rapid rate in recent months.

The bulletin notes this action was intended to generate significant levels of new filings:

Employment Second:

China and India: Reports from U.S. Citizenship and Immigration Services (USCIS) indicate that the rate of new filings for adjustment of status in recent months has been extremely low. This fact has required the continued rapid forward movement of the cut-off date, in an attempt to generate demand and maximize number use under the annual limit. Once the level of new filings or USCIS processing increases significantly, it will be necessary to slow or stop the movement of the cut-off. Readers are once again advised that an eventual need to retrogress the cut-off date is also a distinct possibility.

Employment Third:

Worldwide: up to one month
China: up to one month
India: up to two weeks
Mexico: up to one month
Philippines: up to one month . . .

Please be advised that the above ranges are only estimates for what could happen during each of the next few months based on current applicant demand patterns. The determination of the actual monthly cut-off dates is subject to fluctuations in applicant demand which can occur at any time. Those categories with a "Current" projection will remain so for the foreseeable future.

The bulletin for February 2012 is available at http://travel.state.gov/pdf/visabulletin/visabulletin_Feb2012.pdf

2. State Dept. Implements Fee Increases for Certain Consular Services

On December 6, 2011, the Department of State will implement changes to the Schedule of Fees for Consular Services. Affected services include nonimmigrant visas and border crossing cards.

The final rule on fees changes from $131 to $140 the fee charged for most non-petition-based nonimmigrant visas (Machine-Readable Visas or MRVs) and adult Border Crossing Cards (BCCs). The rule also provides new tiers of the application fee for certain categories of petition-based nonimmigrant visas and treaty trader and investor visas. Finally, the rule increases the BCC fee charged to Mexican citizens under age 15 who apply in Mexico and whose parent or guardian already has a BCC or is applying for one, from $13 to $14.

The final rule is available at http://www.gpo.gov/fdsys/pkg/FR-2011-12-06/pdf/2011-31175.pdf

3. Sen. Grassley Puts 'Hold' on Per-Country Limits Legislation

Despite the fact that on November 29, 2011, the U.S. House of Representatives voted 389-15 in favor of ending per-country numerical limits (caps) on employment-based visas and the Senate was expected to take action also, Sen. Charles Grassley (R-Iowa) has placed a hold on the bill.

Sen. Grassley said that he has "concerns about the impact of this bill on future immigration flows, and am concerned that it does nothing to better protect Americans at home who seek high-skilled jobs during this time of record high unemployment." The bill would eliminate a current provision stating that employment-based visas issued cannot exceed seven percent of the total for any one country. The measure was expected to benefit skilled Indian and Chinese workers and high-tech companies in the United States.

A hold is an informal practice and the majority leader need not follow it, but a hold indicates that the opposing senator may filibuster any motion to proceed.

For the text of the House-passed bill, H.R. 3012, see http://www.gpo.gov/fdsys/pkg/BILLS-112hr3012rh/pdf/BILLS-112hr3012rh.pdf

4. Senate Judiciary Committee Holds Hearing on EB-5 Regional Center Program

The Senate Judiciary Committee e held a hearing on December 7, 2011, on "Reauthorizing the EB-5 Regional Center Program: Promoting Job Creation and Economic Development in American Communities." Witnesses included Bill Stenger, President and CEO, Jay Peak Resort; David North, Fellow, Center for Immigration Studies; and Robert C. Divine, Shareholder, Baker, Donelson, Bearman Caldwell & Berkowitz, P.C. Sens. Patrick Leahy (D-VT) and Charles Schumer (D-NY) issued related statements.

Sen. Leahy noted that current authorization for the EB-5 regional center pilot program, which has been in existence for 18 years, expires at the end of September 2012. He advocated enactment of permanent authorization legislation that he introduced in March 2011 (S. 642). Sen. Leahy noted that in 2011, the EB-5 program is expected to have created an estimated 25,000 jobs and provided direct investments in U.S. communities of $1.25 billion. He said that if the full number of visas allocated to the program are used, based on investment and job creation requirements, the program "has the potential to create or preserve 100,000 jobs per year, with contributions of $5 billion in foreign capital investment. And these benefits come at no cost to American taxpayers."

Sen. Leahy noted that in addition to administrative efforts by U.S. Citizenship and Immigration Services (USCIS), he has been working for months with interested parties and USCIS "to put together a legislative framework to make significant improvements to the overall program." He said the framework would "provide USCIS with additional authorities to ensure that this important program maintains the highest level of integrity and efficiency." He added, "It is time for a permanent authorization to provide investors with the certainty and predictability they need to invest and conduct business with confidence."

Sen. Schumer outlined several examples of USCIS-approved "job-creating" regional center projects in New York:

Steiner Studios, a film production studio in Brooklyn, which received $65 million in EB-5 funding to assist with expansion;
Global Vascular Institute, on the Buffalo Niagara Medical Campus, where EB-5 funding helped support development of the new institute, creating jobs and improving health care access for the people of Buffalo;
Acadia Realty Trust, which received $200 million in EB-5 funding to assist with the construction of the City Point project in downtown Brooklyn;
SJM Company, which received $72 million in EB-5 funding to assist with the redevelopment of the George Washington Bridge Bus Station; and
Dermot Company and Harry's Restaurant, which received $96 million in EB-5 funding to assist with the redevelopment of the Battery Maritime Building and Pier A in Lower Manhattan.

Sen. Schumer said he was proud to co-sponsor S. 642 with Sen. Leahy to permanently authorize the program.

Mr. Stenger testified that the region where Jay Peak Resort is located has the most significant unemployment and economic challenge of any region in Vermont. He said that since 2005, Jay Peak has developed several EB-5 projects, creating over 2,000 jobs in the region, and that the EB-5 investments are expected to create that many jobs again over the next two years. "We are seeing this employment creation at Jay Peak and our surrounding communities in this terribly troubled economy solely because of the EB-5 foreign investor program," he said. The statements of Sens. Leahy and Schumer, along with the witnesses' written testimony, are available here.

5. ICE Issues Memo on Next Steps in Prosecutorial Discretion and Immigration Enforcement

U.S. Immigration and Customs Enforcement (ICE) recently released a memorandum on next steps in the implementation of prosecutorial discretion and immigration enforcement priorities.

ICE said it has launched a comprehensive training program on the appropriate use of the June 2011 Prosecutorial Discretion Memorandum. Also, beginning in November, ICE agents nationwide are reviewing all incoming cases in immigration courts. ICE said that the reviews are designed to identify the cases most clearly eligible or ineligible for a favorable exercise of discretion and are focused on cases appearing on the master calendar and cases that have not yet been filed in immigration court. The initial "test run" of this review of cases will end on January 13, 2012.

Also, beginning on December 4, 2011, ICE and the Department of Justice (DOJ) will launch pilot programs in two jurisdictions to test-run a process for reviewing all cases pending in immigration courts. Over the course of six weeks, an intra-agency team of attorneys from ICE, U.S. Citizenship and Immigration Services, and U.S. Customs and Border Patrol will review the cases on the non-detained dockets in the Denver and Baltimore immigration courts based on the Prosecutorial Discretion Memorandum and guided by a set of more focused criteria. During that time, DOJ's Executive Office for Immigration Review (EOIR) has agreed to shift judges from the non-detained docket in those jurisdictions to hear detained cases, to enhance processing of the latter.

At the end of the period, DHS will promptly review that data and other implementation outcomes and, where appropriate, consult with DOJ to determine, on an expedited basis, the best methods to implement these processes on an ongoing basis nationwide.

The announcement is available at: http://www.ice.gov/doclib/about/offices/ero/pdf/pros-discretion-next-steps.pdf

The June 2011 Prosecutorial Discretion Memorandum is available at: http://www.ice.gov/doclib/secure-communities/pdf/prosecutorial-discretion-memo.pdf

6. Justice Dept. Accuses Arizona Sheriff of Civil Rights Violations; Federal Judge Issues Ruling

Thomas E. Perez, U.S. Assistant Attorney General, sent a letter on December 15, 2011, to the Maricopa County Attorney, Bill Montgomery, accusing the Maricopa County Sheriff's Office (MCSO) in Arizona of engaging in a "pattern or practice of unconstitutional policing."

Meanwhile, a federal judge ruled on December 23, 2011, that Maricopa County's deputies may not detain people based solely on the suspicion that they may be in the United States illegally. U.S. District Judge Murray Snow noted, among other things, that Sheriff Arpaio "has made public statements that a fact-finder could interpret as endorsing racial profiling." A separate federal grand jury investigation of the MCSO related to criminal abuse of power continues.

Mr. Perez's letter notes that a Civil Rights Division investigation found that MCSO engages in racial profiling of Latinos; unlawfully stops, detains, and arrests Latinos; and unlawfully retaliates against individuals who complain about or criticize MCSO's policies or practices. MCSO's "deputies, supervisory staff, and command staff" perpetrated the alleged violations.

The Civil Rights Division also found reasonable cause to believe that MCSO operates its jails in a manner that discriminates against limited English proficient (LEP) Latino inmates, who it said are punished "routinely" for failing to understand commands given in English and are denied critical services provided to other inmates.

The investigation uncovered a number of instances in which MCSO initiated immigration-related crime suppression activities in the community after receiving complaints that described no criminal activity, but rather referred to circumstances such as individuals with "dark skin" congregating in one area, or individuals speaking Spanish at a local business. "The use of these types of bias-infected indicators as a basis for conducting enforcement activity contributes to the high number of stops and detentions lacking in legal justification," Mr. Perez said.

Mr. Perez noted that the bias affects MCSO from the top down. Maricopa County Sheriff Arpaio, for example, labeled as "intelligence" a letter explicitly equating skin color with law-breaking and instructed a subordinate to address it. Such instances "are striking examples of how Sheriff Arpaio has promoted a culture of bias in his organization and clearly communicated to his officers that biased policing would not only be tolerated, but encouraged."

The Civil Rights Division also found that MCSO deputies are encouraged to make high-volume pretextual traffic stops in targeted locations. "We have identified and interviewed Latinos who, though legally present in the United States, were arrested or detained without cause as a consequence of these operations." Further, MCSO's Criminal Employment Squad (CES) deputies, tasked with interdicting undocumented persons by enforcing state forgery and identity theft statutes, "routinely raid businesses in a manner that harms innocent Latino workers. Specifically, CES's deputies typically detain and investigate the immigration status of all employees at a raided worksite, whether or not the employees are listed in the warrant authorizing the raid. The CES targets worksites where most, if not all, of the employees are Latino," the letter states.

MCSO officials also have resorted to official harassment to silence critics, the letter says. For example, former Chief Deputy David Hendershott filed "unfounded complaints" with the Arizona State Bar against five attorneys, alleging ethical violations. The attorneys had publicly criticized MCSO's tactics. Similarly, Mr. Hendershott, acting in his official capacity, filed complaints with the Arizona Commission on Judicial Conduct against judges who had publicly criticized MCSO and Sheriff Arpaio or had rendered decisions deemed detrimental to MCSO's interests. All of the bar and judicial complaints were dismissed as insufficient to warrant an investigation, the letter notes, adding that Sheriff Arpaio participated as a named plaintiff in a civil federal racketeering suit filed against the same targeted judges and a number of other county officials. The claims against the judges echoed the complaints Hendershott had filed; the suit eventually was abandoned. "The arrests and harassment undertaken by MCSO have been authorized at the highest levels of the agency and constitute a pattern of retaliatory actions intended to silence MCSO's critics," Mr. Perez noted.

These violations, along with the absence of clear policies and procedures to ensure effective and constitutional policing and oversight, "have contributed to a chronic culture of disregard for basic legal and constitutional obligations," Mr. Perez said, adding that the Civil Rights Division found "additional areas of serious concern," including MCSO deputies using excessive force against Latinos, and MCSO's implementing its immigration enforcement program in a way that has created a "wall of distrust" between MCSO officers and Maricopa County's Latino residents, and that "has significantly compromised MCSO's ability to provide police protection" to residents.

Mr. Perez told Maricopa County that effective resolution of these issues will require a comprehensive written agreement along with federal judicial oversight. "We prefer to resolve this matter without resort to further litigation, although we will not hesitate to file suit, if necessary," the letter states, setting a deadline of January 4, 2012, for a response to an invitation for "constructive dialogue." Mr. Perez noted that the Civil Rights Division's investigation was delayed when MCSO "repeatedly refused to provide the United States with access to pertinent material and personnel," which was resolved by means of a lawsuit.

MCSO released Sheriff Arpaio's response implying that political motivations of the Obama administration and Congressional Democrats are behind the actions and noting, among other things, that "2 Democrat Latino US Congress men from Arizona, joined by several other Latino Legislatures want me to resign my office. All of these same Democratic elected officials, throughout the years, have been criticizing my enforcement of State and Federal Illegal immigration laws." Conversely, Sheriff Arpaio noted, "Candidates for President of the United States - Herman Cain and Michelle Bachmann recently visited me in my office, Texas Governor Rick Perry and Mitt Romney also called me – all interested in my successful enforcement of illegal immigration and asked for my endorsement. Recently in New Hampshire, I endorsed Texas Governor Rick Perry for President of the United States." (Typographical errors in original.)

Mr. Perez's letter includes a description of the findings, a legal discussion, and remedial measures required , such as training for deputies; establishment of policies and procedures; data collection and risk management; developing and implementing a complaint, investigation, and disciplinary system; a comprehensive language access program for LEP individuals in jail and in the community; and community outreach. The letter is available at http://www.justice.gov/crt/about/spl/documents/mcso_findletter_12-15-11.pdf

7. USCIS Ombudsman Now Requires Form DHS 7001 for EAD Cases

U.S. Citizenship and Immigration Services' Ombudsman's Office requests that those submitting case inquiries complete Form DHS 7001, Case Problem Submission Worksheet, for all cases, including those related to applications for an employment authorization document (EAD). The Ombudsman is requiring completion of the DHS 7001 to comply with applicable privacy rules. In the past, the Ombudsman allowed case inquiries without the DHS 7001 regarding EAD applications falling outside normal processing times. For same-day submission in urgent cases, the Ombudsman encourages people to use Ombudsman Online Case Assistance when submitting inquiries. Those who have already submitted an EAD case inquiry do not need to submit the DHS 7001, but must complete the form for all future inquiries.
The DHS 7001 is available at: http://www.dhs.gov/xlibrary/assets/cisomb_dhsform7001.pdf

8. USCIS Changes Stand-Alone I-130 Filing Locations

U.S. Citizenship and Immigration Services (USCIS) announced that effective January 1, 2012, it has changed the filing locations for Form I-130, Petition for Alien Relative. Domestic petitioners should mail their stand-alone I-130 applications to either the Chicago Lockbox or the Phoenix Lockbox, depending on where they reside in the United States.

There will be no change in filing locations when submitting an I-130 along with Form I-485, Application to Register Permanent Residence or Adjust Status. Individuals filing these forms together should continue to mail them to the Chicago Lockbox facility. Petitioners filing from overseas addresses in countries without USCIS offices should also continue to file at the Chicago Lockbox facility. Petitioners residing in a country with a USCIS office may send their I-130s to the Chicago Lockbox, or may file their I-130s at the international USCIS office having jurisdiction over the area where they live.

Those who submit their I-130 packages to the incorrect Lockbox location may experience a delay in processing. The new filing locations are available on the Form I-130 Direct Filing Locations webpage here.

9. Transition Period for N-Form Processing Changes Ends

U.S. Citizenship and Immigration Services (USCIS) has centralized intake of Forms N-336, N-600, and N-600K to the Phoenix Lockbox facility. The Dallas Lockbox facility will handle the Form N-300. USCIS said this change "streamlines the way forms are processed, accelerates the collection and deposit of fees and improves the consistency of our intake process."

USCIS issued a reminder noting that affected forms received at local and district offices after December 2, 2011, will no longer be forwarded to the appropriate USCIS Lockbox facility. Beginning December 5, affected forms received locally will be returned to the individual with instructions on how to re-file at a designated USCIS Lockbox facility.

The reminder is available at here.

10. USCIS Seeks Business Experts for 'Entrepreneurs in Residence' Initiative

U.S. Citizenship and Immigration Services (USCIS) has begun accepting applications from business experts to serve on its "Entrepreneurs in Residence" tactical team. The purpose of the tactical team, USCIS said, is "to bring business experts in-house to work alongside USCIS staff to ensure that current immigration laws' potential to attract foreign entrepreneurial talent is fully realized. The tactical team will help us develop policy guidance and training tools that support our decision-makers."

USCIS said it will hire business experts via the Department of Homeland Security's Loaned Executive Program. The application period ends on December 31, 2011.

The job announcement is available at here.

Information on the Loaned Executive Program is available here.

Seyfarth Work Authorization Team (SWATeam)

1. California Steel Foundry Fires a Third of Its Workers After I-9 Audit

Pacific Steel Casting Company, based in Berkeley, California, has fired about a third of its workers after U.S. Immigration and Customs Enforcement (ICE) conducted an I-9 work authorization audit in February 2011 and identified about 200 employees allegedly working without legal status.

Elisabeth Jewel, a Pacific Steel spokesperson, said, "It's terribly disruptive. We have highly trained employees and to lose them is very damaging." In some cases, the workers had been with the company for decades and have children in local schools who are growing up in the United States.

The Berkeley City Council passed a resolution in June noting that the targeted workers are skilled and "inject hundreds of thousands of dollars into our local economy each month and support other businesses and families. The company and the workers pay taxes that support local schools and services." The council noted that Pacific Steel's suppliers could also be harmed by the action, and that the audit and consequent firing of the workers will force them "into an underground economy where illegal wages and conditions are prevalent." Pacific Steel is the fourth largest foundry in the United States.

In a related action, the American Civil Liberties Union and several unions filed a Freedom of Information Act (FOIA) request in September 2011 seeking records relating to I-9 audits and "silent raids" such as the one ICE conducted on Pacific Steel. An ICE spokesperson reportedly said that in fiscal year 2011, ICE criminally charged 221 owners, employers, managers, or supervisors; conducted more than 2,496 I-9 audits; and initiated 3,291 worksite enforcement investigations, all up from 2010 numbers.

The Berkeley City Council resolution is available here.

2. Labor Dept. Issues Round 4 FAQ on H-2A Final Rule

The Department of Labor's Office of Foreign Labor Certification (OFLC) has released Round 4 of frequently asked questions (FAQ) on the H-2A temporary agricultural foreign labor certification program, based on the 2010 final rule.

Topics include job offers, assurances, and obligations, including job qualifications and requirements, and the contract impossibility provision; and H-2A labor contractors and surety bonds.

Among other things, the FAQ notes that employers may not use the results of a background check or drug test to automatically reject a U.S. worker for agricultural work. Rather, the results of the background check or drug test may be used to reject a worker only if the employer provides a lawful job-related reason to do so. For example, while a sex offense conviction may be a lawful job-related reason to reject a worker who is applying to work at a "pick-your-own" fruit farm, a Driving Under the Influence (DUI) conviction is very unlikely to be, the FAQ states. An employer requiring a background check or drug test should be prepared to provide documentation, if requested by the State Workforce Agency or the OFLC Certifying Officer, establishing the nexus between the background check or drug test to be conducted and the nature of the job opportunity.

The FAQ further notes that if an employer chooses to disclose in the job order that it will be conducting a criminal background check, the employer's job order must also identify the specific criminal issue(s) for which the employer could lawfully reject an applicant due to the nature of the job opportunity. "A general statement about conducting a criminal background check without any further explanation is unacceptable, as it fails to adequately apprise U.S. workers of the job opportunity and applicable conditions of employment," the FAQ states.

The FAQ is available at http://www.foreignlaborcert.doleta.gov/pdf/h-2a_faq_round4.pdf

3. ETA Announces 2012 Adverse Effect Wage Rates for H-2A Workers

On December 22, 2011, the Department of Labor's Employment and Training Administration (ETA) announced the 2012 adverse effect wage rates (AEWRs) for the employment of temporary or seasonal nonimmigrant foreign workers to perform agricultural labor or services (H–2A workers). AEWRs are the minimum wage rates employers must offer and pay to H–2A workers and workers in corresponding employment for a particular occupation and area so that the wages of similarly employed U.S. workers will not be adversely affected. The Department's H–2A regulations provide that employers must pay their H–2A workers and workers in corresponding employment at least the highest of: (i) the AEWR; (ii) the prevailing wage; (iii) the prevailing piece rate; (iv) the agreed-upon collective bargaining wage, if applicable; or (v) the federal or state minimum wage in effect at the time the work is performed.

The AEWRs range from a low of $9.30 per hour in Mississippi and Louisiana to a high of $12.26 per hour in Hawaii.

The notice is available at http://www.gpo.gov/fdsys/pkg/FR-2011-12-22/pdf/2011-32842.pdf

Seyfarth Immigration Events and News

Recent News from Seyfarth's Immigration Attorneys

Seyfarth Shaw's Pro Bono efforts were again featured as Angelo Paparelli and DHS Secretary Janet Napolitano appeared as guests on the January 13, 2012 edition of the CNN's OutFront with Erin Burnett. Mr. Paparelli's and Elizabeth Wheeler's efforts resulted in the granting of United States citizenship to an Egyptian woman who was smuggled into the United States and forced into slavery as a child. A link to the video on the story is available here. http://www.youtube.com/watch?v=P2HM0GT08rk

The transcript is here: http://edition.cnn.com/TRANSCRIPTS/1201/13/ebo.01.html.

Mr. Paparelli's and Ms. Wheeler's pro bono efforts were also the subject of articles in the December 16, 2011 edition of the Los Angeles Times, as well as the December 23, 2011 edition of The AmLaw Daily. Read the articles at http://articles.latimes.com/2011/dec/16/local/la-me-1216-shyima-hall-20111216 and http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1202537528563&slreturn=1

Angelo Paparelli published a year-end summary of key events in business immigration in 2011, in an article published in the December 29, 2011 edition of the New York Law Journal entitled, "The Year-End Immigration Roundup for Employers." Read the article at http://www.newyorklawjournal.com/PubArticleNY.jsp?id=1202536860976&slreturn=1

In addition, Mr. Paparelli has posted several new blog entries on his Nation of Immigrators public policy blog:

Powdered Wig Immigration with the Lawyer as Potted Plant

The DHS Inspector General Report on Fraud Detection at USCIS: Pious Immigration Baloney

"Power-Mad Career Immigration Bureaucrats Cry Wolf, Spook DHS Leaders"

"The 2011 Nation of Immigrators Awards - The IMMIs" This entry is a must-read summary of the best and worst that our immigration system has to offer, and welcomes readers' feedback on overlooked nominees.

"Guest Immigration Post: What Are We Paying for? USCIS and the I-526 Exemplar Process"

By: Angelo Paparelli, Liz Wheeler, and John Quill

Angelo Paparelli is a Partner and Liz Wheeler is an Attorney in Seyfarth's Downtown Los Angeles office. John Quill is Senior Counsel in the Boston office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Angelo Paparelli at apaparelli@seyfarth.com, Liz Wheeler at ewheeler@seyfarth.com, John Quill at jquill@seyfarth.com or any Business Immigration attorney on our website.

Justin Beyer Published in In-House Defense Quarterly
"Left Holding the Bag? Understanding the Successor Liability Defense"

Tue, 31 Jan 2012 00:00:00 -0400

Justin Beyer authored an article in the Winter 2012 issue of In-House Defense Quarterly, a publication of the Defense Research Institute. The article focuses on using the successor liability defense to escape product liability claims and analyzes the nontraditional exceptions to the general rule, including discussing which states employ the rule's nontraditional exceptions, and why those states that have considered these nontraditional exceptions have almost universally rejected them.

Gerald Maatman Quoted in MarketWatch
"Workplace lawsuits are on the rise"

Tue, 31 Jan 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Gerald “Jerry” Maatman, Jr. was quoted in a MarketWatch report on the rising number of EEOC claims and workplace lawsuits filed.

Using data from Seyfarth’s Workplace Class Action Litigation Report, the article notes the increase in EEOC filings each year of the Obama administration, as well as single plaintiff, class action and ERISA lawsuits.

“We keep thinking that the wave has crested, but every year the numbers get larger in terms of volume than they were before,” says Jerry in the article.

Click here to read the full article.

Seyfarth Shaw Attorney Elected to General Director of South Asian Bar Association

Tue, 31 Jan 2012 00:00:00 -0400

WASHINGTON, D.C. (January 31, 2012) — Seyfarth Shaw LLP is pleased to announce that Washington, D.C. office attorney Vamsi Kakarla has been elected General Director of the DC South Asian Bar Association Executive Board (SABA-DC). His one-year term will began in January 2012.

SABA-DC is a voluntary bar association dedicated to the needs, concerns, and interests of the South Asian legal community in the Washington, D.C. area. SABA-DC’s key objectives are to:

Advance the professional development of South Asian American lawyers and law students;
Provide a forum for professional and social networking;
Increase awareness and dialogue regarding legal issues concerning South Asian Americans;
Improve access to legal services for the South Asian American community, particularly among the lease fortunate; and
Promote a greater understanding of the legal, political, economic and cultural environment of South Asia.

In pursuit of these objectives, SABA-DC regularly organizes panels, conferences, receptions, community outreach efforts, public service projects, mentoring programs, political awareness campaigns, networking events, and a variety of other activities.

Vamsi is counsel in Seyfarth’s Intellectual Property Department. He frequently represents clients involved in patent litigations before the federal courts and the U.S. International Trade Commission. His experience involves all aspects of patent litigation, and he also provides strategic counseling on patent protection and enforcement.

Marshall Babson Quoted in Westlaw Journal Employment
"NLRB says employment agreements can’t bar group claims"

Mon, 30 Jan 2012 00:00:00 -0400

New York partner Marshall Babson, a former member of the National Labor Rrelations Board (NLRB), was quoted on January 24 by Westlaw Journal Employment regarding the NLRB's D.R. Horton ruling that employees cannot be required as a condition to sign as a condition of employment agreements barring them from filing class action lawsuits concerning the conditions of their employment.

Marshall called the consequences of the ruling "ghastly" and added "It represent the board's thumbing its nose at private arbitration agreements."

Seyfarth Shaw Expands Business Litigation Practice with Los Angeles Partner Addition

Mon, 30 Jan 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

LOS ANGELES (January 30, 2012) – Leading law firm Seyfarth Shaw LLP is pleased to announce that Frank Burke has joined the firm's Los Angeles offices as a Litigation partner. Burke was previously a partner and national practice group leader of the Securities Litigation and Enforcement Practice Group at Steptoe & Johnson, and he previously served for five years as an Assistant U.S. Attorney, focusing on white collar and economic crimes.

A seasoned litigator and trial lawyer, Burke’s practice focuses on complex civil and criminal litigation and trials in securities litigation and enforcement, commercial and real estate litigation, merger and acquisition litigation, professional malpractice litigation, white collar criminal defense, internal investigations and compliance, antitrust investigations and litigation and business torts and unfair competition, including consumerand investor class actions. Burke is ranked in Chambers USA for General Commercial Litigation, Best Lawyers in America for Commercial Litigation and White Collar Criminal Defense, and Super Lawyers for Securities Litigation.

"Seyfarth Shaw has more than 200 lawyers in California, a strong culture of collaboration across its practice groups and its 10 offices, and is recognized for its innovative and excellent client service. This offers me an ideal opportunity to work with new colleagues and significantly expand my practice," said Burke. "I'm thrilled to work amongst a group of attorneys who have a history of demonstrated excellence, and I look forward to sharing my ideas and experience with the talented Seyfarth team."

"Frank brings a complementary wealth of knowledge to the firm, and he will serve a key role among our west coast group of litigators," said Katherine Perrelli, Chair of Seyfarth Shaw's national Litigation Department. "His experience in the securities and financial services, white collar defense and internal investigations, complex commercial, real estate and antitrust areas adds multiple dimensions to the firm’s menu of services for both existing and future clients, and his depth of experience will bolster our department as a whole."

"We are delighted to welcome Frank to our Los Angeles office," said Kenwood Youmans, a member of the firm's Executive Committee resident in Seyfarth's Los Angeles office. "Not only is he a top-notch litigator, but he has a proven track record of success when it comes to building his practice and recruiting top-notch talent as we continue to expand the office. His expressed interest in serving as a mentor to younger lawyers shows he is a true team player. We look forward to working closely with Frank and to expanding our size and reach in California."

Burke received his undergraduate degree from Cornell University and his law degree from Harvard Law School. Burke is a member of the Arizona, California, Colorado and Washington bars.

Gerald Maatman Quoted in Business Insurance
"Will GPS monitoring decision impact employers?"

Mon, 30 Jan 2012 00:00:00 -0400

Seyfarth Labor & Employment Partner Gerald L. Maatman was quoted Monday, January 29 in a Business Insurance article examining the workplace litigation repercussions of a Supreme Court ruling that held evidence gathered via a GPS device installed on a suspect's car was an inadmissible search.

While the specific case the court ruled on was a criminal case, several defense attorneys anticipate the issues will overlap with workplace litigation. Jerry differed to some degree, pointing out that the implications may be more relevant for public employees, rather than private employees, who courts find often have fewer privacy expectations.

"I suspect you're going to see use of this precedent in a public sector workplace arena in terms of the limits that might be imposed on public employers in using location information in the context of workplace investigations or personnel decisions based on location information," he said.

OFCCP Likely to Issue New Pay Equity Guidance in 2012, Sends Second Notice to OMB to Rescind 2006 Compensation Guidelines

Mon, 30 Jan 2012 00:00:00 -0400

How can we know what the standards for pay equity compliance are, if OFCCP doesn't tell us? OFCCP seems to be heeding that message from the contractor community and has taken a step toward providing new guidance for compensation evaluations.

On January 17, 2012, the OFCCP submitted a second "Notice of Proposed Rescission, Interpreting Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination ("Standards") and Voluntary Guidelines for Self-Evaluation" ("Voluntary Guidelines") to the Office of Management and Budget (OMB). OFCCP published its first Notice proposing rescission of the guidelines well over a year ago on October 25, 2010, and solicited public comment on its proposal to rescind the guidelines. Click here for a discussion of the 2006 Compensation Standards and Guidelines and OFCCP's first Notice.

In the first Notice, OFCCP did not propose a replacement for the 2006 guidelines. Many of the comments to the first Notice were highly critical of the Agency's plan to abandon the old guidelines without proposing a new compensation assessment procedure. Although the content of the second Notice has not been released, recent comments by OFCCP Director Patricia A. Shiu suggest that OFCCP's second Notice includes a proposal for new compensation guidelines to replace the 2006 guidelines.

In a recent interview with Bloomberg BNA, Director Shiu said that the "overwhelming response to that [first Notice] was: please do not rescind this without providing something in its place. We heard that loud and clear. And I think it's a reasonable request." In terms of possible approaches for evaluating potential pay discrimination, Shiu noted that given the complexities of pay analyses, "there's just no one cookie-cutter approach." Shiu also added that EO 11246 follows Title VII of the 1964 Civil Rights Act precedent, under which "there is no one approach nor could there be."

The OMB must review and approve the second Notice before it is published in the Federal Register. OMB can take up to 90 days to conclude its review, which is expected to be around April or May of 2012.

What This Means For Contractors

For the federal contractor and subcontractor community, there continues to be uncertainty surrounding current compliance standards that will be used in reviewing compensation during OFCCP audits. The contractor community will have to wait at least weeks, maybe months, to see if OFCCP took contractor comments to heart in proposing new compensation guidelines. It is an open question how much the OFCCP will de-emphasize multiple regression analysis as a standard for analyzing pay, and if so, what methodology or methodologies may be suggested. Once OFCCP publishes the second Notice in the Federal Register, the public will have the opportunity to comment on any proposed new compensation guidelines. Until further information is available, multiple regression remains a good practice for many employers who wish to review pay equity, particularly those with larger work forces, even outside the context of OFCCP compliance. Contractors should consult with their legal counsel to discuss the best approaches for pay equity analysis generally and for OFCCP compliance purposes.

By:Valerie Hoffman and Regina Grattan

Valerie Hoffman is a partner in Seyfarth's Los Angeles and Chicago offices and Regina Grattan is counsel in the firm's Sacramento office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Valerie Hoffman at vhoffman@seyfarth.com, Regina Grattan at rgrattan@seyfarth.com or any attorney on our OFCCP & Affirmative Action Compliance Team.

Appellate Court Sheds Light On California Commissioned Employees Exemption

Mon, 30 Jan 2012 00:00:00 -0400

On January 24, 2012, the California Court of Appeal in Muldrow v. Surrex Solutions Corp. held that preliminary activities such as cold calling, searching for viable candidates, interviewing candidates, and inputting data are all essential sales duties, and therefore relevant to determining whether an employee is principally engaged in selling for purposes of the California commissioned employees exemption. In a matter of first impression, the court also ruled that a compensation system accounting for price and costs may still comply with the requirements of the exemption. Additionally, the court held that all employees in a given position, rather than selected members, are relevant to a determination of whether a commission-based compensation system is "bona fide" or not.

Background Facts

Tyrone Muldrow, a former "senior consulting services manager" who engaged in employment recruiting for Surrex, brought a class action alleging that Surrex improperly classified him as exempt under the California commissioned employees exemption. Muldrow recruited candidate-employees for client-employers. The clients would place job orders with Surrex, and Muldrow would search for potential candidates to fill the orders.

After placing an employee with a client, Surrex would bill the client at an hourly rate for the employee's services. In turn, a consulting services manager who successfully placed an employee would receive a percentage of the "adjusted gross profit" that Surrex earned from the client. The adjusted gross profit was generally defined as the rate that the client paid for the employee, less Surrex's costs in employing the employee.

Industrial Welfare Commission Wage Order 7-2001 exempts "commissioned employees" from overtime compensation if the employee's earnings exceed one and one-half times the minimum wage, and more than half of the employee's compensation represents commissions. Previously, in Keyes Motors, Inc. v. DLSE, the California Court of Appeal established two requirements for a compensation program to constitute "commission wages:" (1) the employee must be involved "principally in selling a product or service, not making the product or rendering the service," and (2) the employee's compensation "must be a percent of the price of the product or service."

The trial court in Surrex determined that the class member employees were subject to the commissioned employees exemption, and Muldrow appealed.

"Selling" a Product or Service

Muldrow argued on appeal that "searching on the computer, searching for candidates on the website, cold calling, interviewing candidates, inputting data, and submitting resumes," should not be characterized as sales activities. The court rejected this argument, adopting the trial court's holding that these activities are "essential prerequisites necessary to accomplishing the sale, " and thus, "sales-related activities." Therefore, the court held that plaintiffs were employed "principally in selling a product or service."

Commissions "Sufficiently Related" to Price

Muldrow also argued that Surrex's compensation program violated the "percent of the price of the product or service" requirement set forth in Keyes Motors because the compensation calculation contained cost-related factors. The court disagreed, holding that previous cases on this issue did not intend to limit employers to calculating commissions based strictly on a percentage of the price of the product or service.

Potential class members were responsible not only for negotiating the price that the client would pay Surrex, but also the amount that Surrex would pay the employee. Thus, the court noted that a commission system based solely on price would fail to reward employees who helped Surrex achieve greater profits by limiting costs. The court also stated that Surrex's commission system fully comports with the "essence of a commission" in that it is a payment based on sales, decoupled from actual time worked.

Therefore, the court held that plaintiffs' compensation constituted commissions for purposes of the commissioned employees exemption because it was sufficiently related to the price of services sold.

A Bona Fide Commission System

Senior consulting services managers received a monthly draw (advance on future commissions) ranging from $3,000 to $5,500 per month. Muldrow argued that this compensation plan did not constitute a bona fide commission system, citing the Division of Labor Standards Enforcement Policies and Interpretations Manual stating that "consistent commission earnings below, at, or near the draw are indicative of a commission plan that is not bona fide."

Muldrow attempted to limit the court's analysis on this point to only himself and nine other class members. The court refused, adopting the trial court's holding that "the test cannot be limited to whether any one or group of employees actually was able to realize income in excess of their draw. To so hold would be to reward the unmotivated or certainly the unproductive employee."

Accordingly, the court allowed evidence as to the compensation of all consulting service managers. Upon finding that many class members were paid in excess of their draws, the court rejected plaintiffs' contention that Surrex's commission system "was not bona fide as a matter of law."

What Surrex Means for Employers

Surrex clarifies that the term "sales" should not be interpreted "in a vacuum contrary to the job description of any salesman." Instead, when analyzing whether an employee is principally engaged in selling a product or service, the employer may account for all activities that are "essential prerequisites necessary to accomplishing the sale."

Surrex also confirms that a compensation system can comply with the "percent of the price of the product or service" requirement, even if it accounts for factors other than price. Thus, employers should continue to begin the compensation calculation with the price of the sale or service, but also may consider other profit-related factors in this calculation, such as costs.

Finally, employers should continue to ensure that a commission-based system results in many employees earning in excess of their draw. However, based on Surrex, employers do not need to be as concerned that a small number of unmotivated or unproductive employees will negate the "bona fide" nature of such a compensation system. Of course, employers desiring to rely on the California commissioned employees exemption also should make sure that they satisfy the commission pay exemption contained in the federal Fair Labor Standards Act.

By: Anthony DiBenedetto

Anthony DiBenedetto is an associate in the firm's Sacramento office. If you would like further information, please contact your Seyfarth Shaw LLP attorney or Anthony DiBenedetto at adibenedetto@seyfath.com.

New Withholding Requirements for Qualified Plan Distributions to D.C. Residents

Fri, 27 Jan 2012 00:00:00 -0400

Qualified retirement plans (and 403(b) plans) with participants who live in the District of Columbia are subject to new tax withholding rates. Under a new D.C. law, plans making distributions after January 1, 2012 to D.C. residents must withhold local taxes at the highest D.C. income tax rate—currently 8.95%.

While the new legislation is technically effective January 1, 2012, D.C.’s Office of Tax and Revenue acknowledged that the change was made upon short notice - the guidance was issued on December 28, 2011 - and indicated that plans were expected to make the change effective “as soon as possible.”

The new withholding rule applies to any qualified retirement plan (including 401(k) plans, pension plans, etc.) or 403(b) tax-sheltered annuity plan, as well as to IRAs.

Global Plan Governance Policies: Benefit Risk Management by the Multinational Company

Thu, 26 Jan 2012 00:00:00 -0400

The Global Plan Governance Policy

Globally, subsidiaries (or joint ventures) of multinational companies maintain private retirement plans (DB and/or DC) subject to different local laws.
Potentially adverse legal and financial (as well as employee, public and shareholder relations) risks relate to the operation of these plans.
Global Plan Governance Policies set core principles with respect to local plan governance and operation (e.g., “a governance structure will be established for each local plan that will include the designation of a governing body responsible for overseeing the operation of the plan in accordance with local law”).
The process of maintaining a Global Plan Governance Policy serves to identify plan-related risks and to allocate responsibilities for managing these risks.

Objectives of a Global Plan Governance Policy

A principal objective of a Global Plan Governance Policy is global adherence to core plan governance principles and processes to minimize plan-related risks. Other objectives can be to:

establish and maintain a centralized data base as to retirement plans maintained worldwide;
specify plan data to be provided by local entities to the parent company;
identify retirement plan risk considerations in each local country and establish processes for monitoring of such risks at the local and parent company levels;
clearly delegate global retirement plan oversight and monitoring responsibilities within the multinational; and
possibly centralize other plan-related functions (e.g., plan asset data reporting, asset commingling for investment purposes, common investment manager selection, investment/funding related to DB plan obligations).

DLSE Revises Wage Notice FAQs-- More Bad News for Employers

Thu, 26 Jan 2012 00:00:00 -0400

Beginning January 1, 2012, the Wage Theft Protection Act (Assembly Bill 469) requires California employers to provide notices to all new hires that include specific information. The new statute authorizes the Division of Labor Standards Enforcement ("DLSE") to add other required information deemed "material and necessary" to the list of eight items specifically covered in the statute. The new law is summarized in our October 13, 2011 California Labor and Employment Legislation Alert.

On December 29, 2011, the DLSE published a template for employers to use in order to meet their obligations under the Act, which is codified at California Labor Code Section 2810.5. The template, now available on the DLSE's website in English, Spanish, Chinese, Korean, Vietnamese and Tagalog, raises more questions than it answers regarding an employer's obligations. https://www.dir.ca.gov/dlse/Governor_signs_Wage_Theft_Protection_Act_of_2011.html

One day after issuing the template, the DLSE released Frequently Asked Questions (FAQs ), then revised the FAQs on January 3. On January 23, 2012, the DLSE extensively revised its FAQs again. http://www.dir.ca.gov/dlse/FAQs-NoticeToEmployee.html

Although the DLSE template is only a few weeks old, California employers already have found that it is difficult to complete. The January 23 revised FAQs will not make compliance easier.

Concerns Raised By The New FAQs

Current employees. The original December 30 FAQs stated that current employees, not just new hires, should be provided with a 2815.10 notice, although the statute requires notices be given only at time of hire and seven days after a change in the information. The DLSE retracted the earlier view that giving a notice to current employees was required, but in the latest FAQs takes the position that it is "best practice" to give a 2810.5 notice to current employees as well as to new hires.

"Time of Hire" has been made more controversial by the latest FAQs. "The concept does not necessarily depend on the first day of work by the employee but may be sooner where there has been an offer and acceptance of employment establishing an employment relationship." This is followed by a confusing discussion of unilateral versus bilateral contracts. Cutting through the legalese, employers must provide the notice to new hires "reasonably close in time to the inception of the employment relationship." This language would seem to make it appropriate to send the notice after all contingencies on a contingent offer are satisfied or to give the notice with other "new hire paperwork" and other forms on the first day of work.

Signing the Notice. Labor Code 2810.5 nowhere requires the notice to be signed. The FAQs take the position the notice must be signed by both sides. The employee signs to acknowledge receipt only. However, the new FAQ seemingly makes the employer's signature into something more. "23. Why does an employer representative have to sign an acknowledgment on the notice? A: Employers often consist of various legal entities which are not individuals/persons. The acknowledgment provides assurance that the information on the notice is from the employer and that the employer is providing the information to each employee. This acknowledgment better protects both the employer and employee that the statutory notice is in fact provided as intended by the Legislature. The employer representative may be any person the employer has authorized to sign the acknowledgment." Employers who have developed 2810.5 forms which are not signed by both parties should modify their forms, at least prospectively, to include an employer signature.

Pay Days. The FAQs opine that the employer need not provide a specific date (month, day, and year) for each pay day. Most employers were probably not planning on listing all pay dates indefinitely. Per the DLSE, "The information provided should be sufficient for an employee to understand when she will be paid." The DLSE wants to see both the interval (weekly, bi-weekly or semi-monthly) and well as any recurring day of the month or day of the week, as applicable. Examples given in the FAQ include: "1st and 15th of every month; 1st and 2nd Friday of every month, each Friday of every month."

Rates of Pay. This will be a difficult area for employers who pay multiple pay rates. The notice must include "[t]he rate or rates of pay and basis thereof whether paid by the hour, shift, day, week, salary, piece commission, or otherwise, including any rates for overtime, as applicable." The Legislature's inclusion of language referring to "the rate or rates of pay" contemplates that several rates may apply to an employment relationship. Many of the new FAQs are devoted to questions regarding multiple pay rates. One possibility is to create a separate sheet describing the pay rates and attach it.

Benefits Administration. The new FAQs do not tackle one of the toughest issues presented by the DLSE template-- how to correctly fill out the overly broad questions aimed at joint employment relationships which sweep in third party benefits administration. If the worksite employer uses any other business or entity to hire employees or administer wages or benefits, the form requires completing two sections, one for the worksite employer and one for the other business. Both sections need not be completed if the only other business is a recruiting service or a payroll processing service. The information that must be provided about "the other business" includes whether the other business is a professional employer organization (PEO), employee leasing company, or a temporary services agency, and requires physical address of main office, mailing address, telephone number, and other names. In some cases, characterizing the relationships according to the DSLE categories may not be a simple matter. Employers have questioned whether the reference to benefits administration by a third party requires information regarding third party administrators, such as a FMLA administrator or an Employee Assistance Program (EAP) provider firm. The DLSE should not be concerned about benefits administration in situations where there is a single employer. Properly completing the form in contingent workforce situations (temporary services, leasing, outsourcing and contracting) should be done with the help of counsel.

Overtime Regular Rate. Overtime may be owed at either time and one-half the regular rate of pay or double the regular rate. The "regular rate" may not be readily calculable because it may include bonuses and commissions and other forms of compensation that vary from pay period to pay period. The DLSE's revised FAQs acknowledge this difficulty and, while not sufficiently clear, give an example of how to handle variable overtime. "In such cases, it is sufficient that an employer provide the minimal overtime rate based upon a multiplier of 1½ or double times the hourly rate and also indicate that such specified overtime rate is subject to upward adjustment when other specified forms of wages are earned during the applicable pay period." One problem with this language is that in certain circumstances overtime can adjust either upwards or downwards. The new FAQs state that a variable regular rate is the only time an employer can be inexact about the overtime rate. Bottom line: give the overtime based on a base rate of pay and include a statement about what factors can cause regular rate variations.

Workers Compensation. The DLSE requires insurance carrier's name, address, telephone number, policy number or, if self-insured (Labor Code 3700), certificate number for consent to self-insure. The new FAQs clarify, however, that a change notice need not be given if only the policy number changes if the employer posts the new policy number. However, if anything else changes, including insurance carrier contact information or a change in carrier, statements in the legislative history indicate that a poster with the correct information does not satisfy the requirement of giving employees a written notice of the change in seven days.

Written vs. Oral Contract. The FAQs address, but do not resolve, how best to complete the DLSE template's "check the box" question on whether the employment agreement is written or oral. Most employment agreements are a complex mix of written, oral, and implied components. Some employers may be comfortable with checking "written," others will probably want to indicate a mix of both. Many employers have written at-will agreements, which means the contract is written at least in part. The FAQs opine that the 2810.5 notice will not undercut at-will employment based on a theory that "at-will is compatible with both written and oral agreements." Most employers will still attempt to avoid any doubt by including an at-will reminder in the 2810.5 notice. The FAQs recognize that an employer may tailor the notice. One suggestion is to modify the DLSE form to reflect that the notice is a written agreement governing pay rates, and to include, if appropriate, an at-will reminder, such as "This notice is a written agreement on rates of pay, and confirms that your employment is at-will, meaning that either you or (the Company) can end the employment relationship at any time, without or without cause or notice."

There is a possibility that legal challenges may be brought against the DLSE regarding the template and the FAQs. However, unless and until a court clarifies employer obligations under the new Wage Theft Protection Act, employers should consider contacting employment law counsel for individualized advice on how best to comply with the law.

By: Dana Howells

Dana Howells is a Senior Counsel in the firm's Los Angeles office. If you would like further information, please contact your Seyfarth Shaw LLP attorney or Dana Howells at dhowells@seyfath.com.

Gerald Maatman Quoted in The AmLaw Litigation Daily
“NLRB Ruling is Latest Setback for Employers Hoping to Compel Arbitration”

Thu, 26 Jan 2012 00:00:00 -0400

Employment partner Gerald Maatman was quoted in the January 9 edition of The AmLaw Litigation Daily. The article reported on the National Labor Relations Board’s (NLRB) rejection of an arbitration agreement requiring D.R. Horton employees to waive their class action rights. Some were surprised by the ruling, as it seems to contradict the U.S. Supreme Court’s ruling in AT&T Mobility v. Concepcion, which made it easier for defendants to enforce arbitration agreements with would-be class action plaintiffs.

The article emphasized the significance of Concepcion, mentioning that according to Seyfarth Shaw’s 2012 Workplace Class Action Litigation Report, last year the case was cited in federal and state courts in 215 rulings. Jerry commented that the NLRB’s latest ruling will generate just as much discussion.

"[Employers in all 50 states] are operating on a playing field in flux," Jerry remarked. "Employment lawyers advising companies on workplace arbitration agreements are very busy these days."

Gerald Maatman Quoted in Bloomberg, Reuters, CNBC, American Lawyer, Yahoo!, The Wall Street Journal's MarketWatch, SHRM, Chicago Tribune, Law360, Insurance Journal and more on Seyfarth's 8th Annual Workplace Class Actions Litigation Report

Thu, 26 Jan 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Gerald Maatman was quoted in several articles receiving national coverage January 9-12 on the release of the firm's 8th Annual Workplace Class Actions Litigation Report. Jerry cites 2011 as a "transformative" year, due to the "cascading wave" of Supreme Court decisions. He notes that many "second generation issues" are on the rise, as shown in the second half of 2011, and as courts continue to examine ways for employees to form into collective classes against employers. He also spoke on trends to watch for in case law in 2012.

Jerry told Bloomberg that "class actions are not dead." Instead, they "are reforming into different iterations," and he thinks "the second half of the year we saw efforts at a rebooting process where the plaintiffs' bar were coming at their cases from different angles."

Jerry also commented on other trends to Corporate Counsel, such as the increase in government enforcement, litigation and regulation, saying it is at "white-hot levels, especially where the EEOC [Equal Employment Opportunity Commission] is concerned."

To Law360, Jerry pointed out that employers might find themselves facing smaller, regional lawsuits as plaintiffs' attorneys look for new strategies to replace the larger, nationwide suits. He said, "You might face difference rulings in different jurisdictions because of the development of the law post-Dukes because of how liberal or conservative judges might be in rebooting post-Dukes. Much like real estate, 'location, location, location' is going to be very important."

Allegra Rich Quoted and SeyfarthLean Featured in ABA Journal
"Leaning in to Help: Program Helps Nonprofits Better Serve Immigrant Children"

Wed, 25 Jan 2012 00:00:00 -0400

Pro Bono and Philanthropy Partner Allegra Rich and Seyfarth's SeyfarthLean initiative was featured in a upcoming article in the ABA Journal. The article profiled the results of a collaborative project between Seyfarth and the non-profit Kids in Need of Defense (KIND), a national legal aid organization that helps children without a parent or legal guardian navigate the immigration justice system.

Allegra and a team of Seyfarth attorneys collaborated with KIND to develop an extranet and collection of process maps that will help the organization represent some of the more than 8,000 unaccompanied immigrant children who are placed in federal custody and required to face immigration proceedings.

“The really cool thing about this project was the opportunity to help the entire operation and to feel that we were making a difference at a broader level,” Allegra says. “Our hope is that these process improvements ... will allow KIND to serve more unaccompanied immigrant children, and to recruit, train and mentor a larger pool of attorneys.”

Click here to read the full article.

Dennis Greenstein Quoted in Habitat Magazine's Habitat Weekly
"Breathing Freely"

Wed, 25 Jan 2012 00:00:00 -0400

Seyfarth Shaw New York Real Estate partner Dennis Greenstein was quoted in the January 19 edition of Habitat Weekly. The article discussed the Supreme Court decision Feldman v. the Cryder House Inc., a case in which a shareholder made an alteration to his apartment in order to accommodate a disabled resident, and it was rejected by the co-op board.

The judge held that the co-op violated the federal Fair Housing Amendments Act of 1988, discriminating against Feldman.

Dennis said, "Boards of directors, boards of managers, and managing agents should be sensitive to the needs of disabled tenants, especially those who do not outwardly appear to be disabled. When tenants provide documentation of their disability, boards must make reasonable accommodations or face allegations of discrimination."

Seyfarth Shaw Atlanta Partner Brett Bartlett Named 2011 “Legal Elite” by Georgia Trend

Wed, 25 Jan 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

ATLANTA (January 25, 2012) — Seyfarth Shaw LLP is pleased to announce that Atlanta office Labor & Employment partner Brett Bartlett was recently named to Georgia Trend magazine’s “2011 Legal Elite” list.

Bartlett is chair of Seyfarth Shaw's Labor & Employment Department in Atlanta, a member of the Department's National Steering Committee and a co-chair of the firm's National Wage & Hour Litigation Practice Group. He is also co-author of the ALM Law Journal Press’ definitive treatise regarding wage and hour litigation, Wage & Hour Collective and Class Litigation, published in January 2012. His practice focuses on the defense of complex federal and state wage and hour cases, and he provides preventative counseling and change management assistance to employers wishing to limit their exposure to investigation and litigation under the federal Fair Labor Standards Act and the state laws that require employers to pay overtime and minimum wages to their employees.

Georgia Trend’s ninth annual listing of Georgia’s top attorneys includes eight practices areas: business law; personal injury litigation; criminal law; labor and employment; taxes, estates and trusts; bankruptcy and creditors’ rights; family law; and general practice/trial law. Those named to the list were selected based on peer review and number of votes received. In order to vote or to be selected, an attorney must be a member of the State Bar of Georgia, and he or she must also live and practice in Georgia. For more information, visit www.georgiatrend.com.

The Atlanta office of Seyfarth Shaw was founded in September 1996 and has grown from its original two attorneys to more than 75 attorneys practicing in the areas of labor & employment law, commercial real estate law, corporate law, employee benefits and ERISA litigation, and commercial litigation.

Employer Discipline Of An Employee Who Files An Unfounded Complaint Of Harassment Not Necessarily Unlawful Retaliation

Wed, 25 Jan 2012 00:00:00 -0400

It is unlawful for an employer to retaliate against an employee for engaging in a protected activity such as reporting harassment. But, is an employee always insulated from adverse employment actions based on protected activity? In a case of first impression, on January 23, 2012, in Joaquin v. City of Los Angeles, the California Court of Appeal held that an employer did not unlawfully retaliate against an employee for making a complaint of sexual harassment where the employee's complaint was found to be total fabrication. In this case, the employee was fired not for making a complaint of harassment, but for doing so falsely.

The Background Facts

The plaintiff, Richard Joaquin, was a Los Angeles Police Department ("LAPD") officer. An LAPD sergeant, James Sands, sometimes was Joaquin's supervisor. Following a dispute between Sands and Joaquin in 2005, Joaquin anonymously reported that Sands was sexually harassing him. The matter eventually went to Internal Affairs investigators, who interviewed Joaquin.

Joaquin told Internal Affairs about seven incidents in which he felt that Sands had made improper advances. According to Joaquin, Sands asked him if he would "like to go out sometime," told him "you have nice arms," and started appearing at Joaquin's traffic stops to observe him. Internal Affairs determined that Joaquin's allegations were unfounded.
When Sands learned of the allegations, Sands filed a complaint against Joaquin with Internal Affairs alleging that Joaquin had retaliated against Sands for their dispute by filing a false complaint, and that Joaquin provided false statements during the investigation.

The Sands complaint against Joaquin resulted in a formal Board of Rights hearing conducted by a three member panel consisting of two police officers and a civilian. The Board of Rights concluded that Joaquin had filed a false harassment complaint against Sands. Consequently, the LAPD terminated Joaquin's employment. Joaquin appealed his termination to the Superior Court for a new trial. The Superior Court concluded that the evidence did not support Joaquin's termination, and ordered him reinstated.
Meanwhile, Joaquin sued the City of Los Angeles for retaliation in violation of the California Fair Employment and Housing Act ("FEHA"). A jury awarded him $2.1 million in lost wages, benefits, and emotional distress. The City appealed the judgment.

The Appeal

The Court of Appeal reversed the trial court, concluding that Joaquin failed to prove that firing him on the belief that he had filed a false harassment complaint was unlawful retaliation.

Because no California decision had addressed whether a false report of harassment could lawfully serve as the basis for an adverse employment action, the Court of Appeal relied on federal appellate decisions interpreting Title VII. Those decisions upheld discharges of complaining employees on the basis that the discharge was not for filing a complaint, but rather for making untruthful statements in the complaint or during the investigation. Thus, the Court of Appeal concluded that "an employer may discipline or terminate an employee for making false charges, even where the subject matter of those charges is an allegation of sexual harassment."

Joaquin argued that the City's retaliatory intent could be inferred from (1) Sands's desire to have Joaquin disciplined for making a sexual harassment complaint, (2) Sands's initiating the Internal Affairs investigation, and (3) Internal Affairs and the Board of Rights overlooking evidence in favor of Joaquin. The Court of Appeal rejected that argument, finding there was no basis for the jury to have concluded that the Board's decision to discharge Joaquin was motivated by retaliatory animus.

Similarly, because it was the Board and not Internal Affairs that decided to discharge Joaquin, any influence that Sands had on the Internal Affairs investigation did not bear on Joaquin's termination. Finally, Joaquin's assertion that Internal Affairs and the Board overlooked evidence in his favor was nothing more than an argument against Sands's credibility, but there was insufficient evidence for the jury to find that the Board's credibility determinations were unreasonable. Therefore, the Court of Appeal reversed the jury's verdict.

What Joaquin Means for Employers

Employers should be very cautious about relying on Joaquin to justify the discharge of an employee who has erroneously claimed workplace harassment. Whether an employer can avoid liability for unlawful retaliation when basing an adverse employment action on a protected activity will turn on the facts specific to each case.
The facts in this case are highly unusual, and the Court's holding may be limited to them. In this case, for example, the discipline was imposed by a three-member quasi-adjudicatory panel. In a more conventional discharge scenario, in the private sector, a court might be much less likely to conclude that the decision-making process was insulated from the potential bias of witnesses who were advocating the discipline. Absent a clear, legitimate, non-retaliatory reason for an adverse employment action, such as the false harassment complaint here, an employer's decision to terminate an employee for engaging in protected activity is potentially dangerous and should be undertaken only with a full understanding of all of the relevant facts.

Employers should also consider the possibility that harassment charges made in the context of an administrative charge or proceeding might be absolutely privileged, and thus protected against retaliation even if the complainant's allegations are knowingly false. Some federal courts have upheld discipline of the employee in those circumstances, but some have not, and the California Supreme Court has yet to rule definitively on the subject.

By:Joshua A. Rodine

Joshua A. Rodine is an associate in the firm's Los Angeles office. If you would like further information, please contact your Seyfarth Shaw LLP attorney or Joshua A. Rodine at jrodine@seyfarth.com.

Retail Detail: All California Employers, Including Retailers, Are Required to Issue New Wage Notices to Employees As Of January 1, 2012

Tue, 24 Jan 2012 00:00:00 -0400

On October 9, 2011, Governor Brown signed the Wage Theft Protection Act (Assembly Bill 469). Beginning January 1, 2012, the Act requires California employers (including retailers) to provide certain prescribed notices to all new hires, including their rates of pay, the employer's name and address, and workers' compensation carrier. (The Act is summarized in our October 13, 2011 California Labor and Employment Legislation Alert). Retailers doing business in both California and New York should note that there are key differences between the California and New York statutes.

The Act itself does not include any specific penalties against employers who fail to provide the required notice. There is currently uncertainty and speculation over enforcement and penalties. Employees who do not receive the information could potentially try to seek penalties under California's Private Attorneys General Act ("PAGA"), which provides for penalties of $100 per aggrieved employee for an initial violation, and $200 per aggrieved employee per pay period for each subsequent violation. Employers will argue that the violation is curable, and if cured, will preclude a PAGA action. Employers may also argue that employees cannot allege a PAGA violation for failure to provide the new notice because PAGA exempts certain violations related to postings and notices. Nevertheless, any class or collective action making such claims under PAGA would certainly be costly for the employer, even if the employer prevailed.

The legislation directed the California Labor Commissioner to prepare and promulgate a template notice form for employers to use so that employers can comply with new Labor Code Section 2810.5. Specifically, the law provides that at the time of hiring, the employer must provide written notice to each employee concerning:

The employee's rate or rates of pay and the basis thereof (e.g., hourly, salary, commission), including any applicable overtime rates;
The regular payday designated by the employer;
The name, address and telephone number of the employer, including any "doing business as" names used by the employer;
The name, address, and telephone number of the employer's workers' compensation insurance carrier;
Any other information the Labor Commissioner deems "material and necessary."
In addition, employers must provide written notice of changes in any of the above information within seven calendar days.

On December 29, 2011, the Division of Labor Standards Enforcement ("DLSE") issued the much anticipated template notice. A day later, the DLSE released Frequently Asked Questions (FAQs ) on the new notice. The following week, the DLSE retracted the original FAQs and posted revised FAQs on its website here. The new template notice, available in both Word and PDF formats on the Department of Industrial Relations' web site, here, creates certain new and significant obligations for retailers.

Concerns Raised by the DLSE Template

Because the DLSE did not issue its template notice until a few days before the law was scheduled to go into effect, many retailers designed their own notice forms as the January 1 effective date drew near. Those employers will now need to modify their forms to reflect the additional information the DLSE now requires. Unfortunately, the DLSE template goes significantly farther than the statute.

The new information that the DLSE added to the statute's list of eight items raise additional concerns. For example:

If the worksite employer uses any other business or entity to hire employees or administer wages or benefits, a challenge will be reaching agreement on which entity is responsible for giving the notice and making the necessary information available. The DLSE template requires details far beyond the statute.
The DLSE's template pertaining to overtime rate also raises questions. California overtime has two rates - time and one-half the regular rate of pay or double the "regular rate." "Regular rate" may not be readily calculable because it may include bonuses and commissions that vary from pay period to pay period.
The DLSE also expanded its template to require the workers compensation insurance carrier's address, telephone number, policy number or, if self-insured (Labor Code 3700), certificate number for consent to self-insure. This poses a problem because some retailers whose workers' compensation insurance programs utilize a third party administrator may desire to have employees contact the third party administrator, not the insurance carrier, for help with a claim.
Possibly most perplexing is the DLSE's request that employees "check the box" to identify whether their employment agreement is written or oral. Most employment agreements are a complex mix of both written and oral components.

In addition, employers should probably include an at-will reminder on the form. One example of how employers may modify the form is to add the following language: "The agreements on your pay are written agreements, and this notice confirms that your employment is at-will, meaning that either you or (the Company) can end the employment relationship at any time, without or without cause or notice."

The FAQs Provide Some Answers

The DLSE's FAQs do provide some helpful guidance, such as:

Employers can use their own notices, as long as they contain all of the required information.
Non-English templates are available on DLSE's website in Spanish, Chinese, Korean, Vietnamese and Tagalog. https://www.dir.ca.gov/dlse/Governor_signs_Wage_Theft_Protection_Act_of_2011.html
Employers may provide the notice with other materials that are presented at the time of hire, but in the DLSE's opinion the notice must be on its own form. The DLSE believes employees should not be required to piece together the notice information from several separate documents or pages of a manual.
Employers may provide the notice electronically, but the electronic system must allow for acknowledgement of receipt.
An employee may refuse to sign the notice, which simply signifies receipt. Employers should retain proof of delivery if an employee refuses to sign.
Where there are multiple wage rates, the employer needs to put them all on the notice (e.g., shift differentials, different piece rates).

Retailers should evaluate carefully whether to use the DLSE template or modify and customize it while still providing all of the information the statute requires.

Customize, Customize

"One size fits all" rarely works in the world of employment law. Feel free to contact us for individualized advice on how your company can comply with Labor Code Section 2810.5, while still protecting its own interests.

By: Ann Marie Zaletel and Dana Howells

Ann Marie Zaletel is a Partner in the firm's Los Angeles - Century City office and Dana Howells is a Senior Counsel in the firm's downtown Los Angeles office. If you would like further information, please contact Ann Marie at azaletel@seyfarth.com or Dana at dhowells@seyfarth.com.

Thomas Masenga Profiled in Law360 Q&A

Tue, 24 Jan 2012 00:00:00 -0400

Los Angeles Real Estate partner Thomas Masenga was recently interviewed by Law360 to talk about his view of the current real estate law landscape, as well as discuss some of the recent highlights of his practice and what he sees as the strengths and weaknesses of his fellow real estate attorneys.

After discussing his handling of a complex recent transaction, as well as noting some of the changes in both how real estate law is currently practiced and some of the strengths and weaknesses of the training newer attorneys receive, Tom reflected on the most valuable lesson he’s learned in his 33-year career.

“My competitive nature got the best of me, and I was too concerned about beating the other side and 'winning' the legal battle. I learned that a critical part of legal representation is understanding and learning all I could about the client’s business. That is a prerequisite to helping achieve the desired results for the client.”

Seyfarth Shaw Real Estate Partner Ronald Gart Recognized by Washingtonian Magazine as a “Best Lawyer”

Mon, 23 Jan 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

WASHINGTON, D.C. (January 23, 2012) — For the second consecutive year, leading law firm Seyfarth Shaw LLP is pleased to announce Ronald Gart, Chair of the firm’s Washington, D.C. Real Estate Practice, was recently recognized by Washingtonian magazine as one of the district’s “Best Lawyers” in its 2011 guide to the capital area’s “very best legal talent.” Gart was selected as one of 49 in the Real Estate Lawyers category.

With a practice focused on the numerous aspects of commercial real estate, Gart has extensive knowledge in real estate development, finance lending, asset management, asset purchase and sales, commercial leasing, mix-use development and planned communities. He also advises investors in joint ventures and providers of mezzanine debt, as well as those in the community development investment arena.

Pamela Devata Quoted in Associated Press
“Pepsi Beverages pays $3.1M in racial bias case”

Fri, 20 Jan 2012 00:00:00 -0400

Employment partner Pamela Devata was quoted in a January 11 Associated Press article which discussed employers’ use of criminal background checks to screen job applicants. The article focused on Pepsi Beverages Co., whose use of these checks recently resulted in a $3.1 million settlement to assuage federal charges of race discrimination.

According to the Equal Employment Opportunity Commission (EEOC), Pepsi’s hiring policy, which denied applicants who had been arrested, limited job opportunities for minorities with higher arrest and conviction rates than whites. The settlement is part of a national effort to curtail hiring policies that could have adverse affects on minority candidates.

According to Pam, over the past year the EEOC has increased the number of charges over employers’ use of background checks. "The EEOC has taken a very aggressive enforcement posture on the use of criminal background and criminal history," she noted.

Recent California Court of Appeal Decision Makes It Harder To Fight Copycat Class Actions

Fri, 20 Jan 2012 00:00:00 -0400

The California Court of Appeal has issued a published decision holding that denial of class certification in one lawsuit may not prevent similar class action claims in a later lawsuit. On January 18, 2012, in Bridgeford v. Pacific Health Corporation, the court expressly disagreed with a prior Court of Appeal decision from the same district that held collateral estoppel could prevent class actions that are similar to prior cases where class certification was denied. This decision may change the way courts look at denials of class certification and whether such denials can be used to prevent similar subsequent class actions.

The Bridgeford Decision

In Bridgeford, the plaintiffs filed a class action complaint against Pacific Health Corporation and other hospitals and health care entities for various violations of California's wage and hour laws. Pacific Health demurred to the complaint on the grounds that the plaintiffs were collaterally estopped from seeking class certification, because class certification was denied in a prior action that involved the same causes of action and subclasses that were similar to those in Bridgeford. The trial court sustained Pacific Health's demurrer and dismissed the plaintiffs' complaint in its entirety.

The Court of Appeal reversed, holding that the prior denial of class certification does not bar the claims of absent putative class members in a subsequent suit. The court relied heavily on a recent United States Supreme Court decision, Smith v. Bayer Corporation, 131 S. Ct. 2368 (2011), which held that a federal court could not enjoin a state court from considering a plaintiff's request to approve a class action when a federal court had denied a motion for class certification in a case with similar claims brought by a different plaintiff against the same defendant. Relying on Smith, and without pondering the significance of Smith's special procedural context, the Court of Appeal in Bridgeford expressly disagreed with Alvarez v. May Dept. Stores Co., 143 Cal. App. 4th 1223 (2006), a decision from a Court of Appeal in the same district. Alvarez had held that denial of class certification could collaterally estop absent class members from re-litigating class certification in a subsequent lawsuit. Reaching the opposite conclusion, the court in Bridgeford held that the denial of class certification cannot establish collateral estoppel against unnamed putative class members on any issue, because unnamed putative class members were neither parties to the prior proceeding nor represented by a party to the prior proceeding.

What Bridgeford Means For Employers

Bridgeford has important implications for employers. Prior to Bridgeford, employers could argue that prior denials of class certification prevented plaintiffs from bringing similar subsequent class actions. If the reasoning in Bridgeford is widely adopted, employers will no longer be able to make that argument. Instead, even if an employer is successful in defeating class certification, the Bridgeford decision would allow attorneys to forum-shop by recruiting new plaintiffs to file a case with similar allegations and seek class certification from a different judge.

By: Timothy Nelson

Timothy Nelson is an associate in Seyfarth's Sacramento office. If you would like further information, please contact your Seyfarth Shaw LLP attorney or Timothy Nelson at tnelson@seyfarth.com.

Top 10 2011 Developments/Headlines in Trade Secret, Computer Fraud, and Non-Compete Law

Thu, 19 Jan 2012 00:00:00 -0400

We have compiled a list of the top 2011 developments/headlines in trade secret, computer fraud, and non-compete law. While large jury verdicts and criminal prosecutions garnered a significant amount of attention, there were also a number of significant state and federal court decisions that have altered the landscape of trade secret, computer fraud, and non-compete law in various jurisdictions. For example, in Illinois, the state supreme court broadened the discretion and increased the flexibility of trial courts in determining the reasonableness of non-competes. Also, in Texas, the state supreme court made it easier to enforce non-competes by opening the door for other consideration (apart from access to trade secrets) to serve as consideration for a non-compete. On the federal front, the Ninth Circuit in United States v. Nosal found that an employee may be liable under the Computer Fraud and Abuse Act (“CFAA”) for violations of an employer’s computer use policies (the court has since granted en banc review and heard oral arguments in December 2011) and there remains a circuit split on the applicability of the CFAA in the workplace.

There have also been significant legislative efforts to modify trade secret, computer fraud, and non-compete law in various jurisdictions. For instance, in Georgia, the Restrictive Covenant Act illustrates the state’s fundamental change in public policy toward enforcement of restrictive covenant agreements, including non-competes and non-solicits. In New Jersey, the state recently adopted its own version of the Uniform Trade Secrets Act. In Massachusetts, a non-compete reform bill has undergone significant review, comment, and revision regarding standing, attorneys’ fees, and consideration for non-compete agreements. On the federal front, the Patent Reform Act was passed and there have also been efforts to modify the CFAA.

In 2012, we expect to see more cases involving the intersection between cloud computing/social networking and trade secrets. With the proliferation of electronic information used to conduct business and as more data is housed remotely and outside company servers, courts have begun addressing the extent to which companies retain ownership of such information and can sue for the misuse of such information.
We also expect to see more cases addressing trade secret preemption and the protection (or lack thereof) of confidential information. Some courts have also continued to insist on greater specificity in pleadings on trade secret claims and the strict identification of alleged trade secrets in discovery by plaintiffs to frame the issues in dispute. Disputes concerning the enforcement of forum selection and choice of law provisions in non-compete disputes will also remain prevalent. Lastly, we also expect to see more cases involving the interplay between employee confidentiality obligations and employees’ rights under the Sarbanes-Oxley Act.

Below is our listing of top developments/headlines in trade secret, computer fraud, and non-compete law for this past year in no particular order:

1. Significant State Supreme Court Decisions

Several significant state supreme court decisions have addressed the construction of enforceable non-compete provisions. The Virginia Supreme Court required employers to demonstrate that the non-compete is no broader than necessary to protect the employer’s “legitimate business interests” and does not “unduly burden” the ex-employee’s right to earn a living. The Texas Supreme Court continued the state’s movement toward non-compete enforceability and for the first time approved of something other than providing an employee confidential business information as appropriate consideration for a non-compete agreement (i.e. stock options). The Illinois Supreme Court also made non-compete enforceability easier by granting Illinois trial courts significant discretion to consider “the totality of the facts and circumstances of the individual case” when assessing whether a “legitimate business interest exists.” The Idaho Supreme Court found that a two-year non-compete agreement executed in connection with the sale of a business was enforceable under California law and could be narrowed within a scope that was reasonably necessary to protect the goodwill of the sold business. The Montana Supreme Court ruled that an employer will not be permitted to enforce a non-compete provision in an employment agreement where the employer was solely responsible for ending the employment relationship. The Oklahoma Supreme Court recently held that non-compete agreements are reviewable by a court, even if the agreement contains an arbitration clause and there is no claim as to the validity or enforceability of the arbitration clause, and further held that provisions that are contrary to Oklahoma’s statutory limitations on non-competes may result in the court invalidating the entire non-compete.

2. Expanded Role Of The International Trade Commission in Preventing Foreign Trade Secret Theft

The Federal Circuit’s decision in TianRui Group Co. v. International Trade Commission confirmed that the ITC has jurisdiction to address trade secret claims, even when the alleged wrongful conduct occurs in a foreign country. The court found that the ITC has jurisdiction through section 337 of the Tariff Act, which prohibits “[u]nfair methods of competition and unfair acts in the importation of articles … into the United States….” U.S. companies now have a meaningful remedy to address concerns about the extraterritorial protection of trade secrets.

3. Continuing Developments in Legislation

New Jersey, one of the four remaining states that had not adopted some or all of the provisions of the Uniform Trade Secrets Act (UTSA), recently passed the state’s own version of the UTSA. New Jersey’s Trade Secrets Act was recently signed into law on January 9, 2012.

Senators Kohl (D-WI) and Coons (D-DE) also introduced a federal bill in October 2011 that would create a new federal private right of action for trade secret owners.

Georgia passed the Restrictive Covenant Act. The Act has three significant implications: (1) it creates statutory presumptions that restraints two years or less in duration are reasonable in time and restraints more than two years are unreasonable; (2) it eases the drafting requirements for specific restrictive covenants; and (3) it permits Georgia courts to “blue pencil” (i.e. partially enforce) restrictive covenants that otherwise would be overbroad and, therefore, completely unenforceable under existing Georgia case law. At least one Georgia court has interpreted the new Act as providing courts discretion to re-write restrictive covenants to make them enforceable, rather than merely providing the authority to remove overbroad covenants.

The Massachusetts legislature heard testimony in September 2011 regarding a non-compete bill that aims to modify the common law pertaining to non-compete agreements and to simultaneously afford greater procedural protections to those affected by the contractual restrictions on mobility in employment. Changes include the elimination of a threshold that confined the use of non-compete agreements to employees earning over $75,000 per year in favor of a requirement that courts more broadly consider the economic impact on an affected employee before deciding whether to enforce a non-compete agreement. Bill 2293 also provides for mandatory attorneys’ fees to employees. However, an employer can avoid paying fees if the court determines that it took “objectively reasonable efforts to draft the rejected or reformed restriction so that it would be presumptively reasonable.” Finally, the new bill would permit the signing of mid-employment non-compete agreements so long as “fair and reasonable” consideration is provided to the affected employee To date, the Massachusetts legislature has yet to approve the proposed bill.

There have also been efforts to amend the CFAA. Proposed amendments to the CFAA that would restrict the definition of “exceeds authorized access” have recently been the subject of debate. U.S. Senator Patrick Leahy (D-VT) proposed a bill that excluded violations of computer use policies and terms of service agreements from “exceed[ing] authorized access” in violation of the statute. The Department of Justice has taken a pro-employer stance and objected to CFAA changes, while emphasizing the importance of holding employees liable for violations of computer use policies to protect our nation’s economic security.

Additionally, the American Invents Act of 2011 was signed into law. The America Invents Act of 2011 changes the U.S. Patent system to a “first-to-file” format. More importantly, it allows companies to defend against alleged patent infringement when they practice information they elect to keep as trade secrets, but are sued for infringement because another inventor filed for a patent first. Companies can keep information related to their inventions a trade secret and retain these “prior use rights” as long as they have “commercially” practiced their invention.

4. Significant Jury Trials Verdicts and Criminal Sentences

In 2011 we saw several significant trade secret jury trial decisions. The second jury in the contentious Barbie vs. Bratz case awarded more than $80 million in damages, plus attorneys’ fees and treble damages to MGA for Mattel’s alleged trade secret misappropriation; a reversal of the case’s first jury trial that resulted in a large jury verdict in favor of Mattel. Mattel is appealing the decision and we expect to see more litigation in this case in 2012.

The jury in Pacesetter Inc. v. Nervicon Co. awarded more than $2.3 billion in damages (later pared down to $947 million by the trial court judge) to St. Jude Medical for a former employee’s theft of confidential technical information about the company’s medical devices. Additionally, the jury in DuPont v. Kolon awarded more than $919 million in damages for a former employee’s theft of information regarding DuPont’s anti-ballistic Kevlar fiber.

The TCW Group, Inc. v. Gundlach case, followed with great interest in the financial community ended in split jury verdicts, after each party had sought hundreds of million of dollars in damages against the other. The jury found the former investment chief liable for alleged trade secret misappropriation and breach of his fiduciary duty but did not award any damages on the fiduciary duty claim. Instead, the jury assigned the determination of damages for trade secret theft to the judge. The jury awarded the former investment chief $66.7 million for back pay after his termination. The parties recently settled the litigation pursuant to a confidential settlement, prior to the court’s ruling on the amount of damages to award on the trade secret claim.

Regarding criminal prosecution, an ex-Goldman Sachs programmer was sentenced to more than 8 years in prison for the theft of confidential information regarding the company’s trading system. Additionally, an ex-Dow AgroSciences scientist was sentenced to more than 7 years in prison for the theft of secret information about organic insecticides.

5. Emerging Areas in Social Media and Cloud Computing

The explosion of cloud computing and the ubiquity of social media has increased the risks and vulnerabilities in protecting valuable company data and prized trade secrets. Companies utilizing cloud-computing services must employ effective measures to protect and secure their intellectual property. Issues have also arisen regarding the ownership of employee created social media content and passwords. For example, the current PhoneDog v. Noah Kravitz case in the Northern District of California involves a dispute regarding the ownership of an employee’s Twitter account, specifically the account’s follower list and password. The outcome of this case will be closely monitored by employers, especially in light of the 2010 case Sasqua Group v. Courtney. In that case, a New York district court found that an allegedly misappropriated customer list was not a trade secret because the information could be easily located through Google and LinkedIn searches.

A New Jersey district court in Syncsort Incorporated v. Innovative Routines, International, Inc., 2011 U.S. Dist. LEXIS 92321, (D.N.J. August 18, 2011), however, found that posting information on the internet might not necessarily void that information’s trade secret status. The takeaway is that prior methods to maintain confidentiality may no longer be viable with the heightened connectivity of social media and cloud computing. More recently, a Pennsylvania federal court held that an employer may claim ownership of its former executive’s LinkedIn connections where the employer required the executive to open and maintain an account, the executive advertised her and her employer’s credentials and services on the account, and where the employer had significant involvement in the creation, maintenance, operation, and monitoring of the account.

6. Applicability of the Computer Fraud and Abuse Act In The Workplace

On April 28, 2011, the Ninth Circuit Court of Appeals held in an important decision upholding legal protections for employer data that employees may be held liable under the federal Computer Fraud and Abuse Act (18 U.S.C. 1030 et seq.) in cases where employees steal or remove electronic files or data in violation of their employers’ written computer-use restrictions. The Ninth Circuit found that a former employee “exceeds authorized access” to data on his employer’s computer system under the CFAA where the employee takes actions on the computer that are prohibited by his employer’s written policies and procedures concerning acceptable use (e.g. prohibitions against copying or e-mailing files to compete or help a third party compete with the employer).

Subsequently in October 2011, the Ninth Circuit Court of Appeals ordered that U.S. v. Nosal be reheard by en banc panel and that the “three-judge panel opinion [in U.S. v. Nosal, 642 F.3d 781 (9th Cir. 2011)] shall not be cited as precedent by or to any court of the Ninth Circuit.” Accordingly, the ability of employers to sue employees who violate computer usage policies by stealing company data under the CFAA in the Ninth Circuit is again in question. This comes after the three-judge panel Nosal opinion was beginning to gain momentum in district courts in the Ninth Circuit. Oral argument occurred in December and a decision should be issued with the coming months.

Should the Ninth Circuit reverse the decision, the U.S. Supreme Court may take up the decision as a reversal would cement the conflict between the Ninth Circuit and other circuits, such as the Fifth and Eight Circuits. The U.S. Supreme Court’s decision to take up the case may also be impacted by whether Congress passes amendments to the Computer Fraud and Abuse Act which would curtail the ability of the government and companies to sue for violation of usage policies, including violations of social media sites terms of service.

7. Forum Selection and Choice of Law Provisions

Courts around the country continue to split as to the circumstances under which the parties’ choice of law and forum selection provisions set forth in non-compete agreements will be honored. The determination of what law to apply and the proper forum for the suit can often be dispositive in non-compete litigation. A Nebraska federal district court transferred a non-compete enforcement case to Minnesota because the court decided that the plaintiff’s choice of forum was insufficient to prevent transfer from Nebraska even though only one of the several agreements at the subject of the action contained the forum selection and choice of law provisions. Additionally, an Arizona federal district court recently refused to enjoin violations of a non-compete agreement with a Washington choice law provision because of Arizona’s greater interest in the case and the state’s “fundamental policy.”

8. Protection for Whistleblowers Under The Sarbanes-Oxley Act For Disclosure Of Company Confidential Information?

The U.S. Department of Labor’s Administrative Review Board issued a ruling in Vannoy v. Celanese Corp., which further expands the scope of the whistleblower protection provision in Section 806 of the Sarbanes-Oxley Act (SOX). In particular, the ruling presents the risk that a whistleblower’s violation of confidentiality rules and misconduct that could harm employers may still qualify as protected activity in certain circumstances. Thus, this may provide employees with a license to take company data and allow them to attempt to immunize themselves from the consequences for their wrongful acts. The ARB ruled that a whistleblower’s misappropriation of confidential information in violation of a confidentiality agreement– which could irreparably harm the company and damage many other employees – might still qualify as protected activity.

The ARB directed the ALJ to conduct an evidentiary hearing to determine whether the information the complainant misappropriated was the kind of “original information” Congress intended to protect and whether the method of transfer of information was protected lawful conduct within the scope of SOX. In this regard, the ARB indicated that while Complainant’s conduct may have violated company policy, no charges were brought in connection with his conduct. However, the ARB did not otherwise define “lawful conduct” in this context.

9. Trade Secret Preemption and Protection of Confidential Information

Defendants in trade secret cases will often seek to invoke trade secret preemption to attempt to dismiss common law claims that are based on the same or similar facts as the claim for trade secret misappropriation in the early stages of the litigation. The problem with the premature dismissal of claims is that if the finder of fact does not find that the information misappropriated rises to the level of a trade secret, the plaintiff can be precluded from obtaining any relief on the common law claims to protect confidential information or based upon facts that are separately actionable. This effectively may cut off a plaintiff’s right to pursue common law claims, such as tortious interference with contract or conversion, that are well established legal claims. A California federal district court in Amron International Diving Supply, Inc. v. Hydrolinx Diving Communication, 2011 U.S. Dist. LEXIS 122420 (S.D. Cal Oct. 21, 2011) recently refused to apply trade secret preemption until it was first determined whether the allegedly misappropriated information constituted a trade secret. We expect to see more trade secret preemption decisions in California and the rest of the country in 2012 as courts continue to grapple with this knotty issue.

10. Stricter Pleading Requirements and Pre-Discovery Identification Of Trade Secrets

Some courts across the nation have insisted on stricter pleading of trade secret claims as well as the disclosure of the alleged misappropriated trade secret by plaintiffs before discovery is permitted. For instance, a Colorado federal court held that before the plaintiffs may compel discovery, they must file a complaint that “describe(s) the actual equipment, methods, software or other information” they claim as trade secrets. Plaintiffs’ “general allegations and generic references to products or information are insufficient to satisfy the reasonable particularity standard.” Other courts have been more forgiving in the level of detail required to be pled in the complaint. Another recent case required the disclosure of the alleged misappropriated trade secrets with particularity in federal court before the defendant would be required to respond to plaintiff’s discovery. We expect to see more cases addressing these significant issues in 2012.

Please continue following our blog, www.tradesecretslaw.com, this year. We plan to increase the frequency of our postings by including more authors (including special guest authors (e.g. law professors, clients, and forensic experts), enhancing the visual effectiveness of posts (e.g. more pictures, charts, and video), as well as providing resource material (e.g. applicable statutes, significant cases and links, and webinars). Thank you for your continued support of the blog.

Seyfarth Shaw Promotes 14 to Partner

Wed, 18 Jan 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

CHICAGO (January 18, 2012) — Leading law firm Seyfarth Shaw LLP has announced the promotion of 14 of the firm’s attorneys to partners across seven offices, effective January 1, 2012.

“We are delighted to welcome this talented group of highly-skilled attorneys into the partnership,” remarked Seyfarth Shaw Chair and Managing Partner, J. Stephen Poor. “Their achievements in the field have made lasting contributions to the firm, and we are proud to support their future successes as new leaders as they continue to develop their practices.”

The following lawyers have been elevated to partner:

Corporate

Sheryl Dacso - Houston
Patrick LaRue - Houston

Employee Benefits & Executive Compensation

Nicholas Waddles - Los Angeles

Labor & Employment

Molly Eastman - Chicago
Brandon McKelvey - Sacramento
Andrew McNaught - San Francisco
Barry Miller - Boston
Jill Porcaro - Los Angeles
Arthur Rooney - Chicago

Litigation

Giovanna Ferrari - San Francisco
James McNairy - Sacramento
Scott Olson- San Francisco
Scott Schaefers - Chicago

Real Estate

Alexander Jackins - Washington, D.C.

DOL Rules That SOX Whistleblower Provision Has No Extraterritorial Application

Tue, 17 Jan 2012 00:00:00 -0400

The U.S. Department of Labor’s Administrative Review Board (ARB) ruled in a 3-2 en banc decision that Section 806 of the Sarbanes-Oxley Act of 2002 has no extraterritorial application. Villanueva v. Core Labs., NV, ARB No. 09-108 (Dec. 22, 2011).

Complainant, a Colombian national, was the CEO of Saybolt de Colombia Limitada (Sayboldt), an indirect subsidiary of Core Laboratories (Core), a Dutch company whose securities are registered under the Securities Exchange Act and traded on the New York Stock Exchange. Core had an office in Houston, and Complainant alleged that Core controlled Sayboldt’s business. Complainant further alleged that he complained of a tax evasion scheme that violated Columbian law to Core executives located in Houston, and that they retaliated against him by, among other things, terminating his employment.

Complainant filed a claim under Section 806 of SOX, which OSHA and an ALJ dismissed. The ARB affirmed the dismissal, principally relying on Morrison v. National Australian Bank, Ltd., 130 S. Ct. 2869, 2877 (2010), to evaluate whether Section 806 has an extraterritorial reach and to examine whether the fraudulent activity Complainant reported would trigger an extraterritorial application of Section 806. The ARB was persuaded that Section 806 does not apply extraterritorially, noting that Section 806(a)(1) refers only to domestic securities laws, criminal laws and financial regulations, and is silent to its extraterritorial application. Likewise, the ARB found that Section 806 did not cover Complainant’s claim because of the foreign nature of the alleged fraud. More specifically, the ARB ruled that dismissal was warranted because Complainant did not show that Core’s U.S. accounting policy was fraudulent, identify any domestic financial statement that was fraudulent or otherwise point to a violation of U.S. law. But, in a footnote, the ARB stated that, in addition to considering where the fraud occurred (which was the driving factor in this case) the following should be considered: the location of the job and the employer; the location of the retaliatory act, and the nationality of the laws allegedly violated that the complainant was retaliated against for reporting.

This decision represents a departure from the ARB’s recent decisions expanding the reach of Section 806.

Top 10 Whistleblower Cases Of 2011

Fri, 13 Jan 2012 00:00:00 -0400

Whistleblower litigation implicating a wide range of critical compliance issues continued to proliferate in 2011, and we saw a range of game-changing decisions. Here are some of the tunes that courts, whistleblowers and employers were singing last year.

#10: Don’t Look Back (Boston)

Hendersonv. Masco FramingCorp., No. 11-cv-00088, 2011 U.S.Dist. LEXIS 80494 (D. Nev.July 22, 2011)

This case of second impression results in a split in the approach federal courts have taken in determining whether the provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) precluding mandatory pre-dispute arbitration of whistleblower claims under Section 806 of the Sarbanes-Oxley Act of 2002 (SOX) is retroactive.

Before July 2010 (when Dodd-Frank was enacted), Plaintiff entered into a pre-dispute arbitration agreement with his employer, which governed all claims under federal law, including SOX whistleblower claims. Plaintiff filed suit under Section 806 of SOX, alleging he was discharged in retaliation for complaining that the company improperly withheld FICA Medicare taxes from his retention bonuses. He moved to compel arbitration, and the court focused on whether Dodd-Frank applies retroactively. In considering Plaintiff’s motion, the court acknowledged that there were “two non-binding, diametrically-opposed cases supporting [the parties’] respective positions” – Riddle v. DynCorp Int’l Inc., 733 F. Supp. 2d 743 (N.D. Tex. 2010) (denying retroactive application) and Pezza v. Investors Capital Corp., No. 10-cv-10113, 767 F. Supp. 2d 225 (D. Mass. Mar. 1, 2011) (giving retroactive application). The court, however, rejected the Pezza court’s approach and stressed that the presumption against retroactivity is particularly strong where, as in this case, a retroactive application would eliminate established contractual rights. Accordingly, the court granted the employee’s motion to compel arbitration.

#9: Too Much Too Little Too Late (Johnny Mathis and Deniece Williams)

Schroeder v. Greater New OrleansFed. Credit Union, No. 10-cv-31169, 2011 WL 6307889 (5th Cir. Dec. 19, 2011)

The Fifth Circuit reversed the dismissal of a whistleblower retaliation claim under the Federal Credit Union Act (12 U.S.C. § 1790b(a)(1)) (the Act), based on, among other reasons, a perceived lack of timely and complete documentation regarding a whistleblower’s performance problems.

Plaintiff was a manger in the company’s lending department and call center. Around December 2007, Plaintiff informed the CEO that she believed potentially fraudulent conduct was occurring in connection with lending practices. In March 2008, Plaintiff made the same reports to the Board of Directors (Board). On May 30, 2008, Plaintiff brought her claims of fraud to the chair of the company’s Supervisory Committee (Committee). According to Plaintiff, on June 19 and 20, 2008, she made seven calls to the National Credit Union Administration (NCUA). The NCUA had no record of her calls, and she never told any supervisors about the calls. However, two co-workers claimed that Plaintiff expressed her plans to contact the NCUA in June 2008. A week after her alleged calls to the NCUA, Plaintiff again complained to the Committee, and the company hired an auditor to investigate. The investigation confirmed that some loans violated internal policies, but there was no criminal fraud. In mid-July 2008, co-workers asserted that they informed the CEO that Plaintiff contacted the NCUA. On August 8, 2008, the CEO reduced Plaintiff’s salary, and Plaintiff then complained to the Board and Committee that this was retaliatory. Over the next week, the company added complaints about Plaintiff’s performance in her personnel file. On October 8, 2008, the Board discharged Plaintiff.

Plaintiff filed a whistleblower retaliation suit under the Act, which expressly bars a credit union from retaliating against an employee because that individual provided information to the NCUA or the U.S. Attorney General regarding any violation (by a credit union) of any law or regulation. The district court granted the company summary judgment. The Fifth Circuit affirmed the finding that Plaintiff’s demotion, which was preceded only by internal complaints, was not actionable. But it found that there was a genuine issue of material fact as to whether the Company knew Plaintiff complained to the NCUA. It also ruled that a fact issue existed as to causation given its conclusion that there was little evidence of disciplinary problems in Plaintiff’s personnel record, and that Plaintiff’s performance issues were recorded in her personnel file after her complaints to the NCUA and just a week before her termination.

#8: Come Together (The Beatles)

DeGuelle v. Camilli, No. 10-cv-2172, 2011 U.S. App. LEXIS 24868 (7th Cir. Dec. 15, 2011)

The Seventh Circuit ruled that retaliation against an employee for reporting alleged criminal activity to law enforcement can constitute a racketeering “predicate act,” resulting in liability under the Racketeer Influenced and Corrupt Organizations Act (“RICO”). RICO makes it unlawful for an employee of an enterprise engaged in interstate commerce to “conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity,” which requires the commission of at least two “predicate acts” of racketeering. SOX added retaliation for “providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense” to the list of predicate acts.

Plaintiff filed a lawsuit alleging that his employer terminated him in retaliation for reporting a tax fraud scheme to law enforcement, and argued that his termination was retaliatory and constituted a predicate act under RICO. A rare move in this context, the Seventh Circuit reversed the district court’s dismissal of the complaint, finding that Plaintiff sufficiently alleged that the company’s motivation in terminating Plaintiff was retaliation for the disclosure of the alleged tax scheme, and concluding that “[r]etaliatory acts are inherently connected to the underlying wrongdoing exposed by the whistleblower.”

#7: The Song Remains The Same (Led Zeppelin)

Johnson v. Stein Mart, Inc., No. 10-cv-13434, 2011 U.S. App. LEXIS 18736 (11th Cir. Sept. 9, 2011) (unpublished)

The Eleventh Circuit incorporated defenses common to basic employment law doctrine into the SOX whistleblower context in the course of granting the company summary judgment.

Plaintiff alleged she was transferred, disciplined and discharged from her inventory planner position in retaliation for blowing the whistle on improper accounting and business practices. She began complaining in Spring 2003. On December 1, 2004, the company issued Plaintiff written discipline because she deviated from a purchase plan. On February 11, 2005, Plaintiff received a negative performance evaluation and was placed on a 90-day performance improvement plan. On March 15, 2005, Plaintiff told the CFO that she believed she was retaliated against for her prior internal complaints about what she believed to be unlawful business practices. The CFO conducted an investigation into Plaintiff’s claim, and concluded on May 10, 2005 that there was no evidence to support her allegations. On May 19, 2005, the company terminated Plaintiff’s employment.

The district court granted the company summary judgment on Plaintiff’s Section 806 claim, and the Eleventh Circuit affirmed. The Eleventh Circuit concluded that there was clear and convincing evidence that the company would have discharged Plaintiff in the absence of her complaint. In so concluding, the Eleventh Circuit embraced the employment law doctrine that: (i) an employer need not be “correct” in determining that a plaintiff’s performance is unsatisfactory; (ii) courts “do not sit as a super-personnel department”; and (iii) an employee cannot avoid the consequences of unacceptable performance by blowing the whistle.

#6: With A Little Help From My Friends (The Beatles)

Egan v. TradingScreen, Inc., No. 10-cv-8208, 2011 U.S.Dist. LEXIS 47713 (S.D.N.Y. May 4, 2011)

2011 saw the first decision under Dodd-Frank’s anti-retaliation provision. Plaintiff was the company’s head of sales for the Americas. In early 2009, he allegedly learned that the CEOwas diverting corporate assets to another company that he solely owned. In January 2010, believing that the CEO’s behavior was jeopardizing the company’s business, Plaintiff reported it to the President of the company, who then contacted the Board of Directors (Board). The Board hired an outside law firm to conduct an investigation, in which Plaintiff participated. The investigation confirmed Plaintiff’s allegations. Shortly thereafter, the CEOterminated Plaintiff’s employment.

An issue of first impression, the court considered whether Dodd-Frank’s anti-retaliation provisions require a plaintiff personally to report information to the SEC. Though Plaintiff never personally and directly reported any information to the SEC, he claimed he was protected since he initiated the inquiry and disclosed information in interviews with the law firm conducting the investigation. Plaintiff claimed he was “acting jointly” with the law firm because he expected the law firm to report the information to the SEC. The court agreed with Plaintiff, noting that “[t]he plain text of the statute merely requires that the person seeking to invoke the private right of action have acted with others in such reporting, not that he or she led the effort to do so.” It thus found Plaintiff’s cooperation with the law firm’s investigation sufficient to allow him to invoke Dodd-Frank’s protections — provided he demonstrate that the law firm did in fact provide the information to the SEC. Notably, in a subsequent decision in this case, the court dismissed Plaintiff’s claim with prejudice because Plaintiff could not show that the law firm relayed his statements to the SEC.

#5: This Is How We Do It (Montell Jordan)

Hemphill v. Celanese Corp., 430 Fed. Appx. 341, 2011 U.S. App. LEXIS 13019, No. 10-cv-10746 (5th Cir. July 23, 2011) (unpublished)

This Fifth Circuit confirmed that conducting an independent investigation into a whistleblower’s performance issues substantially heightens an employer’s chances of prevailing on summary judgment.

Plaintiff, an internal audit manager, reported concerns that employees were not complying with legal requirements and internal policies. The company investigated and concluded that there were no violations of any laws. But Plaintiff alleged that his supervisor then told him not to “develop issues,” and rebuffed his request to report alleged violations of SEC rules to the audit committee. Soon thereafter, Plaintiff allegedly yelled at his secretary. A human resources (“HR”) employee who was unaware of Plaintiff’s complaints conducted an investigation into this conduct. The employees who were interviewed worked in a different department than Plaintiff and “had no material interest in [Plaintiff’s] auditing activities.” The HR investigator recommended that Plaintiff be terminated due to his “lying during a formal investigation, harassment of an employee, and creating a negative work environment for the team and those around him.”

Plaintiff filed a complaint under Section 806, and the district court granted the company summary judgment. The Fifth Circuit affirmed, finding that Plaintiff’s protected activity did not contribute to the discharge decision, noting that the company presented “substantial evidence” that it conducted an investigation into Plaintiff’s inappropriate behavior and decided to discharge him on this basis alone. It also found that the company presented clear and convincing evidence that it would have discharged Plaintiff regardless of whether he engaged in protected activity. In so finding, the court emphasized that: (i) the company conducted a thorough investigation; (ii) the HR professionals who supported the recommendation to terminate had no knowledge of the alleged protected activity; (iii) HR interviewed employees who did not work in Plaintiff’s department and “had no material interest in plaintiff’s auditing activities”; and (iv) the supervisor who allegedly told Plaintiff to not “develop issues” was not involved in the investigation and “simply accepted the unanimous termination recommendation.”

#4: Anything Goes (Cole Porter)

Menendez v. Halliburton, Inc., No. 09-002, 2011 DOLAd. Rev. Bd. LEXIS 83 (ARBSept. 13, 2011)

In 2011, the U.S. Department of Labor’s Administrative Review Board (ARB) adopted a new standard governing “adverse employment actions” under Section 806. Now, according to the ARB, an employee need not experience a “tangible” consequence as a result of protected activity.

Claimant filed suit under Section 806, alleging that the company retaliated against him because he had complained to the SEC and the company’s audit committee regarding accounting practices. In particular, he claimed that the company violated his expectations of confidentiality by “outing” him / exposing his identity as a whistleblower. The Administrative Law Judge (ALJ) dismissed his complaint, finding that he had failed to demonstrate that the company had taken adverse action against him. The ARB, however, found that the ALJ erred in finding that Complainant did not suffer an adverse action, concluding that Section 806’s reference to the “terms and conditions of employment” does not limit SOX’s protections to “economic or employment-related actions.” The ARB then analyzed Complainant’s claim that the e-mails referencing his whistleblower complaints breached his right to confidentiality under Section 301 of SOX, which requires publicly-traded companies to establish procedures for confidential, anonymous submissions of employee complaints. The ARB found that Section 301 “effectively establishes a ‘term and condition’ of employment within the meaning of Section 806’s whistleblower protection provision,” and concluded that purportedly outing Complainant was an adverse action.

#3: Don’t Stop Believin’ (Journey)

Wiest v. Lynch, No. 10-cv-3288, 2011 U.S. Dist. LEXIS 132114 (E.D. Pa. Nov. 16, 2011)

Just as employers thought the sky was falling, this federal court held that the ARB’s landmark decision in Sylvester v. Parexel Int’l LLC (discussed below) is not binding on federal courts, and continued to embrace a heightened standard for protected activity.

Plaintiffs filed a complaint alleging retaliation under Section 806 after having reported concerns about certain corporate expenditures. The court held that Plaintiffs failed to adequately allege that they engaged in protected activity, and stressed that Section 806 only protects employees who provide information regarding conduct they “reasonably believe” violates one of the laws enumerated in Section 806, and that the complaint must “definitively and specifically” relate to such laws. Following the dismissal of the complaint, Plaintiffs moved for reconsideration, relying on the ARB’s decision in Sylvester rejecting the “definitively and specifically” standard. The court denied the motion, holding that “[a]n ARB decision is not binding authority on a United States district court.” The court followed the lead of the First, Fourth, Fifth and Ninth Circuits in strictly applying the “definitively and specifically” standard. It also reiterated that the complaint was properly dismissed because Plaintiffs failed to establish that they had conveyed an objectively reasonable belief that fraud occurred.

#2: Upside Down (Diana Ross)

Sylvester v. Parexel Int’l LLC, No. 07-123, 2011 WL 2165854 (ARB No. 07-123) (en banc)

This decision is nearly the pinnacle of the liberal approach the ARB took last year in interpreting Section 806. Complainants reported to company managers that their co-workers failed to properly record test times for clinical drug trials that the company performed on behalf of drug manufacturers; that management responded that it “was no big deal”; and that they then were subjected to various forms of retaliation. The ALJ dismissed the complaint, finding that Complainants failed to establish they engaged in SOX-protected whistleblower activity. However, the ARB reversed, making the following significant pronouncements:

The federal pleading standards do not apply to SOX whistleblower claims initiated with OSHA.
An employee’s complaint need not “definitively and specifically” relate to the categories listed in Section 806, and need not relate to fraud on shareholders.
The “reasonable belief” standard does not require that the complainant actually communicate the reasonableness of his or her belief to management or other authorities.
Section 806 protects complaints about a violation of law that has not yet occurred, provided that the employee reasonably believes, based on facts known to him or her, that the violation is about to be committed.
A complainant need not establish the elements of criminal fraud.

The question now is whether federal courts will defer to this decision.

#1: Breaking The Law (Judas Priest)

Vannoy v. Celanese Corp., No. 09-1118, 2011 DOLSOX LEXIS 68 (ARB Sept. 28, 2011)

The ARB ruled that a whistleblower’s misappropriation of confidential information in violation of a confidentiality agreement – which could irreparably harm the company and damage many other employees – might still qualify as protected activity.

Complainant was the former administrator of the company’s expense reimbursement program. He filed an internal complaint asserting that the company’s system of administering its electronic expense reimbursement and corporate credit card system, and alleged misuse of employee credit cards, posed financial risk to the company. Unbeknownst to the company, Complainant submitted a complaint under the IRS Whistleblower Reward Program, with which he disclosed the information he had misappropriated.

Following his discharge, Complainant filed a complaint with the OSHA under Section 806. OSHA dismissed the complaint, as did an ALJ, but the ARB ruled in Complainant’s favor. The ARB recognized the tension between employer confidentiality policies and employee whistleblower bounty programs, which preclude companies from enforcing or threatening to enforce confidentiality agreements to prevent whistleblowers from cooperating with the SEC. The ARB directed the ALJ to conduct an evidentiary hearing to determine whether the information the complainant misappropriated was the kind of “original information” Congress intended to protect and whether the method of transfer of information was protected lawful conduct within the scope of SOX. In this regard, the ARB indicated that while Complainant’s conduct may have violated company policy, no charges were brought in connection with his conduct. However, the ARB did not otherwise define “lawful conduct” in this context.

By: Steven J. Pearlman, Christopher F. Robertson, Kara Goodwin, Rachel S. Urquhart, Raymond A. Gallenberg and Dawn Mertineit

Steven J. Pearlman is a partner in Seyfarth’s Chicago office, Christopher F. Robertson is a partner in Seyfarth’s Boston office, Kara Goodwin and Rachel S. Urquhart are associates in Seyfarth’s Chicago office, Raymond A. Gallenberg is an associate in the Los Angeles office and Dawn Mertineit is an associate in the Boston office. If you would like further information, please contact your Seyfarth attorney, any member of the firm’s SOX Whistleblower Team, Steve Pearlman at spearlman@seyfarth.com, Chris Robertson at crobertson@seyfarth.com, Kara Goodwin at kgoodwin@seyfarth.com, Rachel Urquhart at rurquhart@seyfarth.com, Ray Gallenberg at rgallenberg@seyfarth.com or Dawn Merineit at dmertineit@seyfarth.com.

Andrew Perellis and Ilana Morady Published in Law360
"Supreme Court Justices Question Validity of EPA's Principal Enforcement Tool"

Fri, 13 Jan 2012 00:00:00 -0400

Seyfarth Environment partner Andrew Perellis and associate Ilana Morady published a piece January 10 in Law360 examining the aftermath of oral arguments in Sackett v. EPA.

The case centers on the EPA’s contention that its administrative compliance orders (ACOs) issued under the Clean Water Act (CWA) are not subject to judicial review until and unless the EPA brings an enforcement action.

Andy and Ilana write that the decision, expected this spring, would impact not only the CWA enforcement authority, but also the Clean Air Act, and possibly orders issued under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) as well.

"Interestingly, although the Sacketts are ordinary citizens, most of the amici on their side are business interests. In fact, three weeks before the Supreme Court granted review of the Sacketts’ case, it denied certiorari to General Electric Co., which had put forth a nearly identical legal grievance under CERCLA," the writers note, adding, "If the Sacketts prevail, the decision will hugely impact the way the EPA uses enforcement tools against corporations and other businesses. There are no amici on the EPA's side."

Wave Of Class Certification Denials Following Dukes v. Wal-Mart May Signal A Trend Away From Class Treatment In Wage Hour Cases

Fri, 13 Jan 2012 00:00:00 -0400

In the last two weeks, there have been three separate decisions out of the Ninth Circuit that have cited Dukes in support of rulings denying class certification under Rule 23 of the Federal Rules of Civil Procedure: Sepulveda v. Wal-Mart Store, Inc., Hughes v. WinCo Foods, and Aburto v. Verizon California, Inc. These decisions may signal a change in the future viability of wage and hour class action litigation, at least in federal court. Each of these cases involved facts and allegations that, before Dukes, would have presented a strong argument for class certification. In each of these cases, however, the Court relied on the U.S. Supreme Court's decision in Dukes v. Wal-Mart to deny class certification.

The Sepulveda Decision

On December 30, 2011, the Ninth Circuit vacated its prior decision reversing a district court's denial of class certification under Federal Rule of Civil Procedure 23(b)(2).

The underlying case sought to certify a class of current and former assistant managers of Wal-Mart who alleged they were misclassified as exempt from overtime requirements. Plaintiffs sought certification under Rule 23(b)(2) on the grounds that Wal-Mart's common policy of classifying assistant managers as exempt was enough to warrant injunctive relief, and also under Rule 23(b)(3) on the grounds that common questions of law and fact predominated on the misclassification issue. In 2006, a judge in the Central District of California denied class certification under both Rule 23(b)(2) and Rule 23(b)(3). The district court held that class certification was not appropriate under Rule 23(b)(2) despite the presence of a common policy, because the monetary relief sought, overtime payments, was not incidental to the injunctive relief sought. On appeal, the Ninth Circuit reversed, finding that the district court abused its discretion because it relied on the "not incidental test" not followed by the Ninth Circuit at the time. Wal-Mart then filed a petition for rehearing and the Ninth Circuit stayed its decision pending the Supreme Court's decision in Dukes v. Wal-Mart.

The Ninth Circuit vacated its prior order, acknowledging that the Supreme Court in Dukes clarified that Rule 23(b)(2) "does not authorize class certification when each class member would be entitled to an individualized award of monetary damages." Because the putative class members' claims would "require highly individualized proof of the duties each [Assistant Manager] performed, the hours spent on those duties, and the overtime hours actually worked," it was not an abuse of discretion for the district court to conclude that the monetary relief was highly individualized, and not simply incidental to the injunctive relief sought on behalf of the putative class.

The Hughes Decision

In Hughes, the plaintiffs sought to certify a class of all hourly employees at WinCo stores in California based on "late" meal period claims. Among other things, plaintiffs argued that WinCo failed to provide grocery employees with meal periods during the first five hours of their shifts because it required manager permission for employees to take a meal period.

Citing Dukes, the district court denied class certification because WinCo gave store and department managers discretion over the timing and arrangement of meal periods. As a result, the decision-making with respect to when employees took meal periods varied from store to store and department to department such that the timing of meal periods could not be proven reliably on behalf of the class with evidence in "a single stroke."

The court also concluded that plaintiffs "failed to…demonstrate the predominance of common questions." Because of the substantial individualized inquires that would be necessary to adjudicate plaintiffs' "late" meal period claim, the Court determined that the class action would devolve into hundreds or thousands of "mini-trials" and the superiority requirement was not met.

The Aburto Decision

In Aburto, the plaintiffs sought certification under Rule 23(b)(3) based on Verizon's alleged common policy of misclassifying its First Level Managers ("FLMs") as exempt from overtime. The district court denied class certification, finding that the ultimate question of whether Verizon unlawfully classified FLMs as exempt "is an individualized inquiry involving facts unique to each Plaintiff." The court noted that it was not enough merely to allege a common scheme or policy, but instead plaintiff must establish the reasons why each FLM was treated in an allegedly unlawful manner.

The evidence before the court revealed that FLMs had different job duties and carried out these duties in a variety of ways based on the location and size of each FLM's respective worksite, the number of employees assigned to each worksite and its business volume as well as the experience level of the employees and the type of work actually performed. In denying class certification, the court relied heavily on Dukes, noting that '[w]ithout some glue holding the alleged reasons for those decisions together, it will be impossible to say that examination of all the class members' claims for relief will produce a common answer to the crucial question why was I disfavored."

What Sepulveda, Hughes, and Aburto Mean For Employers

While the class certification tide may be changing, the law remains unsettled in the application of Dukes to wage and hour claims, especially those brought as collective actions under the Fair Labor Standards Act. Although Wal-Mart, Verizon and WinCo defeated class certification, it is possible that other employers with problematic policies would not have achieved the same results. As these cases demonstrate, whether a lawful policy affected each putative class member in the same manner is a question that often times can only be answered by analyzing the application of the policy with respect to each individual employee, making class certification inappropriate under Dukes.

By: Laura Reathaford

Laura Reathaford is an associate in Seyfarth's Los Angeles office. If you would like further information, please contact your Seyfarth Shaw LLP attorney or Laura Reathaford at lreathaford@seyfarth.com

Steven Pearlman Quoted in Law360
“DOL Limits the Reach of SOX Whistleblower Protection”

Fri, 13 Jan 2012 00:00:00 -0400

Employment partner Steven Pearlman was quoted in an article appearing in the January 9 issue of Law360. The article reported on a Sarbanes-Oxley Act (SOX) whistleblower case that the U.S. Department of Labor (DOL) declined to revive last month. In the case, Villaneuva, a non-U.S. citizen working for Saybolt Columbia in Bogata, claimed to have been fired after complaining about a tax evasion scheme which allegedly violated Columbian law. The DOL rejected the case, holding that the SOX whistleblower provision doesn’t allow for extraterritorial application.

“The Villanueva decision should give employers confidence that if a complaint hinges on an employment relationship between a foreign employer and a foreign employee who complains about fraudulent conduct occurring outside the U.S., the employer likely won't be liable for retaliation under SOX,” Steve commented.

However, Steve went on to explain that the ruling doesn’t necessarily preclude a worker who alleges retaliation stemming from a complaint about a perceived violation of non-U.S. law from bringing a successful SOX whistleblower claim.

“I'm not confident that the ARB would embrace a result that's that sweeping,” he surmised.

Steven Pearlman Quoted in Compliance Week
"Study: Whistleblowers Want Anonymity, Monetary Rewards"

Thu, 12 Jan 2012 00:00:00 -0400

Seyfarth Labor & Employment partner and Chair of the firm's Sarbanes-Oxley Act Whistleblower Team, Steven Pearlman, was quoted in Compliance Week on January 10. The article discussed a recent poll which showed that 78% of the respondents would be willing to report misconduct in the work place if "it could be done anonymously, without retaliation, and would result in a monetary reward."

"The SEC's Whistleblower Program is young, and the SEC is continuing to make efforts to raise awareness of its function and capacity," says Steve. "I expect the numbers of individuals who are aware of the program to increase quite a bit when bounties are issued; bounties should garner media and other attention."

Steve suggests that employers "start evaluating and identifying shortcomings in their internal whistleblower programs in anticipation of what is to come." Steve names the lack of processes in place to handle whistleblower complaints as one of the most widespread issues. "Most companies have sophisticated internal compliance programs, but they are not equipped with processes that will account for certain dynamics or risks in dealing with these complaints."

"You have to make the whistleblower be aware that all divisions are working to handle the reported case appropriately," he comments. "Treat whistleblowers like assets who have helped you. Give them some form of recognition like a letter, and be transparent with the employees by telling them that investigations are being carried out based on their complaints."

Supreme Court Blesses Ministerial Exception To ADA Retaliation Claim

Thu, 12 Jan 2012 00:00:00 -0400

On January 11, 2012, in Hosanna-Tabor Evangelical Lutheran Church & School v. EEOC , the U.S. Supreme Court issued its first decision on the “ministerial exception.” The Court held that this judicial doctrine barred a claim that a religious school retaliated against a “called” teacher after she claimed she had been discriminated against because of her disability, narcolepsy.

Case Background

Cheryl Perich worked for Hosanna-Tabor, a K-8 school belonging to the Lutheran Church-Missouri Synod. Perich was a “called” teacher, a teacher who is regarded as having been called to teaching by God and who receives the formal title “Minister of Religion, Commissioned.” As part of her duties, Perich held herself out as a minister, conveyed the Church’s message and carried out its mission. She taught students religion four days a week, and led them in prayer three times a day.

In mid-2004, Perich became ill with narcolepsy. The school, doubting that Perich could continue her duties, asked her to resign. She refused and attempted to return to work once she was cleared to do so by her physician. The school then rescinded Perich’s call and terminated her employment.

Perich filed a charge with the Equal Employment Opportunity Commission. The EEOC sued Hosanna-Tabor, claiming that Perich had been fired in retaliation for threatening to sue under the Americans With Disabilities Act. (The ADA contains two partial religious employer exemptions, neither of which applies to the prohibition against retaliation.)

In defense of the claim, Hosanna-Tabor argued that Perich was a minister who had been fired for a religious reason – threatening to sue the church in violation of the Synod’s belief that Christians should resolve their disputes internally. The District Court determined that the suit was barred by the ministerial exception and granted summary judgment to Hosanna-Tabor. The Sixth Circuit Court of Appeals reversed, concluding that Perich was not a “minister” under the exception.

The Supreme Court’s Decision

The Supreme Court’s majority opinion, authored by Chief Justice Roberts, began with a discussion of the history of the concept that governments should not interfere with the internal workings of religious organizations. The discussion began with the Magna Carta, proceeded to the Puritans’ arrival in the United States, and culminated with citations to the works of James Madison.

The Supreme Court noted that although this was the Court’s first occasion to consider whether the “freedom of a religious organization to select its ministers is implicated by a suit alleging discrimination in employment,” the Courts of Appeal had uniformly recognized the existence of a ministerial exception grounded in the First Amendment, which precludes claims concerning the employment relationship between a religious organization and its ministers.

The Supreme Court agreed that such a ministerial exception exists, and that requiring a church to employ an unwanted minister would interfere with the church’s internal governance, thereby depriving the church of a power to select those who will personify its beliefs. The imposition of an unwanted minister, according to the majority, would infringe the Free Exercise Clause, which protects a religious group’s right to shape its own faith and mission through its appointments. The majority also found that judicial involvement in the ministerial selection would violate the Establishment Clause, which prohibits government involvement in ecclesiastical decisions.

Having concluded that a ministerial exception existed, the Court then determined that the exception is not limited to the head of a religious congregation. The exception applied to Perich, the Court concluded, because of her formal title, the substance reflected in that title, her own use of the title, and the important religious functions she performed. In concluding that Perich was a minister, the Court found that the Sixth Circuit had improperly failed to see any relevance in the fact that Perich was a commissioned minister. However, the Court noted that such a title, by itself, would not automatically ensure application of the ministerial exception, and declined to adopt a rigid formula for deciding when an employee qualifies as a minister.

Finally, the Court held that the Sixth Circuit gave too much weight to the fact that lay teachers at the school performed the same religious duties as Perich, and that the Sixth Circuit erred by placing too much emphasis on Perich’s performance of secular duties.

After thus analyzing the Sixth Circuit decision, the Court went on to reject the argument made by the EEOC and Perich that Hosanna-Tabor’s asserted religious reason for terminating Perich – that she violated the Synod’s commitment to internal dispute resolution – was pretextual. The Court held that this argument missed the point of the exception, which was not limited to safeguarding a church’s decision to terminate a minister only when the termination decision is made for a religious reason.

Justice Thomas, who concurred in the majority opinion, wrote separately to express his view that courts should defer to a religious organization’s good faith understanding as to who qualifies as its minister. According to Justice Thomas, the right of a religious organization to select its ministers would be “hollow” if secular courts were allowed to “second guess” the organization’s sincere determination that an employee was a minister.

Justice Alito, with whom Justice Kagan joined, filed a separate concurring opinion to clarify his understanding that formal ordination and designation as a “minister” was not necessary for an individual to fall within the ministerial exception.

By:Jeffrey Berman

Jeffrey Berman is a partner in Seyfarth’s Los Angeles office. If you would like further information, please contact your Seyfarth Shaw LLP attorney or Jeffrey Berman jberman@seyfarth.com.

Robert Milligan Co-Edits Supplement to Trade Secret Protection and Litigation in California Treatise

Wed, 11 Jan 2012 00:00:00 -0400

Seyfarth Shaw Los Angeles Trade Secrets partner Robert Milligan co-edited a comprehensive supplement recently released by the State Bar of California to the Trade Secret Protection and Litigation in California treatise.

The supplement updates the statutory and case law in the Second Edition of the Trade Secret Protection and Litigation in California practice guide published by the State Bar of California in 2009. The updates include additional practical tips for protecting trade secrets and for handling trade secret disputes. Recent developments addressed in this supplement include:

Discussion and analysis of more than 50 new cases on topics including misappropriation, preemption, identification of trade secrets, injunctions, damages and attorneys fees;
New content regarding social media policies and measures to protect against trade secret theft; and
New and updated jury instructions from the Judicial Council’s official California Civil Instructions (CACI) for use in trade secret misappropriation cases applying California law.

Marshall Babson Quoted in Reuters
"Employee class actions okay, Concepcion doesn't apply: NLRB"

Wed, 11 Jan 2012 00:00:00 -0400

In a Reuters article that also cited Seyfarth's Workplace Class Action Litigation Report, partner Marshall Babson was quoted regarding the NLRB's ruling in D.R. Horton, Inc. and Michael Cuda, which held that last year's U.S. Supreme court Concepcion ruling doesn't apply to NLRB cases.

As noted in the Report, AT&T Mobility vs. Concepcion was cited in more that 215 cases last year, despite only being handed down in June. It held that AT&T could compel consumers to submit to arbitration, even though California law seemed to permit a consumer class action. In their ruling, the NLRB drew a distinction between consumer issues and labor laws, even when arbitration is a possibility.

"The NLRB is thumbing its nose at private arbitration agreements," said Marshall, who submitted an amicus brief in the case on behalf of the Chamber of Commerce. "The National Labor Relations Act is not intended to be a super-class-action statute."

Marshall went on to say the board's assurance that its ruling will have limited effect, since (unlike Concepcion) it applies only to employment arbitration agreements, is "breathtaking in its lack of understanding." At a minimum, he said, the ruling will affect tens of thousands of employees with no-class-action clauses in employment agreements that mandate arbitration. "Every guy on Wall Street signed one of these agreements," he said.

Click here to read the full article.

Robert Bodansky Published in the Washington Business Journal
“How Being Indispensable Can Hurt the Sale of Your Company”

Tue, 10 Jan 2012 00:00:00 -0400

An article by Corporate partner Robert Bodansky was published in the January 4 issue of the Washington Business Journal. In the article, Bob warns against private companies being too dependent on their owners or other key personnel.

“Very often, the owner of a private company is ‘the company,’” Bob remarks. “It is the owner’s contacts, reputation and expertise that has created and sustained the company and brought in the opportunities.” When the company’s success is tied to a key individual, the company’s chances of being sold are reduced, as “the buyer would have nothing to show for its investment.”

To enhance company value, Bob recommends developing talent internally or through lateral hiring. “It is important to realistically look at the business, define the key positions or roles, candidly assess existing personnel and then get the right people into the appropriate slots,” he emphasizes.

To read the entire article, click here: http://www.bizjournals.com/washington/blog/fedbiz_daily/2012/01/how-being-indispensable-can-hurt-the.html?s=print

Marshall Babson Quoted in The New York Times
"Labor Board Backs Workers on Joint Arbitration Cases"

Tue, 10 Jan 2012 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner and former member of the National Labor Relations Board (NLRB) Marshall Babson was quoted in The New York Times on January 6. The article discusses a recent decision by the NLRB which will affect companies that require employees to pursue all claims through arbitration by requiring those workers to sign mandatory arbitration agreements.

The Board ruled that any of these mandatory agreements must now contain "some way for employees to make class and collective claims, either in arbitration or in court."

Marshall points out, “The National Labor Relations Act was not intended to be a ‘super class action statute’ that protects and preserves the right to proceed as a class in all circumstances without regard to the usual considerations by the court."

Click here to read the full article: http://www.nytimes.com/2012/01/07/business/nlrb-backs-workers-on-joint-arbitration-cases.html?scp=2&sq=babson&st=cse

Law360 Selects Seyfarth Shaw’s Labor & Employment Practice as 2011 Practice Group of the Year

Tue, 10 Jan 2012 00:00:00 -0400

Contact: Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

CHICAGO (January 10, 2012) — Leading law firm Seyfarth Shaw LLP is pleased to announce its Labor & Employment group was recently selected by Law360 as a 2011 “Practice Group of the Year.”

Chair of Seyfarth’s Labor & Employment Group, Lisa Damon, Chair of the firm’s Complex Discrimination Litigation Group, Camille Olson and Co-chair of the firm’s Class Action Group, Gerald Maatman, were quoted in a Law360 article featuring the firm and its “litany of recent achievement on the employment front,” which led to Seyfarth’s inclusion in the exclusive list of winners.

According to Law360, Seyfarth was particularly noted for filing two amicus briefs which helped shape the U.S. Supreme Court’s groundbreaking decision in Wal-Mart v. Dukes. According to Olson, the briefs “presented the only evidence for the Supreme Court regarding centralized company culture and decentralized, nonformulaic decision-making, and whether or not it was inherently discriminatory.” Seyfarth was then the first out of the gate, as a management-side firm, to successfully employ the Dukes ruling in a Fair Labor Standards Act case.

“Making this year’s list is a further testament that our national Labor & Employment group is battle-ready and primed to win,” commented Damon, making the practice, “the best at what we do.”

Lauded for leading the way in litigation against the Equal Employment Opportunity Commission (EEOC), Maatman said, “We also believe we are representing employers in the three biggest EEOC lawsuits presently pending in the U.S. Employers are seeking us out to oppose the Commission in light of our track record of success in these cases. When there's a very tough case, we get called.”

Also of significance was the firm’s victory in the high-profile litigation relating to protection of client Hewlett-Packard’s trade secrets on the move of CEO Mark Hurd to Oracle, which involved work by Seyfarth’s Trade Secrets attorneys Mike Wexler and Robert Milligan, with HP's go to Seyfarth attorneys, litigators Camille Olson and Richard Lapp. Seyfarth was also selected for its successes in a Worker Adjustment and Retraining Notification Act class action, wage-and-hour class actions and plaintiff’s class actions.

With more than 550 law firm submissions received for the series of awards, Law360 editors named Seyfarth one of five recognized firms in the “Employment Group” category. Winners were chosen based on the impact, size, complexity and the number of significant, large or complex cases won by the firm. Only matters taking place between December 1, 2010 and December 1, 2011 were considered. Click here to read the full article.

C.J Eaton Published in Northeast Human Resources Association's Insights Magazine
"The A to Z of the Massachusetts Payment Law"

Mon, 09 Jan 2012 00:00:00 -0400

Boston-based Seyfarth Shaw employment attorney C.J. Eaton authored an article published in the Winter 2012 issue of Insights magazine. The article aims to assist employers in clarifying the complex and often difficult to interpret statute that governs Massachusetts wage payment laws, by reviewing the definition of a wage, when wages are earned and how frequently and when wages must be paid.

C.J. notes, "employers should carefully review the types of compensation included in wages, as well as the frequency and timing of wage payments, to ensure compliance with the law."

The article also outlines what deductions may lawfully be taken from an employee's wages and how employers must notify their employees of the deductions. "[D]ue to the ambiguous wording in the statue, the parameters regarding which deductions are allowable are less than clear…[t]hus, this is a heavily litigated area of law."

Lynn Kappelman Quoted in Massachusetts Lawyers Weekly
“Verdict reflects trend in employment disputes”

Mon, 09 Jan 2012 00:00:00 -0400

Seyfarth Shaw Boston partner Lynn Kappelman was quoted in the January 9 issue of Massachusetts Lawyers Weekly. The article discusses the recent trend and the damage that can be done to a company's reputation when faced with a claim that it illegally retaliated against an employee in connection with a discrimination claim.

Lynn notes that it is the retaliation claim that can be the more difficult for company's to defend: "Don't discount that retaliation claim, because quiet often it's the tail that wags the dog. Even if [the plaintiff has] a hard-to-win discrimination case, it's often the retaliation claim that is so hard for management to defend."

She also remarks that to help clients defend the retaliation claim, she urges them, "to make sure they can trace the termination, demotion or adverse employment decision that took place before the employee filed the complaint."

Seyfarth Shaw’s 8th Annual Workplace Class Action Litigation Report Reviews “Transformative Year” In Employment Class Actions, Sees Ripple Effect Through 2012

Mon, 09 Jan 2012 00:00:00 -0400

Supreme Court rulings in Dukes and Concepcion will reverberate as plaintiffs’ bar re-boots class certification strategies and employers formulate new defenses; Seyfarth expects EEOC to maintain “laser focus on high-impact litigation,” while sluggish economy continues to fuel FLSA and ERISA actions; 790-page Report analyzes nearly 1,000 rulings and major settlements from 2011

Contact:

Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

CHICAGO (January 9, 2012) – Leading employment law firm Seyfarth Shaw LLP has issued its annual Workplace Class Action Litigation Report, covering a charged national landscape of “bet the company” employment disputes fueled by an aggressive plaintiffs’ bar, invigorated federal and state enforcement regimes, a sluggish economic recovery, and several groundbreaking rulings by the U.S. Supreme Court in 2011 that are certain to reverberate in the year ahead and beyond.

Seyfarth notes that the Supreme Court’s decision in Wal-Mart Stores v. Dukes, handed down last June, has already been cited more than 260 times in federal and state court opinions, and AT&T Mobility v. Concepcion 215 times—remarkable figures for rulings less than a year old. Dukes, which established a new standard for certifying class actions, and Concepcion, which held that federal arbitration law supersedes limitations imposed by individual states, opened the floodgates to a wave a new case law in class actions, which will continue to evolve in the coming year and impact litigants for years to come.

Released this week, Seyfarth’s 8th annual Workplace Class Action Litigation Report examines the theoretical and strategic uncertainties stemming from the Supreme Court’s employment law rulings in 2011, and the challenges they pose for companies and their defense counsel. The new Report is the most comprehensive yet, examining 976 class action decisions rendered in the past 12 months by federal and state courts, including private plaintiff and government enforcement actions. The number of case rulings covered by Seyfarth climbed 15 percent over last year’s total of 849 – a direct result of issues raised by Dukes and Concepcion that have loomed over workplace litigation since those landmark decisions last spring.

Seyfarth’s Report remains the sole compendium dedicated exclusively to labor and employment class action litigation in the U.S. Regarded as “the definitive source on employment class action litigation” (EPLiC Magazine, Spring 2011), it has become the “go-to” research and resource guide for businesses and corporate counsel facing complex litigation. Corporate counsel routinely depict the prospect of large workplace class-actions as especially worrisome for companies, as well as a significant burden for in-house legal budgets.

As it has since its first edition in 2004, the Report is authored by Seyfarth Shaw partner Gerald L. Maatman, Jr., co-chair of the firm’s class action defense group and co-author of one of two amicus briefs submitted by Seyfarth to the Supreme Court in Dukes. Maatman also led a number of his own winning class action defense strategies in 2011, including a historic turn in a lawsuit brought by the EEOC in which he won the right to depose EEOC officials about the agency’s own personnel practices.

Click here to link to the preview of the 2012 edition of the Workplace Class Action Litigation Report. The complete 2012 Report is available to clients of the firm and interested corporate counsel. To request a free copy of the Report, please click the button below. For questions, please e-mail ClassActionReport@seyfarth.com.

The Report makes clear that 2011 workplace collective filings rose on nearly every front, from Fair Labor Standards Act and ERISA claims to government enforcement actions, even as other prime litigation theaters such as shareholder and securities actions were largely static. The Equal Employment Opportunity Commission (EEOC) set a new record with nearly 100,000 new discrimination filings against private-sector employers—an expression, the Report notes, of challenging economic conditions as well as the Obama Administration’s emphasis on aggressive enforcement. These EEOC charges “will become ripe for initiation of lawsuits in 2012,” Maatman says.

Reflecting what the Report calls the EEOC’s “laser focus on high-impact litigation,” the agency in 2011 launched 580 systemic investigations involving large groups of alleged victims – a 24 percent spike over 2010.

Maatman notes that employers should prepare themselves for a particular irony in light of the essentially favorable Dukes ruling. “One of the inevitable consequences of Dukes is not a decrease in the number of workplace class actions, but a likely increase—the wrinkle being that the new difficulty in achieving nationwide certification is forcing the plaintiffs’ class action bar into seeking multiple state or perhaps regional class cases to improve the chances of certification. Whatever the overall dimensions of class action filings, one certainty is that plaintiffs’ attorneys will be seeking a new template for certifying workplace class cases for the purpose of negotiating large settlements with defendants.”

He continues, “As for the EEOC, we expect it to continue pursuing its priority of bringing widespread, high-stakes pattern or practice lawsuits, and pursuing novel litigation issues and industry leaders for maximum impact. Despite a number of judicial sanctions levied by federal courts against the EEOC in 2011 for exceeding the bounds of good faith in prosecuting some of its lawsuits, the EEOC does not seem to have been deterred at all from maintaining a white-hot level of enforcement.”

The 2012 Workplace Class Action Litigation Report highlights several significant developments and emerging trends whose effects are likely to be felt throughout the new year:

As a result of Dukes and Concepcion in particular, a skilled and tight-knit plaintiffs’ class action bar is retooling litigation strategies, while equally innovative defense litigators have broken new ground with novel tactics to thwart or dismantle class actions and block class certification. Concurrently, federal and state courts are revisiting class certification rulings in pending cases, based on the new parameters Dukes and Concepcion created for Rule 23 cases and workplace class arbitration.
Wage & hour filings continue to outnumber all other workplace class actions, with FLSA actions brought in federal court leading the way. Wage & hour filings also rose at the state-court level, particularly in key influential states such as New York, California, Illinois, Massachusetts, Pennsylvania and New Jersey. This trend is expected to continue in 2012. (FLSA collective actions are covered in chapter 5 of the Report, while state court workplace class actions are analyzed in chapter 7.)
The uncertain economic climate continues to spur ERISA class actions seeking recovery of 401(k) losses. As ERISA cases grow in size and complexity, they are driving a trend toward substantially higher settlement figures. At the same time, the plaintiffs' bar in ERISA cases is also bumping up against questions over whether and how they can meet class certification requirements, which could make certification of ERISA claims more difficult in the year ahead. (The Report analyzes ERISA class actions in chapter 6.)
The EEOC is in the midst of a transition from bringing one-off cases and representing smaller groups of workers to initiating and litigating larger pattern or practice cases, abetted by increased funding from the Obama Administration that has expanded EEOC employee ranks by 15 percent since 2008. (Chapter 3, section B of the Report covers 2011 rulings in EEOC cases.)
Similarly, the Labor Department is aggressively expanding oversight of industries known for high rates of workplace regulation violations – such as construction, hospitality, and janitorial services – and of so-called “fissured” industries, which feature multiple organizational structures such as franchising, independent contractors, sub-contractors, and the like. Fissured industries include child-care, home healthcare, warehousing, meat processing, transportation, and others. Larger corporate-wide investigations are also expected to be part of an intensified level of DOL enforcement.
While the Concepcion decision from April 2011 secured companies’ use of bilateral arbitration clauses in consumer contracts without risking class arbitration, subsequent case law developments from the second half of 2011 suggest that the principles outlined in Concepcion are increasingly being applied to workplace contracts.
A Supreme Court decision expected in 2012 in Christopher et al v. SmithKlineBeecham will determine whether pharmaceutical sales reps qualify for the outside sales exemption—potentially impacting a wide range of FLSA collective action filings and settlements. Additionally, the Supreme Court might rule on the deference to be accorded Labor Department amicus briefs, part of the DOL’s active policy of weighing in on workplace-related cases.

“In terms of workplace litigation, the continuing trend is greater aggressiveness by plaintiffs’ lawyers and government attorneys in bringing large, complex cases against employers,” Maatman says. “There has been a significant re-shuffling of the deck as a result of landmark Supreme Court rulings in 2011; the plaintiffs’ bar has quickly adopted new strategies, which calls for equal agility and innovation on the part of companies and defense counsel. Given the pervasiveness of collective and class actions in corporate America, and thus the enormous financial stakes, employers are best served by pro-active planning to determine their potential class action vulnerabilities and prepare strategies to avert full-blown class action litigation.”

Eighth Annual Workplace Class Action Litigation Report

Mon, 09 Jan 2012 00:00:00 -0400

Now in its eighth annual edition, Seyfarth’s Workplace Class Action Litigation Report examines the theoretical and strategic uncertainties stemming from the Supreme Court’s employment law and class action rulings in 2011, and the challenges they pose for companies and their defense counsel. The Report also makes clear that workplace lawsuit filings rose on nearly every front last year, from Fair Labor Standards Act and ERISA to government enforcement actions, with the Equal Employment Opportunity Commission setting a new record for discrimination charges brought against private-sector employers in a single year.

Seyfarth notes that the Supreme Court’s decision in Wal-Mart Stores v. Dukes, handed down last June, has already been cited more than 260 times in federal and state court opinions, and AT&T Mobility v. Concepcion has been cited 215 times - remarkable figures for rulings less than a year old. Dukes, which established a new standard for certifying class actions, and Concepcion, which held that federal arbitration law supersedes limitations imposed by individual states, opened the floodgates to a wave a new case law developments in class actions and class arbitrations, which will continue to evolve in the coming year and impact litigants for years to come.

The Workplace Class Action Litigation Report remains the sole compendium published in the U.S. dedicated exclusively to labor and employment class action litigation; regarded as "the definitive source on employment class action litigation" (EPLiC Magazine, Spring 2011), it has become the "go-to" research and resource guide for businesses and corporate counsel facing complex litigation. The Report is authored by Seyfarth Shaw partner Gerald L. Maatman, Jr., co-chair of the firm’s class action defense group and co-author of one of two amicus briefs submitted by Seyfarth to the Supreme Court in Dukes. Maatman also led a number of his own winning class action defense strategies in 2011, including a historic turn in a lawsuit brought by the EEOC in which he won the right to depose EEOC officials about the agency’s own personnel practices.

This edition of the Report is the most comprehensive yet, examining 976 class action decisions rendered in the past 12 months by federal and state courts, including private plaintiff and government enforcement actions. The number of case rulings covered by Seyfarth climbed 15% over last year’s total of 849 – a direct result of issues raised by Dukes and Concepcion that have loomed over workplace litigation since those landmark decisions last spring.

View press release for more information

Preview the 2012 Workplace Class Action Litigation Report

The complete 2012 Report is available to clients of the firm and interested corporate counsel. To request a free copy of the Report, please click the button below. For questions, please e-mail ClassActionReport@seyfarth.com.

Seyfarth Publishes Eighth Annual Workplace Class Action Litigation Report

Mon, 09 Jan 2012 00:00:00 -0400

Seyfarth Shaw is pleased to announce the publication of the eighth annual edition of the Workplace Class Action Litigation Report. The 2012 Report examines the theoretical and strategic uncertainties stemming from the Supreme Court's employment law and class action rulings in 2011, and the challenges they pose for companies and their defense counsel. It also makes clear that workplace lawsuit filings rose on nearly every front last year, from Fair Labor Standards Act and ERISA to government enforcement actions, with the Equal Employment Opportunity Commission setting a new record for discrimination charges brought against private-sector employers in a single year. Clients and friends of the firm can download the first chapter of the Report by clicking here. A copy of the Report can be requested by clicking here.

The Report notes that the Supreme Court's decision in Wal-Mart Stores v. Dukes, handed down last June, has already been cited more than 260 times in federal and state court opinions, and AT&T Mobility v. Concepcion has been cited 215 times - remarkable figures for rulings less than a year old. Dukes, which established a new standard for certifying class actions, and Concepcion, which held that federal arbitration law supersedes limitations imposed by individual states, opened the floodgates to a wave a new case law developments in class actions and class arbitrations, which will continue to evolve in the coming year and impact litigants for years to come.

The Workplace Class Action Litigation Report remains the sole compendium published in the U.S. dedicated exclusively to labor and employment class action litigation; regarded as "the definitive source on employment class action litigation" (EPLiC Magazine, Spring 2011), it has become the "go-to" research and resource guide for businesses and corporate counsel facing complex litigation. The Report is authored by Seyfarth Shaw partner Gerald L. Maatman, Jr., co-chair of the firm's class action defense group and co-author of one of two amicus briefs submitted by Seyfarth to the Supreme Court in Dukes. Maatman also led a number of his own winning class action defense strategies in 2011, including a historic turn in a lawsuit brought by the EEOC in which he won the right to depose EEOC officials about the agency's own personnel practices.

This edition of the Report is the most comprehensive yet, examining 976 class action decisions rendered in the past 12 months by federal and state courts, including private plaintiff and government enforcement actions. The number of case rulings covered by Seyfarth climbed 15% over last year's total of 849 – a direct result of issues raised by Dukes and Concepcion that have loomed over workplace litigation since those landmark decisions last spring.

View press release for more information.

Preview the 2012 Workplace Class Action Litigation Report here.

NLRB Plurality Thumbs Its Nose at Private Arbitration Agreements for Non-Union and Union Employers

Sat, 07 Jan 2012 00:00:00 -0400

A Brief Review of this Significant Decision and An Invitation to a Webinar on Thursday, January 12

In a case of great significance to both union and non-union employers, the National Labor Relations Board late Friday afternoon dealt a crushing blow to arbitration agreements. During the past two dozen years, private employers have implemented arbitration agreements as a means to resolve employment disputes more efficiently than is possible in the judicial system. At the end of 2011, almost 40% of all cases pending in the federal courts were claims by employees or former employees against employers. The U.S. Supreme Court in AT&T Mobility v. Concepcion just last year endorsed use of an arbitration system that is fair and regular, preserves access to remedies, and provides for a decision by a neutral third party arbitrator. A common feature of arbitration agreements approved by the Supreme Court in Concepcion is a waiver of any resort to class or collective actions.

On Friday, however, in a devastating blow to arbitration, two Members of a three Member NLRB struck down all class action waivers as a violation of Section 7 of the NLRA. Relying upon an old line of cases that generally preserved access to the legal system by employees as a form of protected concerted activity, the two Member plurality invalidated the class action waiver contained in the company-wide arbitration program of D.R. Horton, a nationwide homebuilder headquartered in Dallas. Although the two Members paid lip service to the national policy favoring private arbitration agreements and to the recent Supreme Court cases striking down limitations on arbitration, the two Members essentially elevated the National Labor Relations Act to the status of "Super Class Action Statute" -- a result certainly not contemplated by Congress in 1935 when the NLRA was enacted and when class or collective actions were a rarity.

The decision in D.R. Horton likely will be reviewed by the U.S. Court of Appeals, and perhaps by the Supreme Court as well. Meanwhile, many important questions loom for employers with arbitration policies. Should policies be revised or withdrawn? Can courts rely on Section 7 to invalidate arbitration agreements, or can only the NLRB do that? Must class or collective waivers be removed, or can they be severed with the rest of the arbitration agreement enforced? Is there additional language that may or should be added to such policies that will preserve them? Unfortunately, the D.R. Horton decision, rather than settling the dust as many had hoped, has stirred up a storm that is likely to cause problems for businesses and employers for years to come.

Join us on a webinar to review the decision and discuss its implications on Thursday, January 12th. Marshall Babson, nationally recognized labor lawyer and former Member of the NLRB, and his colleagues will lead the discussion.

By: Marshall Babson

Marshall Babson is a partner in Seyfarth's New York office. If you would like further information, please contact your Seyfarth Shaw LLP attorney or Marshall Babson at mbabson@seyfarth.com.

How Safe Is Your Arbitration Agreement Post-AT&T Mobility v. Concepcion?

Fri, 06 Jan 2012 00:00:00 -0400

The Federal Arbitration Act (FAA) was enacted in response to judicial hostility to arbitration agreements, and it makes agreements to arbitrate "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." Long before AT&T v. Concepcion, the U.S. Supreme Court interpreted the FAA to require courts to honor the parties' expectations and enforce arbitration agreements according to their terms. Nonetheless, some courts have refused to enforce arbitration agreements by invoking generally applicable contract defenses, which are expressly preserved by the FAA.

In Concepcion, a 5-4 Court held that the FAA preempts a California rule that invalidated class action waivers in certain arbitration agreements as unconscionable. Since that decision, the Supreme Court has granted certiorari, vacated, and then remanded several cases "for further consideration in light of AT&T Mobility LLC v. Concepcion . . . ."

Concepcion Left The Door Open To Challenges To Arbitration Agreements

On the whole, courts have adopted a broad view of Concepcion and have held that the FAA preempts any rule that stands as an obstacle to enforcement of arbitration agreements as written. Yet a number of federal and state courts have taken a more limited view of Concepcion and continue to find arbitration clauses unenforceable. And Concepcion left the door open for them to do so because the Supreme Court specifically noted that the FAA "permits agreements to arbitrate to be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability." Moreover, Concepcion expressly involved the vindication of state, not federal, rights, so plaintiffs' lawyers may argue that it is unclear what effect that decision has on class or collective actions brought under federal statutes.

Three post-Concepcion decisions are instructive. In the In Re Checking Account Overdraft Litigation, a district court in the Southern District of Florida invalidated several arbitration agreements that contained class action waivers as "unconscionable" despite Concepcion. The court rejected the defendants' argument that Concepcion eliminated unconscionability as a defense to the enforceability of an arbitration agreement. To the contrary, the court explained that Concepcion "has not relieved courts from their obligation to scrutinize arbitration agreements for enforceability on a case-by-case basis where one party resists arbitration." The court then analyzed each of the arbitration agreements under their respective state's contract laws and found them to be unconscionable. Unlike the arbitration agreement in Concepcion, the agreements contained fee-shifting provisions that allowed the defendants to automatically recover their costs and attorney's fees if they prevailed, and allowed them to take those fees and costs directly from a customer's bank account. The court found these provisions to be overly oppressive and unfairly one-sided.

Similarly, in Kanbar v. O'Melveny & Myers, a district court in the Northern District of California found several provisions of a law firm's arbitration agreement for employment disputes to be unenforceable under California law. Initially, the court concluded that the arbitration agreement was procedurally unconscionable because it was a "take it or leave it" condition of employment. The court also concluded that the following provisions were substantively unconscionable:

The Notice Provision. This provision required an employee to give notice of a claim within one year from when the employee knew or should have known about the claim. The court opined that this amounted to a one-year statute of limitations, and that shortened limitations periods, especially with respect to employment-related statutory claims, are unconscionable.
The Confidentiality Provision. This provision limited with whom an employee could communicate regarding the arbitration. The court found this provision to be unconscionable because it stifled an employee's ability to investigate and gather evidence and, therefore, placed the employer in a superior position.
The Provision Exempting the Employer from Arbitration. Under this provision, the employer, and not the employee, could forego arbitration and had access to the courts for certain claims (e.g., claims for injunctive relief based on the disclosure of privileged or confidential information). The court found this provision to be broader than necessary to protect the employer's commercial interests.

The court acknowledged in Kanbar that Concepcion represents a significant change in the law on arbitration. Nonetheless, the court concluded that the FAA did not preempt the court's unconscionability determination based on state law because arbitration agreements are still subject to an unconscionability analysis. According to the court, Concepcion does not preclude challenges to arbitration agreements even if it means that an agreement will not be enforced according to its terms: "The doctrine of unconscionability can override the terms of an arbitration agreement and the parties' expectations in connection therewith."

Finally, in Raniere v. Citigroup, Inc., a district court in the Southern District of New York held that employees cannot waive their right to bring collective actions under the Fair Labor Standards Act ("FLSA"). There, mortgage loan officers filed a nationwide collective action under the FLSA and a class action under New York Labor Law claiming that they were misclassified as exempt employees and, therefore, improperly denied overtime. The employer moved to compel arbitration of the claims brought by the employees who had signed arbitration agreements that included class and collective action waivers. But, according to the court, "[i]t is not enough to respond that such a [collective action] waiver should be upheld in the name of the broad federal policy favoring arbitration, simply because the waiver was included in an arbitration agreement. An otherwise enforceable arbitration agreement should not become the vehicle to invalidate the particular Congressional purposes of the collective action provision and the policies on which that provision is based." The court also opined that Concepcion did not change this analysis, because that decision addressed only a state law, and not federal arbitral law. Accordingly, the court held that a waiver of the right to proceed collectively under the FLSA--which the court characterized as a substantive statutory right--is unenforceable as a matter of law. Because the court concluded that the collective action waiver was unenforceable, it did not address the validity of the class action waiver.

Raniere's holding that the ability to bring a collective action under the FLSA is a substantive--and not a procedural--right that cannot be waived is contrary to each and every decision that has addressed the issue, including five Circuit Courts of Appeal. The defendants in Raniere have filed an appeal with the Second Circuit, and the appellate court's decision could be a candidate for Supreme Court review if it affirms the district court's ruling.

So If You Want To Ensure That Your Arbitration Agreement Is Enforced As Written, Does It Have To Be Fair?

As the post-Concepcion cases demonstrate, companies still will face challenges to their arbitration agreements, and some judges may continue their skepticism towards such agreements, particularly if they contain class action waivers. Accordingly, companies that have or plan to implement arbitration agreements should carefully consider the provisions in their agreements to ensure that they do not arguably prevent the claimant from vindicating his or her rights.
Indeed, the arbitration agreement approved by the Court in Concepcion was unusually consumer-friendly. That agreement, for example, contained the following terms:

AT&T agreed to pay all arbitration costs for nonfrivolous claims by its customers;
AT&T agreed to conduct the arbitration in the county were the customer was billed;
For claims of $10,000 or less, the customer could choose whether the arbitration proceeds in person, by telephone, or based only on submissions;
Either party could opt to bring a claim in small claims court in lieu of arbitration;
The arbitrator could award any form of individual relief, which presumably included punitive damages;
AT&T could not seek reimbursement for its attorney's fees; and
AT&T agreed to pay customers a minimum of $7,500 and twice their attorney's fees if they obtained more in the arbitration than AT&T had offered beforehand.

Although Concepcion did not hold that arbitration agreements must be fair to be enforced, or even to have any of those specific terms, the majority did laud the consumer-friendly provisions in AT&T's arbitration agreement. Moreover, in response to the dissent's claim that class proceedings are necessary to prosecute small-dollar claims, the majority highlighted the district court's conclusion "that the Concepcions were better off under their arbitration agreement with AT&T than they would have been as participants in a class action."

Indeed, a Superior Court judge in Massachusetts recently invalidated an arbitration class action waiver where small-dollar claims were involved. In Feeney v. Dell, Inc., two plaintiffs, whose claims were both worth less than $250, sought to bring a consumer class action against Dell based on the company's collection of sales tax on their computer service contracts. Those contracts, however, required arbitration and included a class action waiver. Nonetheless, the Massachusetts court refused to enforce the class action waiver because, in its view, Dell's "arbitration agreement stands in stark contrast to the AT&T agreement in Concepcion, which had so many pro-consumer incentives that an individual consumer might be better off in arbitration than in class litigation."

How "fair" an arbitration agreement needs to be, if at all, to be enforced post-Concepcion remains to be seen. But companies should not read Concepcion as giving them carte blanche to draft their arbitration agreements without considering the impact that the agreement may have on an employee's ability to vindicate his or her rights.

Be Conscious Of Unconscionable Arbitration Provisions

In light of the uncertainty that remains post-Concepcion, companies that want the benefits of arbitration should consider taking steps to reduce the risk that a court will invalidate their arbitration agreements. Companies may wish to consider, for example, the following provisions when drafting their agreements:

Create an agreement that is as straightforward, short and easy to understand as possible. Try to avoid lengthy agreements filled with legalese.
In addition to making the agreement itself easy to read, make the procedure for initiating arbitration simple and clear from the agreement.
Explain what rules will apply to the arbitration.
If the agreement incorporates certain arbitration rules by reference (e.g., the American Arbitration Association National Rules), make sure those rules are easily available to the claimant (e.g., provide a link to the internet address if the rules are available online).
Allow claimants sufficient discovery to investigate their claims.
Ensure the agreement provides claimants with the same, or close to the same, substantive rights that they would have outside of arbitration. For example, the arbitration agreement should not shorten the applicable statute of limitations or limit the remedies available to a claimant.
Include a provision that specifically excludes any claims that cannot be forced to arbitration from the agreement, e.g., some federal statutes require claims brought under the statute to be filed in court.
If the company wants bilateral arbitration only, then the agreement should include a class action waiver or the company may run the risk that a court will interpret a silent agreement to permit class arbitration.
Class action waivers should be in the initial provisions of the agreement and highlighted. That is, they should not be "buried" in the agreement.
If the company does not want to go to class arbitration in the event the waiver is stricken, the agreement should provide that the entire agreement is void if the waiver is deemed unenforceable.
Allow the claimant to go to small claims court in lieu of arbitration if the claim is less than the claim limit for that court.
Agree to pay all or most of the arbitrator's fees and expenses and any other costs unique to arbitration.
Agree to pay a claimant's attorney's fees and costs up to a set amount in the event he or she prevails at arbitration.

Be Careful What You Wish For

Many companies may see Concepcion as a way to avoid costly class actions by implementing arbitration agreements that include class action waivers. Presumably, however, an arbitration agreement that is "fair" and can withstand judicial scrutiny will not prohibit claimants from vindicating their rights. As a result, companies that rush into arbitration agreements to avoid the costs associated with litigation, particularly collective and class action litigation, may later find themselves facing thousands of bilateral arbitrations at significant costs. Just as the provisions of an arbitration agreement need to be given careful consideration, so does the decision to adopt one.

By: Arthur Rooney

Arthur Rooney is an associate in Seyfarth's Chicago office. If you would like further information, please contact your Seyfarth Shaw LLP attorney or Arthur Rooney at arooney@seyfarth.com.

New Year, New W-2 Reporting Guidance

Fri, 06 Jan 2012 00:00:00 -0400

This is the thirty-first issue in our series of alerts for employers on selected topics in health care reform. (Click here to access our general summary of health care reform and other issues in this series.) This series of Health Care Reform Management Alerts is designed to provide an in-depth analysis of certain aspects of health care reform and how it will impact your employer-sponsored plans.

[√] Applies to grandfathered plans

[√] Applies to new health plans and plans that lose grandfathered status

Under the Patient Protection and Affordable Care Act (PPACA), employers will be required to include the cost of employer sponsored health care coverage on the Forms W-2 they issue to employees. This reporting requirement was originally effective for the 2011 tax year.

In October, 2010, however, the Internal Revenue Service (IRS) issued Notice 2010-69 which provided that reporting would be optional for 2011, but required for 2012 (i.e., W-2s issued in January 2013). In 2011, the IRS issued Notice 2011-28, which provided interim guidance on the W-2 informational reporting requirement and invited comments on the interim rules. (Click here to access our prior Management Alert on Notice 2011-28).

This week, the IRS issued new interim guidance in Notice 2012-9, which supersedes Notice 2011-8 and replaces it with a modified and expanded explanation of the PPACA’s W-2 reporting mandate. Certain provisions of the interim guidance also provide transitional relief intended to facilitate compliance. The IRS will continue to consider comments submitted in response to Notice 2011-8 as it works to develop regulations, but the new guidance and transitional relief may be relied upon until the IRS issues additional guidance. This Alert summarizes: 1) Notice 2012-9’s modifications to the previous interim rules, and 2) Notice 2012-9’s new guidance.

Modifications to Prior Guidance

Generally speaking, Notice 2012-9 retains most of the original interim guidance set forth in Notice 2011-28, albeit with some additional modifications and clarifications to the prior interim rules. Thus, employers that have already begun preparing for the W-2 reporting requirement should not expect to significantly alter their plans in light of the new guidance. The only significant reversal of the previous guidance is with respect to excess reimbursements to highly-compensated employees (explained in detail below).

The introduction to Notice 2012-9 summarizes the modifications and clarifications it makes to the FAQs set forth in Notice 2011-28. Of note, these changes include the following:

Exemption for Small Employers (Transitional Relief)

Notice 2011-28 explained that employers are exempt from the new reporting requirement if they filed fewer than 250 Forms W-2 during the preceding calendar year. Notice 2012-9 clarifies that this rule applies regardless of whether the employer uses an agent pursuant to Internal Revenue Code § 3504. For example, if an employer would have filed 300 Forms in 2011 had it not used an agent, that employer would be subject to the reporting requirement for 2012.

Common Paymasters

Notice 2011-8 discussed how the W-2 reporting requirement applies to employees with multiple employers. Notice 2012-9 builds on this guidance by stating that if related employers employ the same employee, but do not use a common paymaster, the employers may either: 1) report the total aggregate cost on a single W-2, or 2) allocate the cost between the employers and report the divided cost on separate Forms W-2.

Health Flexible Spending Accounts

The new guidance clarifies that the reporting requirement does not apply to coverage under a health FSA if contributions occur only through employee salary reduction elections. Accordingly, if an employer provides a flex credit, the cost of the FSA should not be reported unless the flex credit causes the employee’s health FSA to exceed his or her salary reduction election.

Stand-Alone Dental and Vision (Transitional Relief)

The new guidance clarifies that dental and vision plans that are "HIPAA-excepted benefits" are not subject to the reporting requirements. Generally, to be an excepted benefit, dental or vision benefits must either be offered under a separate policy, certificate or contract of insurance; or participants must have the right not to elect the benefits and if they do elect the benefits, they must pay an additional premium or contribution for that coverage.

Excess Reimbursements

Certain reimbursements of highly compensated individuals under a self-funded medical plan may be includible in gross income if a plan is considered discriminatory under the Internal Revenue Code. These reimbursements are considered to be "excess reimbursements". The original guidance provided that employers should include excess reimbursements in the aggregate reportable cost. The IRS has reversed its position and states in the new guidance that excess reimbursements that are includible in income are not reportable.

New Guidance

Notice 2012-9 also adds several new FAQs under the broad heading of "Additional Issues." These new issues include the following:

EAP, Wellness & On-site Clinics (Transitional Relief)

Importantly, Notice 2012-9 provides definitive guidance on whether employers should report the cost of employee assistance programs (EAPs), onsite clinics, and other wellness initiatives that qualify as group health plans (as defined in Internal Revenue Code § 5000(b)(1)). The answer depends on how the employer administers COBRA continuation coverage for such benefits. If the employer does not charge a COBRA premium for continued coverage under the EAP, onsite clinic, or wellness programs, the employer is not required to report the value of such coverage on the employee’s W2. However, if the employer does charge a COBRA premium, it must report the value of the coverage.

This guidance heightens the need for employers to carefully review their EAP and wellness programs to determine whether they qualify as "group health plans." Failure to properly administer such benefits as group health plans could have potentially far-reaching impact, including COBRA penalties, ERISA penalties, and now W-2 reporting penalties.

Allocating Cost When Coverage Includes Medical and Non-Medical Components

In many cases, an employer-sponsored benefit plan will include medical benefits that must be reported on the W-2 and non-medical benefits that are not required to be reported (e.g., long-term disability). Notice 2012-9 allows employers to use "any reasonable allocation method" to calculate the cost of the portion of coverage that is required to be reported. If the medical component of a benefit plan is "incidental" in comparison to the non-medical portion, the employer is not required to report either portion. Similarly if the non-medical portion is incidental to the medical portion, the employer may include both in determining the reportable cost.

Retroactive Changes to Coverage After Year-End

Notice 2012-9 clarifies that the information reported on the Form W-2 should be based on the information available on December 31 of the reporting year. Thus, if an employee makes a benefit election in the following calendar year that has a retroactive effect (such as the addition of a newborn child to the employee’s coverage), the employer does not need to consider that benefit change when calculating the cost of coverage for the reporting year (i.e., the year ending on December 31).

Coverage that Straddles Two Reporting Years

Additionally, where a coverage period (e.g. final payroll period) extends beyond December 31 of a reporting year, employers may use a reasonable allocation method to divide the cost between the two years, or treat the coverage period as occurring either entirely before December 31 or entirely after December 31. The option selected by the employer should be applied consistently to all employees.

Independent Individual Policies

To the extent an employer merely provides the opportunity for employees to purchase a fixed indemnity policy or coverage for a specified disease or illness, and employees pay with after-tax dollars, the cost of coverage need not be reported. If the employer makes any contribution or employees pay with pre-tax dollars, however, the cost of coverage must be reported.

Third-Party Sick Pay

Generally, a third party provider that makes payments of sick pay to employees on the employer’s behalf has no responsibility for reporting such payments on a W-2. However, under an exception to this rule, the parties may enter into an agreement that makes the third-party agent responsible for issuing W-2s. Notice 2012-9 explains that sick pay payments made by a third-party provider should not be reported on the W 2 prepared by the provider. Instead the employer should report the amounts on the employer-prepared W-2.

Employer Action Steps

In light of the revised guidance, employers should add the following new items to their W-2 action plan:

Determine whether stand-alone dental and vision benefits meet the HIPAA definition of "excepted benefits."
Evaluate whether EAP, wellness programs, and onsite clinics are "group health plans" for purposes of COBRA, and if so, how the reportable cost will be determined.
Choose a consistent method for allocating the cost of coverage when a benefit program includes both medical and non-medical benefits, and for allocating the cost of coverage for reporting periods that straddle two reporting years.
As always, coordinate with payroll staff and vendors to ensure proper reporting on the Form W-2.
Communicate with employees regarding the new information they’ll see reported on their W-2.

Francis "Tripper" Ortman Quoted in Law360
"Mutual Contractors Can't Bring Labor Claims: Calif."

Fri, 06 Jan 2012 00:00:00 -0400

Seyfarth San Francisco office partner Francis "Tripper" Ortman was quoted in Law360 on January 4. The article discussed a California appeals court decision in which a putative employment class action brought by insurance agents employed by Mutual of Omaha Insurance Co. was thrown out. The judge reasoned that the agents were unable under state labor laws to bring claims, affirming a lower court's previous ruling.

The company contended that the state's labor code provision in California fell under the common law test of employment, instead of the statutory definition of "employee," and the plaintiff was classified as an independent contractor, ineligible to receive reimbursement for business supplies and expenses or wages earned when she left the company.

"The opinion provides a recipe for deposition preparation and should prove useful as a road map for both plaintiff and defense practitioners involved in independent contractor cases," Tripper, who represented Mutual of Omaha, noted.

J. Stephen Poor and Kim Craig Quoted in Law360
“How to Woo In-House Counsel in 2012”

Fri, 06 Jan 2012 00:00:00 -0400

Seyfarth Chair and Managing Partner J. Stephen Poor, in addition to the Director of the Project Management Office, Kim Craig, were quoted in a January 1 article published in Law360. The article discussed strategies for law firms trying to obtain work from corporate legal departments, who are just beginning to show signs of economic recovery. According to the author, the changing economic climate calls for a reexamination of how legal services are delivered.

The article highlighted Seyfarth’s project management office, which works with attorneys to track projects in terms of their overall progress, according to Kim. She added, “In April 2011, the firm began using team sites, that allow the entire team working on a case or assignment a way to track projects in real time. Attorneys can upload project plans to the sites, as well as post to-do lists, assignments, and due dates, monitoring each task from inception to conclusion.”

“The idea is to operate as a collaborative unit between in-house counsel and team members in our firm,” remarked Steve. “We thought there had to be a better way to deliver legal services, and the market would increasingly value efficiency coupled with excellence, which would drive changes to the model going forward.”

Brandon McKelvey Quoted in Law360
"Dukes Dooms Class in WinCo Meal Break Suit"

Fri, 06 Jan 2012 00:00:00 -0400

Seyfarth Shaw partner Brandon McKelvey was quoted in Law360 on January 5. The article discussed a California federal court decision, which denied a motion brought by WinCo Foods LLC workers who claimed they were denied meal breaks, due to lack of commonality under the U.S. Supreme Court ruling in Dukes v. Wal-Mart Inc.

The judge held that the plaintiffs also did not adequately represent the class, which they claimed included some supervisors, which they were not.

“It's a significant win for WinCo and many other employers facing these kinds of cases because it shows that the landscape has changed dramatically since the Supreme Court issued Dukes v. Walmart,” said Brandon, who represents WinCo Foods.

“Federal courts in particular are taking a closer look at class certification motions like these,” he said. “So in cases like this one where WinCo had managers who had discretion over break policies, it is much harder to certify a class in federal court under Dukes.”

Brandon also pointed out that WinCo had recently defeated class certification in a case brought in California federal court by assistant store managers who claimed they were misclassified as exempt from overtime pay.

Greg Yates Quoted in Law360
"Real Estate Cases To Watch In 2012"

Thu, 05 Jan 2012 00:00:00 -0400

Seyfarth Shaw Litigation partner Greg Yates was quoted January 1 in a Law360 feature examining cases expected to be hot topics in real estate litigation circles in 2012.

Greg suggested keeping an eye out for more aggressive moves by debt investors involved in bankruptcy proceedings. Typically, junior mezzanine lenders are stuck in the back of the line during bankruptcy proceedings, but as more private equity and hedge funds have purchased debt, Greg expects that role to change.

"These lenders are very aggressive," he notes. "They can file an involuntary bankruptcy to get some leverage and all of a sudden, they've got their nose under the tent and are calling the shots."

Greg also suggested 2012 could see a sharp increase in banks filing lender liability cases against developers unable to repay building loans. In the last two years, banks have given developers more time to pay off loans, which has allowed the banks to avoid taking balance sheet hits. Stronger bank balance sheets in 2012 may mean tougher loan policies to come, however.

"Banks are a lot stronger than they were two or three years ago," Greg said. "They're going to start being aggressive in going after these loans, and I think you'll see a lot of litigation come out of that."

New Bill Ends OFCCP’s Jurisdiction Over Many Health Care Providers; Watch Your Mailboxes, CSAL Scheduling Letters Coming Soon

Thu, 05 Jan 2012 00:00:00 -0400

The old adage that the only constant is change rings true in the new year for federal contractors and subcontractors. These changes, however, are welcome news for many contractors. A bill signed on New Year's Eve by President Obama effectively ended the Office of Federal Contract Compliance Programs' (OFCCP's) jurisdiction over TRICARE health providers. Further, the OFCCP continued a practice it once considered abandoning by issuing Corporate Scheduling Announcement Letters (or CSALs), which is good for federal contractors and subcontractors, as it allows for some advance planning, self-evaluation, and audit preparation and also allows contractors to anticipate the time and resources that will be required for compliance evaluations during the cycle.

Defense Authorization Bill Ends OFCCP Coverage for TRICARE Providers

Health care providers and their legal counsel are all too aware of the OFCCP's oft expressed interest in expanding the OFCCP's jurisdiction over health care providers, resulting in the imposition of affirmative action obligations arising out of Executive Order 11246, Section 503 of the Rehabilitation Act and the Vietnam Era Veterans Readjustment Assistance Act ("VEVRAA") on a huge number of previously uncovered health care providers. The long-awaited decision in OFCCP v. Florida Hospital of Orlando, 2009-OFC-02 (2010) extended OFCCP jurisdiction to medical institutions, pharmacies, or other health care providers who participated in a health care provider network for TRICARE, the Department of Defense's health care program for active and retired military members and their families. For more information click here. However, a new law signed by President Obama on December 31, 2011, ends the jurisdiction of the OFCCP over many health care providers.

The National Defense Authorization Act for Fiscal Year 2012 effectively removes medical institutions, pharmacies, or other health care providers who participated in a health care provider network for TRICARE from the ambit of the OFCCP's jurisdiction. Section 715 contains this TRICARE exception:

For the purpose of determining whether network providers under such provider network agreements are subcontractors for purposes of the Federal Acquisition Regulation or any other law, a TRICARE managed care support contract that includes the requirement to establish, manage, or maintain a network of providers may not be considered to be a contract for the performance of health care services or supplies on the basis of such requirement.

Take note, however, that this Defense Authorization Act does not change the OFCCP's purported coverage over medical institutions, pharmacies, or other health care providers that provide health services to federal employees and their families covered by federal health coverage or to those that provide services pursuant to Medicare Part D. These contractors and subcontractors are still obligated to comply with the affirmative action obligations enforced by OFCCP under Executive Order 11246, Section 503 of the Rehabilitation Act, and the VEVRAA, unless an exemption applies.

OFCCP Corporate Scheduling Announcement Letters On Their Way!

We learned this week that the OFCCP has sent out a new round of CSALs to selected federal contractors or subcontractors. The CSAL is a notification to a parent company that one or more of its establishments are slated for compliance evaluations during the current scheduling cycle, which ends on September 30, 2012.

While this is good news for contractors, as it allows advance planning, it is important to note that the CSAL does not necessarily provide an inclusive list of establishments that may be audited during the scheduling cycle. For example, establishments that are not clearly associated with the parent company on EEO-1 Reports will not be included on a CSAL. It is our experience that OFCCP may choose to audit locations not listed, and some establishments listed will not be audited.

What Contractors Should Do Now

While TRICARE no longer creates OFCCP jurisdiction, healthcare providers may still be subject to OFCCP jurisdiction due to other contract obligations. For that reason, healthcare providers should contact legal counsel to determine the impact of the National Defense Authorization Act on their compliance obligations and should continue to review contracts to determine if they will create compliance obligations. Until a full determination of jurisdiction can be conducted, health care providers who federal assistance payments under TRICARE, and who receive an OFCCP CSAL or scheduling letter, may wish to preserve their jurisdiction defense by asserting that receipt of payments under TRICARE does not render them a contractor.

All other contractors, upon the receipt of the CSAL, should immediately notify personnel responsible for the establishment and for affirmative action compliance that an audit is likely. Consider using the time before a scheduling letter is received to conduct a partial or full mock audit of the establishment. At the very least, review the establishment's affirmative action program, adverse impact analysis, outreach efforts, and progress toward goals. Consult with counsel about the best approaches for self-audits and whether some or all of the review should be done under attorney-client privilege.

If you have questions about this One Minute Memo, please contact the Seyfarth Shaw attorney with whom you work or any attorney on our OFCCP & Affirmative Action Compliance Team.

By: Valerie Hoffman and Christine Hendrickson

Valerie Hoffman is a partner in Seyfarth's Chicago and Los Angeles offices and Christine Hendrickson is senior counsel in the firm's Chicago office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Valerie Hoffman at vhoffman@seyfarth.com or Christine Hendrickson at chendrickson@seyfarth.com.

California Court Of Appeal Provides Roadmap on Classification of Independent Contractors

Thu, 05 Jan 2012 00:00:00 -0400

Insurance agents and other types of salespeople with the discretion to determine when, how, and whether to sell a company’s products may properly be classified as independent contractors, according to the California Court of Appeal’s recent holding in Arnold v. Mutual of Omaha Insurance Company — the first California decision to detail the circumstances under which insurance agents, and potentially other types of salespeople, may be classified as independent contractors. The Arnold court utilized California’s Borello "control test" -- a test similar to other control tests used in jurisdictions around the country -- to determine whether the plaintiff was correctly classified as an independent contractor. The court’s analysis provides a checklist of relevant factors for employers to consider when determining whether a particular worker should be classified as an independent contractor or an employee, as well as a roadmap for summary judgment in cases where the independent contractor status is challenged.

The Facts

Plaintiff Kimbly Arnold, a former insurance agent for Mutual of Omaha, brought a putative class action seeking the reimbursement of necessary business expenses, and penalties for the untimely payment of final wages upon termination of her relationship with Mutual of Omaha. Arnold also asserted a derivative cause of action for unfair competition.
Mutual moved for summary judgment, arguing that Arnold could not recover for the Labor Code violations alleged because those provisions applied only to "employees," and Arnold was properly classified as an independent contractor. The lower court applied the common law test for independent contractor/employee status set forth in S. G. Borello & Sons, Inc. v. Dept. of Industrial Rel., 48 Cal.3d 341 (1989), found that Arnold was properly classified as an "independent contractor," and granted Mutual's motion for summary judgment. Arnold appealed.

The Court's Decision in Arnold

The Court of Appeal rejected Arnold's argument that division 3 of the Labor Code provides a statutory definition of the term "employee." Instead, the court agreed with the trial court and held that the common law Borello test (also known as the "control test") should be used to determine whether Arnold was an employee or an independent contractor.
Applying Borello, the Court of Appeal affirmed that Arnold was properly classified as an independent contractor because "Mutual had no significant right to control the manner and means by which Arnold" sold its products. As the court explained, "Arnold used her own judgment in determining whom she would solicit for applications for Mutual's products, the time, place, and manner in which she would solicit, and the amount of time she spent soliciting for Mutual's products." Moreover, while Mutual offered several resources to its agents (such as training, office space, and prospecting accounts), agents were not required to take advantage of them. The court also was persuaded by the fact that Arnold's appointment was non-exclusive, as she simultaneously contracted with multiple insurance companies to offer her clients competing products.

Analyzing the secondary Borello factors, the court found that several factors weighed in favor of finding that Arnold was an independent contractor and not an employee: she was engaged in a "distinct profession" and was responsible for maintaining her own license with the California Department of Insurance; she was responsible for providing most of her own instrumentalities or tools needed to sell insurance; and was paid a commission "based on her results and not the amount of time she spent working on Mutual's behalf." The court also noted that the inclusion of an at-will provision in an independent contractor agreement "is not by itself a basis for changing that relationship to one of an employee," particularly where both parties believed that they were creating an independent contractor relationship.

Lastly, the court brushed aside Arnold's argument that summary judgment was inappropriate unless the Borello factors unanimously established that she was an independent contractor (i.e., that summary judgment must be denied if a single factor weighed in favor of an employment relationship). As the court explained, it had "little difficulty" affirming summary judgment in Mutual's favor because "while the existence and degree of each factor is a question of fact, … the legal conclusion to be drawn from those facts is a question of law."

What Arnold Means for Employers

Although the court in Arnold did not indicate whether any single factor tipped its analysis, it is clear that Mutual’s agent program — which permitted agents to determine when, how, and whether to sell Mutual’s products, and imposed minimal direct supervision and established results-oriented performance standards — was critical in leading the court to conclude that the plaintiff was properly classified as an independent contractor. Because the Arnold court determined that the common law Borello control test was the appropriate test to analyze employment status in California—and many jurisdictions around the country employ similar control tests—this decision should have far-reaching implications for the insurance and other industries that employ independent contractor salespeople outside California. Post-Arnold, companies that utilize independent contractors to sell their products in such states may apply the analysis in Arnold as a benchmark to assess and review these relationships in order to determine whether changes should be made.

By: Tripper Ortman and Robb McFadden

Tripper Ortman is a partner in Seyfarth's San Francisco office and Robb McFadden is an associate in the San Francisco office. If you would like further information, please contact your Seyfarth attorney, Tripper Ortman at fortman@seyfarth.com or Robb McFadden at rmcfadden@seyfarth.com.

SEC Adopts New Net Worth Standard for Accredited Investors

Wed, 04 Jan 2012 00:00:00 -0400

On December 21, 2011, the Securities and Exchange Commission (the "Commission") adopted a final rule (the "Rule") to exclude the value of a person’s home for purposes of determining whether his or her net worth, individually or together with their spouse, exceeds $1 million, and would therefore qualify as an "accredited investor."

Private placements of securities that are limited to "accredited investors" are subject to fewer regulatory requirements under the Securities Act of 1933 (the "Securities Act") than private placements that include non-accredited investors. Among other things, an unlimited number of accredited investors may participate in the offering (assuming the other private placement rules are followed) compared to only 35 non-accredited investors, and the Commission’s requirements that specific detailed information be provided do not apply to accredited investors.

The Commission’s definition of "accredited investor" appears in Securities Act Rules 215 and 501. The changes were made to conform the Commission’s definition of an "accredited investor" to Section 413(a) of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). In each case, the term "accredited investor" includes persons who fall within one of eight listed categories (or whom the issuer reasonably believes fall within one of the categories).

One of those accredited investor categories is a person with a net worth of at least $1 million. The Rule incorporates new language in Rules 215 and 501 to provide that, in calculating net worth:

a person’s primary residence will not be counted as an asset;
any indebtedness secured by that person’s primary residence, up to the estimated fair market value of the primary residence, will not be counted as a liability, unless the borrowing occurs in the 60 days preceding the purchase of securities in the exempt offering and is not in connection with the acquisition of the primary residence; and
any indebtedness secured by that person’s primary residence in excess of the property’s estimated fair market value will be counted as a liability.

The treatment of indebtedness in the calculation described above is intended to discourage investors from manipulating their net worth by borrowing against home equity shortly before participating in an exempt securities offering, and to treat underwater mortgages the same as they had been prior to the enactment of the Dodd-Frank Act and the adoption of the Rule.

The accredited investor provisions allow issuers to avoid having to make subjective judgments about the suitability of an investment for any particular purchaser. Accredited investors are presumed to be investors who can bear the economic risk of holding unregistered and illiquid securities for an indefinite period and can afford a complete loss of the investment. (See Commission Release No. 33-9287 at 4, 7) In view of the recent instability in values of residential real estate, it no longer made sense as a policy to presume that the value of an investor’s home contributed to their ability to bear these risks inherent in unregistered securities.

In addition, the Rule provides transition relief in limited cases by permitting certain persons who no longer qualify as accredited investors on the basis of net worth due to the exclusion of the value of their primary residence to “grandfather” the exercise of certain pre-existing rights (including statutory rights, contractual rights and rights existing under an entity’s organizational documents) to purchase securities. Under the “grandfathering” provision, in connection with the exercise of any such pre-existing right, a person’s net worth will be calculated under the standard which was in place prior to the enactment of the Dodd-Frank Act (which permitted a person to include their primary residence in the calculation of net worth), so long as he or she:

held the right to purchase securities on July 20, 2010 (the day before the enactment of the Dodd-Frank Act);
qualified as an accredited investor on the basis of net worth at the time that right was acquired; and
held securities of the same issuer (other than the right) on July 20, 2010.

The Rule was published in the Federal Register on December 29, 2011 and will be effective on February 27, 2012. Accordingly, we recommend that issuers review their offering materials and subscription documents and make appropriate revisions to incorporate the new standards set forth in the Rule.Elaine Tippitt

By Blake Hornick, Matthew Hafter, Elaine Tippitt and Greg Sale

Blake Hornick is a partner in the firm’s New York office, Matthew Hafter is a partner in the firm’s Chicago office, Elaine Tippitt is a partner in the firm’s Houston office and Greg Sale is an associate in the firm’s Houston office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Blake Hornick at bhornick@seyfarth.com, Matthew Hafter at mhafter@seyfarth.com, Elaine Tippitt at etippitt@seyfarth.com, or Greg Sale at gsale@seyfarth.com.

NLRB Recess Appointments

Wed, 04 Jan 2012 00:00:00 -0400

With the end of Craig Becker's term yesterday the National Labor Relations Board ("NLRB") had only two members -- Chairman Mark Pearce, a Democrat and Member Brian Hayes, a Republican. Therefore, consistent with the National Labor Relations Act ("Act") and the Supreme Court's decision in New Process Steel (see that alert here) the NLRB lacked a quorum and could not issue decisions. As a result, notwithstanding a December 19, 2011 letter signed by all 47 Senate Republicans opposing any recess appointments to the NLRB, this afternoon President Obama announced his intent to grant recess appointments of three individuals who have been nominated to fill the vacant seats on the NLRB.

President Obama announced his intention to grant the recess appointments of Richard F. Griffin and Sharon Block, both Democrats.

Griffin currently is the General Counsel of the International Union of Operating Engineers ("IUOE") and was nominated for a five-year term expiring August 27, 2016. Griffin would fill a board vacancy created with the expiration of former Chairman Wilma Liebman's term on August 27, 2011. In addition to being General Counsel of the IUOE, Griffin is on the Board of Directors for the AFL-CIO Lawyers Coordinating Committee. Griffin began his career as a Staff Attorney for former NLRB Chairman John Fanning.

Sharon Block currently is the Labor Department's Deputy Assistant Secretary for Congressional Affairs and was nominated to fill the Board vacancy created by the departure of Craig Becker for the balance of a five-year term expiring Dec. 16, 2014. Prior to her current position Block served from 2006 to 2009 as Senior Labor and Employment Counsel for the Senate Health, Education, Labor, and Pensions Committee, where she worked for the late Sen. Edward M. Kennedy. Block also worked as a Senior Attorney to former NLRB Chairman Robert Battista from 2003 to 2006 and as an Attorney in the NLRB Appellate Court branch from 1996 to 2003.

President Obama also announced his intention to grant a recess appointment of Terence F. Flynn who had been nominated on January 5, 2011 to fill the second Republican vacancy on the NLRB. Flynn currently is Chief Counsel to Member Brian Hayes and served in the same capacity for former Republican member Peter Schaumber. Prior to his position at the NLRB, Flynn was an attorney in private practice.

It is expected that with the appointments of Griffin and Block, the NLRB will continue with its union friendly agenda.

By: Jack Toner and Joshua Ditelberg

Jack Toner is senior counsel in Seyfarth's D.C. office and Joshua Ditelberg is a partner in the firm's Chicago office. If you would like further information, please contact your Seyfarth attorney, Jack Toner at jtoner@seyfarth.com or Joshua Ditelberg at jditelberg@seyfarth.com.

Laura Maechtlen Quoted in BNA Human Resources Report
“Transgender Employees: State Laws, Court Ruling on Transgender Bias Signal Employers to Address Issues”

Wed, 04 Jan 2012 00:00:00 -0400

Employment partner and firm Diversity Action Team Executive Committee member Laura Maechtlen was quoted extensively in an article appearing in BNA Human Resources Report on December 26. According to the article, even though there is no federal statue prohibiting discrimination in the workplace based on gender identity or expression, the District of Columbia and 16 states have enacted laws banning employment discrimination based on gender identity. Therefore, it is vital that employers take note.

Laura advises companies to add the full phrase “gender identity and expression” to anti-discrimination policies, and to ensure that all their company policies—hiring, promoting, training, and retention—include this protected class. “Sometimes people just change one policy and not the others,” which is insufficient, she said. She also advised including gender identity in regular harassment training.

If an employee is in the middle of a gender transition, Laura recommends that HR be careful in how assistance is offered. It is important not to approach the employee in a public way and not to ask personal questions. A possible script might begin with “We've noticed some changes and we have resources for you if that's something you want to avail yourself of,” she suggests.

OFCCP Proposes “Game Chang[ing]” Disability Regulations: Redefined EEO Requirements are Extensive, Expensive and Overly Exacting

Tue, 03 Jan 2012 00:00:00 -0400

On Friday, December 9, 2011, the Office of Federal Contract Compliance Programs (OFCCP) dealt a body blow to federal contractors as it delivered its proposed revisions to the regulations addressing affirmative action for individuals with disabilities. OFCCP Director Patricia Shiu warned the contractor community last summer that these new regulations would be a "game-changer." However, this is no "game" for federal contractors, who are now faced with either abandoning federal contracts or attempting to comply with the extensive, enormously expensive, and overly exacting requirements proposed by the OFCCP. This proposal reflects an Agency that fails to understand the already immense pressures on American employers in the face of a difficult economy.

The OFCCP's proposed disability regulations have been published for public comment in a Notice of Proposed Rulemaking (NPRM) titled "Affirmative Action and Nondiscrimination Obligations of Contractors and Subcontractors: Evaluation of Recruitment and Placement Results Under Section 503." This proposed revision to the regulations at 41 CFR Part 60-741, et. seq., which implement Section 503 of the Rehabilitation Act of 1973, as amended, requires that contractors do more to recruit, consider, hire, promote, and accommodate individuals with disabilities. These are laudable goals. However, the OFCCP's proposal to implement these goals saddles contractors with unnecessary administrative burdens, obligates contractors to pre-established workforce composition goals, regardless of industry, geography or size of business, and requires contractors to follow set procedures for administering their human resources function rather than permitting the business to implement procedures in their chosen effective manner. The proposed regulations would require contractors to:

administer multiple solicitations of disability status to applicants and employees;
measure and analyze referrals, applicants and hires;
compare workforce composition to the pre-established goal;
submit an annual report of such results to the OFCCP;
conduct extensive self-assessments;
document all activities in a specific manner;
establish multiple mandatory linkages to disability recruiting resources;
conform to specific written accommodation procedures and timelines;
implement extensive data collection and record-keeping systems; and
implement an extended 5 year record retention period.

Importantly, these proposed regulations emphasize the OFCCP's desire to rely on the contractor's data, documents, and self-assessments to make it easier for the Agency to detect failures of compliance during its audits of contractors. As we have seen in the past few years, it is critical to be aware that a contractor's failure to have accurate and complete data, documents and records of its efforts and other activities can be misinterpreted by the OFCCP to be discrimination and can result in very expensive litigation and/or settlements. These new proposed requirements present a host of opportunities for the OFCCP to find "discrimination," when the issue may simply be a failure to maintain adequate data (such as applicant tracking), documents and other records.

The most significant proposed changes to 41 CFR Part 60-741 are outlined below with an invitation, at the close of this Alert, to our January 5, 2012 webinar which will discuss in more detail the NPRM and challenges for contractors.

Over One Million Additional Individuals with Disabilities Could be Covered

The proposed regulations also adopt much of the ADAAA's structure, including aligning Section 503 with the ADAAA in the definitions of "major life activities," "physical or mental impairment," "record of such impairment," "regarded as," "substantially limits," "record of such an impairment," "direct threat," and "mitigating measures." Thus, the focus will change from whether someone is disabled enough to be covered by Section 503, to ensuring that benefits under the affirmative action program are provided to individuals who identify a person with a disability.

The expansion of this definition means that potentially a large percentage of the workforce may be defined as a person with a disability. While the new definition could be said to be "old news" in the contractor community since it is already in place under the ADAAA, the significant differences in the nature of Section 503's proscriptive requirements to demonstrate compliance and the OFCCP's aggressive auditing program mark a sharp difference in the impact of the Section 503 regulations as compared with the ADAAA regulations. Indeed, given the vast numbers of those who are now disabled by this definition, it is an enormous burden to implement all of the "affirmative actions" required for these individuals under the Section 503 NPRM.

The Proposed Regulations Establish Workforce Composition Goals

One of the biggest "game-changers" in the proposed rule is the establishment of workforce composition goals. Although the Agency declares that the benchmark goal is "neither a quota nor a hiring ceiling, and a failure to attain the goal does not constitute a violation of Section 503 or OFCCP's regulations," the Agency's commentary on the proposed rule indicate that the "primary indicator of effectiveness is whether qualified individuals with disabilities have been hired." The OFCCP proposes adopting a single, nationwide utilization goal of 7 percent for the employment of individuals with disabilities. This 7 percent utilization goal would apply uniformly to each job group; the calculation cannot be aggregated across job groups. This 7 percent goal is derived primarily from disability data collected as part of the Census Bureau's American Community Survey (ACS), with a surprising expansion of the ACS's calculated availability to add "discouraged" disabled workers to the definition of who is considered a person with a disability. The availability of 5.7% is increased by 1.7% to account for "discouraged" disabled workers whom the Agency supposes are still interested in working even though they did not so indicate so in the census data used to support the availability projections used by OFCCP. The OFCCP specifically invited public comment on the proposed goal, and on the potential use of a utilization range of between 4 percent and 10 percent in lieu of a single national utilization goal.

While it may seem at first blush that a 7 percent composition goal is outrageous and unobtainable, with the ADAAA's disability definition so broadly framed, it is likely most employers will be able to meet this goal if (and this is a big if) employees and applicants with disabilities are willing to self-identify. Constructing such a goal puts pressure on employers to encourage employees or applicants to self-identify as a person with a disability, which may well have other adverse consequences. The push toward greater self-identification is likely to increase in the number of disability discrimination lawsuits and requests for accommodation, and may put too much pressure on applicants and employees to feel they must disclose a disability, that they would prefer to remain private.

Further, the Agency solicited comment on the adopting a secondary sub-goal for workforce composition of 2 percent individuals with certain, more severe, disabilities. Such a goal would be very burdensome on contractors as the availability of individuals with these more "severe" disabilities is even less known and many of the disabilities listed as being "severe" are hidden disabilities, which as noted above, the employee or the applicant may not wish to disclose.

Moreover, it is uncertain what the workforce goal should properly be. While the ACS data suggests an availability, the ACS definition was much more limited than the ADAAA definition embraced in this NPRM. At this time, there is no verifiable data capturing the availability of persons with disabilities according to the definitions used in the ADAAA and the Section 503 NPRM. As the commentary with the regulations specifically notes, the OFCCP Director will have the authority to modify the goal level. We would anticipate, as new census or other data regarding the availability of people with a disabilities in the workforce according to this definition becomes available, the goal will be increased to put employers under further burden.

Contractors Will Be Required to Solicit Self-Identification of Applicants and Employees with Disabilities Early and Often

The self-invitation must use the specific language prescribed by the OFCCP. For applicants, the invitation may be included with the application materials, but must be separable or detachable from the job application.

There has been much discussion about whether, and to what extent, employees and especially applicants will self-identify. Many agree it is naive to expect that the applicants or employees with disabilities will rush forward to declare themselves.

Moreover, the frequency of these solicitations, their accurate tracking and follow-up are a substantial burden to employers. The single solicitation of applicants post-offer is certainly more appropriate and will provide an opportunity for interactive discussions about accommodations. The pre-offer solicitation is unnecessary and goes even beyond the applicant tracking requirements under Executive Order 11246, which only require race/ethnicity/gender self-identification once the job seeker becomes an applicant. This NPRM appears to require a solicitation of self-identification even before the job seeker is an applicant, at the time they apply or are considered, but before they are deemed to have the basic qualifications for the job. At the very least, any Section 503 applicant tracking regulations should be consistent with the principal affirmative action regulations under Executive Order 11246.

One of the most significant issues with the proposed regulation's anonymous self-identification process and the proposed 7 percent workforce goal (or 2 percent subgoal) for each job group is that contractors will have no way of accurately counting the number of employees with disabilities in each job group in order to determine if it is meeting these goals. This fundamental disconnect between the self-identification process and the OFCCP's insistence on a workforce goal reflects the failure of the drafters of the regulations to understand the realities and technical aspects of the implementation of their proposed concepts.

More Data Collection, Analysis and Recordkeeping

The proposed rule requires contractors to maintain quantitative measurements and comparisons related to individuals with disabilities who have been referred by state employment services, who have applied for positions with the contractor, and who have been hired by the contractor. The measurements are intended to aid the contractor in evaluating and tailoring recruitment and outreach efforts and in establishing hiring benchmarks. Those measurements and comparisons include the following:

The total number of referrals from state employment services and other organization with whom the contractor has linkage agreements;
The total number of applicants for employment, the number of applicants who are known to be individuals with disabilities, and the "applicant ratio" of known applicants with disabilities to total applicants;
The total number of job openings, the number of jobs filled, the number of known individuals with disabilities hired, and the "hiring ratio" of hires with known disabilities to total hires; and
The total number of job openings, the number of jobs that are filled, and the "job fill ratio" of job openings to job openings filled.

This data collection is completely new and aligns generally with the Section 4212 NPRM for the proposed revisions to the veterans affirmative action regulations. Like our concerns with those data collection requirements, we observe that employers currently have no systems in place to track referrals. Moreover, this tracking will necessarily be difficult to accurately implement as this information will need to be supplied by the job seeker as he or she applies and is thus subject to inaccuracies caused unintentionally by forgetful or unconcerned job seekers. Referral data possibly may be supplied by referral sources, if they have the resources and the time (which is doubtful). If the data is supplied by referral sources, it would be in various formats, possibly not electronic, and would be mostly useless as it would not marry up to the contractor's applicant tracking system. As to the requirement to track job openings, job fills and compute a job fill ratio, this information is entirely unnecessary as the vast number of job openings are filled, and so has little or no value compared to the burden it represents.

Annual Report Required of All Contractors

Under the proposed regulations, contractors would be required to provide OFCCP with an annual report containing these measurements and computations described above, and also the percentage of applicants, new hires, and total workforce for each EEO-1 category, regardless of whether the contractor has been selected for a compliance evaluation.

This requirement would add yet another annual report (in addition to the EEO-1 and the Vets- 100 or 100A) to the contractor's reporting obligations. The apparent principal purpose of this report seems to be to make the OFCCP's job easier in determining which contractors to audit, i.e., lower percentage of people with disabilities reported compared to workforce would result in greater chance of selection for audit. There are other ways for OFCCP to determine whom to audit that are far less burdensome for the contractor community. We note that the OFCCP seems to be "report happy" as it has also separately proposed the institution of an unprecedented report referred to as the Compensation Data Collection Tool, also intended to support audit selection.

Linkage Agreements & Recruitment Will be an Increasingly Important Portion of Compliance Efforts

As with the proposed veterans' regulations (see here), the proposed Section 503 regulations will require contractors to enter into linkage agreements and expand outreach to community groups. The current proposal requires contractors to post most job opportunities with the nearest Employment One-Stop Career Center, enter into signed "linkage agreements" and establish on-going relationships with appropriate recruitment and/or training sources including, at a minimum, each of the following: (1) the local State Vocational Rehabilitation Agency office nearest the contractor's establishment, or a local organization listed in the Social Security Administration's Ticket to Work Employment Network Directory; and (2) at least one of several other listed organizations and agencies for purposes of recruitment and developing training opportunities, which include entities such as the Employer Assistance and Resource Network (EARN), that are funded by the Department of Labor to provide recruitment or training services for individuals with disabilities. Contractors would also be required to "consult" with the Employer Resources Section of the National Resource Directory, a collaboration among the Departments of Labor, Defense, and Veterans Affairs.

The proposed rule also requires contractors to review their outreach and recruitment activities annually to evaluate their effectiveness in identifying and recruiting qualified people with disabilities. The review must be documented and records retained for five years. Other recommended outreach activities are included as well.

As we have discussed in our comments to the Section 4212 NPRM regarding affirmative action for covered veterans, mandatory linkages will likely place an untenable burden on the linkage agencies. These agencies currently do not have the staff or financial resources to enable contractors to fulfill their obligations. And it is unlikely they will be able to staff up and increase their resources in the future to meet the overwhelming demand that will be placed upon them.

Reasonable Accommodation and Direct Threat Procedures Must be Specific and Well-Documented and Accommodations Must be Processed Quickly

Contractors must develop a written reasonable accommodation procedure and disseminate it to all employees. This written procedure must contain a description of the steps the contractor will take when processing a reasonable accommodation request, including the process by which the contractor renders a final determination on the accommodation request; provide an explanation of the circumstances under which medical documentation may be requested and reviewed before a reasonable accommodation is provided; designate an official for the implementation of the reasonable accommodation process (by name, title/office, and contact information); and detail that medical or disability-related information will be kept confidential and segregated from the rest of the personnel file;
Contractors must provide the accommodation requesting applicant or employee with a written confirmation of the employer's receipt of an accommodation request;
The timeframe for processing requests shall not be longer than 5 to 10 business days if no supporting medical documentation is needed. If medical documentation is needed, or if special equipment must be ordered, the timeframe, excepting extenuating circumstances, shall not exceed 30 calendar days;
Any denial or refusal to provide a reasonable accommodation must be provided by the contractor to the accommodation requester in writing. The written denial must include, inter alia, the basis for the denial, a statement of the requester's right to file a complaint with OFCCP, and detail any internal appeal or reconsideration process;
Information about the reasonable accommodation procedures must be communicated in orientation, and transmitted to labor unions;
Contractors must contemporaneously create a written record any time the contractor makes an employment decision based on the employer's belief that an employee poses a "direct threat," which supports its belief that a direct threat exists;
Contractors must not reduce the amount of compensation that the contractor provides to an individual with a disability because of the "actual or anticipated cost of a reasonable accommodation that the individual needs or requests";
In the event an accommodation would constitute an undue hardship, employees or applicants must be given the option of providing the accommodation themselves or paying the portion of the expense that constitutes an undue hardship to the contractor; and
If the individual with a disability rejects a reasonable accommodation made by the contractor he or she may still be considered qualified if the individual subsequently provides and/or pays for a reasonable accommodation himself or herself.

These proposed regulations reflect the OFCCP's apparent intent to control and manage a contractor's human resources decisions. This is out-of-step with EEO law, which respects employers' needs for flexible processes. This will be especially burdensome on small employers with limited human resources staff.

Applicant and Employee Notifications

The proposed regulations make a number of changes concerning the manner in which certain notices must be provided to applicants and employees.

Throughout the proposed rule, OFCCP clarifies that where contractors are required to provide notice in a manner accessible and easy to understand for persons with disabilities, the recommended method of doing so is by using Braille, large print or other versions, instead of reading the notice aloud, which is recommended in the current regulations.
For employees who do not work at a physical location of the contractor, the posting obligations are satisfied if the contractor posts notices in an electronic format, provided that the contractor provides computers that can access the electronic posting to such employees, or the contractor has actual knowledge that such employees are otherwise able to access the electronically posted notices. Electronic notices for employees must be posted in a conspicuous location and format on the company's intranet or sent by electronic mail to employees.
Contractors may use electronic postings to notify job applicants of their rights if the contractor utilizes an electronic application process. Electronic notices for applicants must be conspicuously stored with, or as part of, the electronic application.

Compliance Evaluations and Access to Records

The proposed rule clarifies OFCCP's position concerning the temporal scope of desk audits, largely as a response to the administrative law judge's decision in Office of Federal Contract Compliance Programs, U.S. Department of Labor v. Frito-Lay, Inc., Case No: 2010-OFC-00002, holding the OFCCP is limited to data for the two year period preceding the date of a scheduling letter during a desk audit. OFCCP states that proposed § 60-741.60(a)(1)(i) is modified to clarify "OFCCP's long-standing policy that, in order to fully investigate and understand the scope of potential violations, OFCCP may need to examine information after the date of the scheduling letter in order to determine, for instance, if violations are continuing or have been remedied." Contrary to the ALJ's finding in Frito-Lay, the OFCCP then goes on to say, "The language does not represent a change in policy or new contractor obligations."

Additionally, the proposed rule modifies several of the investigative procedures available to OFCCP during compliance evaluations, which is consistent with OFCCP's Active Case Enforcement Directive (ACE). For more information about ACE, click here. The proposed regulations provide that during a compliance check, used to monitor contractor recordkeeping, OFCCP may request that documents be provided on-site or off-site. The current regulation provides that contractors may provide requested records on-site or off-site at the contractor's option. The proposed rule also provides that focused reviews may be conducted off-site as well as on-site. And the rule includes a new procedure for pre-award compliance evaluations, which is based on the procedure in the Executive Order 11246 regulations.

Finally, the proposed rule attempts to put a stop to some contractors' practices of submitting the least user-friendly form of information, e.g. a roomful of documents rather than a spreadsheet with the relevant data. The proposed regulation provides that during a compliance evaluation, the contractor must specify to OFCCP all formats, including specific electronic formats, in which its records are available and produce requested records in the format selected by OFCCP. According to its comments, OFCCP proposes this change in light of "many instances" in which the Agency conducted extensive review and analysis of records only to find later that they were available in more readily accessible formats.

Self-Assessment Requirements

The proposed regulations also expand the self-audit requirements for contractors' data, processes and programs regarding non-discrimination and affirmative action for individuals with disabilities, including assessing the results of the data collection, linkage agreements and specific outreach obligations discussed above. Those requirements include the following:

Requiring contractors to engage in an annual review of "personnel processes" and technology. In the personnel process review, the contractor must identify the vacancies and training programs for which applicants and employees with disabilities are considered; provide a statement of reasons explaining the circumstances for rejecting individuals with disabilities for vacancies and training programs and a description of considered accommodations; and describe the nature and type of accommodations for individuals with disabilities who were selected for hire, promotion, or training programs.
Requiring contractors to annually review and revise all physical and mental job qualification standards.
Requiring annual (rather than periodic) review of personnel and technological processes;

Not only do the proposed regulations require contractors to conduct such self-assessments, but they also make it clear that OFCCP will be critically reviewing them during their compliance evaluations in order to find non-compliance and demand whatever remedy OFCCP believes appropriate. This is a significant change from the OFCCP's practices under Executive Order 11246 and its review of contractor compliance because with these proposed regulations, unlike the EO 11246 regulations, the OFCCP demands to see and evaluate for themselves the contractor's self-assessments. Consequently contractors will need to be much more circumspect about the information and discussion contained in these documents and it will be wise to develop drafts under attorney-client privilege, especially if issues are anticipated. Under privilege, observations could be made in a draft document regarding potential compliance problems, the problems could be addressed and a final assessment document could be issued once the problems are resolved.

Record Retention Expansion

The proposed regulations would require contractors to retain specified data and documents for five years. As with its NPRM for Section 4212 Veterans Affirmative Action, the OFCCP is attempting to expand the retention period longer than the current statute of limitations. While asserting that this longer period is important for contractors to see their own trends and history, we note that this retention period sets the stage for even more burdensome document requests from OFCCP.

Preference Programs

The regulations encourages contractors to voluntarily develop and implement programs that provide priority consideration to individuals with disabilities in recruitment and/or hiring. It is unclear whether such preference programs would be lawful. OFCCP cites no legal authority upon which contractors may rely in considering risks associated with such programs.

Transparency, Accountability and Specific Communication Requirements

The Agency seeks to require that federal contractors to include the EO clause verbatim in all federal subcontracts. Further, the identity of the official responsible for a contractor's affirmative action activities must appear on all internal and external communications regarding the contractor's affirmative action program and the CEO for each federal contractor must express her or his support of the company's affirmative action obligations publicly and in writing.
The proposed verbatim EO clause provision is apparently designed by OFCCP to send a message to subcontractors that they can no longer claim they did not know or understand their compliance obligations. The verbatim EO clause would require contractors to redraft their contracts and purchase orders and create longer documents. A great many contractors already name and involve the CEO, and name those responsible for compliance in their communications.

What Contractors and Subcontractors Should Do Now

Complying with the regulations, as proposed, would require contractors to engage in a major alteration of their outreach and recruiting activities; human resources policies, procedures and systems; referral and applicant tracking processes and systems; promotion and training practices and recordkeeping; self-audit processes; documentation practices; record retention policies and practices; and substantial revision of their Section 503 affirmative action plans. To learn more about these proposed regulations, the associated challenges for contractors and how to prepare for the likely changes to come, we invite you to join our webinar on January 5, 2012. To enroll in the webinar, please register here.

We also encourage contractors to make their voices heard about how these proposed regulations will impact your businesses, especially given the OFCCP's statements that these additional obligations will not be onerous to federal contractors. Please note that the OFCCP's estimate of the burden on contractors is a one-time cost of $172 per contractor establishment and a recurring annual cost of $301 per contractor establishment.. Clearly, this is a gross understatement of the actual burden that will be experienced. Comments to the Notice of Proposed Rulemaking are due on or before February 7, 2012. If you would like your comments to be included, with or without attribution, in Seyfarth's comments, please forward them to Valerie Hoffman at vhoffman@seyfarth.com or Christine Hendrickson at chendrickson@seyfarth.com.

If you have questions about the proposed regulations or this Management Alert, please contact the Seyfarth attorney with whom you work or any attorney on our OFCCP & Affirmative Action Compliance Team.

By: Valerie Hoffman and Christine Hendrickson

DLSE Template For New Wage Notices--A Cautionary Note

Tue, 03 Jan 2012 00:00:00 -0400

On October 9, 2011, Governor Brown signed the Wage Theft Protection Act (Assembly Bill 469) which, effective January 1, 2012, requires employers to provide certain prescribed notices to all new hires, including their rates of pay, name and address of employer, and workers' compensation carrier. (The Act is summarized in our October 13, 2011 California Labor and Employment Legislation Alert http://www.seyfarth.com/uploads/siteFiles/publications/583298e4-9d57-4711-b9ae-994c63426cbe_documentupload.pdf.)

The legislation specifically directed the California Labor Commissioner to prepare and promulgate a template form for employers' use to comply with new Labor Code Section 2810.5. On December 29, 2011, the Division of Labor Standards Enforcement ("DLSE") issued the much anticipated template. A day later, the DLSE released Frequently Asked Questions (FAQs ) on the new notice http://www.dir.ca.gov/dlse/FAQs-NoticeToEmployee.html.

The new template, available in both Word and PDF formats on the Department of Industrial Relations' web site, http://www.dir.ca.gov/dlse/LC_2810.5_Notice.doc, raises several concerns for employers. Labor Code Section 2810.5 provides that at the time of hiring, the employer must provide written notice to each employee, concerning:

The employee's rate or rates of pay and the basis thereof (e.g., hourly, salary, commission), including any applicable overtime rates;
The regular payday designated by the employer;
The name, address and telephone number of the employer, including any "doing business as" names used by the employer;
The name, address, and telephone number of the employer's workers' compensation insurance carrier; and
Any other information the Labor Commissioner deems "material and necessary."

Written notice of changes in any of the above information must be given within seven calendar days after the time of the changes, unless the changes are all reflected on a timely itemized wage statement or in another writing. Section 2810.5 contains exceptions for state and local government employees, employees who are exempt from the payment of overtime wages under California law, and employees covered by certain collective bargaining agreements.

As noted above, new Labor Code Section 2810.5 further provides that the Labor Commissioner "shall prepare a template that complies" with its requirements. Employers hoped the DLSE would issue the template earlier than a few days before the law was scheduled to go into effect. As a result, many employers designed their own notice forms as the January 1 effective date drew closer. Those forms now may need to be modified to reflect additional information the DLSE added to the original information required by the statute.

Concerns Raised by the DLSE Template

The new statute specifically contemplates that the DLSE would add other required information deemed "material and necessary" to the list of eight items specifically covered in the statute, and it did so to what some will regard as an intrusive level. In addition to the name(s) and address(es) (physical and mailing) of the employer, the DLSE form requires an employer to state whether it is a sole proprietor, corporation, limited liability company, general partnership or other, whether it is a staffing agency (e.g., temp agency or PEO) and any other names under which it does business (such as d/b/a's).

If the worksite employer uses any other business or entity to hire employees or administer wages or benefits, the form requires completing two sections, one for the worksite employer and one for the other business. Both sections need not be completed if the only other business is a recruiting service or a payroll processing service. The information that must be provided about "the other business" includes whether the other business is a professional employer organization (PEO), employee leasing company or a temporary services agency, and requires physical address of main office, mailing address, telephone number, and other names.

One challenge for employers will be reaching agreement on which entity is responsible for giving the notice and cooperation in making the necessary information available. In some cases, characterizing the relationships according to DLSE categories may not be a simple matter.

The DLSE's template pertaining to overtime rate also raises questions. Overtime may be time and one-half the regular rate of pay or double the "regular rate." "Regular rate" may not be readily calculable because it may include bonuses and commissions and vary from pay period to pay period.

The DLSE also expanded its template beyond the language of Labor Code 2810.5 in the area of workers compensation insurance. Not content with the identity of the insurance carrier, the DLSE requires insurance carrier's name, address, telephone number, policy number or, if self-insured (Labor Code 3700), certificate number for consent to self-insure. Employers whose workers' compensation insurance programs utilize a third party administrator have expressed concern that employees should contact the third party administrator, not the insurance carrier, for help with a claim.

Possibly most perplexing and concerning is how best to complete the DLSE's "check the box" for whether the employment agreement is written or oral. Most employment agreements are a complex mix of both written and oral components. A major concern is preventing the 2810.5 notice from undercutting at-will employment, which is often contained in a written agreement. One solution may be to modify the DLSE form to reflect that the notice is a written agreement governing wage information, and to include, if appropriate, an at-will reminder, such as "This notice is a written agreement on rates of pay, and confirms that your employment is at-will, meaning that either you or (the Company) can end the employment relationship at any time, without or without cause or notice."

The FAQ's Provide Some Answers

Despite the issues presented by the form template, the DLSE's FAQ's do provide some guidance, such as:

Employers can use their own notices, as long as they contain all of the required information.
Non-English templates will be available on DLSE's website, as they are completed, in Spanish, Chinese, Korean, Vietnamese and Tagalog.
The notice may be given with other materials that are presented at the time of hire, but in the opinion of the DLSE, the notice required under Labor Code 2810.5 must be on its own form. DLSE believes employees should not be required to piece together the information from several separate documents or pages of a manual.
The notice may be given electronically, but the electronic system must allow for acknowledgement of receipt.
An employee may refuse to sign the notice, which simply signifies receipt. Proof of delivery should exist where an employee refuses to sign.
Where there are multiple wage rates, the employer needs to put them all on the notice (e.g., shift differentials, different piece rates).

Even with the helpful FAQ, questions remain. Employers should consider carefully whether to use the DLSE template or whether to modify and customize it while assuring all the required information is provided to employees in accordance with the statute.

Customize, Customize

"One size fits all" rarely works in the world of employment law. Section 2810.5 and the DLSE's template notice raise many unique issues that need to be carefully considered. Employers should consider contacting employment law counsel for individualized advice on how best to comply with Labor Code Section 2810.5.

By: Dana Howells

Dana Howells is a Senior Counsel in the firm's Los Angeles office. If you would like further information, please contact your Seyfarth Shaw LLP attorney,or Dana Howells at dhowells@seyfarth.com.

Angelo Paparelli Published in New York Law Journal
“The Year-End Immigration Roundup for Employers”

Tue, 03 Jan 2012 00:00:00 -0400

An article co-authored by Immigration partner Angelo Paparelli was published in the December 29 edition of New York Law Journal. In the article, Angelo and Ted Chiappari summarize the key events of 2011 in business immigration.

According to Angelo and Ted, some of last year’s major immigration developments included the exhaustion of the annual H-1B visa quota for specialty-occupation workers in November, sooner than any fiscal year since 2008; the omission of immigration provisions in new Free Trade Agreements; slow progress on immigration equality for same-sex partners; increased availability of prosecutorial discretion for low-level immigration violators; and unpredictability of I-9 enforcement.

“With virtually no immigration reform legislation coming out of Congress, most legal developments in the immigration arena in 2011 have been in other venues: the courts, the agencies and various state legislatures which—by default—have tried to fill the vacuum caused by federal failures to regulate immigration,” commented the authors.

California Supreme Court Weighs In (Or Not) On The Administrative Exemption

Fri, 30 Dec 2011 00:00:00 -0400

On December 29, 2011, four years after granting review, the California Supreme Court decided Harris v. Superior Court, holding that the Court of Appeal mistakenly concluded that claims adjusters, as a matter of law, do not qualify for the administrative exemption.

Employment lawyers had hoped that the Supreme Court would use this occasion to provide some definitive guidance for the employer community. Instead, in reversing the lower court's decision, the Supreme Court simply held that the Court of Appeal had improperly applied the "administrative/production worker dichotomy" as a dispositive test. The general advice that the Supreme Court provides in Harris is that courts evaluating the administrative exemption must apply the specific language of the relevant statutes and wage orders, and should consult other sources (such as the administrative/production dichotomy) only if the statutes and wage orders fail to provide adequate guidance.

Case Background

Liberty Mutual claims adjusters filed a class action seeking unpaid overtime wages based on their allegation that Liberty Mutual misclassified them as exempt administrative employees. Following the trial court's grant of class certification, plaintiffs moved for summary adjudication on Liberty Mutual's affirmative defense that plaintiffs were exempt from the overtime requirements under the administrative exemption. The trial court denied plaintiffs' motion, and, at the trial court's recommendation, the parties sought interlocutory review.

On review, the Court of Appeal reversed and directed the trial court to enter an order granting plaintiffs' motion for summary adjudication. Specifically, the Court of Appeal held that the plaintiffs could not be considered exempt employees because they were not engaged in administrative work. In so holding, the Court of Appeal strictly applied the "administrative/production worker dichotomy" test set forth in the Bell v. Farmers Insurance Exchange cases, 87 Cal.App.4th 805 (2001) and 115 Cal.App.4th 715 (2004) (collectively "Bell"). In strictly applying the dichotomy and relying on Bell, the Harris Court of Appeal held that insurance claims adjusters could not qualify for the administrative exemption as a matter of law because adjusting claims was part of the "product" that their employer sold.

California Supreme Court Reverses Court Of Appeal And Distinguishes Bell Cases

To qualify for the administrative exemption in California, Labor Code section 515 requires that an employee: (1) be paid a salary at or above a certain level; (2) perform administrative work; (3) have primary duties that involve administrative work; and (4) discharge those primary duties by regularly exercising independent judgment and discretion. In Harris, the California Supreme Court only considered the second factor, whether the employees' work qualified as administrative.

According to the applicable Wage Order, this determination requires an analysis of whether such work is "directly related" to management policies or general business operations of the employer. The California Supreme Court broke this analysis down into two components, one "qualitative" and the other "quantitative:" (1) whether the employee's work is administrative in nature, and (2) whether it is of "substantial importance" to the management policies or general business operations of the employer.

In reversing the Court of Appeal, the California Supreme Court distinguished Bell on two important grounds. First, the Court noted that the opinions in Bell limited their holding to the specific facts involved in that case. For example, in Bell, the employer had stipulated that the work performed by the employees in question was "routine and unimportant." Second, the Court noted that the analysis employed by the court in Bell was dependent on its conclusion that the applicable Wage Order at that time (Wage Order 4-1998) did not provide a sufficient definition of the administrative exemption, thereby requiring the Bell court to look beyond the language of the Wage Order.

In contrast, the Court noted that Wage Order 4-2001 (the current and operative Wage Order in Harris) incorporated specific federal regulations and contained "detailed guidance" concerning the administrative exemption. Thus, by relying on Bell and its application of the administrative/production dichotomy, the Court of Appeal in Harris erred by "provid[ing] its own gloss to the administrative/production worker dichotomy and us[ing] it, rather than applying the language of the relevant wage order and regulations."

In distinguishing the Bell cases, the Court declined to state any rule that would forbid use of the administrative/production dichotomy as an analytical tool, in an appropriate case. Instead, the Court held that, in resolving whether work qualifies as administrative, courts must consider the particular facts before them and apply the language of the statutes and wage orders at issue. If the statutes and wage orders fail to provide adequate guidance, the Court held it would be appropriate to consider other sources, including, presumably, the administrative/production dichotomy.

In reversing the Court of Appeal, the Supreme Court expressed no opinion on the strength of the parties' relative positions on the merits of the exemption.

What Harris Means For Employers:

The only concrete guidance from the California Supreme Court in Harris is that the administrative/production dichotomy is not a dispositive test for the administrative exemption. However, the Court left open the possibility that the dichotomy may still apply in future cases. Employers who were looking for more specific guidance from the Court on the administrative exemption will be disappointed, as, even after Harris, determining whether an employee satisfies the administrative exemption remains a highly fact-specific venture.

By: Fred Sanderson and Kimberly Brener

Fred Sanderson is a partner in Seyfarth's Sacramento office. Kimberly Brener is an associate in the firm's San Francisco office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Fred Sanderson at asanderson@seyfarth.com or Kimberly Brener at kbrener@seyfarth.com.

Immigration Inbox: News You Can Use - December 2011

Wed, 28 Dec 2011 00:00:00 -0400

U.S. Immigration:

H-1B Cap Reached for FY 2012 - Petitions for new employment of an H-1B will not be accepted again until April 1, 2012.
House Votes To End Per-Country Limits on Employment-Based Immigration Visas - The measure, which could benefit skilled Indian and Chinese workers and high-tech companies in the United States, is stalled in the Senate because of a hold by Sen. Charles Grassley.
Labor Dept. Current on PERM, H-1B Prevailing Wage Determinations – In the PERM and H-1B programs, the Labor Department considers a prevailing wage determination "current" if it is issued within 60 days of submission.
State Dept. Releases Fact Sheet on Growing Demand for Visas; Greatest Increase From China, Brazil – During the past five years, visa issuances have increased 234 percent in Brazil, 124 percent in China, 51 percent in India, and 24 percent in Mexico.
Employers May Bundle L-1 Filings, USCIS Announces – USCIS will consider multiple applications grouped into "bundles" of L-1 petitions as part of an effort to streamline and improve the adjudication process.
Student and Exchange Visitor Update: F, M, J Visa Processing Resumes Worldwide; Expedited Processing, Record Numbers of Students Announced – International students attending U.S. colleges and universities rose to a record number in the 2010-2011 academic year.
State Dept. Seeks Comments on New Exchange Visitor Summer Work Travel Verification Form – The form will be completed by designated program sponsors, and one is required for each summer work travel participant.
DOL Releases New PERM FAQ on Listing Job Duties Not Normal to Occupation; Discusses Updates to Job Codes – DOL has posted a revised FAQ sheet regarding the PERM labor certification program and listing job requirements not normal to the occupation; the agency also said it is working to incorporate new job codes into the online application system known as Standard Occupational Classifications (SOC).
USCIS Issues Draft EB-5 Memo – USCIS seeks stakeholder input on "foundational issues" before providing greater detail.
State Dept. Announces Progress on 'Historic' Visa Agreement With Russia – The visa agreement has advanced one step closer to entry into force.
Justice Dept. Sues Utah Over Immigration Law – DOJ argued that Utah's law is unconstitutional and mandates immigration enforcement measures that interfere with the immigration priorities and practices of the federal government.

Seyfarth Work Authorization Team (SWATeam):

Labor Dept. Inspector General Identifies 'Integrity of Foreign Labor Certification Programs' as a Top Management Challenge – The OIG said that investigations "continue to uncover schemes carried out by immigration attorneys, labor brokers, and transnational organized crime groups."
OSC Releases Info on Enforcement, Policy, Trends; Launches Webinar – OSC said its enforcement work has been bolstered by a rise in referrals of potential discrimination from entities such as the Department of Labor, legal aid bureaus, and immigrant advocacy organizations.

Also in this issue:

U.S. Immigration

1. H-1B Cap Reached for FY 2012

As discussed in our November 2011 newsletter, U.S. Citizenship and Immigration Services (USCIS) announced that it has received a sufficient number of H-1B petitions to reach the statutory numerical limit (cap) of 65,000 for fiscal year (FY) 2012. November 22, 2011, was the final receipt date for new H-1B petitions requesting an employment start date in FY 2012. USCIS further announced that all petitions received on November 22, 2011 will be adjudicated under the FY 2012 cap. Unlike previous years, there will not be a lottery to select a limited number of petitions filed on the last day of filing.

USCIS will continue to accept and process petitions that are otherwise exempt from the cap. In addition, petitions filed on behalf of current H-1B workers who have been counted previously against the cap will not be counted toward the FY 2012 H-1B cap. Accordingly, USCIS will continue to accept and process petitions filed to:

extend the amount of time a current H-1B worker may remain in the U.S.;
change the terms of employment for current H-1B workers;
allow current H-1B workers to change employers; and
allow current H-1B workers to work concurrently in a second H-1B position.

Petitions for "new employment" of an H-1B, that is, for employment of a person who is not yet in H-1B status for another employer, will not be accepted again until April 1, 2012. Those petitions received after April 1, 2012, must request employment starting October 1, 2012, so that they will be subject to next year's cap (FY 2013).

2. House Votes To End Per-Country Limits on Employment-Based Immigration Visas

On November 29, 2011, the U.S. House of Representatives voted 389-15 in favor of ending per-country numerical limits (caps) on employment-based visas. The bill does not raise the number of such visas issued, but would eliminate the current provision stating that employment-based visas issued cannot exceed seven percent of the total for any one country. The measure could benefit skilled Indian and Chinese workers and high-tech companies in the United States.

Similar legislation is pending in the Senate. For the text of the bill, H.R. 3012, click here.

3. Labor Dept. Current on PERM, H-1B Prevailing Wage Determinations

The Department of Labor's Office of Foreign Labor Certification recently announced that PERM and H-1B prevailing wage determinations are now current. H-2B prevailing wage determinations are expected to become current imminently.

The Department explained that "current" has a different meaning depending on the program. In the PERM and H-1B programs, a prevailing wage determination is considered current when it is issued within 60 days of submission. For H-2B prevailing wage determinations, "current" is within 30 days of submission. The PERM program became current the week of October 23, 2011, and the H-1B program became current the week of November 6, 2011. The Department noted that the dates may be subject to change based on unanticipated actions, such as any additional judicial determinations or legislative actions. The agency added that appeals are being processed as resources allow, with priority placed on becoming current on initial prevailing wage determination requests.

The notice is available under "November 17, 2011," here.

4. State Dept. Releases Fact Sheet on Growing Demand for Visas; Greatest Increase From China, Brazil

In a fact sheet released on October 24, 2011, the Department of State said that demand for U.S. visas is growing, and that the agency is "committed to increasing visa adjudications by one-third in FY 2012 in both China and Brazil, two countries where we have seen the greatest increase in visa demand." During the past five years, visa issuances have increased 234 percent in Brazil, 124 percent in China, 51 percent in India, and 24 percent in Mexico. In fiscal year 2011, consular officers processed more than one million visas in China, an increase of more than 35 percent over last year.

At the busiest U.S. consular posts, officers may interview more than 100 visa applicants per day. Preliminary numbers indicate that consular officers processed more than 9.6 million visa applications in FY 2011. Of those, the Department issued more than 7.5 million U.S. visas, an increase of more than 17 percent over the previous fiscal year, during which 6.4 million visas were issued. During the past five years, visa issuances have increased 234 percent in Brazil, 124 percent in China, 51 percent in India, and 24 percent in Mexico. In fiscal year 2011, consular officers processed more than one million visas in China, an increase of more than 35 percent over last year.

The Department of State noted that according to Department of Commerce figures, 60 million visitors entered the United States in 2010, and 35 percent of those visitors entered using visas issued by the Department of State. International travel to the United States generated $134 billion in revenue and supported 1.1 million U.S. jobs in 2010, the Department of Commerce reported. The Department of Commerce estimated that the number of potential visitors to the United States will increase six to nine percent annually for the next five years, and could reach 88 million visitors by 2016.

The Department of State said it is adding 98 visa adjudicators this year and next in China and Brazil. A number of these new adjudicators are being hired through a pilot program that targets applicants who already speak Mandarin or Portuguese. The Department expects the first group of these special hires to arrive at posts in China and Brazil in spring 2012. A second group will follow in summer 2012.

Some posts in China and Brazil are operating with extended hours to maximize use of existing facilities. Working bilaterally with host governments, the Department of State is also working to expand and improve visa processing facilities to allow for more applicant interviews.

Wait times for visa appointments can fluctuate significantly depending on seasonal demand, the Department of State noted, adding that "[a]t most posts around the world, visa applicants wait less than one week for an interview appointment. We will continue to send temporary duty officers to manage seasonal spikes in demand."

Wait times for student visa interview appointments worldwide are less than 15 days, the Department said. Student visa appointments are prioritized "because of the tremendous intellectual, social, and economic benefits foreign students provide to the U.S. economy." Department of Commerce figures show that international students contributed nearly $20 billion to the U.S. economy during the 2009-2010 academic year, the Department of State noted.

The Department of State said that U.S. embassies and consulates have established procedures to expedite interview appointments for urgent business travel. "U.S. officials work closely with American Chambers of Commerce in more than 100 countries to streamline the visa process for business travelers," the fact sheet states.

The Department said its Business Visa Center facilitates visa application procedures for U.S. companies and convention organizers who invite employees or current and prospective business clients to the United States. The Center handled nearly 3,500 requests in FY 2011. U.S.-based businesses may e-mail businessvisa@state.gov or call 202-663-3198 for more information.

The fact sheet, "State Department Supports Global Travel Growth," is available here.

5. Employers May Bundle L-1 Filings, USCIS Announces

U.S. Citizenship and Immigration Services (USCIS) recently said it recognizes that businesses may need to temporarily move multiple employees to the United States for particular projects that require the employees' specialized knowledge. To do this, USCIS said that employers may petition for their employees to obtain L-1 nonimmigrant classification by filing Form I-129, Petition for a Nonimmigrant Worker. While each L-1 petition must be considered on its own merits, USCIS will consider multiple applications grouped into "bundles" of L-1 petitions as part of an effort to streamline and improve the adjudication process.

For USCIS to consider the bundle, all included L-1B petitions must be related to employees on the same project, who will work at the same location, and who have the same specialized knowledge duties.

USCIS will also consider petitions for L-1A managers included with the bundle, if they will be managing the L-1B beneficiaries who will be working on the project. In addition, USCIS will consider Forms I-539, Application to Extend/Change Nonimmigrant Status, filed for a beneficiary's qualifying dependents included in the bundle. The agency also offered filing tips for bundling L-1 petitions. The information is available here.

Seyfarth recommends that employers carefully consider whether bundling of L-1 cases is advisable based on the circumstances involved, and seek guidance from immigration counsel. Bundling could lead to unforeseen difficulties if the government perceives an obstacle to eligibility and then issues burdensome Requests for Additional Evidence or Notices of Denial for all cases in the bundle.

6. Student and Exchange Visitor Update: F, M, J Visa Processing Resumes Worldwide; Expedited Processing, Record Numbers of Students Announced

The Department of State recently identified difficulties with its Consolidated Consular Database (CCD) communications with the Student and Exchange Visitor Program's (SEVP) Student and Exchange Visitor Information System. The Department discovered this issue on November 14, 2011, and subsequently instructed embassies and consulates worldwide to halt, temporarily, the issuance of all F, M and J visas. SEVP and the Department subsequently resolved the difficulties as of November 18, 2011, and the Department instructed embassies and consulate to resume issuing F, M, and J visas immediately.

Separately, the Department of State announced in conjunction with International Education Week on November 14, 2011, that "[a]ll U.S. embassies and consulates expedite visa processing for foreign students to ensure qualified students are able to begin their academic program on time." Worldwide, the maximum wait for a student visa appointment is now fewer than 15 days, the Department said. Foreign students may apply for their visas up to 120 days before their academic programs begin. The Department encourages all visa applicants to apply early.

According to the Institute of International Education (IIE), international students attending U.S. colleges and universities rose to a record 723,277 in the 2010-2011 academic year. The five percent rise over the previous academic year was fueled by a sharp increase in the number of Chinese students coming to the United States. Chinese students increased by 23 percent altogether and by 43 percent at the undergraduate level. IIE reported that Chinese student enrollment rose to a total of nearly 158,000 students, or nearly 22 percent of the total international student population in the United States, making China the leading sending country for the second year in a row. Students from India, the second largest international cohort in the United States, decreased by one percent to a total of nearly 104,000, IIE said. IIE noted Department of Commerce statistics showing that international students contribute more than $21 billion to the U.S. economy through tuition and living expenditures.

For the tenth year in a row, the University of Southern California is the leading host institution, with 8,615 international students in academic year 2010/11, IIE reported. University of Illinois at Urbana-Champaign hosts the second highest number of foreign students (7,991), with New York University a close #3 (7,988). California remains the leading host state for international students (96,535, up 2 percent), followed by New York (78,888, up 4 percent), and Texas (61,636, up 5 percent).

The notice announcing resumption of F, M, and J issuances is available here.

The notice announcing expedited student visa processing is available here.

The notice announcing the IIE statistics and trends on international students is available here.

7. State Dept. Seeks Comments on New Exchange Visitor Summer Work Travel Verification

The Department of State's Bureau of Educational and Cultural Affairs, which administers the exchange visitor (J visa) program, seeks comments on a new Summer Work Travel Job Placement Verification Form.

The form will be completed by designated program sponsors, and one is required for each summer work travel participant. It will include the employer, address of the employment site, job duties, whether the participant will receive any remuneration for housing and living expenses (and, if so, the amount), and estimates of the living expenses and other costs the participants are likely to incur while in the United States. The form must be signed by the participant, the sponsor, and the third party employer, if a third party organization is used in conducting the summer work travel program. The form will be submitted to the Department by mail or fax as requested during the review of program sponsor files, redesignations, or incidents. Upon request, summer work travel applicants also must present a fully executed Job Placement Verification Form (DS-7007) to any consular official interviewing them in connection with the issuance of a J-1 visa.

The Department seeks public comments to help the agency:

evaluate whether the proposed information collection is necessary for the effective administration of the summer work travel category of the exchange visitor program;
evaluate the accuracy of its estimate of the burden of the proposed collection, including the validity of the methodology and assumptions used;
enhance the quality, utility, and clarity of the information to be collected on the form; and
minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of technology.

The Department estimates that approximately 51 respondents (entities designated by the Department as exchange visitor program sponsors in the Summer Work Travel category, and U.S. businesses that provide the employment opportunity) will take about an hour each to complete the form.

Comments will be accepted up to 60 days after November 28, 2011. The notice, which includes details about where to submit comments, is available here.

8. DOL Releases New PERM FAQ on Listing Job Duties Not Normal to Occupation; Discusses Updates to Job Codes

The Department of Labor has posted a revised frequently asked questions (FAQ) sheet regarding the PERM program and listing job requirements not normal to the occupation on both the ETA Form 9141, Prevailing Wage Request, and the ETA Form 9089.

The brief FAQ states:

Does informing the National Prevailing Wage Center (NPWC) on a prevailing wage request (ETA Form 9141) that the job contains requirements not normal to the occupation meet an employer's obligation to inform the Department of Labor (Department) of these requirements on the Application for Permanent Employment Certification (ETA Form 9089)?

No. Even if the employer has informed the NPWC of these requirements in a prevailing wage request (ETA Form 9141), the employer must still accurately outline its requirements on Questions H.12 or H.13 of the Application for Permanent Employment Certification (ETA Form 9089).

The Department also said it is working to incorporate new and/or revised Standard Occupational Classification (SOC) codes into the PERM online application system. Until the new codes are fully integrated, they may not be available in the online system and the Atlanta National Processing Center will accept the older SOC codes even though they may not match the code indicated on the prevailing wage determination. The Office of Foreign Labor Certification suggested that filers "may also consider placing the new SOC job title in section H.3, and the new SOC code in section H.14 of the ETA Form 9089."

The PERM FAQ, which replaces the previous notice that referred to the State Workforce Agency (SWA), is available here.

The announcement about SOC codes is available here.

9. USCIS Issues Draft EB-5 Memo

U.S. Citizenship and Immigration Services (USCIS) recently released a draft memorandum to address "certain foundational issues" in the EB-5 immigrant investor program. USCIS seeks stakeholder input on these foundational issues before providing greater detail and addressing additional issues.

On a conference call held on November 9, 2011, to discuss the draft memo, Mr. Mayorkas said that it differs from other policy memos in that it gives adjudicators the context of the EB-5 program: that it is important because it creates jobs for U.S. workers. Mr. Mayorkas said that this context should guide adjudicators.

The memo also lays out the preponderance of evidence standard: "[T]he petitioner must establish each element by a preponderance of the evidence. That means that the petitioner must prove to us that what he or she claims is more likely so than not so. This is a lower standard of proof than the standard of 'clear and convincing,' and even lower than the standard 'beyond a reasonable doubt' that applies only to criminal cases. The petitioner does not need to remove all doubt from our adjudication, but must instead show that what he or she presents is more probable than not."

In general, the memo will only take effect when USCIS finalizes it. However, effective immediately, USCIS generally will defer to a state's targeted employment area (TEA) designation. The memo notes: "USCIS is to give deference to the state's designation of the boundaries of the geographic or political subdivision that will be the targeted employment area." It adds, however, that "USCIS must ensure compliance with the statutory requirement that the proposed area has an unemployment rate of at least 150 percent of the national average rate. For this purpose, USCIS will review state determinations of the unemployment rate and, in doing so, USCIS can assess the method or methods by which the state authority obtained the unemployment statistics."

The memo also clarifies that while the immigrant's investment must result in the creation of jobs for qualifying employees, it is the new commercial enterprise that creates the jobs. An investor's money that goes into a new commercial enterprise can be used in a variety of ways, including bridge financing, hiring personnel, or operating the company.

USCIS Director Alejandro Mayorkas said the draft memorandum is a "work in progress," and that the agency is sharing it now "to obtain valuable real-time input and to define a collaborative approach with the stakeholder community." He noted that the draft memorandum "is not operative and will not guide adjudication decisions until it is published in complete and final form. Current policy memoranda continue to guide our adjudications." Mr. Mayorkas said that USCIS plans to consolidate all existing EB-5 memos into one. A second draft will incorporate comments received from stakeholders and add details from other existing EB-5 memos.

An opportunity to comment will be available after the second draft is released, which will likely happen within approximately two months.

The draft memo and a statement from Mr. Mayorkas are available here.

10. State Dept. Announces Progress on 'Historic' Visa Agreement With Russia

Secretary of State Clinton and Russian Foreign Minister Lavrov exchanged diplomatic notes during their November 19, 2011, meeting in Bali on the new agreement on visas announced on July 13, 2011. The exchange of notes advances the visa agreement one step closer to entry into force. Under Russian law, the Duma must next ratify the agreement. Following ratification, the parties will exchange a second set of notes confirming that their internal procedures for entry into force have been completed. The agreement will come into force 30 days after that exchange.

The Department called the visa agreement "historic." It will allow tourists and business travelers from the United States and Russia to receive visas with longer validity periods of 36 months, and for multiple entries.

11. Justice Dept. Sues Utah Over Immigration Law

On November 22, 2011, the Department of Justice and several other agencies filed suit against Utah's new immigration-related law, after similar recent lawsuits against Arizona, Alabama, and South Carolina's laws.

In a complaint filed in the District of Utah, the Department argued that several provisions of Utah's H.B. 497, enacted on March 15, 2011, are preempted by federal law. The Department said its lawsuit comes after several months of "constructive discussions" with Utah state officials and that, notwithstanding the lawsuit, Department officials "expect this important dialogue to continue."

The complaint states that H.B. 497 violates the U.S. Constitution because it attempts to establish state-specific immigration policy. According to a related statement released by the Department, Utah's law "creates and mandates immigration enforcement measures that interfere with the immigration priorities and practices of the federal government in a way which is not cooperative with the primary federal role in this area." Among other things, the Department argues that the law's mandates on law enforcement "could lead to harassment and detention of foreign visitors and legal immigrants who are in the process of having their immigration status reviewed in federal proceedings and whom the federal government has permitted to stay in this country while such proceedings are pending."

"A patchwork of immigration laws is not the answer and will only create further problems in our immigration system," said Attorney General Eric Holder. "The federal government is the chief enforcer of immigration laws and while we appreciate cooperation from states, which remains important, it is clearly unconstitutional for a state to set its own immigration policy. We will continue to monitor and coordinate with our federal partners as we remain concerned about the potential impact of these state laws."

Department of Homeland Security Secretary Janet Napolitano said legislation such as Utah's new law "diverts critical law enforcement resources from the most serious threats to public safety and undermines the vital trust between local jurisdictions and the communities they serve. The Department will continue to enforce federal immigration laws in Utah in smart, effective ways that focus our resources on criminal aliens, recent border crossers, repeat and egregious immigration law violators and employers who knowingly hire illegal labor."

The Department recently notified Utah state officials of its position that Utah's "Immigrant Guest Worker" statutes, H.B. 116 and H.B. 469, are preempted by federal law. Given that the provisions do not take effect until 2013, and "in light of the constructive conversations the department continues to have with Utah officials about these provisions pursuant to the Justice Department's long-standing policy of exploring resolution short of litigation before filing suit against a state," the Department said it is not challenging these provisions now. If Utah fails to comply with federal law in this area, however, "the department will not hesitate to take the legal action necessary to vindicate the important federal interests in this matter before these laws go into effect."

The suit was filed on behalf of the Departments of Justice, Homeland Security, and State, which share responsibilities in administering federal immigration law. The federal government will soon request a preliminary injunction to enjoin enforcement of certain provisions of H.B. 497. Utah's Republican state Rep. Stephen Sandstrom, who sponsored H.B. 497, said he was disappointed, but Utah's Attorney General Mark Shurtleff acknowledged that the focus only on an enforcement measure rather than also including the guest worker provisions in the suit demonstrated the Department's willingness to continue dialogue. "We're now adversaries in the courtroom but we're going to continue to discuss this with them," he said.

The Justice Department previously challenged Arizona's S.B. 1070, Alabama's H.B. 56, and South Carolina's Act No. 69 on federal preemption grounds. The agency said it continues to review immigration-related laws that were passed in Indiana and Georgia. Courts have upheld some provisions but enjoined others and have temporarily restrained enforcement of Utah's law pending a hearing scheduled for December 2, 2011.

The Department's statement is available here.

Seyfarth Work Authorization Team

1. Labor Dept. Inspector General Identifies 'Integrity of Foreign Labor Certification Programs' as a Top Management Challenge

The Department of Labor's Office of the Inspector General (OIG) has identified maintaining the integrity of foreign labor certification programs among the "most serious management and performance challenges facing the Department."

The OIG said that investigations "continue to uncover schemes carried out by immigration attorneys, labor brokers, and transnational organized crime groups." OIG investigations have repeatedly revealed "fraudulent applications filed with DOL on behalf of fictitious companies, as well as schemes wherein fraudulent applications were filed using the names of legitimate companies without the companies' knowledge." Additionally, OIG investigations have uncovered complex schemes involving fraudulent labor certification documents filed in conjunction with or in support of similarly falsified identification documents required by other federal and state organizations, the OIG said.

The OIG noted that the Employment and Training Administration (ETA), which administers the programs, faces challenges in maintaining the integrity of its H-1B and H-2B labor certification programs. The H-1B challenges include statutory limits on the ETA's authority, making system improvements in H-1B labor condition application processing system to better identify incomplete and/or inaccurate applications, and uncertainty about the process for including individuals or entities debarred under the Department's labor certification programs on the government-wide excluded parties lists.

Present H-2B worker protections are based on a model where employers merely assert, but do not demonstrate, that they have performed an adequate test of the U.S. labor market before hiring foreign workers in lieu of U.S. workers, the OIG said. An OIG report issued in October 2011 found that Department regulations had hampered ETA's ability to provide adequate protections for U.S. workers in the H-2B applications filed by four Oregon forestry employers. Although the employers contacted 187 U.S. workers regarding possible employment, none were hired. Instead, 323 foreign workers were brought into the United States for these jobs. The OIG also found that certain state workforce agencies did not fulfill their responsibilities with respect to H-2B applications the OIG reviewed.

The OIG also found that ETA could improve its initial application reviews, post-adjudication processes, and monitoring activities to better protect the interests of U.S. workers. Also, the OIG noted that the state workforce agencies it reviewed were not transmitting posted job orders to other states or referring U.S. workers to employers as required.

The OIG said that ETA's Fraud Detection and Prevention Unit continues to work closely with the OIG to identify and reduce fraud in the labor certification process by reviewing applications for inconsistencies, errors, and omissions. ETA has revised the rule for determining prevailing wage rates and proposed new rules governing the H-2B process. The OIG noted the major features of the new proposed rules, including creating a national electronic job registry for all H-2B job orders; increasing the amount of time for which U.S. workers must be recruited; requiring employers to engage in post-filing recruitment of U.S. workers; creating an H-2B registration process in which employers must demonstrate temporary need before applying for labor certification; reinstating the critical role of the state workforce agencies in assisting employers by using their expertise on local labor market conditions and recruitment patterns; and strengthening debarment authorities by providing the Wage and Hour Division with independent debarment authorities and providing revocation authority to ETA.

To address the H-1B challenges, ETA has entered into a contract with a third-party vendor for employer verification services, the OIG noted. Through this service, ETA is expected to have access to a more comprehensive employer identification database and verification system. This service will be applied to all labor certifications, the OIG said.

In addition, ETA is working with the Department's Chief Acquisition Officer on ways to include foreign labor certification suspensions and debarments on the government-wide excluded parties list.

Finally, ETA is piloting a new risk management model in its permanent labor certification program (PERM). According to ETA, this new risk management model allows ETA to assign risk ratings to applicants and spend an appropriate amount of time reviewing the higher-risk applications, reducing overall reviewing time frames. ETA officials also told the OIG that the new model will eventually be applied to the rest of the foreign labor certification programs.

The OIG said the Department needs to reexamine its certification processes and results to assess effectiveness. Also, the Department needs to enhance its monitoring of the H-2B application process to ensure that state workforce agencies and employers are fully complying with program requirements and intentions and make adjustments to enhance the integrity of its employer verification services by fully implementing electronic employer verification controls to the H-1B program and the remaining foreign labor certification programs. The OIG said that the Department should ensure that it considers suspensions and debarments, and documents decisions, for any entity convicted of violations. It also should ensure that such debarments are reported to appropriate Department personnel for inclusion in the government-wide exclusion system.

The OIG's list of challenges, which includes explanations of why each entry made the list, is available here.

2. OSC Releases Info on Enforcement, Policy, Trends; Launches Webinar

November 6, 2011, marked the 25th anniversary of the passage of the Immigration Reform and Control Act, which created the Department of Justice's Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC). To mark the occasion, OSC issued a commemorative newsletter featuring OSC's enforcement, policy, and outreach trends and antidiscrimination efforts. Among other things, the newsletter notes that in 2011, OSC collected over $735,000 in civil penalties from employers. Fiscal year 2011 included OSC's largest civil penalty amount to date, $290,400.

OSC said its enforcement work has been bolstered by a rise in referrals of potential discrimination from entities such as the U.S. Department of Labor (DOL), legal aid bureaus, and immigrant advocacy organizations. For example, OSC has received a number of referrals from DOL regarding agricultural employers believed to have a preference for hiring H-2A visa holders over domestic workers. Recently, OSC has renewed its dialogue with the Equal Employment Opportunity Commission and with DOL's Office of Federal Contract Compliance Programs to ensure that appropriate referrals are made in a timely fashion. It has also initiated discussions with DOL's Wage and Hour Division to identify appropriate cross-agency referrals.

OSC noted that its settlement agreements now routinely include back pay for identified economic victims along with training and monitoring. OSC has also pursued a rising number of pattern or practice claims, including claims involving citizenship status discrimination and "document abuse" (discriminatory employment eligibility verification practices). OSC's recent settlements have involved the healthcare field and institutions of higher education more often than in the past.

Recognizing the need for closer interagency collaboration, on March 17, 2010, OSC and U.S. Citizenship and Immigration Services signed a Memorandum of Agreement providing for enhanced information-sharing and case referrals regarding the misuse, abuse, or fraudulent use of E-Verify and allegations of E-Verify-related employment discrimination. Through this information-sharing agreement, OSC has obtained E-Verify transactional data to investigate allegations of discrimination in the use of E-Verify.

In December, OSC will launch a webinar series on the antidiscrimination provisions of the Immigration and Nationality Act. See OSC's webinar page, here, to sign up for a webinar directed at workers or employers, or to suggest a topic for a future webinar. E-mail terence.j.scott@usdoj.gov to arrange a webinar at another time for your organization.

Recent News from Seyfarth's Immigration Attorneys

Seyfarth Shaw's Pro Bono efforts were featured in a December 15 Associated Press video and a December 16 Los Angeles Times article, available here. The article features Seyfarth attorneys Angelo Paparelli and Elizabeth Wheeler, whose efforts resulted in the granting of United States citizenship to an Egyptian woman who was smuggled into the United States and forced into slavery at age 10. An Associated Press video on the story is available here.

Jim Curtis of our Chicago office presented a webinar on hot Occupational Safety and Health Administration (OSHA) issues faced by the hospitality industry on November 3. The presentation discussed enforcement trends as well as policies and practices that may expose businesses to risks that may be avoided.

Minh Vu of our Washington, D.C. office, on November 30, gave an in-depth look at the ADA's new requirements recreational facilities and service animals. The webinar covered how the requirements impact employers' lodging facilities and operations.

Jack Toner of our Washington, D.C. office and Ronald Kramer, Molly Eastman and Isabel Lazar of our Chicago office will be presenting a webinar titled "The Year That Was And Will Be: National Labor Relations Board Update For Hospitality Employers" on January 18, 2012 at 1:00 PM ET. The webinar will cover the National Labor Relations Board's big year, both in terms of its rulemaking initiatives and key decisions impacting hospitality employers. Please email events@seyfarth.com if you would like to attend.

Recent and Upcoming Seminars:

Gabriel Mozes presented at the Massachusetts Continuing Legal Education's annual BasicsPlus seminar in Boston on December 12, 2011, on the topic, "NAFTA TN Classification for Canadians and Mexicans."

In addition, Mr. Paparelli has posted several new blog entries on his Nation of Immigrators public policy blog:

"Telling Immigration Stories: It's Not Just about Code Sections"

"The Immigration Appeaser-in-Chief Should Try Some New Ammunition"

"Immigration Governance Unmasked"

"Immigration Magnetized, Privatized and Depersonalized"

By: Angelo Paparelli, Gabriel Mozes, and John Quill

Angelo Paparelli is a partner in Seyfarth's Los Angeles Downtown office. Gabriel Mozes is counsel in the Boston office. John Quill is senior counsel in the Boston office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Angelo Paparelli at apaparelli@seyfarth.com, Gabriel Mozes at gmozes@seyfarth.com, John Quill at jquill@seyfarth.com or any Business Immigration attorney on our website.

Stanley Bloch and Andrew Lucano Quoted Extensively on TMCnet.com
“Cable TV M&A: Cash Flows Good, Valuations Not So Great but Excitement Looms”

Wed, 28 Dec 2011 00:00:00 -0400

Corporate partners Stanley Bloch and Andrew Lucano were quoted extensively in a December 20 TMCnet.com Cable Technology article regarding the cable industry in 2011 and anticipated trends in 2012.

Stan’s assessment of the current U.S. cable market was that “cash flows are good but valuations have been disappointing, and this has been a modest year in terms of M&A.”

Andrew pointed out that the cash flow/valuation tradeoff can be viewed two ways. “On the one hand, having cash flow means that those looking to sell can wait out this period of economic uncertainty until valuations get better. On the other hand, this is obviously a good time for those with resources to investigate purchasing strategic assets inexpensively.”

Stan predicted that in 2012, as the economy shows signs of improvement, “People who have held back will come to market. Buyers willing to pay what sellers are looking for.”

Click here to read the full article.

Angelo Paparelli Featured in American Lawyer's The AmLaw Daily
“Seyfarth Lawyer Helps Secure Citizenship for Former Suburban Slave”

Wed, 28 Dec 2011 00:00:00 -0400

Immigration partner Angelo Paparelli was featured in the December 23 edition of The AmLaw Daily. The article provided an overview of a recent pro bono case Angelo handled, in which he helped secure American citizenship for native Egyptian Shyima Hall. Shyima, now 22, was sold into slavery when she was nine years old. The Egyptian couple who purchased Shyima took her to California where she was forced to work for the family and live in their garage without heat, air conditioning or windows. Three years later, local police were notified, and Shyima was transferred to foster care. Today, she has become a leading voice about the dangers of human trafficking.

"She's very spirited, very smart and brave," Angelo told AmLaw Daily. "And not bitter in the least. She really is in the present moment, and wants to go forward, and wants to help other people."

Greg Yates Quoted in The Real Deal
“Courtroom Clashes”

Tue, 27 Dec 2011 00:00:00 -0400

New York Bankruptcy partner Greg Yates was quoted in a December 12 article appearing in The Real Deal. The article gave an overview of New York City’s current legal climate in the real estate sector.

According to the article, real estate litigation has changed a great deal since the 2008 crash. The number of residential foreclosure suits across New York State has increased, along with suits under the Interstate Land Sales Full Disclosure Act (ILSA). However, the major trend has been a decrease in real estate litigation and commercial foreclosures.

"In the last few years, there hasn't been the volume of real estate litigation you would expect," noted Greg. "Lenders have not really pushed the borrowers, either to take the property back or to force bankruptcies or other ligation fights. They extend and pretend."

New York Appellate Court Articulates New Evidentiary Standard For Summary Judgment In Discrimination Cases Under NY City Human Rights Law

Tue, 27 Dec 2011 00:00:00 -0400

On December 20, 2011, the New York Supreme Court, Appellate Division - First Department, issued its decision in Bennett v. Health Management Systems, Inc., in which it affirmed the grant of summary judgment dismissing the plaintiff's age and race discrimination claims under the New York City Human Rights Law ("City HRL"). In doing so, the First Department took the opportunity to address the evidentiary standard required at the summary judgment stage in a discrimination case under the City HRL, keeping in mind that statute's "uniquely broad and remedial purposes."

In brief, Bennett articulates the following summary judgment framework:

Where the defendant moves for summary judgment by putting forth "evidence of one or more non-discriminatory motivations for its actions," a court should "generally avoid" the first part of the McDonnell Douglas inquiry, which asks whether a plaintiff has established a prima facie case of discrimination. Thus, in most cases, the court should first examine whether the defendant has provided a legitimate, non-discriminatory reason for the challenged employment decision.
To meet its burden at the summary judgment stage, the defendant must show that "no reasonable jury could find defendant liable" under any of the evidentiary routes: the McDonnell Douglas test, as one of a number of mixed motives, by direct evidence, or some combination thereof.
If the defendant meets its burden, a plaintiff will withstand summary judgment "in almost every case" by showing "that at least one of the reasons proffered by defendant is false, misleading, or incomplete." Bennett cautions employers to avoid "throwing numerous non-discriminatory justifications against a wall," because a plaintiff who impeaches just one of those justifications can defeat summary judgment.

Bennett underscores the need for employers to document adverse employment actions and provide clear, well-supported and truthful reasons for those actions. As an example, an employer should not label an employee's separation as a job elimination or layoff if, in fact, the employee was dismissed for unsatisfactory job performance. While there may be humane reasons for doing so (e.g., letting the employee tell prospective employers that he was laid off, as opposed to fired for poor job performance, in the hope of increasing his chances of a getting a new job), it is now likely that no such good deed will go unpunished on summary judgment. Thus, now more than ever, employers operating within New York City and subject to the City HRL should consult with HR professionals and employment counsel to ensure that they properly review, justify and document the reasons for any adverse employment actions.

Arguably, Bennett applies to City HRL claims in state court only, but we expect that there will be litigation over whether this standard applies to City HRL claims brought in federal court. In the meantime, employers may start to see more plaintiffs filing discrimination cases under the City HRL in state court than in federal court, as those plaintiffs seek to take advantage of Bennett's summary judgment standard. Even then, the Bennett court's decision to affirm the grant of summary judgment shows that employers following best practices can still prevail on summary judgment under the City HRL.

By: Edward Cerasia and Jacob Oslick

Edward Cerasia is a partner in Seyfarth's New York office and Jacob Oslick is an associate in the New York office. If you would like further information, please contact your Seyfarth attorney, Edward Cerasia at ecerasia@seyfarth.com or Jacob Oslick at joslick@seyfarth.com.

Seventh Circuit Determines That Retaliation Can Form The Basis Of A RICO Violation

Tue, 27 Dec 2011 00:00:00 -0400

On December 15, 2011, the United States Court of Appeals for the Seventh Circuit issued a blow to corporate defendants by determining that retaliation against an employee for reporting alleged criminal activity to law enforcement can constitute a racketeering “predicate act,” resulting in liability under the Racketeer Influenced and Corrupt Organizations Act (“RICO”). DeGuelle v. Camilli, No. 10-2172 (7th Cir. Dec. 15, 2011). This unprecedented decision provides whistleblowers with yet another possible cause of action and expanded remedies.

SOX Adds Retaliation as a RICO “Predicate Act”

Under RICO, it is unlawful for an employee of an enterprise engaged in interstate commerce to “conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity,” which requires the commission of at least two “predicate acts” of racketeering within a span of ten years. In enacting the Sarbanes-Oxley Act (“SOX”) in 2002, Congress added retaliation for “providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense” to the list of statutorily-defined predicate acts. To prove that predicate acts are part of a pattern under RICO, a plaintiff must demonstrate a relationship between the predicate acts and a threat of continuing activity - known as the “continuity plus relationship” test.

Seventh Circuit: Retaliatory Acts are “Inherently Connected” to Conduct Exposed by Whistleblowers

In DeGuelle, plaintiff Michael DeGuelle filed a lawsuit against his former employer, S.C. Johnson & Son, Inc. (the “Company”) that alleged, among other things, RICO violations. Specifically, DeGuelle claimed that he was terminated in retaliation for reporting an alleged tax fraud scheme to federal law enforcement agencies. DeGuelle argued that, in addition to the Company’s alleged tax fraud, his termination constituted a further predicate act as part of a single continuous pattern of racketeering activity. The district court for the Eastern District of Wisconsin disagreed, finding that DeGuelle’s complaint alleged two unrelated schemes: the tax fraud and the retaliation. DeGuelle v. Camilli, No. 10-CV-0103, 2010 WL 1484236 (E.D. Wis. Apr. 12, 2010). In so holding, the district court noted that the alleged tax scheme and DeGuelle’s termination involved “different victims, participants, and motives.”

The Seventh Circuit, however, disagreed with the district court, finding that the DeGuelle had sufficiently pled that the Company’s motivation for terminating him was retaliation for disclosing the alleged tax scheme. The court acknowledged that most courts, both pre- and post-SOX, have not considered retaliation against an employee a racketeering act, but disagreed with this approach, concluding that “[r]etaliatory acts are inherently connected to the underlying wrongdoing exposed by the whistleblower.” The Seventh Circuit thus found that DeGuelle had sufficiently alleged that his termination was related to the alleged tax scheme to constitute a predicate act giving rise to potential RICO liability.

Notably, the Court acknowledged that the Company had taken efforts to investigate DeGuelle’s allegations of tax fraud, including hiring an outside law firm to conduct an investigation of his claims and revoking a negative performance evaluation that Company officials determined was potentially retaliatory. Despite these clear indications that the Company had taken DeGuelle’s concerns seriously (and despite the court’s acknowledgement that some of the actions of the defendants were “inconsistent with any alleged involvement in the tax fraud scheme”), the court determined that there were “enough allegations within the complaint to conclude, at this stage in the proceedings, that [defendants] were participants in the RICO scheme.”

Implications

This decision is notable as it is one of the first in the country to hold that retaliation against an employee who reports potential criminal activity to law enforcement constitutes a predicate act under RICO. As RICO only requires a plaintiff to prove the commission of two predicate acts, this decision may produce more litigation from disgruntled employees who seek to tie their termination or demotion to a single alleged bad act of the employer.

Furthermore, as the statutory scheme provides that retaliation for providing “any truthful information relating to the commission or possible commission of any Federal offense” constitutes a predicate act, this decision indicates that a whistleblower who provides information to law enforcement about potential crimes could possibly state a claim even if no crime was actually committed. For example, if an employee alleged that he or she was both discouraged from cooperating with law enforcement and then retaliated for doing so, the employee could argue that the employer committed two predicate acts - witness tampering and retaliation - despite the fact that the underlying complaint to authorities did not lead to a determination that a crime had actually been committed.

However, in addition to the Seventh Circuit acknowledging that the majority of courts have concluded that alleged retaliation is not a predicate act, it should also be noted that in order to prevail on a RICO retaliation theory, a plaintiff must allege that he or she complained to law enforcement authorities about a violation of federal law. Retaliation for internal reporting alone or violations of state or local laws would not constitute a RICO predicate act even under the Seventh Circuit’s holding. The Seventh Circuit also recognized that “there is a danger, as expressed by many courts prior to the enactment of the Sarbanes-Oxley Act, that plaintiffs will bring claims which should be handled by state law (i.e., wrongful termination) into federal court under the guise of RICO,” but concluded that the other requirements of RICO would “weed out” these improperly filed claims. Nonetheless, employers should be aware that they face increased risks in managing an employee where they learn that the employee has contacted law enforcement authorities about possible federal criminal violations.

By: Christopher F. Robertson and Dawn Mertineit.

Christopher F. Robertson is a partner in Seyfarth’s Boston office and Dawn Mertineit is an associate in the Chicago office. If you would like further information, please contact your Seyfarth attorney, any member of the firm’s SOX Whistleblower Team, Chris Robertson at crobertson@seyfarth.com or Dawn Merineit at dmertineit@seyfarth.com.

Appellate Court Clarifies Employer Reporting Time Pay and Split Shift Obligations

Tue, 27 Dec 2011 00:00:00 -0400

On December 21, 2011, in a case of first impression, the California Court of Appeal in Aleman v. AirTouch Cellular held that employees are not entitled to “reporting-time pay” when they report to work for a scheduled meeting and work at least one-half of that time, even when that time is less than two hours. The court also ruled that an employee is not entitled to a “split-shift” premium if the employee’s daily compensation already exceeds the minimum wage for all hours worked plus an additional hour. Additionally, the court upheld an employee’s release of claims where the parties had a bona fide dispute over liability, and the employee released these claims in exchange for consideration.

Background

Former retail sales and customer service representatives who sold cell phones and other items for AirTouch, a wireless service provider, brought a class action alleging that AirTouch failed to pay nonexempt employees properly for attending mandatory meetings. Plaintiffs alleged that AirTouch did not comply with the provisions on reporting-time pay and split-shift pay that appear within Industrial Welfare Commission Wage Order 4-2001, otherwise known as Wage Order 4.

AirTouch sales and customer service representatives were required to attend periodic “store meetings” that would last up to one and one-half hours. Plaintiffs complained that AirTouch paid them for only the length of the meeting and did not pay them reporting-time pay on those days when they had to report to work just to attend the meeting. Plaintiffs also claimed they were improperly denied split-shift compensation on days when they attended a meeting in the morning, and then worked a longer shift later the same day.

AirTouch responded that it did not owe the plaintiffs reporting-time pay and had sufficiently compensated them for split-shifts. Additionally, AirTouch claimed that one plaintiff had waived her claims by signing a settlement agreement and release.

The trial court granted summary judgment to AirTouch and dismissed the plaintiffs’ claims.

Reporting Time

Wage Order 4 states: “Each workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work, the employee shall be paid for half the usual or scheduled day’s work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee’s regular rate of pay, which shall not be less than the minimum wage.”
One plaintiff, Daniel Krofta, asserted that Wage Order 4 required AirTouch to pay him for a minimum of two hours on days when he was required to report to work just to attend a meeting, regardless of whether the meeting was scheduled or whether he worked more than one-half of his scheduled time. The Court of Appeal disagreed, finding that reporting-time pay was not owed because, even if the scheduled meeting lasted less than two hours, Krofta would still be furnished more than one-half of his scheduled day’s work.

To illustrate, the court described a hypothetical situation in which an employee’s only scheduled work for the day is a mandatory meeting of one and one-half hours, but the meeting concludes after one hour, leaving the employee with only one hour worked. In this situation, as with Krofta, the employee would not be entitled to reporting-time pay, because the employee still was furnished work for at least one-half of the scheduled 1.5 hour meeting. However, the court pointed out that if the meeting had been cut short after one-half hour, then the employee would be entitled to two hours of reporting-time pay, because the employee would have been furnished work for less than one-half of the scheduled time.

Split Shift

Wage Order 4 defines a “split-shift” as “a work schedule, which is interrupted by non-paid non-working periods established by the employer, other than bona fide rest or meal periods.” Under the Wage Order, an employee who works a split-shift is entitled to one hour of pay at the minimum wage in addition to the minimum wage for that workday.

The court found that Krofta worked a split-shift on several occasions, when he attended a meeting in the morning, then returned for a longer shift later the same day. AirTouch argued that it had properly paid Krofta on these days, because his total daily pay exceeded the minimum wage for all hours worked plus an additional hour at minimum wage.

The court agreed with AirTouch, noting that the Wage Order required one hour at the minimum wage to be paid in “addition to the minimum wage for that day,” rather than the “regular wage” for that day. Accordingly, the court held that an employee who works eight hours on a split-shift must receive minimum compensation of nine hours times the minimum wage, as opposed to eight hours of regular wages plus one hour of minimum wage.

Release of Claims

One plaintiff, Mary Katz, signed a “Release of Claims Agreement,” in exchange for the right to exercise long-term incentive awards exceeding $25,000. AirTouch raised the release as a defense to Katz’s wage claims. Katz contended that the release was invalid under Labor Code section 206, which requires an employer in a wage dispute to pay, without condition, all amounts conceded to be due.

The court noted that Labor Code section 206 does not require unconditional payment of disputed amounts, and held that the release was enforceable because a bona fide dispute existed as to whether the employer owed Katz additional compensation, and because Katz received consideration for releasing her disputed claims. The court therefore affirmed the trial court’s order granting summary judgment against Katz.

What AirTouch Means for Employers

As long as employee meetings are scheduled ahead of time, and employees work at least one-half of the time scheduled, an employer does not owe the employee reporting-time pay for attending such meetings. Accordingly, when an employer requires an employee to report to work for a meeting or other event, the employer should (1) ensure that the meeting or event is scheduled in advance for a specified length of time, and (2) ensure that the employee works at least one-half of the scheduled time.

Because the court also held that employees are not allowed additional split-shift compensation if their compensation already exceeds the minimum wage for all hours worked plus an additional hour, it appears that employers need only be concerned about split-shift pay for employees whose hourly wage is close to the minimum wage.

Finally, employers should not expect a court to uphold a release agreement purporting to waive an employee’s undisputed wage claims. Instead, employers should seek releases from employees only with respect to bona fide wage disputes, and only when the employee receives consideration in exchange for the release.

By: Anthony DiBenedetto

Anthony DiBenedetto is an associate in Seyfarth’s Sacramento office. If you would like further information, please contact your Seyfarth attorney or Anthony DiBenedetto at adibenedetto@seyfarth.com.

NLRB Postpones Implementation of Posting Requirement Rule Until April 30, 2012

Fri, 23 Dec 2011 00:00:00 -0400

Today the National Labor Relations Board (“NLRB”) announced that it has again postponed implementation of its published rule requiring private sector employers subject to the National Labor Relations Act (“NLRA”) to post an official notice informing employees of their rights under the NLRA, and penalizing employers for non-compliance.

The NLRB decided to postpone implementation as a result of a request made by Judge Amy Berman Jackson of the U.S. District Court in connection with a consolidated lawsuit brought by the National Association of Manufacturers and the National Right to Work Legal Defense and Education Fund Inc. which alleges that the NLRB does not have statutory authority to implement such a rule. The NLRB had already postponed implementation until January 31 because of the litigation.

We will keep you informed of any further developments in this regard.

Apparent Lack Of Timely And Complete Documentation Leads Fifth Circuit To Revive Whistleblower Action

Fri, 23 Dec 2011 00:00:00 -0400

Schroeder v. Greater New Orleans Fed. Credit Union, No. 10-cv-31169, 2011 WL 6307889 (5th Cir. Dec. 19, 2011)

The Fifth Circuit Court of Appeals revived a whistleblower retaliation claim against Greater New Orleans Federal Credit Union (the Company) under the Federal Credit Union Act (12 U.S.C. § 1790b(a)(1)) (the Act), finding that a jury question existed as to whether Plaintiff Mary Schroeder (Plaintiff) engaged in protected activity. The court found that internal complaints are not protected activity under the Act, and a genuine issue of material fact existed as to whether Plaintiff complained of fraud to the National Credit Union Administration (NCUA). The court also found that questions of fact bearing on causation existed due to the scope of documentation regarding Plaintiff’s performance issues and the timing of when certain documents were added to her personnel file.

Background

The Company hired Plaintiff as a collections manager in May 2006, and promoted her in July 2007 to also manage the Company’s lending department and call center. In December 2007, Plaintiff’s relationship with the CEO began to deteriorate, and around this same time, Plaintiff informed the CEO that she believed potentially fraudulent conduct was occurring in connection with lending practices. In March 2008, Plaintiff made the same reports to the Board of Directors (Board). On May 30, 2008, Plaintiff brought her claims of fraud to the chair of the Company’s Supervisory Committee (Committee). On June 9, 2008, the CEO relieved Plaintiff of most managerial duties for the stated reason that she failed to accomplish certain pre-set goals for her department.

According to Plaintiff, on June 19 and 20, 2008, she made seven calls to the NCUA. However, the NCUA had no record of her calls, and the Plaintiff never told any supervisors about the calls. But, two co-workers claimed that Plaintiff expressed her plans to contact the NCUA in June 2008. A week after her alleged calls to the NCUA, Plaintiff again complained to the Committee, and the Company hired an auditor to investigate. The investigation confirmed that some loans violated internal policies, but there was no criminal fraud. In mid-July 2008, co-workers asserted that they informed the CEO that Plaintiff contacted the NCUA. A day or two later, the CEO sent the Committee a letter indicating that she understood the audit was a result of Plaintiff’s internal reports and added that Plaintiff was underperforming and creating disturbances within the organization. That letter made no reference to Plaintiff’s complaints to the NCUA, and the CEO said she did not learn of Plaintiff’s complaint to the NCUA until months later.

On August 8, 2008, the CEO reduced Plaintiff’s salary to her pre-promotion level. Two weeks later, Plaintiff sent the Board and Committee a letter characterizing that action as retaliatory. That letter made no mention of any complaints to the NCUA. In addition, on October 1, 2008, Plaintiff’s attorney sent an e-mail to the NCUA, but it made no reference to any prior calls to the NCUA in June 2008. Over the next week, the Company included several employee complaints about Plaintiff’s attitude and management style in her personnel file. Also, Plaintiff claimed to have sent letters to the NCUA (and the FBI) on October 6, 2008, but the NCUA recorded its receipt on October 21, 2008. On October 8, 2008, the Board discharged Plaintiff.

The Court’s Decision

Following her discharge, Plaintiff filed a whistleblower retaliation suit under the Act, claiming that the Company demoted and discharged her in retaliation for reporting of fraud. The Act’s whistleblower provision expressly bars a credit union from retaliating against an employee because that individual provided information to the NCUA or the U.S. Attorney General regarding any violation (by a credit union) of any law or regulation. The District Court granted the Company summary judgment, ruling that Plaintiff’s complaints to the CEO and Board were not protected. It also found that Plaintiff failed to establish a causal connection between any protected activity and the adverse employment actions. Rather, it found that Plaintiff’s alleged performance problems supported her termination.

The Fifth Circuit affirmed the finding that Plaintiff’s demotion, which was preceded only by internal complaints, was not actionable. However, it found that there was a genuine issue of material fact as to whether the Company knew Plaintiff complained to the NCUA. The Fifth Circuit also ruled that fact questions existed as to causation issues given its conclusion that there was little evidence of disciplinary problems in Plaintiff’s personnel record, and that Plaintiff’s performance issues were recorded in her personnel file after her complaints to the NCUA and just a week before her termination.

Implications for Employers

This decision illustrates the importance of timely, accurate and complete documentation in situations where an employee with performance problems “blows the whistle.” In particular, it shows that documenting performance concerns only after an employee complains could lead to the perception / misperception that the employer is trying to “paper the record” for strategic reasons. To minimize risks, counseling should correspond to robust documentation to correct the performance issues. This has the added benefit of demonstrating that an employer’s decision was driven by legitimate and non-retaliatory reasons in situations where litigation is unavoidable.

By: Steven J. Pearlman and Rachel Urquharthttp://www.seyfarth.com/RachelUrquhart

Steven J. Pearlman is a partner in Seyfarth’s Chicago office and Rachel Urquhart is an associate in the Chicago office. If you would like further information, please contact your Seyfarth attorney, any member of the firm’s SOX Whistleblower Team, Steve Pearlman at spearlman@seyfarth.com or Rachel Urquhart at rurquhart@seyfarth.com.

Five Key Labor And Employment Issues Hospitality Employers Need To Be Aware Of This Quarter

Thu, 22 Dec 2011 00:00:00 -0400

Employee or Independent Contractor? Hospitality Employers Should Take Precaution in Light of Enhanced Penalties in Recent California Legislation
Occupy The Lobby: Hotel Employee Lobby Incident Largely Protected By The NLRA
California Courts Hear Arguments on Two Wage/Hour Class Actions Important to the Hospitality Industry
Be Careful What You Say At The Bargaining Table
American Hotel and Lodging Association Files Amicus Brief Urging Supreme Court to Resolve Court Split Over When Employers Can Use the Tip Credit to Satisfy Minimum Wage Obligations

Employee or Independent Contractor? Hospitality Employers Should Take Precaution in Light of Enhanced Penalties in Recent California Legislation

By: Camille Olson, David Kadue, Tim Haley, Fred Sanderson and Ferry Lopez

On October 9, 2011, Governor Jerry Brown signed California Senate Bill 459 ("SB 459"), which adds sections 226.8 and 2753 to the California Labor Code. SB 459, effective January 1, 2012, imposes steep penalties on employers who willfully misclassify employees. This legislation is but one example of a growing effort at both the federal and state level to identify, reclassify, and prevent misclassification of employees as independent contractors, deterring companies from doing so with significant penalties. Given the hospitality industry's widespread utilization of independent contractor services, hospitality employers should reevaluate their independent contractor agreements and take precautionary measures to ensure compliance with this new legislation. Below, we highlight the key provisions and set forth recommendations for compliance with SB 459 and avoidance of its significant civil penalties.

Key Provisions of SB 459

SB 459 makes it unlawful:

to willfully misclassify an individual as an independent contractor; or
to charge a willfully misclassified contractor a fee or make any deductions from compensation for any purpose including for goods, materials, space rental, services, government licenses, repairs, equipment maintenance or fines.

In addition, SB 459:

imposes a civil penalty of between $5,000 and $15,000 for each violation;
increases the civil penalties to between $10,000 and $25,000 if the employer has engaged, or is engaging, in a pattern or practice of such violations;
provides for the Contractor's State License Board to initiate disciplinary action against any licensed contractor that has been found to have violated the Act;
requires that any person or employer who has been found to have violated the Act to post a website notice (or to display prominently if there is no website) that, the person or employer has been found to have violated the Act and that the employer or person has changed its practices to prevent further violations;
provides that violations and disciplinary actions shall "remain in effect" against successors if it has one or more principals or officers and is engaged in the same or similar business; and
provides for joint and several liability for any person, other than an attorney or an employee providing advice to his or her employer, who knowingly advises an employer to treat an individual as an independent contractor to avoid employee status for that individual if the individual is found not to be an independent contractor.

Enforcement

SB 459 authorizes the Labor and Workforce Development Agency ("LWDA") or a court to determine if an employer has violated the provisions of SB 459, and to assess civil penalties. SB 459 also provides that the Labor Commissioner may enforce the statute and assess penalties through Labor Code section 98 proceedings. Despite the Legislative Counsel's statement that SB 459 authorizes an individual to file a complaint to request the Labor Commissioner to assess penalties, the language of the statute does not expressly authorize an employee to bring such an action, either in court or before the Labor Commissioner.

Employees likely will attempt to recover SB 459 penalties via the California Labor Code Private Attorneys General Act ("PAGA"). Under PAGA, aggrieved employees can bring a representative action on behalf of all other current and former employees to recover civil penalties in the Labor Code that may be assessed by the LWDA. This may include civil penalties under SB 459. Penalties recovered by an employee in a PAGA action are apportioned as follows: 75% to the LWDA, and 25% to the aggrieved employees. Also, although an employee would not be able to recover SB 459 penalties via California's Unfair Competition Law (Business and Professions Code section 17200 et seq.), the employee could use the UCL to seek injunctive relief.

SB 459 is considered "non-urgency" legislation, meaning it is effective January 1, 2012. The statute does not indicate whether the Legislature intended it to apply retroactively, so enforcement of SB 459 likely will be prospective only. The statute of limitations for the recovery of SB 459 penalties, whether pursued under the statute itself or via a PAGA action, should be limited to one year.

Willful Misclassification

Any violation of the statute requires a showing of "willful" misclassification, but SB 459 provides little guidance as to what is "willful." Rather, the Act simply defines willful misclassification as a misclassification that is voluntary and knowing, which is also vague.

Whether an individual is an employee or an independent contractor under California or federal law varies depending upon the law being applied. In each case, however, the determination is fact-specific and requires the decision-maker to balance numerous factors. While no single factor is controlling, the most important factor is whether the putative employer has the right to control not merely a worker's results but the manner and means used to obtain those results. The test is vague and ambiguous. Accordingly, it would seem that a finding of willfulness should be limited to the most egregious cases, particularly in light of the draconian consequences of a violation.

Until further guidance is provided, hospitality employers will face numerous questions in attempting to comply with the willfulness standard. For example, if an administrator determines that an individual has been misclassified as an independent contractor under California's workers compensation laws, must the hospitality employer thereafter treat that individual and all others similarly situated as employees under all laws? What if the hospitality employer disagrees with the decision of the administrator? What if the hospitality employer has an opinion from an accountant or lawyer that the individual was properly classified as an independent contractor? The answers to these questions must await further development.

Charging or Deducting Fees

Providing equipment or supplies or reimbursing a worker for expenses incurred is evidence of employment status. Thus, most hospitality companies will avoid paying or reimbursing a contractor for expenses incurred to prevent a finding of employment status. Similarly, if the contractor uses supplies or space provided by the hospitality company, the hospitality company will charge the contractor appropriate fees so that it cannot be argued that the hospitality company is paying for the contractor's expenses. For instance, when a hospitality employer contracts with an outside catering agency to staff an event, the catering agency would be required to pay rental fees for use of kitchen equipment. But this practice would constitute a violation of SB 459 if the contractor was willfully misclassified. Hospitality employers should be able to avoid a violation of this fee provision even in the case of a willful misclassification, however, by requiring the contractor to obtain any necessary supplies, tools or equipment from unrelated third parties. The hospitality employer could still be liable under Labor Code section 2802, if that section – which requires employers to indemnify employees for expenditures or losses incurred in discharging employment duties – applies to ordinary expenses, as some courts have held.

SB 459 is silent concerning what constitutes a separate violation of the fee provision. Does it constitute a violation of SB 459 each time it charges a fee to a misclassified independent contractor (the Act does not expressly say so), or is it a violation for each misclassified contractor who is charged a fee or is subjected to a deduction? Again, further guidance is necessary to answer this question.

Other Ambiguities

As noted above, SB 459 provides for a range of civil penalties for each violation. The hospitality employer could expend tens of thousands of dollars for one misclassified individual, and hundreds of thousands of dollars if the hospitality employer is found to have a pattern or practice of willfully misclassifying workers. Further, if for example, a hospitality employer is found to have willfully misclassified outside catering agencies throughout a given year, those penalties would be multiplied by dozens or hundreds of misclassified workers, yielding exponential figures in potential employer liability. But no guidance is provided as to what merits a $5,000 penalty or $15,000 penalty. There is also no guidance as to what constitutes a "pattern or practice" that will result in larger civil penalties.

Recommendations

In light of federal initiatives and California's enactment of SB 459, hospitality employers should consider taking various steps to evaluate their existing independent contractor relationships:

Develop and publish a corporate policy on the engagement of independent contractors and the management of those relationships. As part of this policy, require that approval be obtained from a knowledgeable employee before any independent contractor relationship is established.
Train employees who manage independent contractor agreements as to how to work with independent contractor relationships.
Ensure that the company has a well-written independent contractor agreement for each contractor, that it is accurate, complete, and individually negotiated.
Audit the company's independent contractor relationships, including a review of any past decisions or determinations concerning independent contractor status.
Obtain a written legal opinion from counsel regarding the appropriateness of the classification of workers as independent contractors, based on counsel's understanding of the specific factual situations at issue.

This new legislation raises additional complex questions beyond the scope of this analysis. For example, even though the Act does not contain an express right of action, does it support an implied one? If you would like to discuss any of these issues further, please contact a Seyfarth Shaw attorney.

Occupy The Lobby: Hotel Employee Lobby Incident Largely Protected By The NLRA

By: Jack Toner

The Occupy Wall Street movement has gotten significant national attention as hundreds of activists, in order to publicize their demands (whatever they are) take over public space (city parks) and demonstrate against the government and Wall Street. The participants in Occupy Wall Street have the freedom to do so because, for the most part, their demonstrations have been on public property. Imagine for a moment, however, if your employees had the right to use your public space (e.g. lobby, reception area or bar) in order to publicize their complaints and to pressure you to give into whatever demands or grievances they may have. You probably think that there is no such right because your public areas are in fact on private property and, thus, you could prohibit employees by engaging in such conduct. The National Labor Relations Board ("NLRB"), however, in a recent decision, has opened the door to such demonstrations by declaring that pursuant to the National Labor Relations Act ("Act") employees cannot be disciplined for engaging in such conduct. LaGuardia Associates, LLP d/b/a Crowne Plaza LaGuardia, 357 NLRB No. 95 (September 30, 2011).

The NLRB in a number of decisions since last year has repeatedly expanded its definition of employee rights under Section 7 of the Act, which provides, in part, that employers may not discipline or discharge employees for engaging in union organizing or protected concerted activity. In LaGuardia, the Board majority (Chairman Mark Pearce and Member Craig Becker, over the dissent of Member Brian Hayes) reversed the findings of an Administrative Law Judge ("ALJ") and found that employees were engaged in activity protected by Section 7 and, therefore, could not be disciplined when they - while on paid working time and in violation of valid written policies - were part of a mob that physically and verbally assaulted a supervisor in front of guests in the hotel lobby.

During a union rally outside the hotel, a union official asked a hotel employee to lead a group of co-workers in presenting a petition to the hotel's chief operating officer ("manager") regarding a dispute over layoff procedures. Based on the union official's request, the employee organized a group of 13 to 15 co-workers. Each of the workers clocked in and, as a group, located the manager in the lobby area, where - in front of hotel guests and in loud voices - they demanded that the manager read the petition. The manager declined to do so and, instead, offered to meet with a representative of the group in his office to discuss the matter. The manager also requested that the employees report to their duty stations. The group, however, refused the offer and demanded that the manager remain in the lobby while the petition was read. When the manager tried to leave, the group surrounded him and three employees physically restrained him from leaving. A fourth employee struck a security guard on the arm as he attempted to escort the supervisor through the mob. After careful consideration, the hotel terminated the four employees who physically touched either the manager or the security officer, suspended five additional employees for three days for impeding the manager's ability to leave, and issued written warnings to the remaining participants in the confrontation. In the employees' disciplinary letters, the hotel noted that they were away from their workstations while on duty and "participated in a disturbance in a public area of the lobby using a loud and inappropriate voice." The union filed a charge alleging that the employees were actually engaged in protected concerted activity, thus making the disciplinary actions illegal.

After a hearing, the ALJ determined that each employee's behavior was so egregious as to lose any protections under the Act, noting in particular that the hotel's "approach to applying discipline … was careful, measured, and explicitly tailored to the conduct it believed the employees engaged in." The ALJ explicitly found that the manager "genuinely felt intimidated" by the confrontation and that the disciplinary actions were consistent with the hotel's valid written employee rules. Notwithstanding the ALJ's findings, however, the Board majority determined that only the three employees who physically touched the manager engaged in sufficiently egregious activity to lose the Act's protection. Consequently, the Board found that the discipline meted to the other employees was illegal.

As the NLRB readies to issue regulations that will encourage unions to ramp up their organizational efforts and file petitions for election with the NLRB, hospitality employers should expect to see greater use of demonstrations as an organizational tactic. Although LaGuardia involved a unionized employer, it applies equally to non-union employers who may face ever more disruptive employee conduct - either during union organizing campaigns or to oppose decisions or policies by their employer. The hospitality industry is obviously particularly susceptible to such tactics and hospitality employers should prepare in advance as to ways to respond if necessary.

California Courts Hear Arguments on Two Wage/Hour Class Actions Important to the Hospitality Industry

By: Andrew McNaught

On November 8, 2011 and November 10, 2011, California Courts heard oral arguments in two high profile wage and hour class actions, the outcomes of which will likely have significant impact on hospitality industry employers in California.

On November 8, the California Supreme Court heard argument in the long-awaited "meal and rest" case: Brinker Restaurant Corp., et al v. Superior Court. The main issue in this case is whether an employer is required only to make meal periods available to employees or whether an employer has an affirmative obligation to ensure that meal periods are taken.

On the merits, several justices appeared to be favorably disposed to the employer's interpretation of California Labor Code section 512, the meal period statute, which says that an employer may not employ an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than 30 minutes, except that if the total work period per day of the employee is no more than six hours, the meal period may be waived by mutual consent of both the employer and employee. The statute also mandates a second meal break after 10 hours of work.

This debate is more than academic. It is extremely important to California hospitality industry employers with significant numbers of non-exempt employees, such as restaurants and hotels. If they must "ensure" that meals are taken by their non-exempt employees, then they must strictly police meal breaks to make certain that they are being taken. However, if employers need only "make available" meal breaks, then the employer's meal period obligation should be satisfied so long as employees are permitted to take a timely, 30-minute meal period, regardless of whether the employee decides to take a shorter meal period or no meal period at all.

Aside from the debate about the interpretation of the word "provide," there was also a good deal of argument on when non-exempt employees must take their meal breaks. Apparent support was found among the Court for the idea that employers must enforce a "rolling five hour" rule. This is the theory that a California employer must provide an uninterrupted meal for every five consecutive hours of work. If this "rolling five hour" rule is adopted, then employers will be forced to structure meal breaks very close to the middle of each shift regardless of the needs of the business or the desires of the employees. This is because a second meal break (or a penalty for a missed meal break) would be required if employees work five hours after taking their first meal break.

If that is how the opinion is written, then the practical result may be to force employers to "ensure" that non-exempt employees are permitted to take meal breaks at a certain time (i.e., the middle of the shift). This is true even though section 512 seems likely to be interpreted as requiring only that the employer "make available" a meal break. The Court's decision is due on April 12, 2012.

Just two days later, on November 10, 2011 the California Court of Appeal, First District, heard oral argument in Duran, et al. v. U.S. Bank. The Duran case presents extremely important issues relating to how class action trials are conducted in California. In a matter of first impression, the Court of Appeal is considering whether class action plaintiffs may use statistical sampling and representative evidence to establish liability on a class-wide basis.

After class certification, the misclassification case went to a bench trial on the Bank's defense under the outside sales exemption. The trial court conducted the liability phase of the trial based on a purportedly random sample of 20 class members out of 260 total. It determined that the Bank had misclassified 19 of the 20 class members in the sample, and then extrapolated from that result that all 260 class members had been misclassified. The trial court also refused to allow U.S. Bank to put on evidence at trial that at least 70 of the 260 class members, who had signed declarations for the company, were not misclassified. After the damages phase, the trial court entered judgment against the Bank in the amount of approximately $15 million.

The panel appeared receptive to the Bank's arguments. The Court had "significant questions" about the trial court's trial management plan which appeared to implicate the Bank's due process rights, and also regarding the trial court's exclusion of defendant's evidence supporting individualized defenses. The panel also demonstrated considerable concern regarding the trial court's approval of extrapolating class-wide liability to 260 class members based on a trial sample of only 19, which resulted in a 43.3% margin of error.

It appears that the Court of Appeal may be poised to overturn the judgment against U.S. Bank and at the very least reject the trial plan and use of sampling for liability authorized by the trial court. The Court may follow the U.S. Supreme Court's guidance in Wal-Mart Stores v. Dukes, disapproving "trial by formula" because "a class cannot be certified on the premise that [a defendant] will not be entitled to litigate its statutory defenses against individual claims." A decision in the Duran case is expected before the end of February 2012.

Be Careful What You Say At The Bargaining Table

By: Isabel Lazar

Hospitality employers are well aware that claims of "inability to pay" can open themselves up to having to provide the Union financial information demonstrating that inability to pay. NLRB v. Truitt Mfg. Co., 351 U.S. 149 (1956). In National Extrusion & Mfg. Co., 357 NLRB No. 8 (2011) the Board majority has taken this obligation to new level: Where an employer premised its demand for substantial wage concessions on a need to remain "competitive" in the marketplace, as opposed to claiming an inability to pay, the union was entitled to information concerning the employer's current and former customers, job quotes, outsourcing, pricing structure, market studies and competitors. The Board majority went on to find that, because the employer unlawfully withheld the requested information, the employer's lockout of employees, temporary replacement of them, and cancellation of their health insurance coverage violated Sections 8(a)(3) and (5) of the Act.

Specifically, the employer in National Extrusion stated at the bargaining table that a 12 percent reduction in wages over three years was necessary to make its facility more competitive. More specifically, it stated that it faced competition from Asia and that its production costs had increased while its production had diminished. In response, the Union issued an information request asking for: a list of all current customers so that the union could contact them to see if they contemplated purchasing products from other sources; a copy of any and all quotes that the company had provided and how many had been awarded in the past five years; a list of all outsourced work in the past five years; a list of all customers who stopped buying from the facility during the last five years; a list of prices for products; marketing studies and marketing plans; and a complete calculation of the projected company savings over the next three years as a result of the concessions. The employer refused to provide virtually all of the information in reliance on prior Board law. Nonetheless, the Board found a violation of the National Labor Relations Act Section 8(a)(5). In holding there was an 8(a)(5) violation, the majority -- which consisted of then Chairman Liebman and Member Becker -- carefully and explicitly stated that the case was NOT an inability to pay case. Nonetheless, they noted they wanted the employer to share information because "information sharing helps to foster honest and constructive collective bargaining."

This decision turns years of Board precedent on its head. Whereas before, it was firmly established that a general claim about non-competitivness, particularly related to future ability to compete, was insufficient to require the employer to open its books, now such general assertions are adequate. The key takeaway for all hospitality employers from this decision is to think twice before making any statement explaining the rationale behind their proposals, counteroffers, or rejections in negotiating. Otherwise, the company risks making information public or, at least, available to the union, even under a confidentiality agreement.

American Hotel and Lodging Association Files Amicus Brief Urging Supreme Court to Resolve Court Split Over When Employers Can Use the Tip Credit to Satisfy Minimum Wage Obligations

By: Alex Passantino

How often can a bartender polish the bar rails before he becomes a janitorial worker? How much time can a server roll silver before she becomes a hostess? And how in the world is an employer supposed to keep track?

These questions have been arising with increasing frequency, most notably in cases addressing the issue of which employees are "tipped employees" for the purposes of an employer using the tip credit to satisfy its minimum wage obligation. Under the Fair Labor Standards Act, the "wage" for a "tipped employee" includes (among other items) a cash wage of $2.13 per hour and an "additional amount on account of the tips received by [the tipped] employee which amount is equal to the difference between" $2.13 per hour and the minimum wage in effect at the time. This latter amount is commonly referred to as the "tip credit."

In the case of Fast vs. Applebee's International, Inc., the Eighth Circuit Court of Appeals determined that the ability of an employer to use the tip credit to satisfy its minimum wage obligations was subject to a 20% limitation on an employee's performance of "non-tip-producing" work. Under the Fast decision, if the "non-tip-producing" work exceeds the 20% limit, the employer must make an additional wage payment to compensate the employee at the full minimum wage for the time spent performing "non-tipproducing" duties, even though the employee was already paid at least the minimum wage (in wages and tips combined) for all hours worked.

This ruling put the Eighth Circuit squarely at odds with the Eleventh Circuit Court of Appeals's decision in Pellon v. Bus. Representation Int'l, Inc., which determined that, because the non-tipped duties were related to the occupation, the duties "need not by themselves be directed toward producing tips." The Eleventh Circuit rejected the 20% rule, holding that "a determination whether 20% (or any amount) of . . . time is spent on non-tipped duties is infeasible" and that it would be "impractical or impossible" to divide the workday among the various tasks performed.

Given the "impractical" and "infeasible" standard in Fast, the employer has -- not surprisingly -- sought review of the Eighth Circuit's decision by the United States Supreme Court. On behalf of the American Hotel & Lodging Association AH&LA), Seyfarth Shaw LLP submitted an amicus curiae brief to the Supreme Court, urging it to take the Fast case for review and provide the employer community with much-needed guidance on the "tipped employee" issue.

In the amicus brief, AH&LA notes the difficulties inherent in implementing a rule that differs based on which side of the Mississippi River a facility is based and alerts the Court to employer concerns related to the monumental task of monitoring and tracking every task performed by every tipped employee to determine whether each employee spent at least 80% of his or her time on tip-producing tasks. Noting that such monitoring would require either (1) constant surveillance of tipped employees by their managers or a person hired specifically to conduct monitoring or (2) detailed timekeeping by employees themselves, we explained that the realities of the workplace make neither option workable.

Finally, in the amicus brief, AH&LA stresses the compliance challenges related to the Eighth Circuit's decision, in that it creates a rule that employers must follow, but no guidance on how to comply with that rule. The line between "tipproducing" and "non-tip-producing" is less than clear. The majority of duties performed by a waiter, for example, contribute to a customers' dining experience and are thus arguably tip-producing. Some of those duties are, however, more obvious to the tip-providing customer than others. For example, placement by a server of food on the table in front of customers is most certainly tip-producing, direct customer service, but what about the behind-the-scenes placement of the same food on a tray or cart by the same server before bringing to the table? Both duties undeniably contribute to the customer experience. Does the fact that the customer directly observes one and not the other matter? An employer's miscategorization of even a single duty could have significant consequences by tipping the 80/20 balance, thus causing the employer to lose the ability to use the tip credit.

These significant issues impact all employers of tipped employees, regardless of the industry. Accordingly, AH&LA requested that the Supreme Court take the Fast case on appeal. Until such time as the Supreme Court rules, however, employers in the Eighth Circuit must comply with the decision of the Fast court.

Hospitality Team Updates

Jim Curtis and Meagan Newman of our Chicago office presented a webinar on hot Occupational Safety and Health Administration (OSHA) issues faced by the hospitality industry on November 3. The presentation discussed enforcement trends as well as policies and practices that may expose businesses to risks that may be avoided.

The National Labor Relations Board: New Expedited Election Rules And Possible New Members

Wed, 21 Dec 2011 00:00:00 -0400

New Expedited Election Rules

With only days left in the term of National Labor Relations Board ("NLRB" or "Board") Member Craig Becker, and just a few days before the Christmas holiday, the Board announced that it adopted final rules that will significantly expedite the processing of election petitions filed by unions. The new rules will:

Provide an NLRB hearing officer with the ability to limit the evidence that can be introduced at a representation case hearing.
Provide the hearing officer with the authority to deny a party the right to file a post-hearing brief.
Eliminate a party's right to have the NLRB review a decision by a regional director that directs an election.
Eliminate current language that requires an election to be conducted within 25-30 days, thereby permitting elections to be held before the 25-day period.
Eliminate a party's right to have the NLRB review any decisions by a regional director or an administrative law judge regarding post-election disputes.

One of the unstated reasons for the Board making these changes is that many unions and even NLRB personnel claim that employers have abused the current process by litigating issues merely to delay an election. In their view, many employers, rather than resolving the election issues such as eligibility of the voters and stipulating to the election, often litigate minor issues simply to gain additional time to counter the union's organizing efforts.

Under current NLRB case processing goals, if the parties stipulate to an election it will be held in a median of 38 days from the date of the filing of the petition, but if a hearing is necessary the median is approximately 56 days. The new rules will reduce the time for processing representation cases that require a hearing by approximately 14 days, which means that elections will be held in roughly the same time as if the parties had stipulated to an election.

In addition to having a quicker election, the new rules will limit an employer's ability to raise issues and, as a consequence, may inhibit the ability to preserve them for judicial review. Although the implementing guidance has not been announced, the new rules give NLRB regional directors and hearing officers significant discretion in determining the issues that can be raised in pre-election hearings. They also give the Board more discretion in deciding what cases to review on appeal.

Although the new rules will not become effective until April 30, 2012, the National Chamber Litigation Center, in conjunction with the Coalition for a Democratic Workplace, filed a lawsuit seeking to enjoin the implementation of the rules. With additional lawsuits potentially on the horizon, it is important for employers to begin reviewing their policies and strategies regarding resisting union organizing with the new rules in mind.

Click here to read the final rule and introduction, and here to read a description of the amendments.

Possible New Board Members

In addition to the new rules, it is anticipated that President Obama will make recess appointments to the NLRB. Absent new appointments, the NLRB would be unable to issue decisions after Member Becker's term expires at the end of this year because it would not have the three members necessary to constitute a quorum.

Therefore, it is noteworthy that President Obama, on December 15, 2011, announced his intent to nominate Sharon Block and Richard Griffin to be members of the NLRB. Ms. Block is currently the Deputy Assistant Secretary for Congressional Affairs at the U.S. Department of Labor, but prior to that appointment worked for Senator Ted Kennedy as Senior Labor and Employment Counsel for the Senate HELP Committee. Mr. Griffin is currently General Counsel to the International Union of Operating Engineers (IUOE).

It would appear that the December 15 announcement is a step toward making the anticipated recess appointments because a person must first be nominated in order to be given a recess appointment. Because the authority of the President to make recess appointments has rarely been challenged, there is little established law regarding exactly under what conditions the President has such authority. While 47 Republican Senators recently wrote the President announcing their intent to oppose any recess appointments to the NLRB, it is expected that "new" law may soon be in the making.

By: Jeff Berman, Joshua Ditelberg, Fredric Fischer and Jack Toner

Jeff Berman is a partner in Seyfarth's Los Angeles office, Joshua Ditelberg and Fredric Fischer are partners in the firm's Chicago office and Jack Toner is senior counsel in the firm's D.C. office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Jeff Berman at jberman@seyfarth.com, Joshua Ditelberg at jditelberg@seyfarth.com, Fredric Fischer at ffischer@seyfarth.com or Jack Toner at jtoner@seyfarth.com.

Brian Ashe Published in The Recorder
“’Brinker’ Issues Explained”

Tue, 20 Dec 2011 00:00:00 -0400

An article by Employment partner Brian Ashe was published in the December 13 issue of The Recorder. The article discussed Brinker Restaurant v. Superior Court, an employee meal and rest case. The California Supreme Court’s decision on the case will decide whether employers need only make meal breaks “available” to employees, or must “ensure” that the breaks are taken.

Brian explained the potential consequences of the court’s decision. “This debate is important to California employers,” he emphasized. “If they must ‘ensure’ that meals are taken by nonexempt employees, then they must strictly police meal breaks to ensure that they are taken. If, however, employers need only ‘make available’ meal breaks, then effective communication of a meal-break policy should discharge the employer's duty.”

Another factor under consideration in Brinker is the idea of when a break needs to be taken within a shift of five hours or more. Can an employee’s break be placed anywhere within his/her shift, or must it be placed so that the employee never works more than five consecutive hours?

“If a ‘rolling five hour’ rule is adopted, then employers will be forced to structure meal breaks for nonexempt employees very close to the middle of their shift, regardless of the desires of the employees,” Brian warned. “Otherwise, a second meal break (or a penalty for a missed meal break) will be due to employees who work five hours after taking their first meal break even though they are only working a standard eight hour shift. Most businesses will try to avoid such gross inefficiencies by requiring meal breaks in the middle of the shift.”

Scott A. Carlson and Jason Priebe Published in IICLE E-Discovery 2012 Handbook

Tue, 20 Dec 2011 00:00:00 -0400

A chapter titled “Discoverability,” co-authored by Scott A. Carlson, co-chair of the firm’s eDiscovery group, and Jason Priebe, Senior Counsel, was published in the IICLE 2012 E-Discovery Handbook. In this chapter, Scott and Jason cover the discoverability of electronically stored information (ESI) in Illinois and sources of potentially relevant ESI.

The modern litigant must carefully consider what information is necessary to his or her case. Requesting or sending extremely broad discovery requests to opposing counsel only increases time, cost, and energy needed by both parties. Researching the format, medium, physical location, transitory characteristics, amount and quality of the information available and potentially relevant to the facts at issue all combine to form the concept known as “discoverability.”

The handbook is available online at: https://www.iicle.com/booksandproducts/newproductdetails.aspx?ID=4880

2011 Trade Secrets Webinar Series - Year in Review

Mon, 19 Dec 2011 00:00:00 -0400

Throughout 2011, Seyfarth Shaw LLP’s dedicated Trade Secrets, Computer Fraud & Non-Competes practice group hosted a series of CLE webinars that addressed significant issues facing clients today in this important and ever changing area of law. The series consisted of six webinars: Trade Secrets in the Financial Services Industry, The Anatomy of a Trade Secret Audit, Georgia’s New Non-Compete Statute, Managing and Protecting Trade Secrets in the Brave New World of Cloud Computing and Social Media, Choosing the Right IP Protection: Patent, Trade Secret or Both?, and Key Considerations Concerning Trade Secrets and Non-Competes in Business Transactions. As a conclusion to this well-received 2011 webinar series, we have compiled a list of key takeaway points for each of the webinars, which are listed below. For those clients who missed any of the programs in this year’s webinar series, the webinars are available on compact disc upon request and CLE credit is available as discussed below. We are also pleased to announce that Seyfarth Shaw LLP will continue its trade secrets webinar programming in 2012 and has several exciting topics lined up.

Trade Secrets in the Financial Services Industry

The first webinar of the year, Trade Secrets in the Financial Services Industry, was led by Seyfarth attorneys Scott Humphrey and Scott Schaefers. The financial services industry has unique concerns with respect to trade secret protection. This webinar had a particular focus on a financial institution’s relationship with its FINRA members and also covered practical steps that can be implemented to protect trade secrets and what to do if trade secrets are disclosed.

Enforcement of restrictive covenants and confidentiality obligations for FINRA and non-FINRA members are different. Although FINRA allows a former employer to initially file an injunction action before both the Court and FINRA, FINRA, not the Court, will ultimately decide whether to enter a permanent injunction and/or whether the former employer is entitled to damages as a result of the former employee’s illegal conduct.
Address restrictive covenant enforcement and trade secret protection before a crisis situation arises. An early understanding of the viability of your restrictive covenants and the steps that you have taken to ensure that your confidential information remains confidential will allow you to successfully and swiftly evaluate your legal options when an emergency arises.
Understand the Protocol for Broker Recruiting’s impact on your restrictive covenant and confidentially requirements. The Protocol significantly limits the use of restrictive covenants and allows departing brokers to take client and account information with them to their new firm.

The Anatomy of a Trade Secret Audit

The second webinar was led by Robert Milligan, Bob Niemann and David Monachino. This webinar dissected what is involved in an audit of your company’s trade secret protections, including, identifying trade secrets and secrecy protections and implementing effective secrecy protections and hiring and termination protocols. The webinar also discussed employing a comprehensive trade secret protection plan, as well as managing and working to protect computer-stored data, including responding to emergency issues related to computer fraud and security breaches.

The issues relating to all the aspects of trade secrets can be overwhelming to those that deal with it on rare occasions or in emergencies. Having effective checklists are helpful to marshal evidence, evaluate your claims, and be pro-active to pursue litigation and defend against claims. Ask your Seyfarth Shaw attorney for sample checklists.
Use a forensic computer investigator to assess former employees’ computer activities, including use of email and USB devices to unlawfully transmit company data. Ensure that you have strong computer usage restrictions that prohibit unauthorized and unpermitted computer activities on your computer network.
Mark your confidential documents confidential and treat them as such, including having company policies requiring that they not be removed from the workplace and that they be returned at time of termination. Also establish clear employee entrance and exit policies to ensure that trade secret information is adequately protected throughout the hiring and termination process.

Georgia’s New Non-Compete Statute

The third webinar of the year, led by Bob Stevens and Erika Birg with guest panelist Kevin Levitas, former member of the Georgia House of Representatives, focused on Georgia’s Revised Restrictive Covenant Act. The webinar addressed the fundamental paradigm shift toward enforcing restrictive covenant agreements in Georgia and addressed the underlying legislation, legislative history that led to the 180 degree change for enforcement of such agreements in Georgia and detailed the significant changes to the law.

There has been a fundamental change in Georgia public policy toward enforcement of restrictive covenant agreements, including non-competes and non-solicits.
The Georgia Revised Restrictive Covenant Act addressing restrictive covenants permits courts for the first time to blue pencil or modify agreements entered into after May 10, 2011 to make overbroad agreements enforceable. The old Georgia law still applies to agreements entered into prior to January 1, 2011. Due to arguments over the constitutionality over Georgia’s Restrictive Covenant Act passed in late 2010, the law regarding agreements entered into between January 1, 2011 and May 10, 2011 is still uncertain.
Employers operating in Georgia should have their non-compete agreements evaluated by competent counsel to ensure that they comply with the new Act and provide employers with the greatest protections under Georgia law.

Managing and Protecting Trade Secrets in the Brave New World of Cloud Computing and Social Media

2011’s fourth trade secrets webinar focused on cloud computing and social media and their impact on trade secret status and protection efforts. Robert Milligan, Jason Stiehl and Jason Priebe led this highly attended webinar. This webinar discussed a technological overview of cloud computing and social media, “both sides of the coin” look at cloud computing adoption as a business decision, trade secrets and reasonable secrecy measures, key considerations in selecting a cloud provider from a security and trade secrets perspective, effective vendor and employment agreements and policies to protect trade secrets in the cloud, and effective social media policies to protect trade secrets.

When utilizing cloud computing, generally follow a three-step process: (1) ensure you understand and define your trade secrets internally through a trade secret audit before consider placing such information in the cloud; (2) create necessary barrier/security protocol to protect those secrets; and (3) develop comprehensive and cohesive social media and restrictive covenants/confidentiality policies to avoid disclosure.
Identifying and collecting information to fulfill an organization’s duty to preserve and/or discovery obligations can be tricky in cloud environments. While the information may belong to your company or organization, the underlying software structure belongs to a service provider, and the data may be scattered over multiple locations. It is a good idea to consider potential issues of data control, ownership, and jurisdiction when evaluating a software as a service (SAAS) cloud-based platform solution.
Carefully review the proposed service agreement with the cloud provider and ensure that provider agrees to keep data confidential and has reasonable security measures in place to protect your information; also consider avoiding contractual limitations on provider liability depending upon bargaining power. If the secrets involved are “bet the company” type information, the cloud may not be the place to store it.

Choosing the Right IP Protection: Patent, Trade Secret or Both?

The fifth webinar, led by Brian Michaelis, Dan Schwartz and Jim McNairy, focused on choosing the best legal tool to protect particular types of intellectual property. The topics discussed in this webinar included a definition of a patent and what information is patentable, defining a trade secret and what information qualifies for trade secret protection, the pros and cons of patent vs. trade secret protection, which types of information/technology may be best protected through both trade secret and patent protection, the impact the new America Invents Act (Patent Reform Legislation) has on the decision to seek patent or trade secret protection.

There may be “tension” between patent protection and trade secrets; for instance, patents require public disclosure in return for a government granted monopoly whereas trade secret require that the information remain secret throughout its life. Once information is no longer secret or otherwise becomes available, trade secret protection will be lost.
The remedies available under patent laws and trade secret law differ significantly. A patent owner is always entitled to at least a “reasonable royalty” for any infringement. There is no statutory floor of damages such as a “reasonable royalty” for trade secret owners.
Recent changes to the patent laws provide trade secret owners with additional defenses to allegations of patent infringement where the trade secret owner has maintained as a trade secret a later patented method or system.

Key Considerations Concerning Trade Secrets and Non-Competes in Business Transactions

The final webinar of 2011 was led by Todd Hunt, Erik Weibust and Jim McNairy. This webinar included a discussion of which relationships other than employer/employee relationships require trade secret protections, the most significant risks to the trade secret status of your valuable confidential information under the Uniform Trade Secrets Act and best practices for protecting trade secrets in business transactions.

Broader non-competes are better tolerated in the sale of a business context, but care should be taken to carefully assess your specific facts and applicable law to help ensure that time, place, and subject matter restrictions, if any, are consistent with law in the jurisdiction(s) at issue. Pay special consideration to choice of law and choice of forum issues as they impact enforceability.
Adequately protecting trade secrets and goodwill in business presentations and transactions requires careful planning and forethought. The often large and frequent exchange of information in these contexts requires use of Non-Disclosure/Confidentiality Agreements.
All business relationships are potential threats to trade secret status and opportunities for misappropriation. Given this, it is imperative to identify any trade secrets at issue and proactively assess any aspects of the business relationship or transaction that may present risks of unintended or unauthorized disclosure or use of trade secrets, as well opportunities for bad actors to improperly acquire your trade secret information.

2012 Trade Secrets Webinar Series

Beginning in January 2012, we will begin another series of Trade Secret webinars. The first webinar of 2012, Latest Developments in the Computer Fraud and Abuse Act, Social Media and Privacy, will be held on January 26. To receive an invitation to this webinar or any of our future webinars, please sign up for our Trade Secrets, Computer Fraud & Non-Competes mailing list by clicking here.

For attorneys licensed in Illinois, New York or California, who are interested in receiving CLE credit for viewing recorded versions of the 2011 webinars, please e-mail CLE@seyfarth.com to request a username and password.

If you have any questions, please contact the Seyfarth Shaw attorney with whom you work or any Trade Secrets, Computer Fraud & Non-Compete attorney on our website (www.seyfarth.com/tradesecrets). You may also access our blog, Trading Secrets, at www.tradesecretslaw.com.

Pre-Certification Settlements With Named Plaintiffs May Excuse Defendants From Responding to Pending Discovery

Fri, 16 Dec 2011 00:00:00 -0400

In Pirjada v. Superior Court (Pacific National Security, Inc.) (December 12, 2011), the California Court of Appeal for the Second District held that, when a defendant settles a class action with the named plaintiff prior to certification, and there are outstanding written discovery requests, it is not an abuse of discretion for a trial court to find that discovery moot and deny a motion to compel.

Pirjada was a security officer for Pacific National Security, Inc. ("Pacific National"). Pirjada sued on behalf of himself and a putative class of all security guards who had been employed in California by Pacific National during the preceding four years, alleging causes of action for failure to provide meal and rest periods, other wage-and-hour claims, and unfair business practices.

Trial Court Denies Motion To Compel And Motion To Dismiss

On March 10, 2011, Pirjada, through his counsel Westrup Klick LLP ("Westrup"), served Pacific National with a request for production of documents by mail. The requests included two specific requests for the names and last-known contact information of all putative class members. Pacific National did not object or respond to the document request within the 30 days specified by the California Code of Civil Procedure. Pacific National also did not seek an extension on the time to respond nor move for a protective order.

Also in March 2011, after efforts to negotiate a settlement with Westrup failed, Pacific National negotiated a settlement directly with Pirjada. On March 15, 2011, Pirjada sent Westrup a copy of the executed settlement agreement and asked that Westrup immediately dismiss his claims in the lawsuit.

Rather than dismiss the lawsuit, Westrup made a May 2, 2011 motion for an order providing notice to putative class members that substitution of a new class representative was necessary. The motion also requested use of a third-party administrator, who would provide Westrup with the identity of those putative class members who were willing to be contacted about the lawsuit. Pacific National opposed Westrup’s motion and filed its own motion to dismiss based on the parties’ settlement. Pirjada joined in that motion.

The trial court denied Pacific National’s motion to dismiss, noting that court approval is required before a class action may be dismissed. The court reasoned that Pirjada and his counsel had fiduciary obligations to putative class members that were not relieved by Pirjada’s individual settlement with Pacific National.

The court cited La Salsa v. American Savings & Loan Assn., 5 Cal.3d 864, 872 (1971) for the proposition that, when a named plaintiff can no longer represent a putative class, plaintiffs should be given an opportunity to either amend the complaint to redefine the class or add new named plaintiffs. The court denied the motion to dismiss and granted 60 days leave for Westrup to add new named plaintiffs. The trial court also denied Westrup’s motion for class notice, emphasizing that counsel was free to communicate with other putative class members who may want to pursue a claim and "court-sanctioned notice" was not necessary or appropriate.

On June 9, 2011, Westrup moved for an order compelling responses to the discovery requests seeking putative class member contact information, arguing that Pacific National had failed to serve any responses so all objections were waived. Pacific National opposed the motion on the grounds that: (1) Pirjada had settled his claims before responses were due, relieving Pacific National of any duty to respond; (2) Westrup had no right nor standing to move to compel responses because the discovery had been served on behalf of Pirjada; and (3) the motion was essentially an impermissible motion for reconsideration of Westrup’s earlier failed motion to compel notice to potential class members.

The trial court denied the motion to compel on the grounds that the discovery was moot because Plaintiff had settled his claim. The court clarified its prior ruling that Westrup’s right to communicate with the putative class did not mean that counsel was permitted to engage in discovery, but rather that counsel should be given an opportunity to informally locate and communicate with putative class members.

Westrup Appeals, Seeking Discovery and Notice To Class Members

Westrup appealed, making two main arguments: (1) in failing to respond to the document requests, Pacific National had waived all objections to the request for putative class member contact information and it was an abuse of discretion to deny the motion to compel, absent a finding of mistake, inadvertence, or excusable neglect; and (2) the trial court abused its discretion in refusing to authorize notice to putative class members that Pirjada had settled his claims and that a replacement representative was needed.

The Court of Appeal rejected Westrup’s discovery argument, citing the trial court’s broad discretion to deny motions to compel. The Court further noted that by the time Westrup had filed a motion to compel, the trial court had already protected the putative class members’ interests by giving Westrup leave to amend and postponing any determination on whether to dismiss the case.

Although the Court rejected Westrup’s discovery argument, its opinion also stated that Pacific National should have taken precautions to either object to the outstanding discovery as moot, move for a protective order, or include a provision in the settlement agreement with Pirjada that all outstanding discovery requests would be withdrawn. The Court went on to state that it would not have been an abuse of discretion for the trial court to require Pacific National to respond to the discovery and that it would have left such a ruling in place as well.

The Court of Appeal also rejected Westrup’s argument regarding class notice as premature. The Court recognized the legal obligation to inform absent class members before dismissing a class action where dismissal may prejudice the class, but deferred to the trial court’s broad discretion to determine the nature and extent of that notice. The Court went on to state that the trial court would necessarily revisit this issue when it ruled on Pacific National’s pending motion to dismiss and that Westrup would have another opportunity to argue for class notice. It would therefore be inappropriate for the Court to instruct the trial court on how to rule on that motion. The Court therefore concluded that the trial court was within its discretion to deny class notice upon Westrup’s initial request.

Lessons For Employers

Best practices dictate that a responding party in this case should have served objections to the pending discovery as moot, sought a protective order based on the settlement agreement, or included a provision in the settlement agreement withdrawing the outstanding written discovery.

By: Hayley Macon

Hayley Macon is an associate in Seyfarth’s Los Angeles office. If you would like further information, please contact your Seyfarth Shaw LLP attorney or Hayley Macon at hmacon@seyfarth.com.

Angelo Paparelli Quoted in the Los Angeles Times
"Sold into slavery as a girl, Shyima Hall becomes a U.S. citizen"

Fri, 16 Dec 2011 00:00:00 -0400

Seyfarth Shaw Immigration partner Angelo Paparelli was quoted in an article in the L.A. Times on December 16. The article discussed the story of Shyima Hall, who was smuggled out of Egypt at the age of 10 when her parents sold her to work as a slave to an Irvine, Calif. family. She toiled for three years before the U.S. Immigration and Customs Enforcement (ICE) investigated the case after a concerned neighbor tipped off child welfare authorities. Now at 22 years old, Shyima has spoken frequently on combating human trafficking and now dreams to become a federal agent for the ICE.

On Thursday, December 15, Angelo attended Shyima's swearing in ceremony in Montebello, Calif. He represented Shyima pro bono and noted that her citizen application was filed under a special provision for juvenile immigrants. He also pointed out that her decision to stay in the United States was supported from the beginning by county officials.

"She has literally gone through a living hell, and now she wants to give back," Angelo commented. "She's there to give other people courage."

Click here to read the full article: http://www.latimes.com/news/local/la-me-1216-shyima-hall-20111216,0,1583100.story

Seyfarth Shaw Named US Employment Law Firm of the Year by Acquisition International

Fri, 16 Dec 2011 00:00:00 -0400

Contact:

Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

CHICAGO (December 16, 2011) — Leading law firm Seyfarth Shaw LLP announced today it was the recipient of the Acquisition International Legal Award 2011 for "US Employment Law Firm of the Year." With more than 7,000 nominations across 48 categories, the winners of the inaugural awards include lawyers who "think on their feet" and law firms which "develop new routes to market and operate on a resourceful and pragmatic basis."

Chair of Seyfarth’s International Labor & Employment Law practice Darren Gardner remarked, "It is very flattering to win such a prestigious award arising from client feedback. We have really been focused on building a team that strives to be the best in the practice area. We are fortunate to have a number of the leading lawyers in the international employment area who work well together as a team on global projects for our clients. This is a great acknowledgment of our team’s efforts and the results achieved."

Seyfarth Shaw's team of international labor employment lawyers is the largest of its type globally, composed of foreign-trained lawyers with deep experience, representing multinational companies in a wide range of industries. The team worked on the international employment aspects of more than 20 acquisitions over the last 12 months.

Acquisition International magazine reports on mergers and acquisitions and features analyses of corporate finance changes, the latest deals and topical issues. The monthly publication is aimed at decision makers actively involved in a wide variety of deals, including the FTSE 100, British Private Equity & Venture Capital Association, European Private Equity and Venture Capital Association and numerous international venture capitalist associations.

Seyfarth Shaw Immigration Practice Helps Pro Bono Client, a Formerly Enslaved Egyptian Woman, Become a U.S. Citizen

Thu, 15 Dec 2011 00:00:00 -0400

Contact:

Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

Human trafficking victim Shyima Hall represented pro bono by attorney Angelo Paparelli in citizenship application process; naturalization ceremony takes place today, Dec. 15, 2011 in Los Angeles

LOS ANGELES (December 15, 2011) — Leading law firm Seyfarth Shaw LLP, which represented Egyptian human trafficking victim Shyima Hall, 22, in her goal to become a U.S. citizen, is pleased to announce that Ms. Hall is nearing the completion of her naturalization process. Hall will be sworn in as a U.S. citizen in a ceremony at the U.S. District Court in Montebello, Calif. on December 15, 2011.

Shyima Hall’s story became national news following the 2005 indictment and 2006 conviction of a wealthy Egyptian couple who were accused of holding Hall hostage for nearly two years as a slave in their upscale Irvine, Calif. home. Beginning in 2000, the couple, Abdel Nasser Eid Youssef Ibrahim and Amal Ahmed Ewis-abd Motelib, forced Hall, then 10 years old, to work inside their house and sleep in their unheated garage, using threats and physical abuse. Ibrahim and his wife were eventually sentenced to federal prison for three years and one year, 10 months, respectively, and later deported.

After her rescue in 2002, Hall was adopted by a Southern California family. She is now working to obtain a college degree, in pursuit of her dream of a career in law enforcement – specifically, working for the U.S. Immigration and Customs Enforcement (ICE). Hall’s other dream is to become a U.S. citizen, which becomes a reality today, Dec. 15.

“My hope of becoming a U.S. citizen is tied to my career goal – eventually I’d like to work for the ICE Department of Homeland Security unit,” said Hall. “I wish to help future victims of slavery and human trafficking.” Hall has already worked with ICE in helping the agency's human trafficking awareness program, volunteering to speak at a number of its educational events.

Angelo Paparelli, a partner in Seyfarth Shaw’s Immigration practice group who practices in Los Angeles and New York, represented Hall pro bono as she worked to obtain her citizenship. He learned from an ICE official about Hall’s need for help in the application process. The officer asked Paparelli to recommend pro bono counsel for Hall. Instead, Paparelli volunteered to donate his and the firm’s legal services in assisting Hall in becoming naturalized.

“It was an honor helping Shyima obtain what so many of us take for granted – our U.S. citizenship,” Paparelli said. “After the torment she endured this past decade, it is especially satisfying to see her finally cross the threshold and meet her goal of becoming a U.S. citizen. Shyima’s story of courage, resilience and self-sacrifice is an inspiration in so many ways -- not just for immigrants, but also for victims of human trafficking.”

Paparelli plans to attend Hall's swearing-in ceremony today.

Seyfarth Shaw Finishes Strong Year with more than $1 Billion in Cable and Telecom M&A Deals

Thu, 15 Dec 2011 00:00:00 -0400

Contact:

Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

NEW YORK (December 15, 2011) - In the past 12 months, law firm Seyfarth Shaw LLP has closed more than $1 billion in cable and telecom industry transactions, including a $350 million acquisition for Suddenlink Communications and the purchase and sale of various cable and telecom assets totaling in the hundreds of millions for companies such as AT&T, US Cable and Windjammer Communications.

"The past 12 months have been a busy time for us with numerous cable clients acquiring or shedding assets for strategic reasons. We are gratified to be a go-to firm for leading cable operators and financial institutions engaging in M&A transactions in the cable space," said Andrew Lucano, corporate partner and vice chair of Seyfarth’s Mergers & Acquisitions Practice Group. "We also have had significant deal flow in the telecommunications industry, representing a leading telecom provider in several M&A transactions."

Joel Cartee, a corporate partner with Seyfarth in Atlanta said, "2011 was active in terms of cable and telecom deals and we expect 2012 to be equally robust. While there is continued consolidation in these industries, there are also new companies entering this space and/or expanding their existing telecom/cable businesses. In the telecom industry, the major carriers are being joined by foreign companies, private equity firms and cable companies looking to fulfill specific strategic objectives with telecommunication asset acquisitions and dispositions."

Among the cable and telecom transaction highlights from 2011 include:

Seyfarth Shaw advised Cequel Communications, LLC, which does business as Suddenlink Communications, in its acquisition of NPG Cable, Inc. and its subsidiaries from News-Press & Gazette Co. for approximately $350 million. The transaction closed April 1, 2011.
Seyfarth Shaw represented Windjammer Communications LLC, a cable operator providing television, high-speed Internet and phone services, in the sale of broadband systems serving, in aggregate, approximately 17,000 customers in Alabama and Georgia to Charter Communications. Charter is a leading broadband communications company, and the fourth-largest cable operator in the United States. The transaction closed on August 1, 2011.
Seyfarth Shaw represented US Cable of Coastal-Texas, L.P. in the sale of broadband systems serving, in aggregate, approximately 16,000 customers in Missouri to Charter Communications. The transaction closed on September 1, 2011.
Seyfarth Shaw represented US Cable of Coastal-Texas, L.P. in the sale of broadband systems serving, in the aggregate, approximately 33,000 customers in Minnesota and Wisconsin to Midcontinent Communications. The transaction closed on October 1, 2011.
Seyfarth Shaw represents AT&T Inc. on a routine basis in connection with M&A transactions throughout the United States in the telecom industry, including more than twenty transactions in the last two years with an aggregate deal value exceeding $1 billion.

"We look forward to working with buyers and sellers of cable and telecom assets in the year ahead. Seyfarth Shaw attorneys understand the intricacies of each industry, having advised numerous clients on the legal aspects of deals in multiple regions of the United States as well as internationally," said Lucano.

Brian Ashe Quoted in The Recorder
"Wage Suits Get a New Poster Boy"

Thu, 15 Dec 2011 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Brian Ashe was quoted by The Recorder in an article recounting a contentious series of wage and hour lawsuits filed against a San Francisco restaurant.

The plaintiffs claim the restaurant improperly pooled tips, however the restaurant owners claim the plaintiffs' cases threaten the viability of their northern California locations because the suits are unusually aggressive and penal, pointing to a number of unusual tactics, including a demurrer filed in response to one motion that they claim had little purpose except to run up fees.

Brian agreed with the defendants that demurrers are highly uncommon--he's encountered only one in his entire career. He also noted, however, they are rarely successful.

Massachusetts Employment & Labor Law Report - December 2011

Thu, 15 Dec 2011 00:00:00 -0400

Governor Signs Transgender Rights Law
Massachusetts Court Applies Wage Act to Out-of-State Employee
U.S. District Court Rejects Longstanding Wage Rule, Conditionally Certifies Collective Action of Hospital Workers
Despite Supreme Court Ruling, Massachusetts Court Invalidates Class Action Waiver in Arbitration Agreement
First Circuit Rules that Interviewing an Applicant Is Not an Admission that the Applicant Is Qualified for the Position
First Circuit Finds Banquet Sales Managers Exempt from Overtime

Governor Signs Transgender Rights Law

On November 23, 2011, Massachusetts Governor Deval Patrick signed a law to protect transgender people in Massachusetts from discrimination in employment, housing, mortgage loans, and credit. The legislation also affords transgender people protection under the state's existing hate crime laws. The law becomes effective on July 1, 2012.
The law amends the Commonwealth's non-discrimination laws, Mass. Gen. Laws c. 151B, to include "gender identity" as a new protected category. The law contains a broad definition of gender identity: "a person's gender-related identity, appearance or behavior, whether or not that gender-related identity, appearance or behavior is different from that traditionally associated with the person's physiology or assigned sex at birth."
According to the language of the new law, evidence of a person's gender identity may include "medical history, care or treatment of the gender-related identity, consistent and uniform assertion of the gender-related identity or any other evidence that the person's gender-related identity is sincerely held, as part of the person's core identity." The law also provides that while transgender people may not be discriminated against on the basis of their gender identity, transgender people may not assert their gender identity "for any improper purpose." Notably, the law does not include language to protect transgender people in public accommodation settings, such as hotels, restaurants, clubs, and restrooms.

With the passage of this law, Massachusetts joins more than a dozen other states in protecting transgender people from discrimination in the workplace. Massachusetts employers should review their personnel policies and procedures, including policies related to equal employment opportunity, dress codes, bathrooms, and any other gender-specific facilities, to ensure compliance with the new law.

Massachusetts Court Applies Wage Act to Out-of-State Employee

In Dow v. Casale, the Massachusetts Superior Court held that the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, § 148 (Wage Act), protects out-of-state employees so long as they have sufficient contacts with the Commonwealth. In the wake of this decision, Massachusetts employers cannot assume that their out-of-state employees are not covered by the Wage Act.

In 2006, Starbak Communications, Inc., located in Massachusetts, hired Russell Dow as its sole salesperson. Dow, a commissioned employee, reported to Gregory Casale, Starbak's CEO in Massachusetts, with whom he communicated daily by email and several times a week by phone. Throughout his employment with Starbak, Dow was a resident of Florida, worked out of his home, and contacted his customers via telephone or email. However, Dow worked with between eleven and nineteen customers located in Massachusetts and traveled to Massachusetts twelve times in 2008 and at least eight times in 2009. When visiting Massachusetts, Dow always worked out of the same cubicle at the Starbak office. His business card identified his work address as the Starbak office and listed a Massachusetts telephone and fax number. All paperwork related to Dow's sales activities, such as purchase orders and invoices, was generated in Massachusetts and customers returned such documents to Starback's facility in Massachusetts.

Beginning in the third quarter of 2008, Starbak failed to pay Dow his full commissions and eventually ceased paying any commissions when the company filed for bankruptcy in February 2010. In April 2010, Dow filed suit against Casale and two other Starbak executives to recover $138,957 in commissions, expenses, and accrued vacation, alleging a violation of the Wage Act. Both parties then filed motions for summary judgment.

The Superior Court granted Dow's motion for summary judgment, holding that the purpose of the Wage Act is to prevent the unreasonable retention of wages and that there is no language in the Wage Act that restricts its coverage to employees who work or reside in Massachusetts; nor is there any language that identifies whether it is the situs of the employer, the employee or the work that determines coverage under the Wage Act. The Court applied a personal jurisdiction analysis and found that Dow had sufficient and regular contacts with Massachusetts to fall within the scope of the Wage Act's protections. These contacts included the location of Dow's customers in Massachusetts; Dow's business travel to Massachusetts; Dow's use of a Massachusetts business address, telephone number and fax number; Dow's daily communication with Casale (located in Massachusetts); and the fact that paperwork related to Dow's sales activities was generated in and returned to Massachusetts.

Although this decision may be limited by the facts of the case, specifically Dow's repeated contacts with Massachusetts, it continues to expand the scope of the Wage Act. Given that the costs of non-compliance can be high due to automatic trebling of damages resulting from any violation, Massachusetts employers should review their pay policies and practices with regard to out-of-state employees to ensure compliance with the Wage Act.

U.S. District Court Rejects Longstanding Wage Rule, Conditionally Certifies Collective Action of Hospital Workers

In Norceide v. Cambridge Health Alliance, Judge Nancy Gertner of the U.S. District Court for the District of Massachusetts rejected a longstanding wage rule, known as the Klinghoffer Rule, and allowed plaintiffs, a group of hospital workers, to pursue their minimum wage claims on a collective action basis.

The plaintiffs alleged that they were not paid for all hours worked, in violation of the minimum wage provisions of the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. (FLSA). Their employer, Cambridge Health Alliance, moved to dismiss the claims based on the Klinghoffer Rule. The Klinghoffer Rule was first recognized by the U.S. Court of Appeals for the Second Circuit in United States v. Klinghoffer Bros. Realty Corp., 285 F.2d 487 (2d Cir. 1960). In that case, the Second Circuit concluded that the FLSA requires only that (1) employees receive overtime for all hours worked in excess of 40 hours per week; and (2) in toto, employees receive at least the minimum wage for all hours worked. Under the Klinghoffer Rule, courts have declined to find a minimum wage violation so long as the employee's total weekly pay, divided by their actual hours worked, does not dip below the minimum wage threshold for each hour of work. Thus, where an employee alleges that he worked 38 hours in a week, but received pay for only 34 hours, courts will find no violation of the FLSA so long as the average hourly rate for all 38 hours worked is above the federal minimum wage.

At least five other circuit courts and the U.S. Department of Labor (DOL) have adopted the Klinghoffer Rule and declared that the weekly-average method is the proper way to determine if an employer has violated the FLSA's minimum wage requirement. But Judge Gertner observed that courts following Klinghoffer have "mostly done so by citing to Klinghoffer without any further analysis of whether, in fact, the weekly average rule effectuates the legislative intent of the FLSA's minimum wage law." Offering her own analysis of the statute's legislative intent, Judge Gertner concluded that Congress intended for the hour-by-hour method (not the weekly-average method) to be used to determine whether a minimum wage violation has occurred; that is, where an employee is not paid an hourly wage for a certain number of hours worked in a week, there is a violation of the FLSA's minimum wage requirements even where the average pay received for each hour actually worked is above the federal minimum wage. The Court concluded that the plaintiffs could proceed with their minimum wage claims on a collective action basis.

Although clearly an outlier case, Norceide is an adverse decision for all employers, particularly those in Massachusetts, because it potentially makes it easier for plaintiffs to prevail on their FLSA minimum wage claims. Keeping track of employees' actual working hours and paying them for all hours worked remains employers' best defense against this type of claim.

Despite Supreme Court Ruling, Massachusetts Court Invalidates Class Action Waiver in Arbitration Agreement

A Superior Court judge recently invalidated a class action waiver in an arbitration agreement under state law, even though in April 2011 the U.S. Supreme Court held that federal law preempts state laws that interfere with a company's ability to enforce class action waivers in arbitration agreements. This ruling shows that Massachusetts courts may still find class action waivers in arbitration agreements unenforceable, particularly where the waivers are not carefully drafted or where small claims are at stake.

In Feeney v. Dell, Inc., two plaintiffs sought to bring a consumer class action against Dell arising out of Dell's collection of sales tax on their computer service contracts. Their claims were both worth less than $250. Their contracts with Dell required arbitration, prohibited class actions, and did not allow consumers to be awarded anything more than the value of their claims.

In 2009, the Massachusetts Supreme Judicial Court (SJC) invalidated Dell's class action waivers. The SJC ruled that, given the small claims at stake, a class action was the only realistic option for consumers to pursue their claims against Dell. Accordingly, the SJC held, the waivers were contrary to public policy and unenforceable.

After the SJC's ruling, the Supreme Court ruled in AT&T Mobility LLC v. Concepcion that the Federal Arbitration Act (FAA) preempted a California rule that banned class action waivers in certain consumer arbitration agreements. The Supreme Court found that the California rule required companies with certain arbitration agreements to allow class-wide arbitration, even though class actions are less efficient than individual arbitrations. The Supreme Court decided that the California rule thus frustrated the ability to resolve disputes efficiently, thereby interfering with one of the FAA's purposes. However, the Supreme Court also added that the claim before it was likely to be prosecuted on an individual basis because the company agreed to pay claimants at least $7,500 and twice their attorneys' fees if they obtained an arbitration award greater than the company's last settlement offer.

After Concepcion, Dell argued in the Superior Court that the SJC's earlier ruling was no longer valid because, similar to the California rule invalidated in Concepcion, the SJC required Dell to allow consumers to pursue their claims through class actions notwithstanding the language of the arbitration agreements, thereby frustrating the purpose of the FAA. The Superior Court rejected Dell's argument and found that, unlike the arbitration provision in Concepcion, Dell's provision did not include features that would make individual-based arbitration of small claims feasible. The Superior Court concluded that the SJC's ruling did not frustrate the FAA because individual-based arbitration was not a realistic option for Dell's consumers. The Superior Court added that it would have upheld Dell's class action waiver if Dell had made individual-based claims feasible, such as through incorporating a minimum recovery provision.

Employers who have or are considering arbitration class action waivers should be aware of Feeney because it shows that, regardless of Concepcion, courts may still invalidate such waivers, particularly where small-dollar claims are involved as may be the case in wage and hour disputes. To avoid invalidation, employers may want to consider including provisions in their waivers that make individual-based arbitrations feasible for small-dollar claims.

First Circuit Rules that Interviewing an Applicant Is Not an Admission that the Applicant Is Qualified for the Position

In Goncalves v. Plymouth County Sheriff's Dep't, the U.S. Court of Appeals for the First Circuit held that allowing an applicant to proceed through the stages of a hiring process is not an admission that the applicant was qualified for the position or similarly situated to other applicants for purposes of state and federal anti-discrimination laws.

Plaintiff Joy Goncalves was a 49 year old Cape Verdean woman who worked for the Plymouth County Sheriff's Department and had applied for a promotion to two different information technology (IT) positions. Both positions called for an associate's degree in a computer-related field, at least three years of relevant work experience, and three or more years of experience using certain web development and interface software. The Sheriff's Department considered a number of applicants for each position, including two white applicants who were younger than the plaintiff. The application process involved several stages, including a panel interview and an examination that tested the applicants' IT knowledge. Although the plaintiff was allowed to complete all stages of the application process, she scored considerably lower than the two white applicants at both the interview and the examination stages. As a result, the Sheriff's Department hired the two white applicants rather than the plaintiff.

The plaintiff filed a lawsuit alleging unlawful discrimination based on her gender, race, age, and national origin in violation of Massachusetts General Laws ch. 151B, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, and the Age Discrimination in Employment Act, 29 U.S.C. § 623. The District Court granted the Sheriff's Department's motion for summary judgment, holding that the plaintiff had failed to sustain her prima facie burden because she had not shown that she was qualified for either of the positions or similarly situated to the applicants hired. The District Court also noted that the Sheriff's Department had demonstrated a nondiscriminatory justification for its decision and that the plaintiff had not shown this reason to be pretextual.

On appeal, the plaintiff argued that by allowing her to advance through the interview process, the Sheriff's Department had effectively admitted that she was both qualified for the positions and similarly situated to the applicants hired. The First Circuit reviewed the evidence concerning plaintiff's IT background and experience and interview/examination scores, as well as the other applicants' work experience, IT background, and interview/examination scores. The First Circuit dismissed the notion that the Sheriff's Department had conceded plaintiff's qualifications simply by allowing her to advance through the hiring process: "That the [Sheriff's Department] in an abundance of caution let her application advance does not make Goncalves qualified." It similarly found that the decision to allow the plaintiff to advance in the hiring process was insufficient to create a genuine dispute of material fact regarding the similarly situated element of her prima facie case, noting that it could not "rely on 'overly attenuated inferences, unsupported conclusions, and rank speculation' to quiet the tolling of the summary judgment bell."

While Goncalves serves to protect employers who may provide opportunities to under-qualified applicants to proceed through the interview process, employers should do so with caution, keeping in mind the First Circuit's statement that it was "confusing" as to why the Sheriff's Department had permitted the plaintiff to proceed if she clearly lacked the requisite skills and experience. In another set of circumstances, a plaintiff may successfully argue that resolution of this "confusion" should be left to a jury.

First Circuit Finds Banquet Sales Managers Exempt from Overtime

The First Circuit recently held that sales managers for a Boston banquet facility are exempt from the overtime requirements of the FLSA and Massachusetts wage laws because they qualify as administrative employees.

In Hines v. State Room, Inc., the plaintiffs sought unpaid overtime wages that they claimed they were due. The banquet facility countered that the plaintiffs were exempt from the FLSA's overtime requirements because they were administrative employees. The plaintiffs responded by claiming that their job duties – which included securing wedding and other event business for the company and working with clients to design those events – did not meet the criteria for the administrative exemption. The plaintiffs argued, first, that the sales aspects of their job made them "production" workers not eligible for the exemption, and, second, that they did not exercise the level of independent judgment and discretion required for the exemption. The District Court rejected both of these arguments, and the First Circuit affirmed.

The First Circuit determined that the plaintiffs' job duties could not be considered "production" because they were ancillary to the employer's principal business function of actually providing banquet services. The Court also found that the job involved the exercise of independent judgment and discretion because acting as the face of the company and "engaging potential clients and assisting them in selecting from various options from the employers' offerings" required "invention, imagination and talent."

The Court rejected the plaintiffs' assertion that, based on language in a recent and controversial decision by the Second Circuit involving pharmaceutical sales representatives, In re Novartis Wage & Hour Litigation, they could not be exempt under the administrative exemption because they lacked authority to make financial decisions and did not perform any of the job duties listed in the DOL administrative exemption regulations. The First Circuit rejected the notion that "simple evaluation of the regulation's exemplary list of factors to be considered among 'all the facts involved in the particular employment situation in which the question arises' provides a determinative answer to the ultimate question whether an employee exercises discretion."

The case is certain to become a key precedent for employers in two ways. First, it aids employers in arguing that employees in sales-related job positions meet the "duties test" for the administrative exemption. Hines is the most recent in a line of First Circuit administrative exemption cases, starting with the 1997 decision Reich v. John Alden Life Insurance Co., that have held that employees charged with representing the company to outsiders meet the criteria for the administrative exemption, even where sales is also a large portion of the job. This line of cases implicitly rejects a position recently taken by the DOL and some district courts in other contexts that sales jobs are necessarily "production" jobs and thus ineligible for the administrative exemption. Second, the case clarifies that the discretion and independent judgment analysis necessary for application of the administrative exemption should not be unnecessarily rigid.

Table of Cases

Dow v. Casale, et. al, No. 10-1343-BLS1 (Mass. Super. July 15, 2011).
Feeney v. Dell, Inc., No. MICV 2003-01158 (Mass Super. Sept. 30, 2011).
Goncalves v. Plymouth County Sheriff's Dep't, 659 F.3d 101 (1st Cir. 2011).
Hines v. State Room Inc., No. 10-2298 (1st Cir. Nov. 28, 2011).
Norceide v. Cambridge Health Alliance, Civ. Action No. 10-cv-11729 (Aug. 28, 2011).

Jason DeJonker Published in Chapter 11 Bankruptcy and Restructuring Strategies, 2012 Edition
“Strategy and Legal Issues in Chapter 11 Cases, Single Asset Real Estate Matters, and Bankruptcy Litigation”

Wed, 14 Dec 2011 00:00:00 -0400

Litigation partner Jason DeJonker was a contributing author for Chapter 11 Bankruptcy and Restructuring Strategies, 2012 ed.: Leading Lawyers on Navigating Recent Trends, Cases, and Strategies Affecting Chapter 11 Clients (Inside the Minds). In his chapter, Jason covered recent Chapter 11 bankruptcy trends, such as a reduction in mega-cases, the use of single asset real estate bankruptcy cases as leverage, massive fraud and Ponzi scheme cases, and hesitancy in seeking Chapter 9 relief. Other topics covered in the chapter include the impact of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), recent bankruptcy decisions impacting real estate bankruptcies and fraudulent transfer claims, and challenges and strategies in the current bankruptcy and workout markets.

One of the key pieces of advice Jason offers is that of litigating to conclusion. “As everyone knows, trials are expensive, time-consuming matters for all parties,” Jason remarks. “While a trial may be expected in many types of commercial litigation, in the bankruptcy arena, parties typically settle the vast majority of adversary proceedings and contested matters before trial. Consequently, many traditional bankruptcy practitioners have limited experience trying cases, and their clients may have limited resources (monetary and otherwise) to commit to a trial. As a result, a willingness to try a case can create favorable settlement leverage. If the amount at stake is sufficient, preparing for trial may be the best way to create favorable leverage.”

Seyfarth's Boston Office Sponsors Massachusetts LGBTQ Bar Association Holiday Dinner

Mon, 12 Dec 2011 00:00:00 -0400

Seyfarth Shaw's Boston office, with contributions from the Boston Diversity Action Team, recently served as the exclusive sponsor of the Massachusetts LGBTQ Bar Association Holiday Dinner. The event was held on December 8 at Petit Robert Central in downtown Boston. Nearly 100 prominent members of the legal profession attended, including judges, in-house counsel, and local law students. Boston office associate Ryan Malloy, a member of the Bar Association, co-organized the event, and Boston partner Lynn Kappelman delivered opening remarks. Lynn's speech highlighted the many successes achieved by the LGBTQ community during the past year, including passage of the Massachusetts Transgender Equal Rights Bill, successful challenges to the Defense of Marriage Act, including the filing of an amicus brief in the First Circuit signed by the firm and 70 national employers, and increased protections for students against bullying in Massachusetts schools. The firm was recognized at the event for its commitment to equal rights and the community.

Gerald Maatman Quoted in Business Insurance
"Best (and worst) of 2011: Employment"

Mon, 12 Dec 2011 00:00:00 -0400

Seyfarth Shaw Chicago partner Gerald Maatman was quoted in Business Insurance on December 11. The article posed the question to attorneys as to which were the best and worst developments in employment law. Jerry referenced the U.S. Supreme Court decision in Betty Dukes et al., vs. Wal-Mart Stores Inc. as "the best development of the year."

Jerry said of the decision, it is "probably being cited more than any other Supreme Court decision this year, and it is a defining standard insofar as almost every lawsuit involving class action issues has to account for" how Dukes influences the case.

He added, "It's a win for employers. It's armed employers with arguments they didn't have before."

When asked of the worst development of 2011, Jerry said the federal district court case EEOC vs. JP Morgan Chase Bank N.A. According to Jerry, the lawsuit exceeded the scope of its investigation, and the judge gave "a free pass, so to speak, to the EEOC's litigation tactics."

Click here to read the full article: http://www.businessinsurance.com/article/20111211/NEWS07/312119993#crit=maatman

Religious School Lawfully Terminated Employee For Conduct That Violated Church Precepts

Mon, 12 Dec 2011 00:00:00 -0400

In Henry v. Red Hill Evangelical Lutheran Church of Tustin (December 9, 2011), a California Court of Appeal held that a preschool that is part of a church's ministry lawfully terminated its director for living with her boyfriend and raising their child together without being married. In doing so, the court rejected the director's claims of employment discrimination and wrongful termination in violation of public policy.

Sara Henry was a teacher at the Red Hill Evangelical Lutheran Church of Tustin ("Red Hill"), where she also served as director of the pre-school. Red Hill is a non-profit religious corporation and the school, which does not exist as a separate legal entity, is part of the church's ministry. Before each school year, Henry signed documents affirming "the ministry of teaching as a God-ordained vocation."

Henry and the other teachers signed a pledge stating: "you minister our students and families." Although Red Hill did not require teachers to be Lutheran—Henry is Catholic—Red Hill did require that teachers be practicing Christians. On a weekly basis, the teachers participated in devotions. Henry taught religion, led classes in daily prayer, and "spoke to the children about Jesus on a daily basis."

Henry, who was married when she applied to work at the school, divorced and then gave birth to a child fathered by her boyfriend. When the school learned of this and Henry's intention not to marry her boyfriend, the school terminated her employment for her "failure to adhere with the Professional Expectations of the teaching staff in that her living arrangements were contrary to the religious beliefs of the church and school."

Henry sued Red Hill on tort and statutory claims, alleging that her termination was unlawful marital status and sex discrimination under the California Fair Employment and Housing Act ("FEHA"), and contrary to public policy against sex discrimination contained both in the California Constitution and in Title VII of the Civil Rights Act of 1964. The trial court rejected Henry's claims, finding that her employer was a religious organization that had the right to terminate her employment for violating church precepts. Henry appealed.

The Court of Appeal rejected Henry's FEHA claim for marital status and sex discrimination, finding that Red Hill was not covered by the FEHA. The court relied on the complete exclusion of non-profit religious corporations and associations from the FEHA definition of "employer." The court also held that the narrower exemption for religious educational institutions incorporated as non-profit benefit corporations did not apply, for two reasons. First, there was no evidence that Red Hill was a public benefit corporation, as opposed to a religious corporation. Second, the school had "no independent legal status apart from the church."

The court then addressed Henry's claim that her termination violated the public policy against discrimination contained in Title VII. The court rejected this theory of liability, finding that the claim was barred by Title VII's partial religious employer exemption. The court accepted Red Hill's contention that it did not discharge Henry for having a baby out of wedlock, or for remaining unmarried. Rather, Red Hill discharged Henry for continuing to live with her boyfriend in a sexual relationship while unmarried. The court held that, on these facts, Title VII does not apply, because Title VII contains a partial religious employer exemption that allows religious employers to terminate an employee whose conduct or religious beliefs conflict with those of the religious employer.

The court also rejected Henry's public policy claim based on Article I, Section 8 of the California Constitution, which prohibits discrimination because of sex. The court relied on the ministerial exception—a judicially created, constitutionally compelled doctrine—which "protects religious organizations from the normally attendant adverse consequences of employment discrimination" in cases involving "ministers."

Acknowledging that the United States Supreme Court recently heard oral argument in a case presenting the question of whether a "called" teacher fell within the ministerial exception, Hosanna-Tabor Evangelical Lutheran Church v. EEOC, the court concluded that the ministerial exception barred Henry's claim.

Although Henry primarily taught classes, the court determined that she was a "spiritual leader" because, for example, she led students in prayer, read Bible stories, led chapel worship, participated in weekly devotions with staff, led staff prayers, assured parents of the school's Christian atmosphere, taught religion, and spread the faith. Accordingly, the court concluded that the ministerial exception applied and barred Henry's claims.

By: Jeffrey Berman and David Kadue

Jeffrey Berman and David Kadue are partners in Seyfarth's Los Angeles office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Jeffrey Berman at jberman@seyfarth.com or David Kadue at dkadue@seyfarth.com.

Marshall Babson Quoted in The Wall Street Journal
"A Boeing Accord Looms to Defuse Big NLRB Fight"

Fri, 09 Dec 2011 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Marshall Babson was quoted in The Wall Street Journal on December 7. The article discussed a possible labor agreement between Boeing Co. and the National Labor Relations Board (NLRB), which filed a complaint on behalf of the International Association of Machinists and Aerospace Workers District Lodge 751. The union comprises Boeing employees in several states, and they claimed that Boeing was shifting its union work to nonunion workers, allegedly in response to union strikes.

Boeing's proposal to the union includes a four-year contract extension for 31,000 union members and commitments that Boeing will build new and existing planes in Washington state. If the union agrees, they will inform the NLRB that they are no longer opposed to Boeing using a new, nonunion plant in South Carolina.

Marshall commented that the deal between Boeing and the International Association of Machinists and Aerospace Workers union gives hope for collective bargaining, and it "shows collective bargaining really works if it's given the opportunity."

Gerald Maatman Quoted in Business Insurance
Supreme Court to rule on pharmaceutical sales overtime pay

Fri, 09 Dec 2011 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Gerald R. Maatman was quoted in a Business Insurance article on December 4, looking at an expected U.S. Supreme Court ruling that could have a wide ranging impact on what types of employees could qualify for overtime payments.

The case, which looks to resolve conflicting Circuit Court rulings, concerns pharmaceutical sales representatives, who claim they should not be considered outside sales representatives. Outside sales reps are exempt from overtime under the Fair Labor Standards Act. The Court has said it will look at both the specific issues regarding pharmaceutical sales reps as well as the broader regulations governing the definition and regulation of outside sales representatives.

Given the potential scope of the ruling, Jerry said it's fair to expect a “ripple effect, so depending on the holding or the language used by the Supreme Court, I think it will be important … it does have the potential to have much broader implications” beyond the pharmaceutical industry. The ruling, he suggested, may even go so far as to impact the ability of plaintiffs to bring actions in many cases. “There is much more wage-and-hour litigation than almost any other type of employment litigation, and some of the judges think it's gotten out of hand,” Jerry said.

Christopher Robertson Quoted in Compliance Week
"SEC Outlines Ambitious Agenda for 2012 on Dodd-Frank and Beyond"

Fri, 09 Dec 2011 00:00:00 -0400

Seyfarth Shaw Boston partner Christopher Robertson was quoted in the December 6 issue of Compliance Week. The article discusses the SEC's intention to adopt the majority of the remaining rules required by the Dodd-Frank Act in 2012, and "[t]he SEC also says it intends to go further than Dodd-Frank requires by finalizing rules on executive compensation for which Dodd-Frank does not specify a mandatory deadline...[and] it plans to adopt rules related to credit ratings, asset-backed securities, derivatives, and market oversight.

Chris, a former senior counsel with the SEC's Division of Enforcement noted his confidence in the SEC to accomplish their goals for completion of the Dodd-Frank rules by noting, "[i]f the key people in charge of each rulemaking initiative remain unchanged, it is realistic for them to meet these deadlines[.]"

Seyfarth Shaw Receives Top Marks in the Human Rights Campaign’s 2012 Corporate Equality Index

Thu, 08 Dec 2011 00:00:00 -0400

Contact:

Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

CHICAGO (December 8, 2011) — For the fourth consecutive year, leading law firm Seyfarth Shaw LLP has achieved a perfect score of 100 and has been recognized as one of the "Best Places to Work" in the Human Rights Campaign Foundation’s annual survey, the Corporate Equality Index (CEI). The 2012 CEI results reflect the HRC's revised and heightened standards for evaluating workplace policies and practices as they apply to the LGBT community.

“Seyfarth Shaw is deeply committed to encouraging and cultivating a diverse and inclusive culture throughout the firm. We are proud to earn this recognition and to have maintained the perfect score for the fourth year in a row, demonstrating that we don’t just ‘talk the talk,’” said Seyfarth Shaw Chairman J. Stephen Poor. “We know that diversity is important to clients, and it’s equally important to us. We benefit daily from the varied ideas, perspectives and experiences of our employees, and we will continue to champion individuality and equal opportunity in our LGBT community.”

The 2012 Corporate Equality Index rated a total of 850 businesses in numerous industries, including the entire Fortune 500 and 134 law firms. Of the 850, only 190 businesses received a 100 percent score in the 2012 index, a significant drop from the 337 who received the highest marks last year. The criteria for the 2012 CEI graded companies on equal employment opportunity policies, employment benefits, organizational LGBT competency, public engagement and responsible citizenship.

Launched in 2002, the HRC Foundation’s Corporate Equality Index has examined various industries’ corporate policies affecting Lesbian, Gay, Bisexual and Transgender (LGBT) employees throughout the country, and it has become a benchmarking tool for companies throughout the U.S., providing an in-depth analysis and rating of large U.S. employers and their policies and practices. For more information, please visit http://www.hrc.org/.

Holiday Blues for Employers in New England

Thu, 08 Dec 2011 00:00:00 -0400

The holiday season brings an extra surprise for New England employers this year: two additional "holidays" that impose premium pay and voluntariness of work requirements for certain employees working December 26 or January 2. Employers doing business in Massachusetts and Rhode Island may already be familiar with "Blue Laws" imposing certain requirements for work performed on Sundays and certain holidays. When certain holidays, including Christmas and New Year's Day, fall on a Sunday – as they do this year – those holidays legally are observed on the following Monday. For those two weeks, the Blue Laws apply to both the actual holiday (because it is a Sunday) and the following Monday (because it is a legal holiday). What does this mean for employers in those states? As explained below, the answer varies based on the state and nature of the employer's business.

Massachusetts

Retail Employers
Retail employers in Massachusetts may not open on December 25, and retail employers operating on December 26, January 1, and January 2 must follow unique requirements regarding premium pay and voluntariness of work. Retail businesses must pay non-exempt employees who work on those days premium pay of least one and one-half times their regular rate of pay. This premium pay can be off set against any overtime worked in the same workweek. For example, if an employee works a total of 48 hours during the week of December 25, and 8 of those hours are on December 26, the employee is due a total of 40 hours of pay at his regular rate and 8 hours of pay at one and on-half times his regular rate.
In addition, retailers cannot require employees to work on those days, and refusal to work cannot be grounds for discrimination, dismissal, discharge, reduction in hours, or any other penalty.

Non-Retail Employers
Unless subject to one of the 55 exemptions in the Blue Laws, non-retail employers are prohibited from operating on December 26 and January 1. Non-retail employers that fall into an exemption allowing them to legally operate on the days above are not required to provide premium pay, and the voluntariness requirement does not apply (though religious accommodation requirements must still be met). Non-retail businesses need a local police permit to operate on Christmas Day, regardless of whether they may generally open on Sundays and holidays.

Rhode Island

Rhode Island has even more comprehensive holiday pay requirements that apply to the upcoming holidays. As in Massachusetts, businesses may not operate on Christmas and Thanksgiving, and when a holiday falls on a Sunday, it is observed on the following Monday. Blue Law requirements thus apply on December 26, January 1, and January 2. Both retail and non-retail employers must pay non-exempt employees who work on those days at least one and one-half times their regular rate of pay. In addition, work performed by an employee on those days must be voluntary, and refusal to work cannot be grounds for discharge or any other penalty. Finally, Rhode Island has a unique Blue Law requirement that applies only to retail employers: each employee who works on a holiday must be guaranteed a minimum of four hours employment.

As in Massachusetts, retail employers can off set premium pay against any overtime worked in the same workweek (see example above). However, the Rhode Island Department of Labor takes the view that non-retail employers cannot offset premium pay and overtime. For example, if an employer's workweek runs from Sunday through Saturday, and a non-retail employee works a total of 48 hours during the week of December 25, with 8 of those hours worked on December 26, the employee is due a total of 32 hours of pay at his regular rate and 16 hours of pay at one and on-half times his regular rate (8 hours of holiday premium pay and 8 hours of overtime).

Employees working in certain businesses or occupations in Rhode Island are exempt from the premium pay requirement. Exempt employees include health care workers and employees working in restaurants, hotels, summer camps, resorts or other recreational facilities (except health clubs).

Conclusion

Employers should note that, in both Massachusetts and Rhode Island, these provisions also apply when Independence Day (July 4) or Veterans Day (November 11) fall on a Sunday. In 2012, Veterans Day is a Sunday, and premium pay and voluntariness of work requirements will also apply to November 12.

By:C.J. Eaton, Barry Miller and Lynn Kappelman

C.J. Eaton and Barry Miller are associates in Seyfarth's Boston office and Lynn Kappelman is a partner in the firm's Boston office. If you would like further information or have questions regarding the applicability of the provisions above to your business, please contact your Seyfarth Shaw LLP attorney, C.J. Eaton at ceaton@seyfarth.com, Barry Miller at bmiller@seyfarth.com, or Lynn Kappelman at lkappelman@seyfarth.com.

Preventing Violence In The Workplace: Few Evidentiary Hurdles

Thu, 08 Dec 2011 00:00:00 -0400

On December 5, 2011, in Kaiser Foundation Hospitals v. Wilson, the California Court of Appeal upheld a trial court's decision to grant a permanent injunction pursuant to Code of Civil Procedure section 527.8––the provision governing injunctions designed to prevent workplace violence against employees. In affirming the trial court's ruling, the Court of Appeal held that the trial court properly considered hearsay evidence when determining that credible threats of violence supported the injunction.

Background

Defendant Jeff Wilson is the spouse of former Kaiser employee Diane Younge-Barnes. In April 2010, Younge-Barnes's employment with Kaiser was terminated. In May 2010, Wilson and Younge-Barnes were at a Kaiser facility for the birth of their granddaughter. When told that Younge-Barnes could not be in the nurses' area, Wilson threatened two Kaiser employees.

Specifically, the two Kaiser employees signed declarations testifying that Wilson said he was going to put [them] down." Three days later, Wilson and Younge-Barnes again returned to the Kaiser facility. This time, when Younge-Barnes was told to leave the nurses' area, Wilson, according to the employees' declarations, stated he was "going to flip his lid" and "do something that he would regret."

The two Kaiser employees further stated in their declarations that Wilson was detained by police after making threats that he was going to "kill someone." And, a day later, according to the two employees, Younge-Barnes told a therapist that Wilson threatened to shoot a Kaiser employee.

On July 2, 2010, Kaiser filed petitions seeking injunctions prohibiting Wilson from committing acts of violence or threatening violence against the two Kaiser employees pursuant to section 527.8 of the Code of Civil Procedure.
At the hearing for the permanent injunction before the trial court, the Kaiser employees testified they did not actually witness what was described in their declarations, and significant amounts of the information on the record was actually heard secondhand from other sources. Despite the fact that the evidence presented by the employees clearly was hearsay, the trial court granted Kaiser's petitions and ordered Wilson to stay away from and have no contact with Kaiser for three years.

The Appeal

Wilson appealed the ruling, arguing that the employee declarations should not have been considered because they were not admissible. Wilson argued that all of the usual rules of evidence applied at a hearing, including Evidence Code section 1200, which made the declarants' testimony inadmissible hearsay.

Code of Civil Procedure 527.8(e) governs the procedure whereby an employer may seek and obtain a restraining order or injunction against violence. Under section 527.8(e), an employer must file "an affidavit that, to the satisfaction of the court, shows reasonable proof that an employee has suffered unlawful violence or a credible threat of violence by defendant, and that great or irreparable harm would result to an employee." Within 15 days of the filing of a petition, a hearing is held to determine whether an injunction should issue. During the hearing, the judge "shall receive any testimony that is relevant" and is free to make an independent inquiry if he or she sees fit. The judge must find by "clear and convincing" evidence that the defendant engaged in unlawful violence or made a credible threat of violence for the injunction to issue.

The Court of Appeal first acknowledged that there was no relevant legal authority governing the extent to which the rules of evidence apply to hearings held pursuant to section 527.8(f). A plain reading of 527.8––which clearly states that the trial court "shall receive any testimony that is relevant"––suggested, however, that the Legislature intended the trial court to consider all evidence, including hearsay evidence. Moreover, after considering the language in Evidence Code section 1200, which provides that hearsay generally is inadmissible "[e]xcept as provided by law," the court concluded that the evidence admitted at the hearing need only be relevant to be considered.

Moreover, the court analogized the unique context of a hearing on a petition to obtain a workplace violence injunction to the civil harassment procedures delineated in Code of Civil Procedure section 527.6. There, the applicable legal authority supported allowing all relevant evidence, particularly affidavits or declarations, which necessarily contain a form of hearsay evidence. Finally, the court reasoned that because the hearing was before a judge, and not a jury, the judge, well aware of the unreliability of hearsay evidence, could assign such testimony the appropriate weight. Accordingly, the court found that the trial court did not err in considering hearsay evidence.

What Kaiser v. Wilson Means for Employers

Code of Civil Procedure section 527.8 is a useful mechanism for employers, particularly in light of an employers' duty to maintain a safe work environment and the potential liability stemming from a failure to do so. Whether an employer moves for a restraining order against a disruptive or violent customer, a disgruntled former employee, or a spouse of an employee, it frequently must act quickly to ensure the safety of employees, often filing a petition immediately after the threatening behavior takes place. With this ruling, the Court of Appeal confirmed that although the evidence presented must meet the "clear and convincing" threshold, such evidence need not contain first-hand accounts of violent or threatening behavior. This ruling will help to ensure employee safety by allowing employers to obtain declarations from managers or supervisory personnel who were told about threats but did not witness them firsthand, which may be particularly important where the threatened employee is unwilling or reluctant to come forward.

By: Fred Sanderson and Anthony Musante

Fred Sanderson is a partner in the firm's Sacramento office and Anthony Musante is an associate in the firm's Sacramento office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Fred Sanderson at asanderson@seyfarth.com or Anthony Musante at amusante@seyfarth.com.

Gerald Maatman Published in PropertyCasualty360
"EPLI Risk-Management Survival Guide: Top 10 steps to take for federal & state compliance in 2012"

Wed, 07 Dec 2011 00:00:00 -0400

Seyfarth Shaw partner Gerald Maatman wrote an article published in PropertyCasualty360 on December 6. The article discusses the 10 priority to-do items that should be on a human resources/risk management professional's checklist for compliance with federal, state and local laws and regulations in 2012. Jerry notes, "Complying with this patchwork quilt of workplace obligations is a daunting challenge for an organization's risk-management and human-resources professional, corporate counsel and executives…and the costs of noncompliance are increasing."

From auditing personnel policies for compliance with new EEOC-related regulations and accounting for leave of absence entitlements created by new laws at the state and local level, to auditing payroll policies and procedures for compliance with new laws and case developments, Jerry provides a detailed checklist for a human resources or risk management professional to consider as we enter the new year.

Click here to read the full article: http://www.propertycasualty360.com/2011/12/01/epli-risk-management-survival-guide

Steven Pearlman Quoted in Compliance Week
"Whistleblower Complaints Speak Volumes"

Wed, 07 Dec 2011 00:00:00 -0400

Chicago Labor and Employment Partner Steve Pearlman was quoted in the November 29 article in Compliance Week titled, "Whistleblower Complaints Speak Volumes." The article focused on the Securities and Exchange Commission’s (SEC) new whistleblower bounty program, noting that already the SEC has received 334 complaints. The complaints span a variety of categories, ranging from corporate disclosures and financial statements to insider trading to Foreign Corrupt Practices Act to municipal securities and public pensions to unregistered offerings. The SEC also included a broad category of "other" types of complaints.

The SEC's whistleblower bounty program is at a nascent stage; the SEC's report to Congress referencing the 334 complaints covers only seven weeks, and awards have not yet been issued. This shows why the 334 complaints are particularly significant. As Steve explained: "Companies should be concerned. If you look in broad view, [the program] is still in its infancy, no award has been given out yet, and they are still showing this number."

Steve added that companies should keep up with their training programs…while creating new avenues for internal reporting to mitigate any issues identified by previous surveys. This is especially important in light of the article's report on studies showing that 49 percent of employees report misconduct (i.e., blow the whistle) to their immediate supervisor and 29 percent go to senior management directly. Managers need to be trained so that they respond appropriately to whistleblower complaints and minimize the risk of retaliaton suits.

Marshall Babson Quoted in The Christian Science Monitor
“NBA labor deal: Did it fix the league's biggest problem?”

Wed, 07 Dec 2011 00:00:00 -0400

Marshall Babson, Employment partner and former member of the National Labor Relations Board, was quoted in a November 28 article published in The Christian Science Monitor. The article provided an overview of the recent tentative agreement between NBA players and owners to end the lockout.

According to the article, the goal of the agreement—which still needs to be approved by the players—was to reduce disparities between large and small-market teams within the league. To reduce the gap, concessions included a reduction in the players’ share of the league’s basketball-related income from 57 percent to between 49 and 51 percent. If the deal goes through, a 66-game season would begin on Christmas Day.

“This deal amounts to a major bet on the prospect that evening out the ability of more teams to attract top players will be much better for the entire league than what has existed up till now,” commented Marshall. “The argument is that if the players can live within this new, diminished percentage, the actual amount they take home could be much more if the sport continues to grow as a whole.”

Steven Pearlman Quoted in Law 360
"SEC Details Fledging Dodd-Frank Whistleblower Program"

Tue, 06 Dec 2011 00:00:00 -0400

Chicago employment partner Steve Pearlman was quoted in the November 16 article in Employment Law 360. The article discusses the Securities and Exchange Commission's recent report to Congress regarding the results of its new whistleblower bounty program. The report covers the period between August 12 and September 30. It notes that whistleblower tips have been submitted both domestically and overseas. In fact, 334 complaints were raised from 37 different states, and numerous complaints came out of China and the U.K. Complaints ranged from market manipulation to offering fraud to issues with corporate disclosures and financials. The SEC also placed a number of complaints in the broad category of "other."

Steve commented that although the data the SEC provided is taken from a relatively small period of time, which makes extrapolation difficult, the fact that so many tips have been made even before bounties have been issued make it very likely that the number of tips will increase substantially once the public sees large awards. Steve also observed that the SEC Office of the Whistleblower's triage process, delegation to various divisions within the SEC and collaboration with other agencies shows that the SEC is equipped to handle what many believe will be a future avalanche of complaints submitted in hopes of receiving substantial bounties.

Michael Wexler Quoted in Crian's Chicago Business
"Illinois Supreme Court broadens reach of non-compete labor contracts"

Tue, 06 Dec 2011 00:00:00 -0400

Chicago Trade Secrets, Computer Fraud, and Non-competes partner Michael Wexler was quoted in a December 2 article in Crain’s Chicago Business. The article discusses the ramifications of an Illinois Supreme Court ruling that may make it easier for companies to enforce non-compete agreements, thus curtailing job-hopping by executives.

The unanimous ruling increases the number of factors—including legitimate business interests and the restrictiveness of non-compete agreements—that can be considered to prevent even low level employees from leaving for a competing firm. The consensus is that by expanding the factors under consideration, including the broad category of legitimate business interests, the ruling expands the situations in which non-competes will be enforced.

Said Mike: “It's more focused on the protectable business interest that an employer has, as opposed to previous case law that focused on more limited factors.”

Click here to read the full article: http://www.chicagobusiness.com/article/20111202/NEWS04/111209940/illinois-supreme-court-broadens-reach-of-non-compete-labor-contracts

D. Ward Kallstrom and Jonathan Braunstein Published in Law360
“Clawing Back Overpayments from Health Care Providers”

Tue, 06 Dec 2011 00:00:00 -0400

An article by Seyfarth attorneys D. Ward Kallstrom and Jonathan Braunstein was published in the November 14 issue of Law360. The article describes International Longshore & Warehouse Union-Pacific Maritime Ass’n Welfare Plan Board of Trustees v. South Gate Ambulatory Surgery Center, in which a medical plan’s board of trustees sued an outpatient surgery center, a doctor, and an anesthesiologist for expenses the plan paid for the treatment of plan members that were later determined to have been either excessive or not medically necessary. The providers moved to dismiss, arguing that the trustees had not pled fraud and that the faulty payments could not be traced to assets currently in the provider’s possession.

Despite the fact that neither the plan nor the trustees had a contractual relationship with the providers, Judge William Alsup rejected the providers’ motion to dismiss, holding that “the providers became subject to plan provisions for restitution of benefit overpayments when they accepted payment from the plan through contractual assignments from plan members,” according to the authors. Judge Alsup also ruled that the restitution sought by the trustees was equitable relief under ERISA.

The authors emphasize the importance of the case, since it “extended the right to restitution to situations where the only contractual relationship was between the provider and plan members, even absent fraud or traceability.”

“The case is important given that fraudulent health care claims for benefits from private U.S. medical plans have been estimated to total $200 to $300 billion per year,” the authors remark. “Most of this fraud is believed to be perpetrated by health care providers.”

David Warburg Featured in Law360
"Q&A With Seyfarth Shaw's David Warburg"

Tue, 06 Dec 2011 00:00:00 -0400

Seyfarth Shaw Corporate Department partner David Warburg was featured in a Q&A in Law360 on December 1. David was asked about the most challenging transaction he had worked on; which aspects of his practice area were in need of reform; an important deal or relevant issue to his practice area; a mistake he made early in his career and learned from; and he was asked to name an attorney outside of his firm, in his field, who has impressed him.

David described a restructuring and equity recap of privately held bonds and classes of preferred equity for a media company that had run out of money in the second half of 2008, and despite efforts by board members and key investors, he could not get a recapitalization done.

He also noted an instance in which he represented a publicly traded, non-U.S. client in its first-ever acquisition of a U.S. company. Despite having to settle pre-existing SEC books and records enforcement proceedings and a class action suit against the target and negotiating with one of the U.S. agencies who sits on the Committee of Foreign Investment in the U.S. and who was using the CFIUS review process to renegotiate an existing arrangement, extracting additional concessions from his client, David's team ended up making it "look so easy" that David wasn't sure anyone except the foreign local counsel and the client's CEO and CFO realized what an achievement it was.

In need of reform, David mentions a better or updated regulatory environment for raising private capital for small companies. He notes Regulation D as being a "ridiculously low" standard, and the absence of minimum standards for Chief Financial Officers of public companies. He suggests that CFO search, selection, hiring and retention should be as or more closely scrutinized as director selection.

Relevant issues to David's practice he mentioned were associate training and expertise. He expressed the importance of training junior associates better: both specifically, because transactions require more specialized knowledge and experience than in the past, and broadly, because practice group needs are more volatile.

Early in his career, David learned, "Always check, never assume someone else got it right, and take a minute to think," when as a junior associate, he mistakenly selected the wrong appraisal for insertion in an SEC registration filing, only to be caught by the underwriters' counsel.

He also learned not to "fly solo." As a young partner, David suggested an alternative approach to a client without consulting the relationship partner first, upsetting the client.

David named Joe Bartlett for thinking and writing "about issues we should think about, and has been ahead of almost all of us in doing so for over 25 years."

Federal Contractors Be Alert: OFCCP Is On the Move; Good News for TRICARE Health Care Providers

Tue, 06 Dec 2011 00:00:00 -0400

New Proposed Affirmative Action Regulations for Individuals with Disabilities Imminent

The Office of Management and Budget (OMB), on November 30, 2011, approved a Notice of Proposed Rulemaking (NPRM) to revise the Office of Federal Contract Compliance Programs' (OFCCP's) regulations implementing affirmative action for persons with disabilities under Section 503 of the Rehabilitation Act of 1973. Publication of the NPRM in the Federal Register is imminent. The disability affirmative action regulations have not undergone a comprehensive revision since 1996. According to OFCCP Director Patricia Shiu, the old regulations "were simply not cutting it," and the upcoming NPRM is "going to be a game changer." We will share our analysis of the new proposed regulations as soon as possible after their publication.

Stepped-Up Enforcement

The Agency is newly emboldened by the recent ruling in favor of the OFCCP in the closely watched United Space Alliance case, which upheld an earlier administrative ruling requiring United Space Alliance to produce additional compensation data as requested by OFCCP, even though the threshold tests conducted during the agency's desk audit found that there was no discrimination. New complaints against other contractors have been filed in the past few weeks with the OFCCP and the Solicitor's Office acting collaboratively and aggressively.

New Wave of OFCCP Scheduling Letters Coming Soon

Many OFCCP offices will be scheduling audits in the next few months. The Chicago District office of the OFCCP, which has jurisdiction over federal contractors in the Chicagoland area, central Illinois, eastern Iowa, and northern Indiana, will be issuing 165 scheduling letters to supply and service contractors and will select 15-20 construction contractors for evaluation within the next one to two months, according to District Director Mike Thomas. Addressing the Chicago Industry Liaison Group last Friday, Mr. Thomas reported that seven new compliance officers started in the Chicago District Office last week, increasing the number of compliance officers in the Chicago District by over 50%. In addition, according to remarks by Mr. Thomas, there will be an uptick in the involvement of the Solicitor's Office in the Midwest Region of the OFCCP. The Midwest Region will now typically involve the Solicitor's Office in any case with non-technical violations.

Responding to Audit Letters Will Require Significantly More Resources

While OMB has not yet approved OFCCP's proposed revisions to its Scheduling Letter and Itemized Listing (the letter contractors receive announcing they are to be audited), contractors should take note that many of the newly proposed data and document requests are being requested by OFCCP now, at the beginning of the desk audit. The proposed Scheduling Letter and Itemized Listing is available here. The changes will increase the complexity of audits from the outset and also will affect the way federal contractors and subcontractors develop portions of their annual affirmative action programs and maintain their human resources information. Some of the most significant proposed changes include:

Requiring contractors to submit employment leave policies including, but not limited to, policies related to implementing the Family and Medical Leave Act, pregnancy leave, and accommodations for religious observances and practice;
Requiring contractors to submit applicant flow, hiring, promotion and termination data by job group and job title; by specific race/ethnicity subgroups; and provide actual pools of candidates for promotions and terminations; and
Requiring compensation data (including base salary, wage rate, and hours worked) to be submitted by gender and particular race/ethnicity data for each employee, by job title, EEO-1 category and job group.

Senate Votes to Exempt TRICARE Health Care Providers from Federal Subcontractor Status

On December 1, 2011 the Senate passed 93-7 a National Defense Authorization bill exempting certain health care providers under the TRICARE network from OFCCP jurisdiction. This bill sets the stage for Congress to trump OFCCP's prior directive covering such employers. TRICARE is the Department of Defense's health benefits program for military personnel and their families. Section 702 of this bill includes the following language plainly exempting TRICARE institutional, professional, and pharmacy network providers from covered subcontractor status:
In establishing rates and procedures for reimbursement of providers and other administrative requirements, including those contained in provider network agreements, the Secretary shall to the extent practicable maintain adequate networks of providers, including institutional, professional, and pharmacy. Network providers under such provider network agreements are not considered subcontractors for purposes of the Federal Acquisition Regulation or any other law.
The House and Senate versions of the bill will have to be reconciled as the House did not provide such an exemption.

What Contractors Should Do Now: Audit Readiness

Be prepared. Consider using the time before you receive a Scheduling Letter to conduct partial or full mock audits. Consult with your legal department or with us about the best approaches for self-audits and whether some or all of the review should be done under attorney-client privilege. If you receive a Scheduling Letter, immediately notify personnel responsible for the establishment and for affirmative action compliance. Also, stay tuned for more information on the NPRM on the Section 503 regulations.

By:Valerie Hoffmanand Christine Hendrickson

Valerie Hoffman is a partner in Seyfarth's Chicago and Los Angeles offices and Christine Hendrickson is senior counsel in the firm's Chicago office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, our OFCCP & Affirmative Action Compliance Team, Valerie Hoffman at vhoffman@seyfarth.com, or Christine Hendrickson at chendrickson@seyfarth.com.

First Circuit’s Administrative Exemption Decision Could Maintain the Availability for the Administrative Exemption for Some So-Called “Sales” Employees

Mon, 05 Dec 2011 00:00:00 -0400

On November 28, 2011, the U.S. Court of Appeals for the First Circuit issued a decision in Hines v. State Room, Inc. finding that sales managers for a Boston banquet facility were exempt from overtime under the Fair Labor Standards Act's ("FLSA") administrative exemption. The case is certain to become a key precedent for employers in two ways. First, it aids employers in arguing that employees in sales-related job positions meet the "duties test" for the administrative exemption. Second, the case clarifies that the discretion and independent judgment analysis necessary for application of the administrative exemption should not be unnecessarily rigid.

Production vs. Administrative Work

The court determined that the plaintiffs' job functions – which included working with clients to design customized weddings and other events and securing contracts for those events, as well as selling banquet services to customers – were properly considered administrative because they were ancillary to the employer's principal business function of actually providing banquet services. In doing so, the First Circuit implicitly rejected the position taken by the Department of Labor's Wage and Hour Division ("DOL") and some courts that performing sales work places an employee on the non-exempt side of the so-called "production vs. administrative" or "ancillary" dichotomy of the administrative exemption.

The DOL's position in this regard is summarized in its controversial Administrator's Interpretation No. 2010-1 issued on March 24, 2010 concerning the exempt status of mortgage loan officers (found at: http://www.dol.gov/WHD/opinion/adminIntrprtn/FLSA/2010/FLSAAI2010_1.pdf). In that Interpretation, the DOL opined that the typical duties of mortgage loan officers lead to the conclusion that their primary duty is making sales. Once it reached that conclusion, it further reasoned that because companies employing mortgage loan officers have a primary business purpose of designing, creating, and selling home lending products, the sale of a home mortgage by those employees is "production" work that is ineligible for the administrative exemption.

The DOL's reasoning is based on the requirement that administrative exempt employees, among other things, have a primary duty of "the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers." 29 C.F.R. § 541.200(a)(2). "To meet this requirement, an employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment." 29 C.F.R. § 541.201(a) (emphasis added). The DOL's Interpretation reasons that "a careful examination of the law as applied to the mortgage loan officers' duties demonstrates that their primary duty is making sales and, therefore, mortgage loan officers perform the production work of their employers."

This Interpretation, to which some courts have deferred to at least some extent, potentially narrows the administrative exemption. First, it defines the sales function as part of a company's core function. A mortgage company exists not only to design and create home lending products, but also to sell them. A pharmaceutical company exists not just to research, development, and manufacture drugs and therapies, but also to sell them. A banquet company exists not merely to prepare and provide banquets, but also to sell banquets. A widget company's main purpose is not just to make widgets, but also to sell them. Second, because work on a business' core function is "production" work in the view of the DOL, the DOL's Interpretation then equates sales with production work that is ineligible for the administrative exemption. This narrow interpretation, the reasoning of which is not limited to mortgage loan officers - is particularly harmful for employers because it more conducive to both collective and class certification and to summary judgment than the often factually-intensive "discretion and independent judgment" prong of the administrative exemption (discussed below).

The First Circuit in Hines, however, takes a far less mechanistic reading of the administrative exemption. It does not equate sales with a company's function. Rather, it limits the definition of the banquet companies' principal business as "providing banquets." As to sales, the court reasoned that "[t]he sales aspect of the defendants' businesses, although necessary to their success, is clearly ancillary to the principal function of actually providing the banquet services themselves." Indeed, virtually every business includes a sales function. Without sales, a business has no revenue, and thus no way to stay in business. The First Circuit in Hines correctly acknowledged that just because sales are necessary to success, they do not therefore become the company's principal business for purposes of the administrative exemption. Thus, under the First Circuit's reasoning, and in contrast to the DOL's view, a widget maker's principal business for administrative exemption purposes is to make widgets, not to sell them (or a law firm's principal business is to represent and advise its clients on legal matters, not to sell legal services to clients). And therefore, sales work is not necessarily production work. By de-linking sales from a company's principal business, the First Circuit makes the administrative exemption potentially available to employees whose primary duty arguably is sales.

Discretion and Independent Judgment

Showing that an employee performs work "directly related to the management or general business operations of the employer" does not necessarily mean that an employee is exempt. The employee must also have a primary duty that "includes the exercise of discretion and independent judgment with respect to matters of significance." 29 C.F.R. § 541.200(a)(3). Hines is significant on this prong of the administrative exemption as well. In this regard, the court found that the sales manager job involved the exercise of independent judgment and discretion because acting as the face of the company and "engaging potential clients and assisting them in selecting from various options from the employers' offerings" required "invention, imagination and talent."

The court rejected the plaintiffs' argument that, based on language in a recent and controversial Second Circuit decision involving pharmaceutical sales representatives, In re Novartis Wage & Hour Litigation, they could not be administrative exempt because they lacked authority to make financial decisions and did not perform any of the specific examples of job duties involving independent judgment and discretion listed in the DOL's administrative exemption regulations. The First Circuit expressed disagreement with the notion that "simple evaluation of the regulation's exemplary list of factors to be considered among 'all the facts involved in the particular employment situation in which the question arises' provides a determinative answer to the ultimate question whether an employee exercises discretion."

Further, the court rejected plaintiffs' argument that the employees merely recited a prescribed sales pitch or were required to hue to a particular guidelines. In keeping with precedents from the First, Sixth, and Seventh Circuits, the court held that discretion and independent judgment nevertheless could be exercised within the guidelines provided by an employer.

Finally, the court declined to adopt plaintiffs' arguments that they did not exercise the requisite discretion and independent judgment because of areas where they had no authority, such as those involving the employer's finances and contractual obligations. Taking a "glass-is-half-full" approach, the First Circuit focused instead on what the plaintiffs could do, and in performing those duties, whether those duties involved the exercise of discretion and independent judgment. On these facts, the First Circuit answered that question in the affirmative.

Conclusion

At least in the First Circuit, Hines represents a rejection of the DOL's narrow view of administrative work and of the Second Circuit's narrow view of discretion and independent judgment. If the opinion proves persuasive in other circuits, Hines could be a significant precedent in maintaining the availability of the administrative exemption to employers under the FLSA and state overtime laws.

By: Noah A. Finkel and Jessica M. Schauer

Noah A. Finkel is a partner in Seyfarth's Chicago office and Jessica Schauer is an associate in the firm's Boston office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Noah A. Finkel at nfinkel@seyfarth.com, or Jessica Schauer at jmschauer@seyfarth.com.

Visit our blog at www.wagehourlitigation.com

Investment Advice for Plan Participants: Department of Labor Issues Final Regulations

Mon, 05 Dec 2011 00:00:00 -0400

This fall the U.S. Department of Labor issued final regulations on eligible investment advice arrangements, effective on December 27, 2011, which provide tailored investment advice to participants and beneficiaries in individual account plans. The regulations describe an ERISA prohibited transaction exemption that Congress enacted as part of the Pension Protection Act of 2006. Specifically, a prohibited transaction likely would occur if an investment advisor affiliated with an entity providing services to the plan is retained to provide investment advice to participants. However, if the conditions of the Department’s regulations are met, engagement of the investment advisor will not result in a prohibited transaction. On the other hand, if the investment advisor is unrelated to the plan’s service providers, a prohibited transaction would not occur and the exemption (and adherence to the regulation described below) is not necessary.

It is not uncommon for plans to offer general investment education, but these regulations describe arrangements that go a step further and provide individualized advice. This is an important difference, because providing investment education generally is not a fiduciary act, while providing advice for a fee is. If a plan fiduciary is considering implementing an eligible investment advice arrangement pursuant to the regulations, it will be responsible for the selection and monitoring of the investment adviser and authorization of the arrangement (each as described below).

This alert describes the eligible investment advice regulations, and responsibilities of the investment advisor and plan fiduciaries that engage the investment advisor. Plans are not required to make eligible investment advice arrangements available. However, as participants begin receiving the comparative chart and other materials next year under the fee disclosure regulations (see our Management Alert called Plan and Investment Disclosure Requirements, dated July 26, 2011), they may find the advice useful to help them apply the objective investment data they receive to their own needs and circumstances.

Eligible Investment Advice Arrangements

Fee Leveling and Computer Model

The regulations describe two types of arrangements: a fee leveling model, and computer model. Fee leveling means that the person providing the advice cannot receive compensation that varies with the participant’s investment decisions. Computer modeling refers to advice provided by software programs that give advice, which are certified by investment experts (sometimes called a “black box”). Under either type of arrangement, the participants receive advice on making investment choices among the different investment funds available under the plan. The advice is generated applying “generally accepted investment theories” that take into account historic risks and returns of different asset classes over time, investment management and other fees of the recommended investments, and participants’ personal information if they provide it. Following is a summary of the requirements applicable to the fee leveling arrangements, computer model arrangements, or both.

Characteristic	Applies to:
Advice is based on generally accepted investment theories that take into account the historic risks and returns of different asset classes over defined periods of time.	Fee Leveling and Computer Model
Advice takes into account investment management and other fees and expenses attendant to the recommended investments.	Fee Leveling and Computer Model
Advice takes into account, to the extent furnished, information relating to the participant’s or beneficiary’s age, time horizons (e.g., life expectancy, retirement age), risk tolerance, current investments in designated investment options, other assets or sources of income, and investment preferences.	Fee Leveling and Computer Model
No fiduciary adviser receives, directly or indirectly, any fee or other compensation that varies depending on a participant’s or beneficiary’s selection of a particular investment option.	Fee Leveling
Factors used in estimating future returns of investment options are appropriately weighted.	Computer Model
Appropriate objective criteria is utilized to provide asset allocation portfolios comprised of the plan’s investment options.	Computer Model
Recommendations are avoided that inappropriately favor investment options (1) offered by the fiduciary adviser or its affiliate, or (2) that may generate greater income for the fiduciary adviser or its affiliate.	Computer Model
Takes into account all designated investment options available under the plan (with the exception of certain annuities) without giving inappropriate weight to any one option.	Computer Model
Before using the model, the fiduciary adviser obtains a written certification from an “eligible investment expert,” as defined in the regulations.	Computer Model

Participant Characteristics Shape the Investment Advice

As noted in the chart above, the investment advice arrangements must have the capability to consider the participant’s age, time horizons (e.g., life expectancy, retirement age), risk tolerance, current investments in the plan’s investment funds, other assets or sources of income, and investment preferences. This information must be requested, but the advice does not need to take it into account if it is not provided. While not required, investment advice providers are not precluded from asking for other information, such as participant contribution rates and liquidity needs.

Generally Accepted Investment Theories and Annual Audits

According to the preamble, the Department purposely did not define “generally accepted investment theories,” nor provide examples or safe harbors in the regulations. It explained that it did not want to restrict advisers in design and innovation of their advice arrangements, as such restrictions could potentially lower the quality of the investment advice received by the participants. Plan fiduciaries may not have the ability to independently evaluate whether an arrangement utilizes generally accepted investment theories, although the regulations provide for certifications and annual audits to assist the plan fiduciary. If the arrangement is a computer model, it will have a written certification from an independent investment expert that the model satisfies the requirements of the regulation (which incorporates the “generally accepted investment theory” standard).

Under both fee leveling and computer model arrangements, the investment advisor is required to obtain annual audits of its investment advice arrangement. The auditor must provide a copy of its audit report each year to the investment advisor and the plan fiduciary within 60 days of the audit’s completion. The reports may be part of the fiduciary’s monitoring process.

Disclosure to Participants

Participants must receive written disclosure from the investment advisor about the eligible investment advice arrangement before advice is first provided. The regulations provide a model disclosure form that may be used.
The written notice must provide information about factors that may be relevant to the provision of investment advice. For example, the notice must disclose relationships that might be relevant to the advice (e.g., other parties who had a role in developing the advice program or that have affiliations with the investment funds); fees or other compensation that the adviser or any affiliate will receive in connection with the advice (e.g., when participants buy, sell or hold securities, or request rollovers or distributions of assets); and other services provided by the investment adviser in connection with the provision of advice (e.g., investment management or shareholder services). The notice must include past performance of the plan’s investment alternatives, if not already provided. The regulations do not specify whether the past performance data is “already provided” when distributed in accordance with the fee disclosure regulations or the regulations under Section 404(c) of ERISA.
In addition to the information specific to the adviser and the investment options, the written notice also must inform participants how their information will be used or disclosed, that the adviser is a fiduciary, and that the participant can seek advice outside of the investment advice program.

Considerations For The Plan Fiduciary

Responsibilities under Regulations and General ERISA Principles

If a plan fiduciary is considering making an investment advice arrangement available to participants, the final regulations restate the Department’s previous position that the selection and monitoring of an investment adviser is subject to the fiduciary duty of prudence. Once the fiduciary has selected an investment adviser, the investment advice arrangement must be expressly authorized by the plan fiduciary. The express authorization could be accomplished by recording the review and approval of the arrangement in the minutes of the committee that functions as the plan fiduciary, though other forms of authorization would also be acceptable. In connection with the authorization, the investment advisor must provide a written notice to the plan fiduciary that (i) it intends to comply with the prohibited transaction exemption, (ii) it will obtain annual audits, and (iii) the auditor will furnish a copy of its report within 60 days of the audit’s completion.

Prudent Selection and Monitoring Process

The final regulations reference a 2007 Field Assistance Bulletin, in which the Department described items a fiduciary might consider when selecting and monitoring an investment adviser, whether or not retaining such investment adviser would be a prohibited transaction. Considerations in the selection process might include the adviser’s experience and qualifications, its registration in accordance with applicable federal and state securities laws, its willingness to assume fiduciary status, and the extent which advice furnished will be based on generally accepted investment theories. During this process, the investment adviser should provide the plan fiduciary with a copy of its computer model certification, if applicable, and its most recent annual audit reports, discussed above. Considerations in a monitoring process might include any changes in the information used in selecting the adviser (e.g., whether the adviser continues to meet applicable federal and state securities law requirements and whether the advice being furnished to participants was based on generally accepted investment theories), whether the investment advice provider is complying with the contractual provisions of the engagement, how much the participants use the investment advice services relative to its cost, and participant comments and complaints about the quality of the furnished advice.

Next Steps for Plan Fiduciaries

The Department of Labor’s regulations on eligible investment advice arrangements may enable the plan fiduciaries to provide welcome assistance to plan participants in managing their individual accounts for retirement. Providing such arrangements is not required, however. Time and care will be required to prudently select and authorize the arrangement, monitor it periodically, and provide for the participant disclosures before any advice is given.

SEC and CFTC Adopt Reporting Requirements for Certain Advisers to Private Funds

Mon, 05 Dec 2011 00:00:00 -0400

On October 31, 2011, the Securities and Exchange Commission (the “Commission”) and the Commodity Futures Trading Commission (the “CFTC”) adopted new rules (the “PF Reporting Rules”) requiring certain private fund advisers to periodically report information to the Commission on Form PF, a new reporting form. The PF Reporting Rules impose different reporting requirements on investment advisers depending on the type and size of funds managed. Under the PF Reporting Rules, advisers that are dually registered with the Commission and the CFTC must satisfy certain CFTC filing requirements regarding private funds—and may satisfy other CFTC filing requirements regarding commodity pools that are not private funds—by periodically filing Form PF with the Commission. Information reported on Form PF will be kept confidential by the Commission and the CFTC, and will be used primarily by the Financial Stability Oversight Council in monitoring systemic risks to the U.S. financial system.

Reporting Advisers; Minimum Threshold

The PF Reporting Rules require investment advisers that are registered with the Commission and that have at least $150 million in private fund assets under management (“Reporting Advisers”) to file Form PF. Private funds include funds relying on an exemption from registration as an investment company under section 3(c)(1) or 3(c)(7) of the Investment Company Act, such as hedge funds, private equity funds and liquidity funds. For purposes of determining whether it meets the $150 million minimum reporting threshold to be classified as a Reporting Adviser required to file Form PF, an adviser must aggregate together:

assets of managed accounts advised by such adviser that pursue substantially the same investment objective and strategy and invest in substantially the same positions as such adviser’s private funds, unless the value of those accounts exceeds the value of such private funds; and
assets of private funds advised by any of the adviser’s related persons (e.g., officers, directors, employees and affiliates) other than related persons that are separately operated.

To avoid duplicative reporting, Reporting Advisers may exclude from Form PF and from calculations of reporting thresholds any assets invested in the equity of other private funds. In addition, Reporting Advisers with principal offices and places of business outside the United States may exclude any private fund that, during such Reporting Adviser’s last fiscal year, was not a United States person, was not offered in the United States, and was not beneficially owned by any United States person.

Reporting Advisers may report the private fund assets that they and their related persons manage on a single, combined Form PF.

Tiered Reporting Requirements

Under the PF Reporting Rules, Reporting Advisers are classified as either “large” or “smaller” Reporting Advisers. The amount of information required to be reported and the frequency of reporting differs for each classification.

Smaller Reporting Advisers

All Reporting Advisers other than those who fall within any of the categories of large Reporting Advisers outlined below will be required to file Form PF annually within 120 days of the end of their respective fiscal years to report basic information regarding the private funds they advise, such as fund:

size;
leverage;
investor types and concentration;
liquidity; and
performance.

Smaller Reporting Advisers managing hedge funds must also report information about fund strategy, counterparty credit risk, and use of trading and clearing mechanisms.

Large Reporting Advisers

Large Reporting Advisers include:

(i) any Reporting Adviser with at least $1.5 billion in assets under management attributable to hedge funds¹ as of the end of any month in such Reporting Adviser’s prior fiscal quarter;
(ii) any Reporting Adviser with at least $1 billion in combined assets under management attributable to liquidity funds² and registered money market funds as of the end of any month in such Reporting Adviser’s prior fiscal quarter; and
(iii) any Reporting Adviser with at least $2 billion in assets under management attributable to private equity funds³ as of the last day of such Reporting Adviser’s most recently completed fiscal year.

Reporting requirements differ for each of the three categories of large Reporting Advisers with respect to both reporting frequency and the type of information that must be reported.

Large hedge fund Reporting Advisers must file Form PF quarterly within 60 days of the end of each fiscal quarter. Such Reporting Advisers must report on an aggregated basis information regarding exposures by asset class, geographical concentration, and turnover by asset class. In addition, for each managed hedge fund having a net asset value of at least $500 million, such Reporting Advisers must report certain information relating to that fund’s exposures, leverage, risk profile, and liquidity.

Large liquidity fund Reporting Advisers must file Form PF quarterly to update information regarding the liquidity funds they manage within 15 days of the end of each fiscal quarter. Such Reporting Advisers must provide information on the types of assets in each of their liquidity funds’ portfolios, certain information regarding each such fund’s risk profile, and whether the fund has a policy of complying with Rule 2a-7 under the Investment Company Act of 1940, which rule concerns registered money market funds.

Large private equity fund Reporting Advisers must file Form PF annually within 120 days of the end of the fiscal year. Such Reporting Advisers must provide information regarding portfolio company leverage, the use of bridge financing, and their funds’ investments in financial institutions.

Timing of Initial Filings

Most smaller and large Reporting Advisers must begin filing Form PF following the end of their first fiscal year or fiscal quarter, as applicable, ending on or after December 15, 2012. However, Reporting Advisers with at least $5 billion of assets under management attributable to (i) hedge funds; (ii) liquidity funds and registered money market funds; and/or (iii) private equity funds must begin filing Form PF following the end of their first fiscal year or fiscal quarter, as applicable, ending on or after June 15, 2012.

By Blake Hornick, Elaine Tippitt and Greg Sale

Blake Hornick is a partner in the firm’s New York office, Elaine Tippitt is a partner in the firm’s Houston office and Greg Sale is an associate in the firm’s Houston office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Blake Hornick at bhornick@seyfarth.com, Elaine Tippitt at etippitt@seyfarth.com, or Greg Sale at gsale@seyfarth.com.
_________________________________

¹Under Form PF, a “hedge fund” generally is any private fund having any one of three common characteristics of a hedge fund: (a) a performance fee that takes into account market value; (b) high leverage; or (c) short selling.

²Under Form PF, a “liquidity fund” is any private fund that seeks to generate income by investing in a portfolio of short term obligations in order to maintain a stable net asset value per unit or minimize principal volatility for investors.

³Under Form PF, a “private equity fund” is any private fund that is not a hedge fund, liquidity fund, real estate fund, securitized asset fund or venture capital fund and does not provide investors with redemption rights in the ordinary course.

Seyfarth Shaw’s New York Office Welcomes Finance Partner

Mon, 05 Dec 2011 00:00:00 -0400

Contact:

Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

NEW YORK (December 5, 2011) – Leading law firm Seyfarth Shaw LLP is pleased to announce that Christopher Carolan has joined the firm’s New York office as a partner in the Corporate Department, and a member of its Finance Practice Group. Carolan was previously a partner at Brown Rudnick.

Carolan's practice is focused on representing lenders, agents, and borrowers in the origination, workout, restructuring, and recovery of a wide variety of leveraged finance transactions involving everything from early stage venture capital financing to major credit facilities for Fortune 100 companies. He has represented clients in syndicated and single lender financings, frequently involving complex intercreditor relationships, secured by diverse personal property and real estate collateral, and often involving multiple cross-border jurisdictions.

Carolan has developed particular expertise in the financing and restructuring of retailers, commodity producers and traders, technology firms, real estate, and others. In the energy sector, Carolan has advised lenders financing the installation of solar power generating facilities secured by the solar facility and a pledge of its tax rebates, other government incentives and purchase contracts, and he’s worked with lenders to solar panel manufacturers in workouts, restructurings, provision of debtor-in-possession financing, credit bids by the lenders and provision of merger financing. He has also counseled clients during the financing of strategic acquisitions and the construction of special projects. In addition, Carolan has represented clients in complex in-and-out-of-court restructurings, providing counsel on the resolution of distressed credits, enforcement of rights and remedies, liquidation and sale of assets, provision of debtor-in-possession financing and exit financing.

“Seyfarth Shaw has demonstrated its commitment to fortifying its New York finance practice, and I’m excited to join and expand my practice alongside my new colleagues at such a well-respected and reputable firm,” said Carolan.

Chair of Seyfarth Shaw’s Corporate Department Esteban Ferrer said, “Chris’ depth of experience as a finance attorney, representing both lenders and borrowers, makes him ideally suited to serve the needs of our New York based clients in the asset based lending, mezzanine lending, leveraged lending and financial restructuring arenas. We look forward to working with him as we continue to prioritize our national finance platform.”

John Napoli, Seyfarth’s New York Office Co-Managing Partner, added, “Chris will be a great addition to the New York office. He’s an incredibly talented young lawyer, and his particular expertise will complement our menu of services nicely.”

Carolan received his undergraduate degree and graduate degree from Fordham University and his law degree from New York University School of Law, where he was a member of the Law Review. Carolan is a member of the New York bar. He is also a member of the Board of Governors of the Human Rights Campaign.

Richard Alfred and Jessica Schauer Published in Law360
"Dearth Of A 'Sales'man"

Mon, 05 Dec 2011 00:00:00 -0400

Seyfarth Shaw Boston partner Richard Alfred and associate Jessica Schauer wrote an article published in Law360 on November 29. The article discusses the potential impact of the Supreme Court's November 28 decision to grant certiorari in Christopher v. SmithKlein Beecham Corp., which will review the decision by the U.S. Court of Appeals for the Ninth Circuit holding that pharmaceutical sales representatives are outside salespersons according to the FLSA and are therefore exempt from overtime.

The article provides background on the Ninth Circuit's decision and reviews the two issues in the plaintiff's petition to the Supreme Court:

1. "Whether deference is owed to an amicus brief submitted by the U.S. Department of Labor interpreting the outside sales exemption." Richard and Jessica commented, "the expected Supreme Court decision will [also] determine whether the DOL's 'ambush by amicus' strategy will succeed."

and

2. "Whether the outside sales exemption applies to the pharmaceutical sales representatives." Richard and Jessica noted, "[A] decision by the Supreme Court on the scope of the outside sales exemption will also impact the ability of other employers to apply the functional approach to this exemption in determining weather employees are 'making sales' where the final step of the sales process - closing the sale - is performed by others." It is also noted that the Supreme Court's review of this issue should provide clarification as to the scope of outside sales exemption for both employers and the courts.

Richard Schwartz, Fred Singerman and Lauren Worsek Published in the New York Law Journal
"New York Same-Sex Marriage and Employee Benefits"

Mon, 05 Dec 2011 00:00:00 -0400

Seyfarth partners Richard Schwartz and Fredric Singerman, along with associate Lauren Worsek, wrote a wide-ranging article published in the New York Law Journal. The article examined the impact on employee benefits of New York State becoming the fifth state in the U.S. to permit same-sex marriage.

The writers walk through the implications and potential conflicts for employers implementing same-sex marriage in the context of laws such as the Defense of Marriage Act (DOMA), the Employee Retirement Income Security Act of 1974 (ERISA), and the Internal Revenue Code (Code).

They wrote: "Passage of the New York State Marriage Equality Act imposes new conditions on New York employers that require them to consider issues previously addressed only by employers who voluntarily extended benefits to employees' domestic partners. Such employers must now understand the inherent inconsistencies between federal and state law, apply such laws to their employee benefit plans, programs, and policies, and establish appropriate income tax withholding procedures consistent with both federal and state law. Where the employer has discretion, it is critical to review the applicable plan language to ensure that the employer's intent is explicit."

John Toner and Marshall Babson Quoted in The Hill
"Republican Wild Card in NLRB Vote"

Fri, 02 Dec 2011 00:00:00 -0400

Seyfarth Shaw Labor & Employment attorneys John “Jack” Toner and Marshall Babson were quoted in the Capitol Hill newspaper The Hill for their takes on the National Labor Relations Board's (NLRB) vote to move forward on a contentious union election rule. As a result of the vote, lone Republican board member Brian Hayes is threatening to resign or withhold his participation, hoping to stop or delay a rule which would allow a union to hold an organizing vote as soon as 10 days after filing a petition.

“This is uncharted territory for the board when it comes to rulemakings,” said Jack, a former executive secretary for the NLRB and now senior counsel at Seyfarth. “I think there is an argument that the failure of the third member to participate in a rulemaking would not necessarily invalidate the rulemaking,” Jack said.

Marshall likewise believes that it’s unlikely Hayes can do anything to stop the implementation of the regulations.

“Internal rules don’t trump the statute,” said Marshall, a Seyfarth partner and former member of the NLRB. “The board derives its power from the statute.”

Marshall pointed to a 2010 Supreme Court case in which he represented the U.S. Chamber of Commerce where the court ruled that the NLRB needs at least three of its five seats filled to act. However, no justices during oral arguments agreed with assertions that a board member could disable the board, simply by not showing up or resigning.

“My recollection is that every justice agreed that they would not have the power to disable the board,” Marshall said.

Richard Alfred Quoted in Law360
"Supreme Court to Rule On GSK Reps' OT Status"

Fri, 02 Dec 2011 00:00:00 -0400

Seyfarth Shaw Labor & Employment partner Richard Alfred was quoted on November 28 in Law360 in an article discussing the potential impact of the U.S. Supreme Court's upcoming ruling as to whether GlaxoSmithKlein drug sales representatives are entitled to overtime pay.

The ruling is significant for several reasons, primarily as it will be the first time that the court will rule on any of the so-called white collar exemptions to the FLSA and it will provide guidance as to how much deference courts should give to briefs by regulators. Richard noted that the Supreme Court's decision on deference will have a "ripple effect on amicus brief filings," as it will either cause the DOL to "step-up" or "shut-down" its amicus brief initiative, "which is attempting to engage in rulemaking through amicus brief filing."

Additionally, the court's interpretation of the outside sales exemption and its definition of "sales" will have an impact on future wage and hour cases in the pharmaceutical industry as well as others. "If the Supreme Court adopts a functional approach to the meaning of 'sales' under the outside sales exemption, it will have an effect on other industries," Richard noted.

Seyfarth Shaw Named to BTI’s Client Service List of Top Law Firms in US
BTI survey based on client rankings of firms delivering superior legal service

Fri, 02 Dec 2011 00:00:00 -0400

Contact:

Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

NEW YORK/CHICAGO (December 2, 2011) — Seyfarth Shaw LLP, one of America's leading full-service law firms, has been recognized as one of the nation’s best law firms for client service by BTI Consulting Group in its 2012 BTI Client Service A-Team Report.

Seyfarth was named to the report's cream-of-the-crop list, the "Client Service 30," which "have truly differentiated themselves in the eyes of clients" and "distinguished themselves as the absolute best" of nearly 650 firms that serve the Fortune 1000, according to the report. The annual Client Service A-Team report evaluates individual law firm performance based on feedback from chief legal officers and their direct reports in Fortune 1000 companies.

Seyfarth was specifically praised in nearly every category, delivering a "level of responsiveness and sophistication that is first-rate," and known for its "collaboration," efficiency" and the "way they provide services in relation to the client’s needs."

"We are honored to be recognized by general counsel across the country as one of the top law firms in delivering client service, which in today's business environment is as crucial as the caliber of your legal counsel," said Seyfarth Chairman J. Stephen Poor. "We are dedicated to providing the best overall experience for our clients, one that encourages in-depth client feedback, innovative approaches to structuring fees and services, creative applications of technology and helps our clients deliver positive business outcomes."

Seyfarth was recognized by BTI in the following categories:

Leaders of the Best
Client Focus
Commitment to Help
Handles Problems
Innovative Approach

Honor Roll of the Best
Anticipates the Client’s Needs
Legal Skills
Understands Client's Business
Meets Scope and Budget
Unprompted Communication
Brings Together National Resources
Helps Advise on Business Issues
Keeps Clients Informed
Deals with Unexpected Changes
Provides Value for the Dollar

Seyfarth has gained recognition for its pioneering application of Lean Six Sigma methodologies to the delivery of high quality legal services. The firm has become the only large law firm to build a distinctive client service model—called SeyfarthLean—that combines the core principles of Lean Six Sigma with robust technology, knowledge management, process management techniques, alternative fee structures and practical tools. The broad, systemic use of such a model across multiple practice areas is unique to the legal profession and reflects a fundamentally different approach to delivering legal services.

Illinois Supreme Court Affirms Legitimate Business Interest Test For Restrictive Covenants And Provides Some Guidance On How To Analyze A Legitimate Business Interest

Fri, 02 Dec 2011 00:00:00 -0400

Illinois courts have traditionally followed the three pronged rule of reasonableness test when determining whether to enforce a restrictive covenant:

a. is the restriction no greater than what is required to protect the legitimate business interest of the employer;
b. does the restriction impose undue hardship on the employee;
c. is the restriction injurious to the public.

However, on September 23, 2009, the Illinois Fourth District Appellate Court, in Sunbelt Rentals, Inc. v. Ehlers, 394 Ill.App.3d 421, held that a court need not consider the first prong of the rule of reasonableness test, an employer’s legitimate business interest, when determining whether to enforce a restrictive covenant. The Sunbelt decision has been widely criticized since its publication and Illinois’ four other Appellate Court districts have declined to follow it.

Yesterday, the Illinois Supreme Court effectively reversed, and ended all further discussion on, Sunbelt. Reliable Fire Equipment Co., v. Arredondo, 2011 IL 111871 (December 1, 2011). While writing that it “emphatically disagreed” with the Sunbelt decision, the Illinois Supreme Court scolded the Fourth District Appellate Court for “overlooking or misapprehending” Illinois Supreme Court precedent that requires a court to consider all three prongs of the rule of reasonableness test, including an employer’s legitimate business interest, when determining whether to enforce a restrictive covenant.

The Reliable Fire decision also resolves another dispute that has been raging in the Illinois Appellate Courts for sometime; what is the proper test for assessing whether an employer has a business interest worthy of restrictive covenant enforcement/protection. Some Illinois Appellate courts have ruled that only “trade secrets” and “near permanent customer relationships” can establish a legitimate business interest. Other Illinois Appellate courts have taken a more flexible approach, and look at the following seven factors when assessing whether an employer has a legitimate business interest:

1) the number of years required to develop the customer;
2) the amount of money invested to acquire customers;
3) the degree of difficulty in acquiring customers;
4) the extent of personal customer contact by the employer;
5) the extent of the employer’s knowledge of its customers;
6) the duration of customer association with the employer; and
7) the intent to retain employer-customer relations.

In Reliable Fire, the Illinois Supreme Court sides with the more flexible approach. Specifically, the Illinois Supreme Court informs its lower courts that only considering whether an employer has trade secrets and/or near permanent customer relationships is insufficient when assessing a legitimate business interest. Rather, Illinois Courts are to consider “the totality of the facts and circumstances of the individual case” when assessing whether a legitimate business interest exists. The “totality of the facts and circumstances” can include, but is not limited to, an evaluation of near permanent customer relationships, the former employee’s access to confidential information, the seven factors identified above, and/or anything else found in the common law. Moreover, the Reliable Fire decision declines to place any weight on the possible “facts and circumstances” that could create a legitimate business interest because “the same identical contract and restraints may be reasonable and valid under one set of circumstances, and unreasonable and invalid under another set of circumstances.”

Thus, Reliable Fire appears to expand what an employer can state/argue is a legitimate business interest, and gives the trial court significant discretion when deciding what factors establish a legitimate business interest and whether to enforce a restrictive covenant. We will continue to monitor Illinois courts to see if the Reliable Fire holding leads to any changes in how trial courts assess and enforce restrictive covenants.

IRS Issues Sample Amendment for PPA Funding-Based Restrictions and Extends Deadline for Amending Plans

Fri, 02 Dec 2011 00:00:00 -0400

Internal Revenue Code Section 436, as added by the Pension Protection Act of 2006 (PPA), includes provisions that limit the ability of defined benefit pension plans that fall below certain funding levels to increase plan benefits or pay benefits in an accelerated form, effective for plan years beginning on or after January 1, 2009. For more information on the PPA “funding-based restrictions,” click here to review Seyfarth’s November 2008 Management Alert on pension plan funding under PPA. Although these funding-based restrictions apply only to underfunded plans, all defined benefit plans are required to contain provisions that incorporate these restrictions, and the IRS was charged with issuing a sample amendment to do this.

Recently-issued IRS Notice 2011-96 is likely the last of a series of extensions of the deadline for adopting a PPA amendment incorporating funding-based restrictions. The Notice provides a sample amendment and extends the deadline to amend for this requirement to the end of the plan year beginning on or after January 1, 2012. It also extends the corresponding relief period that allows plan sponsors to amend for funding-based restrictions without violating anti-cutback rules.

Employer Action Steps

Amend Plan. Plan sponsors should amend their defined benefit plans to reflect the funding-based restriction provisions no later than December 31, 2012 (for calendar year plans). The deadline may be earlier for plan sponsors seeking to file a determination letter application, or later for collectively bargained plans or off-calendar year plans.
Evaluate Sample Amendment. The Notice confirms that the sample amendment will satisfy the Code Section 436 amendment requirements. Plan sponsors may modify the notice to conform to the plan’s terminology, provided that the changes do not materially modify the substance of the amendment. Plan sponsors who have already adopted an amendment intended to comply with Code Section 436 should evaluate whether their current plan language is consistent with the IRS sample amendment.
Ensure Current Compliance. Note that the PPA funding-based restrictions are already in effect for underfunded plans, even though the amendment deadline has been extended.

Immigration Inbox: News You Can Use - November 2011

Fri, 02 Dec 2011 00:00:00 -0400

U.S. Immigration

1. Fiscal Year 2012 H-1B Quota Reached
2. EB-2 India, China EB-2 Visa Numbers Jump; Other Visa News
3. Employment Authorization Document, Certificate of Citizenship Redesigned
4. ICE Announces Large Removal Numbers for FY 2011
5. 'Fairness for High-Skilled Immigrants Act' Bill Heads to House Floor for Consideration
6. USCIS Designates South Sudan for TPS, Extends Sudan Designation
7. California 'Dream Act' Becomes Law
8. Federal Court Halts Parts of Alabama Immigration Law
9. USCIS Announces 'Entrepreneurs in Residence' Initiative, Discusses EB-5 Enhancements
10. USCIS Seeks Comments on Proposed EB-5 Immigrant Investor Rule
11. Customs and Border Protection Discontinues H-2A/2B Exit Program Pilot

Seyfarth Workforce Authorization Team (SWATeam)

1. DHS Secretary Napolitano Testifies on E-Verify, Enforcement Efforts
2. OCAHO Orders Drywall Company To Pay $173,250 in Penalties
3. Justice Dept. Sues California Healthcare Provider for Discrimination
4. California Passes "Anti" E-Verify Law

GLOBAL MOBILITY

1. Italy Requires Fingerprints for North Africans

U.S. Immigration

1. Fiscal Year 2012 H-1B Quota Reached

On Wednesday, November 23, 2011, United States Citizenship & Immigration Services (USCIS) announced that as of Tuesday, November 22, 2011 it had received sufficient H-1B petitions to meet the regular H-1B quota (or "cap") for Fiscal Year 2012, which began on October 1, 2011 and ends on September 30, 2012. USCIS previously announced on October 19, 2011 that it had received sufficient H-1B petitions to meet the Master's H-1B cap. Both H-1B caps have now been reached.

As a result, USCIS will reject cap-subject petitions received after Tuesday, November 22nd for new H-1B workers seeking an employment start date in Fiscal Year 2012.

More information on the cap count is available at http://www.uscis.gov/h-1b_count.

2. EB-2 India, China EB-2 Visa Numbers Jump; Other Visa News

The November 2011 Visa Bulletin includes the following information:

The November employment-based second preference cut-off date for applicants from China and India is the most favorable since August 2007. This advancement is expected to generate significant levels of demand based on new filings for adjustment of status at U.S. Citizenship and Immigration Services offices. While significant future cut-off date movements are anticipated, they may not be made on a monthly basis. Readers should not expect such movements to be the norm throughout the fiscal year, and an eventual retrogression of the cut-off at some point during the year is a distinct possibility.

In recent remarks, Charles Oppenheim of the Department of State's Visa Office discussed predictions for employment-based visa numbers. Among other things, Mr. Oppenheim anticipates that in December 2011, the EB-2 priority date for China and India will move to March 1, 2008, and there could be additional movement in January and February. After that movement, these two categories may slow down and possibly retrogress later in the year.
Mr. Oppenheim predicted that the EB-3 category for Mexico, Philippines, and most other countries should move forward one month every month. The EB-3 category for China is expected to advance one to three weeks per month in the near future.

Prospects for India's EB-3 category do not look so promising. There are 54,000 cases pending since 2007, and many more with subsequent priority dates that have not yet been filed. Only 2,800 are allowed per year. Potentially this could mean 225,000 to 300,000 people waiting in line for India EB-3 visa numbers, including dependents. Mr. Oppenheim noted that over 50 percent of H-1Bs are given to Indian nationals every year; he said the majority will apply for permanent residence.

The EB-1 and 2 categories for all countries, Mexico, and Philippines, are expected to remain Current for some time, Mr. Oppenheim said. Last year there were 18,000-20,000 fewer cases filed in the EB-1 category, which allowed more EB-1 China and India petitions to move forward along with some EB-2 adjustments from those countries.
The November Visa Bulletin is available at http://travel.state.gov/visa/bulletin/bulletin_5572.html.

3. Employment Authorization Document, Certificate of Citizenship Redesigned

U.S. Citizenship and Immigration Services (USCIS) announced a redesigned Employment Authorization Document (EAD) and Certificate of Citizenship (Form N-560) with new security features. USCIS began issuing the new EADs on October 25, 2011, and the new N-560s on October 30. The agency anticipates that more than 1 million people will receive the new documents over the next year.

USCIS will replace EADs already in circulation as individuals apply for their renewal or replacement. All previously issued EADs remain valid until the expiration date printed on the card. Previously issued Certificates of Citizenship remain valid indefinitely.

USCIS said the new features of the EAD will better equip workers, employers, and law enforcement officials to recognize the card as definitive proof of authorization to work in the United States. USCIS said it worked closely with the Immigration and Customs Enforcement Forensic Document Laboratory to incorporate technology and tactile features to deter counterfeiting, tampering, and fraud, and to facilitate card authentication.

The announcement is available at:
http://www.uscis.gov/portal/site/uscis/menuitem

A related fact sheet is available at:
http://www.uscis.gov/portal/site/uscis/menuitem

4. ICE Announces Record Removal Numbers for FY 2011

U.S. Immigration and Customs Enforcement (ICE) recently announced the agency's fiscal year (FY) 2011 year-end removal numbers. Overall, in FY 2011, ICE's Office of Enforcement and Removal Operations removed 396,906 individuals, the largest number in the agency's history. Of these, nearly 55 percent, or 216,698 of the people removed, were convicted of felonies or misdemeanors, an 89 percent increase in criminal removals since FY 2008. This includes 1,119 people convicted of homicide; 5,848 people convicted of sexual offenses; 44,653 people convicted of drug-related crimes; and 35,927 people convicted of driving under the influence.

The ICE announcement is available at http://www.ice.gov/news/releases/1110/111018washingtondc.htm.

5. 'Fairness for High-Skilled Immigrants Act' Bill Heads to House Floor for Consideration

Rep. Jason Chaffetz (R-Utah) introduced the "Fairness for High-Skilled Immigrants Act" (H.R. 3012) on September 22, 2011. The House Judiciary Committee approved the bill with changes on October 27. It now goes to the full House of Representatives for a vote. The bill would eliminate the per-country numerical limitation for employment-based immigrants over three years and increase it for family-based immigrants, from 7 percent per country to 15 percent per country. It also would amend the Chinese Student Protection Act of 1992 to eliminate the provision requiring the reduction of annual Chinese (PRC) immigrant visas to offset status adjustments under the Act.

In media releases, Rep. Chaffetz said, "Per-country limits make no sense in the context of employment-based visas. Companies view all highly skilled immigrants as the same regardless of where they are from—be it India or Brazil. By removing per-country limits, American companies will be able to access the best talent." He noted that the current percentage cap "has created a backlog of qualified workers." Rep. Chaffetz pointed out that the legislation will not adversely affect the wages and working conditions of similarly employed workers in the US. but will "encourage high-skilled immigrants who were educated in the U.S. to stay and contribute to our economy, rather than taking the skills they learned and aiding our competitor nations."

Co-sponsors of the bill include Reps. Tim Griffin (R-Ariz.), Zoe Lofgren (D-Cal.), and Lamar Smith (R-Tex.). It is supported by the U.S. Chamber of Commerce; Compete America, a coalition of high-tech companies including Microsoft, Google, and Oracle; various trade groups including the Business Software Alliance, the Semiconductor Industry Association, and the Information Technology Industry Council; and Immigration Voice, a leading coalition of highly skilled foreign professionals.

Rep. Chaffetz's statement is available at http://chaffetz.house.gov/press-releases. The text of the bill is available at http://www.gpo.gov/fdsys/pkg/BILLS.

6. USCIS Designates South Sudan for TPS, Extends Sudan Designation

The Department of Homeland Security (DHS) has designated the Republic of South Sudan for temporary protected status (TPS) for 18 months, effective November 3, 2011, through May 2, 2013. The 180-day registration period for eligible individuals to submit initial TPS applications began on October 13, 2011, and will remain in effect until April 10, 2012.

This designation allows eligible South Sudan nationals (and those having no nationality who last habitually resided in the region that is now South Sudan) who have continuously resided in the United States since October 7, 2004, to obtain TPS. In addition to demonstrating continuous residence in the United States since October 7, 2004, applicants must demonstrate that they have been continuously physically present in the United States since November 3, 2011.

The notice designating the Republic of South Sudan is available at http://www.gpo.gov/fdsys/pkg/FR-2011-10-13/pdf/2011-26537.pdf. The notice announcing the extension of the designation of Sudan for TPS and automatic extension of EADs for Sudanese TPS beneficiaries is available at http://www.gpo.gov/fdsys/pkg/FR-2011-10-13/pdf/2011-26538.pdf.

7. California 'Dream Act' Becomes Law

California's Governor Jerry Brown has signed into law the second portion of the California "Dream Act," AB 131, which allows undocumented students to qualify for state-funded scholarships and financial aid for state universities after other legal resident and U.S. citizen students have applied. Gov. Brown said it would enable top students to have "a chance to improve their lives and the lives of all of us." He signed the first portion, AB 130, in July, which allows such students to apply for private scholarships and loans. Currently, undocumented California high school graduates can apply for in-state tuition rates, as can those in 12 other states, including New York, Texas, and Washington.

The text of AB 131 (as enrolled) is available at http://e-lobbyist.com/gaits/text/351864.

8. Federal Court Halts Parts of Alabama Immigration Law

The U.S. Court of Appeals for the 11th Circuit issued an injunction pending appeal on October 14, 2011, blocking certain provisions of Alabama's new immigration law, HB 56. The provisions blocked included requiring the immigration status of students to be checked in public schools and making failure to "complete or carry an alien registration card" a misdemeanor for immigrants. The court allowed Alabama to enforce other controversial provisions, such as requiring that police attempt to determine the immigration status of people stopped who they suspect are unauthorized; barring state courts from enforcing contracts with undocumented individuals if the hiring party knew that the person was in the U.S. unlawfully; and making it a felony for undocumented people to enter into business transactions in Alabama, including applying for a driver's license or business license.

The Department of Justice had filed an appeal with the 11th Circuit because of potential negative consequences of the new state law both domestically and internationally, including conflicts with federal responsibilities, discrimination against those legally in the U.S., driving undocumented persons underground or to other states, and affecting diplomatic relations. Advocacy groups, including the American Civil Liberties Union, had filed a separate motion against Alabama's new law.

The law is already having an impact in Alabama. For example, reportedly a quarter of commercial building workers have left the state, several thousand students have stopped going to school, and church attendance has dropped. Anecdotal evidence is piling up. The Alabama-based Southern Poverty Law Center, which set up a hotline, received about 2,000 calls so far from people with problems such as being afraid to drive their sick family members to the doctor, being unable to set up water service because water companies were requiring them to prove their legal status, or whose children were being bullied at school. The Department of Justice has also set up a hotline for complaints about the Alabama law, telephone: 1-855-353-1010; e-mail: Hb56@usdoj.gov.

Tomato farmer Jamie Boatwright reported that he has a large crop of tomatoes ripe and ready for picking, but most of his workers have left Alabama. Similarly, the owners of Smith & Smith Farms were struggling with three trucks of workers for harvesting instead of 12. Both farms reported that U.S. workers were mostly either not interested or started working but then quit after a few hours. Meanwhile, contractors are taking longer to rebuild after the spring tornadoes that devastated the Tuscaloosa area. "We're seeing smaller crews and seeing work take longer to accomplish," said Jimmy Latham, president of Alabama Associated General Contractors and a Tuscaloosa contractor.

Alabama state Senator Scott Beason, who sponsored the legislation, said he is receiving similar complaints from local businesses experiencing difficulties in finding workers and keeping their businesses going. He asserted that there are sufficient numbers of Americans willing to do the jobs abandoned by undocumented workers, and that the adjustment to the new law will take time. Mr. Boatwright begs to differ, noting that he hasn't been able to attract or retain American workers to his tomato farm and that if he were to raise his wages in an attempt to do so, he would also have to hike the price of his tomatoes and would lose business to neighboring states.

The text of the Alabama law is available at http://alisondb.legislature.state.al.us/acas/searchableinstruments/2011rs/bills/hb56.htm. The latest opinion from the 11th Circuit is at http://www.ca11.uscourts.gov/unpub/ops/201114532ord.pdf. The most recent previous court action on the law, enjoining certain provisions but upholding others, is available at http://irli.org/system/files.

9. USCIS Announces 'Entrepreneurs in Residence' Initiative, Discusses EB-5 Enhancements

As part of the Obama administration's "Startup America" efforts to encourage high-skilled immigration into the U.S. under existing laws, U.S. Citizenship and Immigration Services (USCIS) Director Alejandro Mayorkas recently announced the "Entrepreneurs in Residence" initiative to use "industry expertise to strengthen USCIS policies and practices surrounding immigrant investors, entrepreneurs and workers with specialized skills, knowledge, or abilities." Director Mayorkas announced the initiative at the High Growth Entrepreneurship Listening and Action Session at AlphaLab in Pittsburgh, before the quarterly meeting of the President's Council on Jobs and Competitiveness with President Obama.

Director Mayorkas said the introduction of expert views from the private and public sectors "will help us to ensure that our policies and processes fully realize the immigration law's potential to create and protect American jobs." USCIS will launch the "Entrepreneurs in Residence" initiative with a series of informational summits with industry leaders to gather strategic input. Informed by the summits, the agency will create a tactical team including entrepreneurs and experts, working with USCIS personnel, "to design and implement effective solutions." Director Mayorkas said the initiative "will strengthen USCIS's collaboration with industries at the policy, training, and officer level[s], while complying with all current Federal statutes and regulations."

The initiative builds upon USCIS's recent efforts to promote startup enterprises and spur job creation, including enhancements to the EB-5 immigrant investor visa program. USCIS said that since August, it has been conducting a review of the EB-5 process, working with business analysts to enhance related adjudications, implementing direct access to adjudicators for EB-5 regional center applicants, and launching new specialized training modules for USCIS officers on the EB-2 visa classification and L-1B nonimmigrant intracompany transferees.

USCIS's statement on "Entrepreneurs in Residence" is available at http://www.uscis.gov/portal/site/uscis/menuitem. A transcript of a related press conference held in October 2011 is available at http://www.uscis.gov/USCIS/News/2011/October.

Immigration partner, Angelo Paparelli, co-authored an article on the USCIS "Entrepreneurs in Residence" program in the October 26 issue of the New York Law Journal called, "Intubation and Incubation: Remedies for an Ailing Immigration Agency," available here. His blog post on the program, "Entrepreneurs in Immigration Residence Are Set to Occupy USCIS," is available here.

10. USCIS Seeks Comments on Proposed EB-5 Immigrant Investor Rule

U.S. Citizenship and Immigration Services (USCIS) seeks public comments on a proposed rule published on September 28, 2011, that would enable the agency to process certain applications approved between 1995 and 1998 by immigrant investors under the fifth preference employment-based (EB-5) immigrant visa classification.

The proposed rule would implement provisions of the 21st Century Department of Justice Appropriations Authorization Act that apply to a group of immigrant investors who had a Form I-526, Immigrant Petition by Alien Entrepreneur, approved between January 1, 1995, and August 31, 1998. Specifically, the rule would enable USCIS to process cases for approximately 580 principal immigrant investors and their dependents whose I-526 petitions were approved during that period and who, before November 2, 2002, sought to register for permanent residence or adjust their status (using Form I-485); or remove conditions on permanent residence obtained as an entrepreneur (using Form I-829).

The processes outlined in the proposed rule would provide an additional two-year period for most of these immigrant investors to meet the EB-5 investment and job-creation requirements. This rule would not impact any other applications or petitions filed under the EB-5 program.

Comments will be accepted until November 28, 2011, and should be submitted via one of the methods listed in the proposed rule, which is available at http://www.gpo.gov/fdsys/pkg/FR-2011-09-28/pdf/2011-24619.pdf. USCIS corrected the docket number for the proposed rule on October 4, 2011; see http://www.gpo.gov/fdsys/pkg/FR-2011-10-04/pdf/2011-25463.pdf.

11. Customs and Border Protection Discontinues H-2A/2B Exit Program Pilot

U.S. Customs and Border Protection has discontinued the H-2A and H-2B Temporary Worker Visa Exit Program Pilot, effective September 29, 2011. The pilot began on December 8, 2009. It required temporary workers in H-2A or H-2B nonimmigrant classifications who enter the United States at the port of San Luis, Arizona, or the port of Douglas, Arizona, to depart (at the time of their final departure) from these respective ports and to submit certain biographical and biometric information at one of the kiosks established for that purpose.

The notice is available at http://www.gpo.gov/fdsys/pkg/FR-2011-09-29/pdf/2011-24716.pdf.

Seyfarth Workforce Authorization Team (SWATeam)

1. DHS Secretary Napolitano Testifies on E-Verify, Enforcement Efforts

Department of Homeland Security (DHS) Secretary Janet Napolitano testified at an oversight hearing on October 26, 2011, before the House Judiciary Committee on worksite enforcement and the E-Verify program, among other issues. She noted that since fiscal year (FY) 2009, U.S. Immigration and Customs Enforcement (ICE) has audited more than 6,000 employers suspected of hiring unauthorized workers, debarred 441 companies and individuals from receiving federal contracts, and imposed more than $76 million in financial sanctions, which she said was more than the total number of audits and debarments conducted during the entire previous administration. In FY 2011, ICE also criminally arrested 221 employers accused of violations related to employment, which Secretary Napolitano noted was "an agency record."

As of FY 2011, she noted, more than 292,000 employers have enrolled in E-Verify, representing more than 898,000 locations. More than 1,000 new employers enroll each week, and the number of employers enrolled in E-Verify has more than doubled each fiscal year since 2007. In FY 2011 alone, E-Verify processed 17.4 million employment queries, she said.

To improve E-Verify's accuracy, USCIS reduced mismatches for naturalized and derivative U.S. citizens by adding naturalization data and U.S. passport data to E-Verify, Secretary Napolitano said. Because of this enhancement, in FY 2011, "more than 80,000 queries that previously would have received an initial mismatch requiring correction at the secondary verification stage were automatically verified as work-authorized," she said. USCIS also has added 80 staff positions to support monitoring and compliance since the beginning of FY 2010. Also, to counter identity theft, USCIS now allows for the verification of passport photos through the E-Verify system.

Judiciary Committee Chairman Lamar Smith (R-Tex). said it was true that DHS has increased the number of audits of companies' employment eligibility verification forms. However, he said, "these audits are of questionable benefit," citing a U.S. Government Accountability Office report stating that ICE officials have said that fine amounts are so low that they are not a meaningful deterrent and "employers view the fines as a cost of doing business, making the fines an ineffective deterrent." He called for more worksite enforcement actions, stating that when ICE does not arrest undocumented workers, "[t]hey go down the street and knock on the door of the next employer, and take jobs away from American workers."

Secretary Napolitano's written testimony is available at http://judiciary.house.gov/hearings. Rep. Smith's statement is available at http://judiciary.house.gov/news/Statement.

2. OCAHO Orders Drywall Company To Pay $173,250 in Penalties

The Executive Office for Immigration Review's Office of the Chief Administrative Hearing Officer (OCAHO) has ordered Ketchikan Drywall Services, Inc., of the Puget Sound area of Washington, to pay penalties for various I-9 violations. Ketchikan was ordered to pay $770 per violation, for a total of $173,250, for violations such as failure to ensure that employees completed or signed I-9 forms.

Among other things, the decision noted that failure to complete an I-9 form is not a mere technical or procedural failure but "is substantive in nature and defeats the purpose of the law." Such substantive violations include, among other things, failing to collect an employee signature; listing the wrong documents to establish identity or employment eligibility; failing to complete the I-9 within three days of hire; and failing to fully complete the form, including the employee attestation that he or she is authorized for employment in the U.S., and regardless of what other documents may have been copied or retained. The decision noted that "[c]opying the documents may well serve to insulate an employer from errors in transcribing the information, but nothing . . . purports to excuse an employer who fails to transcribe any information at all." The decision noted that specific instances of omission when a copy of a document is retained with the form will be considered on a case-by-case basis, but "there is no general rule that omissions are cured by copying documents."

The decision, which includes additional details about Ketchikan's various violations, is available at http://www.justice.gov/eoir/OcahoMain/publisheddecisions/Looseleaf/Volume10/1139.pdf.

3. Justice Dept. Sues California Healthcare Provider for Discrimination

The Department of Justice (DOJ) filed a lawsuit on September 30, 2011, against Generations Healthcare, a provider with skilled nursing facilities throughout California, alleging that it engaged in a pattern or practice of discrimination by imposing unnecessary documentary requirements on naturalized U.S. citizens and non-U.S. citizens to work in the U.S. The Department noted that employers are prohibited by law from placing additional burdens on work-authorized employees during the process of hiring or when verifying their employment eligibility based on their citizenship status or national origin.

The DOJ's investigation found that the company demanded that a work-authorized applicant produce a permanent resident card, also known as a "green card." The department's investigation also revealed that Generations Healthcare required all newly hired non-U.S. citizens and naturalized U.S. citizens at its St. Francis Pavilion facility to present specific and extra work authorization documents beyond those required by federal law to prove their status, a burden that was not placed on native-born U.S. citizens.

"Employers are not allowed to impose more burdensome employment eligibility verification procedures on certain workers based on their citizenship status," noted Thomas E. Perez, Assistant Attorney General for the Civil Rights Division.

The DOJ's media release announcing the lawsuit is available at http://www.justice.gov/opa/pr/2011/September/11-crt-1301.html.

4. California Passes "Anti" E-Verify Law

On October 9, 2011, California Governor Jerry Brown signed into law "The Employment Acceleration Act of 2011" (Assembly Bill 1236), which prohibits California government agencies, including cities and counties, from requiring employers to enroll in E-Verify as a condition of receiving a government contract or to apply for or maintain a business license. Supporters of the bill anticipate reduced operating costs for employers by eliminating the burdens and expenses related to enrolling in and adhering to the E-Verify program requirements. Employers in California may continue to use E-Verify on a voluntary basis or as required by federal contracts.

The text of the bill can be found at : http://leginfo.ca.gov/pub

GLOBAL MOBILITY

1. Italy Requires Fingerprints for North Africans

Italy now requires fingerprints for short-term visas (business and tourism) for North Africans, as part of a larger European Union effort.

As of October 11, 2011, the Italian consulates in Algeria, Egypt, Libya, Mauritania, Morocco and Tunisia now require fingerprints for individuals applying for short-term Schengen visas (maximum of 90 days for business and tourism). This is intended to improve border control and to expedite the issuance of future visas to those already registered in the Schengen Visa Information System (VIS).

It is expected that this requirement will be enforced in other Italian consulates in the Schengen Area within the next two years. Other European Union (EU) consulates are following suit, as part of a larger EU effort to include fingerprints of visa applicants from North African countries in a database that connects all 25 countries in the Schengen "border-free" zone.

Recent News From Seyfarth's Immigration Team

Seyfarth Shaw opened its new Immigration Compliance Center – a "fix it and forget" all-encompassing approach to every area of immigration-related legal compliance, from I-9 and E-Verify to H-1B Labor Condition Application paperwork requirements. A press release announcing the launch of the ICC is available here.

Seyfarth Shaw's Pro Bono efforts were featured in an October 26 article in the Chicago Daily Law Bulletin. The article discussed Seyfarth's pro bono legal services in conjunction with Kids in Need of Defense (KIND), a nonprofit organization serving immigrant children facing deportation, many of whom have fled wars, human rights abuses, economic problems or natural disasters. http://www.supportkind.org/media/20520/chicago%20law%20bulletin.pdf

At Seyfarth Shaw's November 2011 Advanced Labor and Employment Law Conference in Los Angeles, Immigration Partner, Angelo Paparelli advised in-house lawyers to be sensitive to immigration issues in a presentation titled, "Beware the Alien Law Invasion: How Immigration Issues Permeate the Work of In-house Counsel."

Angelo Paparelli journeyed to Bangalore, India to present "Best Practices for Indian Companies" at a conference addressing U.S. and global enforcement of immigration and employment laws, and also visited clients and companies in Mumbai. His blog post on his trip and the situation facing Indian consulting firms, "Missive from Mumbai: Why Are U.S. Immigration Agencies Attacking India and Hurting America," is available here. His presentation, "U.S. & Global Enforcement of Immigration and Employment Laws Best Practices for Indian Companies, is available here.

He also served as a faculty member at the 24th Annual AILA California Chapters Conference in San Francisco on November 12th, addressing the current H-1B environment and recent enforcement trends.

On November 16, Angelo participated in the University of California Berkeley Graduate School of Journalism's conference, "The Changing Face of America: Immigration from the Ground Up." Angelo's related blog post, "Journalism's Immigration Challenge," is available here. At the conference, he joined two UC faculty members in a discussion entitled "Opening the Door to Highly Skilled Workers?"

On November 17, 2011, Immigration Partner, Dyann DelVecchio, and Associate, Jason Burritt, will present at a Breakfast Briefing in our New York City office , on the topic, "Immigration Law - Eyes to the Sky, Feet in the Gutter." Their presentation is available here.

By: Angelo Paparelli, Elaine Walsh, and John Quill

Angelo Paparelli is a partner in Seyfarth's Los Angeles Downtown office, Elaine Walsh is counsel in the Boston office and John Quill is senior counsel in the Boston office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Angelo Paparelli at apaparelli@seyfarth.com, Elaine Walsh at ewalsh@seyfarth.com, John Quill at jquill@seyfarth.com or any Business Immigration attorney on our website.

NLRB Votes to Speed Up Election Process

Thu, 01 Dec 2011 00:00:00 -0400

As expected, yesterday, the National Labor Relations Board ("NLRB") held a special meeting to discuss and to vote on Chairman Mark Gaston Pearce's resolution to amend certain election procedures "in order to reduce unnecessary litigation" in disputed election cases. Over the objections of Member Brian Hayes, Chairman Pearce and Member Craig Becker voted to go forward with Chairman Pearce's resolution.

Prior to the meeting, there was much speculation that Member Hayes might resign from the NLRB in order to stop the majority from voting to proceed. This speculation was based on the fact that the NLRB needed three members in order to proceed to a vote and that Member Hayes had publically opposed changing the election rules in the manner proposed by Chairman Pearce and Member Becker. Obviously, the speculation was inaccurate.

Rules incorporating the changes contained in the resolution must still be drafted and voted on by the NLRB members. Although a date for the vote has not been set, it must be assumed that it will take place before the expiration of Member Becker's term at the end of this year. We will continue monitor happenings at the NLRB regarding this rulemaking initiative.

Although not relevant to the rulemaking proceeding, it is noteworthy that the Boeing Company and the International Association of Machinists announced a tentative agreement intended to resolve the much publicized dispute regarding the relocation of some work from its unionized plant in Washington to a non-union plant in South Carolina.

By: Jeffrey A. Berman and Jack Toner

Jeffrey A. Berman is a partner in Seyfarth's Los Angeles office and Jack Toner is senior counsel in the firm's D.C. office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Jeffrey A. Berman at jberman@seyfarth.com, or Jack Toner at jtoner@seyfarth.com.

Flawed Special Committee Process Results in $1.26 Billion Judgment

Wed, 30 Nov 2011 00:00:00 -0400

The Delaware Chancery Court’s recent decision in In re Southern Peru Copper Corporation Shareholder Derivative Litigation¹ highlights the importance of special committees’ role in assuring that directors meet the rigorous “entire fairness” test when board conduct is challenged. The opinion offers directors valuable guidance to avoid costly errors.

Background

Grupo Mexico – which controlled 63% of the voting power of Southern Peru Copper Corporation (a NYSE-listed mining company) – wanted Southern Peru to acquire another Grupo Mexico subsidiary called Minera Mexico, a privately held entity engaged in mining operations in Mexico. Grupo Mexico’s asking price was $3.1 billion worth of Southern Peru’s publicly traded stock.

Southern Peru’s Board of Directors set up a Special Committee whose “duty and sole purpose” was to evaluate Grupo Mexico’s proposal and determine whether that transaction was in the best interests of Southern Peru’s stockholders. The authorizing resolutions did not explicitly give the Special Committee the authority to negotiate the terms proposed by Grupo Mexico or to explore alternative’s to Grupo Mexico’s proposal.²

The Special Committee retained Goldman Sachs as its financial advisor to determine the value of the Mexican mining company – the “get” Southern Peru would receive in exchange for its “give” of its publicly traded stock. Goldman Sachs’ initial analysis showed that Southern Peru would “give” stock with a market price of $3.1 billion but would “get” an asset worth only $1.7 billion.³

The Special Committee adopted a strategy so the values of the give/get would be more comparable. The Special Committee concluded that Southern Peru’s market price overvalued the company. Rather than taking advantage of this higher valuation multiple and using Southern Peru’s stock as cheap acquisition currency, Goldman Sachs was directed to use less favorable EBITDA multiples to conclude that the “real,” “intrinsic” or “fundamental” value of Southern Peru’s stock would be $2.06 billion, even though it had a market value of $3.19 billion at that time.⁴ The Special Committee also “topped up” Minera’s value by applying Southern Peru’s valuation multiples to Minera, which was questionable in view of Minera’s liquidity problems.

The Delaware Court rhetorically suggested that if it made sense for Grupo Mexico to consolidate Minera and Southern Peru, the Special Committee could have asked Grupo Mexico to make an offer to acquire Southern Peru at a premium to the market price as the buyer and not the seller. This would have revealed the deficiencies in Grupo Mexico’s offer, namely that Minera had liquidity problems, and undermined the credibility of Grupo Mexico’s “give.” As the Chancellor said: “[B]y acting like a third-party negotiator with its own money at stake and the full range of options, the Special Committee could have put Grupo Mexico back on its heels” and thus caused the “get” to be more consistent with the “give.”⁵

The transaction’s voting provisions also troubled the Court. The Minera acquisition would be subject to approval by two-thirds of Southern Peru’s stockholders instead of approval by a majority of the minority stockholders unaffiliated with Grupo Mexico. However, a major unaffiliated stockholder agreed to vote in favor of the merger in exchange for Southern Peru granting it registration rights. The result was that even if the Special Committee recommended that the stockholders not approve the transaction, the two-thirds majority vote would be achieved and Southern Peru would have to close.

Key Holdings

Because a controlling stockholder was on both sides of this transaction, the Court evaluated the defendants’ conduct under the “entire fairness” test rather than the deferential standard of the business judgment rule. The entire fairness test requires the defendants to show that the transaction is entirely fair to the minority stockholders by demonstrating their “utmost good faith and the most scrupulous inherent fairness of the bargain.”⁶

“Entire fairness” requires both a fair process and a fair price. If the controlling stockholder can show that the transaction was approved by a properly functioning committee of independent directors or by an informed vote of a majority of the minority stockholders, the burden on the defendants to persuade the court that the transaction was entirely fair shifts to the plaintiffs who must show that the transaction was not fair.

Because the defendants in Southern Peru “fell victim to a controlled mindset,” the Court found that the defendants would not have prevailed under the entire fairness test even if the burden shifted to the plaintiffs. The Court’s conclusion was informed by several factors:

Southern Peru’s Special Committee did not have “real bargaining power” to negotiate at arms’ length with the controlling stockholder.⁷
- The Special Committee accepted the mandate of the controlling stockholder and looked only at the transaction Grupo Mexico proposed. The Committee did not consider alternatives, which “took off the table other options that would have generated a real market check” and had the effect of “depriv[ing] the Special Committee of negotiating leverage to extract better terms.”⁸
- The Special Committee and its financial advisor went to “strenuous lengths” to reduce the value of Southern Peru rather than insisting that Grupo Mexico demonstrate that Minera’s value justified Grupo Mexico’s asking price.⁹
The vote of Southern Peru’s independent minority stockholders was not informed and did not give them a “genuine chance to disapprove the transaction.”¹⁰
- Southern Peru’s proxy statement failed to disclose a $2.0 billion counteroffer the Special Committee made in the process that showed the disparity of value in the give/get equation.
- The minority stockholders were not informed of the standalone valuations for Minera and Southern Peru or that the Southern Peru’s actual market value had been discounted by $2 billion less to reach an “implied” equity value.
Because the transaction was subject to approval by two-thirds of all stockholders (not a majority of the minority stockholders), and the largest stockholders were intent on voting for the transaction regardless of the Special Committee’s recommendation, the minority stockholders were not truly protected.

Headlines

In re Southern Peru articulates many principles that are helpful to Board committees considering a transaction with an interested stockholder. These should be considered planning tools in any transaction that may be subject to the entire fairness test and should ultimately minimize the total costs of the transaction by reducing litigation expense and the likelihood of an unfavorable verdict:

The resolutions creating the special committee should give it all the power and authority to conduct arms’ length bargaining and the committee should engage in a “meaningful back-and-forth”¹¹ with the controlling stockholder, so that even if the controlling stockholder rejects alternative proposals all options can be explored for the benefit of minority stockholders. Thus, both the creation and functioning of the committee are important.
The special committee’s role as protector of the minority stockholders’ interests should not be undermined by a stockholder approval process that trumps any negative position the committee may take.
The committee’s decision-making process should be laid out in its minutes and other records. The Southern Peru Court observed on a number of instances that the lack of an appropriate record undermined the credibility of various defenses, even characterizing one rationale on commodity pricing the defendants offered for their view of Minera’s value as an “after-the-fact rationalization conceived of for litigation purposes.”¹²
It is important to identify potential conflicts on the special committee early. One member of Southern Peru’s Special Committee participated in the Committee’s deliberations only to conclude on the eve of signing that he was conflicted and had to recuse himself.

By: Matthew I. Hafter

Matthew I. Hafter is a partner in the Corporate Department in the firm’s Chicago office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, or Matthew I. Hafter at mhafter@seyfarth.com.

¹ In re Southern Peru Copper Corporation Shareholder Derivative Litigation, C.A. No. 961-CS, slip op (Del. Ch. Oct. 14, 2011).
²Id. at 12.
³Id. at 17.
⁴Id. at 19.
⁵Id. at 21.
⁶Id. at 46, citing Weinberger v. UOP, Inc., 475 A.2d 701 (Del. 1984).
⁷The controlling stockholder must form an independent committee but also show that “each of the contending parties had in fact exerted its bargaining power at arms’ length” to shift the burden to the plaintiffs. Id. at 50, quoting Kahn v. Lynch Communication Systems, Inc., 638 A.2d 1110, 1121 (Del. 1994).
⁸Id. at 64.
⁹“In plain terms, the special committee turned the ‘gold’ it was holding in trust into ‘silver’ and did an exchange with ‘silver’ on that basis, ignoring that in the real world the gold they held had a much higher market price in cash than silver. That non-adroit act of commercial charity toward the controller resulted in a manifestly unfair transaction.” Id. at 4.
¹⁰Id. at 57.
¹¹Id. at 69.
¹²Id. at 82.

Marshall Babson and Bradford Livingston Quoted on HR.com
"Couple of labor lawyers diagram moves by NBA players in antitrust suit"

Wed, 30 Nov 2011 00:00:00 -0400

Seyfarth Shaw Labor & Employment partners Marshall Babson and Bradford Livingston were quoted on HR.com in an article describing the motives behind the National Basketball Players Association (NBPA) lawsuit.

Marshall and Brad point out a risky move the players are making, noting that the NBPA disclaimed interest in representing the NBA players in hopes of creating distance from the terms of negotiations that could exist in a collective bargaining agreement between the players and the owners.

"By allegedly disclaiming interest," they wrote, "The NBPA and players hope to pressure the team owners by use of federal antitrust laws. Because of a doctrine known as the 'non-statutory labor exemption,' the terms of a CBA—including one that 'fixes' wages and other terms of employment among multiple individual employers—are immunized from antitrust claims. That's true even in the absence of a current collective bargaining agreement, as long as a bargaining relationship still exists. Therefore, with the alleged disclaimer of interest by the NBPA, the 'non-union' players believe they are free to attack the owners for antitrust violations."

Please click here to read the full article: http://www.hr.com/en/communities/couple-of-labor-lawyers-diagram-moves-by-nba-playe_gvdv2ib6.html

Introducing SeyfarthLean Consulting

Tue, 29 Nov 2011 00:00:00 -0400

Contact:
Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

CHICAGO (November 29, 2011) — Leading law firm Seyfarth Shaw LLP is pleased to formally introduce SeyfarthLean Consulting (“SLC”), a stand-alone subsidiary company engaged in providing efficiency models to the internal processes and projects of in-house legal departments and other business units in an organization through the use of SeyfarthLean (Seyfarth’s customized integration of Lean and Six Sigma) methodology and tools.

SeyfarthLean was born out of Seyfarth Shaw’s conclusion in the middle of the last decade that clients were concerned by the inherently inefficient nature of the hourly fee business model adopted by most law firms. Seyfarth concluded that this problem required shifting the legal service delivery model (and thus the business model) toward an approach that places a higher premium on efficiency and better fulfillment of the client's expectations.

SLC expands on the firm’s existing work for clients and uses this methodology to provide innovative solutions to in-house legal departments and other business units of a company. SLC provides clients with “Voice of the Client” interviews, sophisticated process mapping, root cause analysis, project management, data analysis and technologies to improve workflow and quality control and has already handled major projects, including litigation management optimization, contracts administration, real estate leasing and acquisition management and complex large-scale transactions with multiple parties and workflows to improve efficiency and quality for its clients, while at the same time reducing expenses and/or adding revenue to the bottom line of the client.

The CEO of SeyfarthLean Consulting is Atlanta partner Robert Reynolds. Reynolds has led any number of engagements for Fortune 500 clients focused on process design, project management and other optimization solutions. In his role with SeyfarthLean Consulting he is focused on the implementation of SeyfarthLean solutions in corporate law departments, HR, procurement and other enterprise functions.

“The more we have worked with our clients utilizing SeyfarthLean for the delivery of legal services, the more we have realized that we can use the methodology to assist clients in optimizing the overall legal and operational workflow within their departments and in their relationships with their internal clients, as well as with outside providers of legal services,” Reynolds said.

Working alongside Reynolds is Chief Strategic Innovations Officer Carla Goldstein. Goldstein began her career as a corporate attorney and then moved into law firm management. She created Seyfarth’s Project Management Office and worked with Labor & Employment Chair Lisa Damon to drive SeyfarthLean from its inception to its firm-wide integration. Goldstein has a JD and an MBA, and is a certified project manager and Lean Six Sigma Green Belt. Goldstein has been involved in providing Fortune 500 companies with many innovative solutions, both in connection with the delivery of legal services as well as the client’s internal processes.

Goldstein has discovered that, “When working with our clients on joint process mapping sessions and other aspects of a SeyfarthLean project, the clients began to realize that there were areas within their own departments that they wanted to analyze for improved efficiencies. As SeyfarthLean was customized for the legal industry, it has been a solution that fits well with our clients’ internal processes.”

Representative consulting assignments have included the review and assessment of a large-scale asbestos litigation management structure, a multi-billion dollar cross-border M&A integration initiative with a two-year timeline, an evolution of the business model for a large non-profit that was nominated for the ABA’s Corporate Pro Bono Project of the Year, the review and streamlining of a large-scale real estate management system for a national restaurant development company, a litigation management optimization project for a national insurance company, creation of the full life cycle of selecting, engaging, managing and evaluating outside counsel for a global defense contractor and other optimization projects of similar size and scale. In addition to the efficiency studies, SLC has allowed clients to share resources and costs for large-volume complex to non-complex transactions such as IT procurement, logistics, research and development and confidentiality agreements. SLC manages the workflow and quality assurance for the full stream of a client’s matters.

Seyfarth Shaw Adds to National Labor & Employment Practice

Tue, 29 Nov 2011 00:00:00 -0400

Contact:

Ivette Delgado, Senior Public Relations Associate
(212) 218-5273, idelgado@seyfarth.com

CHICAGO (November 29, 2011) – Leading law firm Seyfarth Shaw LLP is pleased to announce that Christine Hendrickson has joined the Chicago office of the firm as senior counsel in the Labor & Employment Department and as a member of the Labor & Employment Office of Federal Contract Compliance Programs (OFCCP) & Affirmative Action Compliance practice group, as well as the Diversity Team. She previously worked in the employment law department of Paul Hastings LLP.

Hendrickson advises clients of all sizes and industries in matters involving OFCCP proceedings, including audits, enforcement actions and other litigation. She also provides strategic guidance and counseling to clients on diversity programs, reductions-in-force, pay equity and employment compliance diagnostics. Hendrickson represents employers covering a range of litigation matters challenging pay, promotion, hiring and other personnel decisions, and she also works with them to revamp and build personnel “best practices.”

“I am happy to join Seyfarth Shaw and become part its renowned Labor & Employment practice,” said Hendrickson. “The firm is the go-to for clients when counseling them on matters pertaining to OFCCP and affirmative action compliance, and it’s an ideal fit for my practice focus.”

Seyfarth’s Chicago Managing Partner David Rowland said, “We gladly welcome Christine to the firm, and we look forward to working with her.”

“Christine’s skill set is a great boost for our OFCCP & Affirmative Action Compliance team,” said Lisa Damon, Chair of Seyfarth Shaw's Labor & Employment Department. “We are delighted to have her on our team.”

Hendrickson received her undergraduate degree from Colby College and her law degree from the University of Michigan Law School. Hendrickson is a member of the Illinois and Washington, D.C. bars.

Quicker, If Not "Quickie" Elections

Tue, 29 Nov 2011 00:00:00 -0400

Earlier today, National Labor Relations Board ("NLRB") Chairman Mark Pearce issued a resolution to amend the June 22, 2011 proposed amendments to the NLRB's rules regarding the processing of representation cases.

The amendments which are expected to be voted on tomorrow, November 30, at a special meeting of the NLRB, although not as severe as the originally proposed rules, are nevertheless very problematic.

The amended rules would do the following:

Provide an NLRB hearing officer with the ability to limit the evidence that could be introduced at a representation case hearing.
Provide the hearing officer with the authority to deny a party the right to file a brief.
Eliminate a party's right to have the NLRB review a decision by a regional director to direct an election.
Eliminate current language that requires an election to be conducted within 25-30 days, thereby permitting elections to be held before the 25-day period.
Eliminate a party's right to have the NLRB review any decisions by a regional director or an administrative law judge regarding post-election disputes.

The resolution and an explanation of the proposed amendments can be found on the NLRB's website. The rules that remain from the originally proposed notice of rulemaking are still before the NLRB and may be addressed by the NLRB at a future date.

By: Jeffrey Berman and Jack Toner

Jeffrey Berman is a partner in Seyfarth's Los Angeles office and Jack Toner is senior counsel in the firm's D.C. office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Jeffrey Berman at jberman@seyfarth.com, or Jack Toner at jtoner@seyfarth.com.

Fiscal Year 2012 H-1B Quota Reached

Mon, 28 Nov 2011 00:00:00 -0400

As a result, USCIS will reject cap-subject petitions received after Tuesday, November 22nd for new H-1B workers seeking an employment start date in Fiscal Year 2012. USCIS will apply a computer-generated random selection process to all cap-subject petitions that USCIS received on November 22. Based on the timing of last year's lottery system, USCIS should provide lottery results by early December.

For additional background information on the H-1B visa program and the cap, please visit our previous One Minute Memos: "H-1B Work Permit Filings: Will You Beat the Cap?" and "Fiscal Year 2012 H-1B Cap Closing Fast."

By: John Quill

John Quill is senior counsel in Seyfarth's Boston office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, John Quill at jquill@seyfarth.com, or any immigration attorney on our website.

Supreme Court To Decide Whether Pharmaceutical Sales Representatives Meet The FLSA’s Outside Sales Exemption

Mon, 28 Nov 2011 00:00:00 -0400

At 10 a.m. EST today, the U.S. Supreme Court announced its decision to grant certiorari in Christopher v. SmithKline Beecham Corp. The Court will review a decision of the U.S. Court of Appeals for the Ninth Circuit, reported at 635 F.3d 38 (see Seyfarth Shaw's Wage & Hour Litigation Blog, www.wagehourlitigation.com, February 14, 2011 post), that held that pharmaceutical sales representatives are outside salespersons for purposes of the Fair Labor Standards Act and therefore are exempt from overtime. The Plaintiffs' petition, which SmithKline and the industry did not oppose, sought review of two issues:

(1) Whether deference is owed to an amicus brief submitted by the Department of Labor interpreting the outside sales exemption, and

(2) Whether the outside sales exemption applies to pharmaceutical sales representatives.

While the Supreme Court's docket does not yet indicate the specific issues on which the Court granted certiorari, it is most likely that it did so as to both of these issues.

The Ninth Circuit, in its rulings on these issues, rejected the "rigid, formalistic interpretation" of the term "sales" advocated by the plaintiffs and adopted by several other federal courts. The court compared the plaintiff pharmaceutical sales representatives to other types of sales employees and found that they "share many more similarities than differences," including the fact that they "are driven by their own ambition and rewarded with commissions when their efforts generate new sales." The Circuit Court also held that an amicus brief filed by the Department of Labor ("DOL") on behalf of the plaintiffs was not entitled to deference. The Ninth Circuit did not reach and the Supreme Court's review will not consider the applicability of the administrative exemption to pharmaceutical sales representatives.

The Ninth Circuit's decision is contrary to the Second Circuit's 2010 decision in In re Novartis Wage and Hour Litigation, which raised similar issues as well as the applicability of the administrative exemption to pharmaceutical sales representatives (which the Second Circuit rejected). In that case, the Second Circuit ruled that sales representatives for Novartis Pharmaceutical Corporation did not meet the criteria for either the outside sales of administrative exemptions. Giving controlling deference to an amicus brief filed by the Department of Labor ("DOL"), the Second Circuit held that because pharmaceutical sales representatives are prohibited by federal law from actually entering into contracts to sell their employer's products, they do not qualify for the outside sales exemption, which applies to employees "[w]hose primary duty is[] making sales." Several district courts, including the Northern District of Illinois, Southern District of Florida and District of Connecticut have also rejected application of the outside sales exemption to pharmaceutical sales representatives on similar grounds. Those decisions, along with cases decided in favor of the application of one or both exemptions by the Southern District of Indiana, Eastern District of Texas, and Eastern District of Pennsylvania, are either currently on appeal to the Fifth or Seventh Circuits or are expected to be appealed.

Given a typical schedule for briefing and argument at the Supreme Court, a ruling on this case is not likely until late next spring.

Deference to the DOL

The Supreme Court's decision in this case is likely to focus on the degree of deference to be afforded to the amicus brief submitted by the DOL in support of the plaintiffs' position before the Ninth Circuit. The amicus brief at issue is part of a larger strategy by the DOL – referred to as "ambush by amicus" by one pharmaceutical industry group – aimed at influencing the courts through the unsolicited submission of amicus briefs in cases it views as important. The Second Circuit in Novartis ruled that the DOL's interpretation of its own regulations in the brief was entitled to controlling deference. The Ninth Circuit, in stark contrast, held that no deference is required in this circumstance because the amicus brief represents a departure from "pharmaceutical industry norms[] and the acquiescence of the Secretary [in the exempt classification of similar positions] over the last seventy-plus years." The Ninth Circuit also decided that the DOL's regulations with respect to the outside sales exemption merely "paraphrase the statutory language," and that the DOL has no "special authority to interpret its own words" in such cases.

The Outside Sales Exemption

The outside sales exemption applies to any employee "[w]hose primary duty is[] making sales." Because federal law prohibits the sale of any prescription drug without the authorization of a licensed physician, pharmaceutical sales representatives cannot consummate a sale of any of their employer's products. Rather, they visit with physicians, describing the features and benefits of those medications in an effort to obtain a non-binding commitment from the physician to prescribe the drug when medically appropriate. The Novartis court held that such activities do not fit within the outside sales exemption because the term "sales" requires a transfer of title, while the Ninth Circuit held that the term "sales" must be interpreted broadly under a functional approach to include anyone who "in some sense" sells. The Supreme Court's review of this issue should clarify the scope of the outside sales exemption for employers and the courts.

Effect of the Supreme Court's Decision

The Supreme Court's decision in Christopher v. SmithKline will most directly affect the pharmaceutical industry. A decision by the Supreme Court on the scope of the outside sales exemption will also impact the ability of other employers to apply the functional approach to this exemption in determining whether employees are "making sales" where the final step of the sales process – closing the sale – is performed by others. Such a decision will mark the first time that Court has endeavored to interpret this exemption in the more than seventy-year history of the FLSA. A Supreme Court decision upholding the Ninth Circuit's decision will effectively resolve the exempt status of pharmaceutical sales representatives for those companies whose sales representatives operate in a manner similar to SmithKline's. On the other hand, if the Supreme Court reverses the Ninth Circuit's decision regarding the application of the outsides sales exemption, then pharmaceutical companies (and other employers whose exemption of "sales" employees depend on a functional approach to the outside sales exemption) will be left with the administrative exemption to support the exempt status of these employees.

Finally, the expected Supreme Court decision will also determine whether the DOL's "ambush by amicus" strategy will succeed. If the Court holds that the DOL's amicus brief in Christopher is entitled to deference – even if it is not entitled to the very high level of deference afforded by the Second Circuit in Novartis – it is likely that the agency will increase its involvement in wage and hour litigation going forward as a means to attempt to change positions taken by prior administrations without time-consuming notice-and-comment rulemaking. A Supreme Court decision siding with the Ninth Circuit on this issue will put an end to the DOL's amicus strategy and require the agency to engage in proper rulemaking.

We will update our readers and recipients of this Alert as developments warrant.

By: Richard Alfred and Jessica Schauer

Richard Alfred is a partner in Seyfarth's Boston office and Jessica Shauer is an associate in the firm's Boston office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Richard Alfred at ralfred@seyfarth.com, or Jessica Schauer at jmschauer@seyfarth.com.

Steven Pearlman Quoted in Perspectives Magazine
“Deputizing the Workforce: Will bounties motivate whistleblowers?”

Mon, 28 Nov 2011 00:00:00 -0400

Labor & Employment partner Steven Pearlman was quoted extensively in an article appearing in the Fall 2011 issue of Perspectives magazine. The article discussed the whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that went into effect earlier this year, and surmised on the effects these provisions will have on whistleblowing activity.

The Dodd-Frank Act grants the Securities and Exchange Commission (SEC) the right to reward eligible individuals who provide information that leads to an enforcement action in which more than $1 million in sanctions is ordered. These “whistleblowers” would be paid between 10 and 30 percent of any sanctions collected. In addition, whistleblowers can now take their complaints directly to the SEC, rather than going through company channels first.

Steve worries that because of Dodd-Frank, whistleblowers may wait to report problems until they escalate. “There are risks when employees bypass the internal reporting channels,” he says. “Shareholders are better protected when a prompt and thorough internal investigation is done. The longer a fraud can grow, the more evidence can get lost and the more damage can be done. The new structure through Dodd-Frank creates a perverse incentive for fraud to grow because the bigger the fraud, the bigger the bounty.”

Steve advises employers to improve internal reporting and early detection systems, and to use certification forms that ask employers to report any conduct they consider unethical, unlawful, or in violation of company policies that could result in financial injury. “Good faith, legitimate complaints from employees serve a great purpose for a company,” he asserts. “If I’m running a company and an employee is aware of a fraud, I want to know about it. I want them to help me police my company.”

Seyfarth Shaw

Tracy Billows Quoted in Westlaw Journal Employment“Justices: States not liable for damages under family-leave law”

Gerald Maatman Quoted in Risk & Insurance"Discrimination and the New EEOC"

Val Hoffman and Alex Passantino Quoted in Law360"Contractors Must Offer Jobs To Predecessor Workers, Feds Say"

California Court Holds That Federal Labor Law Does Not Preempt Wage Deduction Claim

The Facts

Case Background

The Court of Appeal's Decision

What Sciborski Means for Employers

Justice Department Extends ADA Compliance Deadline For Pools And Spas To January 31, 2013 But Leaves “Fixed” Lift Requirement Intact.

Camille Olson Quoted in Time“Hard Labor. Inside the mounting backlash against unpaid internships”

Minh Vu Quoted in Hotel Management"House of Representatives may remove pool lift installation extension from ADA rules"

Richard Alfred Quoted in Business Insurance and Workforce Management"Pharmaceutical Sales Reps Exempt from FLSA Overtime Rules"

Richard Alfred Quoted in The Fiscal Times"Managers Sue for Overtime, Citing Unfair Practices"

Camille Olson Quoted in The New York Times“The Uses and Misuses of Unpaid Internships”

Richard Alfred Quoted in The AmLaw Litigation Daily"Seventh Circuit Muddies Waters on Overtime Pay for Pharma Sales Reps"

Seyfarth Shaw Appoints New Los Angeles Managing Partner

DOL Provides Additional Guidance on Participant Fee Disclosures

Applicability of the Regulations to Certain Plans

Types of Investments for Which Disclosures Must be Provided

Disclosures of Administrative Expenses Charged to Individual Accounts

Other Guidance on How to Provide the Disclosures

Next Steps

Timothy Haley, Scott Schaefers and Reema Kapur Published in Law360"Recent Class Decision Highlights the Perils of Exchanging Wage Information"

Richard Alfred Quoted in Law360"7th Circ. Says Admin OT Exemption Covers Pharma Sales Reps"

The Daily Journal Names Pair of Seyfarth Partners “Top Women Lawyers”

Richard Alfred Quoted in Forbes"Court Rebuffs Labor Dept. On Sales Rep Overtime"

Strategy & Insights: Managing Transgender Issues in the Workplace Following The EEOC's Macy Ruling

The EEOC's Ruling in Macy

What the Macy Decision Means for Employers

Employer Best Practices in Addressing Transgender Issues in the Workplace

California Supreme Court: Neither Side Can Recover Attorney’s Fees In Meal and Rest Break Cases

The Proceedings in the Trial Court And The Court of Appeal

The Supreme Court Decision

What Kirby Means For Employers

Percentage Rent Delays - Time is Money...

OFCCP News You Can Use: The Latest Developments and Upcoming Events

OFCCP Starts New Round of CSALs

Inaugural Southeast Industry Liaison Group Regional Conference To Be Held in Charlotte

Seyfarth Shaw to Host Breakfast Briefing on OFCCP's Increasingly Aggressive Enforcement and Regulatory Activities

Greater LA ILG to Host OFCCP Director Shiu

2012 Cal-Peculiarities: How California Employment Law is Different

Seyfarth Shaw Issues 13th Annual Edition of Cal-Peculiarities - The Definitive 2012 Guide to California’s Distinctive Employment Laws and Workplace Regulations

Pamela Devata Quoted in Chicago Daily Law Bulletin“EEOC tells employers to handle criminal records with caution”

Greetings to all of those who attended our March Webinar "Dealing With The EEOC In 2012: Strategies For Employers Targeted In The Commission’s Systemic Enforcement Litigation Program"

Calculating and Paying the Comparative Effectiveness Research Fee

Fee Assessed Against “Group Health Plan” Sponsors

Calculating Covered Lives

Paying the Fee

Frederic Singerman and Jill Keblawi Published in the Journal of Pension Benefits"Interest on Delayed Pension Payments: The Emerging New Normal?"

Pamela Devata Quoted in CQ Researcher"Criminal Records and Employment"

Pamela Devata Quoted in Law360“EEOC Hints Case-By-Case Criminal Checks A Better Bet”

David Kadue Quoted in SHRM and La Opinion"Ruling seen as victory for California employers" and "Corte Suprema falla a favor de empleadores Corte Suprema falla a favor de empleadores"

Brian Ashe Quoted in The Recorder"Rest Break Ruling a Plus for Plaintiffs Lawyers"

Steven Pearlman Quoted in Law360"DOL Ruling Makes SOX Whistleblower Cases Harder to Beat"

Bart Lazar Quoted in Legal Bisnow"5 Key Points on Privacy"

Gerald Maatman Quoted in Law360"EEOC Must Disclose Credit Check Info In Kaplan Bias Suit"

Classy Opinion Gives Win To Employer Resisting Class Action

The Trial Court Decision

The Court's Holding

What Kinecta Means For Employers

David Bizar Published in insideARM.com"Massachusetts First State to Require Creditors to Validate Consumer Debts"

Pamela Devata Quoted in BNA Human Resources Report"EEOC Updates Enforcement Guidance on Employers' Use of Criminal Histories"

Emma Mata Featured by NBC Latino"Attorney volunteers to help children avoid deportation"

MultiCultural Law Magazine Nationally Ranks Seyfarth Shaw for Diversity

Gerald Maatman Quoted in Advisen News"Plaintiffs Bar 'Reboots' on EPL Suits"

Richard McArdle Quoted in Law360"Judge Denies Class Status To 9,000 ARIC Agents In Wage Suit"

Valerie Hoffman Quoted in Law360"Obama Won't Order Ban On Anti-Gay Bias By Contractors"

Loren Gesinsky Quoted in the New York Law Journal"Develop the 'Write' Stuff"

Does My Plan Provide Minimum Value?

Background

Three Options for Measuring Minimum Value

Strategies for Achieving Minimum Value

Request for Comments on Minimum Value and 2014 Reporting Requirements

Seyfarth Shaw Names New Chicago Labor & Employment Department Practice Chair

Ilan Barzilay Quoted in Boston Business Journal"Akamai case tests IP law boundaries: Company says rival violated its patents on speeding Web video"

Richard Alfred Quoted in Dayton Daily News Article"More workers suing employers over wage issues"

Pamela Devata Quoted by the Associated Press and Picked Up by the Huffington Post, FOX News, ABC, Yahoo!, The New York Times, The Miami Herald, The Boston Globe, The Denver Post, The Fresno Bee and More"New gov't guidance on employee background checks"

Gerald Maatman and Christopher DeGroff Quoted in Inside Counsel"EEOC's discrimination crackdown poses challenges for employers"

OFCCP News Roundup

Tracy Billows Quoted in Westlaw Journal Employment
“Justices: States not liable for damages under family-leave law”

Gerald Maatman Quoted in Risk & Insurance
"Discrimination and the New EEOC"

Val Hoffman and Alex Passantino Quoted in Law360
"Contractors Must Offer Jobs To Predecessor Workers, Feds Say"

Camille Olson Quoted in Time
“Hard Labor. Inside the mounting backlash against unpaid internships”

Minh Vu Quoted in Hotel Management
"House of Representatives may remove pool lift installation extension from ADA rules"

Richard Alfred Quoted in Business Insurance and Workforce Management
"Pharmaceutical Sales Reps Exempt from FLSA Overtime Rules"

Richard Alfred Quoted in The Fiscal Times
"Managers Sue for Overtime, Citing Unfair Practices"

Camille Olson Quoted in The New York Times
“The Uses and Misuses of Unpaid Internships”

Richard Alfred Quoted in The AmLaw Litigation Daily
"Seventh Circuit Muddies Waters on Overtime Pay for Pharma Sales Reps"

Timothy Haley, Scott Schaefers and Reema Kapur Published in Law360
"Recent Class Decision Highlights the Perils of Exchanging Wage Information"

Richard Alfred Quoted in Law360
"7th Circ. Says Admin OT Exemption Covers Pharma Sales Reps"

Richard Alfred Quoted in Forbes
"Court Rebuffs Labor Dept. On Sales Rep Overtime"

Pamela Devata Quoted in Chicago Daily Law Bulletin
“EEOC tells employers to handle criminal records with caution”

Frederic Singerman and Jill Keblawi Published in the Journal of Pension Benefits
"Interest on Delayed Pension Payments: The Emerging New Normal?"

Pamela Devata Quoted in CQ Researcher
"Criminal Records and Employment"

Pamela Devata Quoted in Law360
“EEOC Hints Case-By-Case Criminal Checks A Better Bet”

David Kadue Quoted in SHRM and La Opinion
"Ruling seen as victory for California employers" and "Corte Suprema falla a favor de empleadores Corte Suprema falla a favor de empleadores"

Brian Ashe Quoted in The Recorder
"Rest Break Ruling a Plus for Plaintiffs Lawyers"

Steven Pearlman Quoted in Law360
"DOL Ruling Makes SOX Whistleblower Cases Harder to Beat"

Bart Lazar Quoted in Legal Bisnow
"5 Key Points on Privacy"

Gerald Maatman Quoted in Law360
"EEOC Must Disclose Credit Check Info In Kaplan Bias Suit"

David Bizar Published in insideARM.com
"Massachusetts First State to Require Creditors to Validate Consumer Debts"

Pamela Devata Quoted in BNA Human Resources Report
"EEOC Updates Enforcement Guidance on Employers' Use of Criminal Histories"

Emma Mata Featured by NBC Latino
"Attorney volunteers to help children avoid deportation"

Gerald Maatman Quoted in Advisen News
"Plaintiffs Bar 'Reboots' on EPL Suits"

Richard McArdle Quoted in Law360
"Judge Denies Class Status To 9,000 ARIC Agents In Wage Suit"

Valerie Hoffman Quoted in Law360
"Obama Won't Order Ban On Anti-Gay Bias By Contractors"

Loren Gesinsky Quoted in the New York Law Journal
"Develop the 'Write' Stuff"

Ilan Barzilay Quoted in Boston Business Journal
"Akamai case tests IP law boundaries: Company says rival violated its patents on speeding Web video"

Richard Alfred Quoted in Dayton Daily News Article
"More workers suing employers over wage issues"

Pamela Devata Quoted by the Associated Press and Picked Up by the Huffington Post, FOX News, ABC, Yahoo!, The New York Times, The Miami Herald, The Boston Globe, The Denver Post, The Fresno Bee and More
"New gov't guidance on employee background checks"

Gerald Maatman and Christopher DeGroff Quoted in Inside Counsel
"EEOC's discrimination crackdown poses challenges for employers"

Gerald Maatman Quoted in The Wall Street Journal MarketWatch
"Employers advised on considering arrest records"

Elizabeth Schrero Published in Real Estate Dispute Resolution: Leading Lawyers on Selecting and Implementing the Best Resolution Method
"Developing Effective Strategies for Resolving a Client's Real Estate Dispute"

Gerald Maatman and Christopher DeGroff Published in Securities Litigation Report
“Class Action Watch: Case Law Developments in EEOC-Initiated Litigation & Trends to Watch for in 2012”

Gerald Maatman Quoted in Law360
"EEOC Fights to Keep Method for Pursuing Large-Scale Cases"

Dennis Greenstein Quoted in The New York Times
"Q&A When Hiring a Moonlighting Super"

Bart Lazar Quoted in FTC: WATCH
“FTC in the spotlight in new Obama privacy proposal”

Valerie Hoffman Quoted in Law360 Article
"House Dems Push Obama To Outlaw LGBT Bias In Contracting"

Richard Alfred Quoted in MSNBC.com Article
"Off the clock: Employees fighting for overtime pay"

Richard Alfred Quoted in USA Today
"More American workers sue employers for overtime pay"

Gerald Maatman Quoted in the Chicago Tribune
"Wal-Mart ruling that quashed many class actions helps bolster Merrill Lynch broker's case"

Robert Milligan Published in the Intellectual Property & Technology Law Journal
"Top 10 Developments/Headlines in Trade Secret Computer Fraud, and Non-Compete Law"

Steven Pearlman Quoted in InsideCounsel
"Whistle Stoppers, Five ways to protect your company from whistleblower liability"

Jennifer Kraft Quoted in Benefits Pro
"Striking individual mandate poses potential employer challenges"

Christopher DeGroff quoted in Detroit Free Press
"Bias cases hit record numbers at EEOC"

Richard Alfred Quoted in Law360
"Incompatibility Defense In Hybrid Wage Suits Down, Not Out"

Leon Sequeira Quoted in the International Business Times
"Supreme Court Health Care Case: Do Oral Arguments Really Matter?"

Leon Sequeira Quoted in Health Data Management
"The View from Inside the Supreme Court"

Rebecca Woods Quoted and Featured in Law360
"Rising Star: Seyfarth's Rebecca Woods"

Jennifer Kraft Quoted in Scrip Magazine
"Supreme Court justices question Congress' commerce powers in health reform case"

Brian Ashe Quoted in Law360
"Clear Win or Employers Unlikely in Upcoming Brinker Ruling"

Katherine Perrelli Quoted and Alexander Jeffrey Mentioned in Legal Bisnow
"The Mysterious, True Story of An Art Deal"