Germany’s Financial Regulator Implements New Electronic System Guaranteeing Whistleblowers Absolute Anonymity and Non-traceability

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As we reported last summer, Germany’s Financial Supervisory Authority (BaFin) set up a centralized platform for receiving whistleblower complaints of alleged violations of supervisory provisions within the financial sector.

Beginning this year, the BaFin implemented a new electronic system, allowing whistleblowers to submit their reports. The system guarantees the informants absolute anonymity, while on the other hand enabling the BaFin to make contact regarding possible inquiries. Thereby, although taking place on anonymous basis, the newly installed communication channel is expected to give BaFin the opportunity to verify the truth value of the submitted information by posing further questions, e.g. regarding the background of the complaint. READ MORE

BREAKING DEVELOPMENT: Supreme Court to Rule on Enforceability of Class Action Waivers in Arbitration Agreements

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In August of 2016, we reported that the Ninth Circuit created a deeper circuit-split on whether class action waivers in arbitration agreements violate the National Labor Relations Act (“NLRA”) with its decision in Morris v. Ernst & Young LLP.

As expected, the Supreme Court granted review today of three of the conflicting Court of Appeals decisions. It granted review of the Fifth Circuit’s decision in Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015). The Fifth Circuit rejected the National Labor Relations Board’s (“NLRB”) position that class action waivers unlawfully interfere with employees’ NLRA rights to engage in concerted activity, agreeing with the Second and Eighth Circuits. The Ninth and Seventh Circuits, on the other hand, adopted the NLRB’s position that class action waivers violate the NLRA.

The Supreme Court also granted review in Morris v. Ernst & Young, 834 F.3d 975 (9th Cir. 2016) and Epic Systems Corp. v. Lewis, 823 F.3d 1147 (7th Cir. 2016). The Seventh Circuit held that an arbitration agreement precluding collective arbitration or collective action violates section 7 of the NLRA and is unenforceable under the FAA. The Ninth Circuit agreed and concluded that compulsory class action waivers violate sections 7 and 8 of the NLRA by limiting workers’ rights to act collectively, noting in footnote 4 that agreements containing an “opt-out” clause for pursuing class claims do not violate the NLRA.

All three cases have been consolidated and will be argued together.

 

Game Over for NCAA Student Athletes Seeking Employee Status? 7th Circuit Affirms Dismissal of U. Penn Athletes’ FLSA Complaint

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On December 5, 2016, the Seventh Circuit affirmed dismissal of a complaint filed by two University of Pennsylvania track and field athletes against the National Collegiate Athletic Association, the university, and more than 120 other NCAA Division I universities and colleges alleging that student athletes are entitled to minimum wage under the Fair Labor Standards Act (“FLSA”). In Berger v. NCAA, the court held that student athletes are not “employees” within the meaning of the FLSA and thus, are not entitled to a minimum wage for their athletic activities. READ MORE

New York State Rings in the New Year by Adopting Increased Salary Basis Thresholds

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Just before their December 31, 2016 planned effective date, the regulations proposed by the New York State Department of Labor in October 2016 were formally adopted on December 28, 2016. Pursuant to the regulations, New York City employees need to be paid a minimum of $42,900 annually to be considered exempt from overtime under the administrative and executive exemptions.  Lower salary thresholds have been established for small New York City employers (10 or fewer employees) and for employers outside of New York City.  An employee who earns less than the salary thresholds on and after December 31, 2016 will become non-exempt and overtime eligible unless their salaries are increased above the new salary threshold.  New York State employers should also be mindful that the salary thresholds will increase annually through 2020.  A complete schedule of the new salary thresholds by employer location and size can be found here.

For employers who might have suspended or reversed decisions to reclassify employees or increase their salaries when the federal overtime regulations were enjoined last month, the New York State Department of Labor did not leave much time to consider the options and address compensation practices.  Although just formally adopted, the regulations are effective on December 31, 2016 as had been contemplated in the proposed regulations. (See New Minimum Wage FAQs).

EEOC Issues First Update on National Origin Discrimination Since 2002

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In its first update in 14 years, the U.S. Equal Employment Opportunity Commission (EEOC) issued new Enforcement Guidance on National Origin Discrimination (“Enforcement Guidance”) on November 21, 2016, replacing its 2002 Compliance Manual on National Origin Discrimination. With input from approximately 20 organizations and individuals, the Enforcement Guidance addresses important legal developments over the past 14 years on national origin issues ranging from employment decisions and workplace harassment to human trafficking. READ MORE

Pulling the Seat From Under PAGA Plaintiffs

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From the time of its enactment, the California Private Attorneys General Act of 2004 (“PAGA”) has been a thorn in the side of employers.  For example, the California Supreme Court insists PAGA actions are not class actions, but that hasn’t stopped aggrieved employees from seeking class-wide discovery.  And because PAGA permits employees to seek penalties for unconventional causes of action previously off-limits to private plaintiffs (such as the California Wage Order’s suitable seating requirement), employers must grapple with new uncertainties. 

But one aspect of PAGA that provides some relief to employers is the requirement that plaintiffs exhaust administrative remedies before filing a lawsuit.  To satisfy this this requirement, a plaintiff is required to send a notice to her employer and the Labor Workforce Development Agency (“LWDA”) setting forth the “specific provisions” of the Labor Code allegedly violated and explaining the “facts and theories to support the alleged violation” and then wait 65 days before filing suit.  This notice requirement has two purposes: (1) to give the LWDA sufficient information to determine whether the alleged violation justifies an investigation and/ or citation and (2) to put the employer on notice so that it may voluntarily cure the alleged violation. Oftentimes, however, plaintiffs’ notice letters are deficient because they fail to include sufficient facts and theories to inform the employer or the LWDA of the nature of the claims.  In such cases, plaintiffs have failed to exhaust administrative remedies. 

Judge Gonzalo Curiel’s recent decision in Gunn v. Family Dollar Stores, Inc., Case No.: 3:14-cv-1916-GPC-BGS (S.D. Cal. Dec. 2, 2016), reminds us of the standard that notice letters must meet.  Plaintiff Gunn’s notice letter advised the LWDA of his intent to file a PAGA action for violations of Wage Order 7-2001, Section 14, and “[s]pecifically . . . allege[d] that Family Dollar failed to provide suitable seats to Plaintiff and other current and former employees when the nature of their work reasonably permits the use of seats, in violation of California Labor Code section 1198 and Wage Order 7-2001, section 14.”  Judge Curiel held that such an allegation was insufficient to meet PAGA’s standards.  As he noted, plaintiffs must detail the “facts and theories” supporting their alleged violations. But here, the plaintiff’s allegations simply parroted the language of the underlying regulation, amounting to nothing more than a “string of legal conclusions” devoid of any of the facts or theories required by the Labor Code.  The court rejected the plaintiff’s contention that facts could be implied by his allegations (i.e., that the class of employees at issue would not include office employees because they have seats). 

The most notable aspect of Judge Curiel’s opinion, however, was his denial of the plaintiff’s request for leave to amend.  Although the court recognized leave to amend tends to be granted freely, he disagreed that applied to defective PAGA notices.  The court stated that “courts have granted PAGA claimants leave to amend only when the plaintiff’s complaint failed to adequately plead exhaustion, not when Plaintiff provided defective notice to the LWDA” (emphasis added).  Indeed, granting the plaintiff leave here would tacitly endorse a strategy that precludes the LWDA from receiving the information necessary “to intelligently assess the seriousness of the alleged violation,” thereby frustrating the purpose of PAGA’s statutory notice requirement.

While the unpublished opinion in Gunn will not likely mark a sea change in how courts treat PAGA actions, it is nevertheless a victory for California employers.  Those facing suitable seats claims, which are based on a notoriously ambiguous statute, may have the most to gain. 

 

Whistle While You Work: SEC Whistleblower Office Releases Its 2016 Annual Report

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The SEC released its Fiscal Year 2016 Annual Report (the “Report”) to Congress on the Dodd-Frank Whistleblower Program on November 15, 2016. The Report analyzes the tips received over the last twelve months by the SEC’s Office of the Whistleblower (“OWB”), provides additional information about the whistleblower awards to date, discusses the OWB’s efforts to combat agreements that chill whistleblowers, and describes the OWB’s recent activity in the anti-retaliation arena.

Breakdown of Tips Received in FY 2016

The OWB reported a modest increase in the number of whistleblower tips and complaints that it received in 2016–4,218 tips in 2016 compared to 3,923 tips in 2015. Overall, the 2016 whistleblower tips were similar in number and type of whistleblower tips reported in 2015. As in 2015, the most common types of allegations in 2016 were Corporate Disclosure and Financials (22%), Offering Fraud (15%), and Manipulation (11%). Most whistleblowers, however, selected “Other” when asked to describe their allegations.

The OWB received whistleblower tips and complaints from all 50 states, the District of Columbia, and Puerto Rico. Domestically, the largest number of whistleblower complaints and tips were from California (547), New York (296), Florida (239), and Ohio (230). Additionally, the OWB received whistleblower tips from individuals located in 67 foreign countries. Of these, the countries from which the largest number of tips originated were Canada (68), the United Kingdom (63), Australia (53), the People’s Republic of China (35), Mexico (29), and India (20), with Germany, Ireland, and Taiwan being other countries from which the SEC received more than 10 tips.

More Questions for Employers As DOL Appeals Preliminary Injunction of Overtime Rules

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On December 1, 2016, the date that the Department of Labor regulations were set to become effective, the government filed a notice of appeal [link to http://dciconsult.com/wp-content/uploads/2016/12/DOL-appeal.pdf] of the November 22, 2016 the United States District Court for the Eastern District of Texas’s Order granting a nationwide preliminary injunction “from implementing and enforcing” the DOL’s new overtime regulations. Those regulations would have raised the minimum salary level for exempt employees from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). The Court’s ruling was based, in part, on its holding that the DOL exceeded its delegated authority by changing the salary basis test at a level that was contrary to Congress’ intent that executive, administrative and professional employees be exempted from coverage of the FLSA. A full copy of the injunction order can be found here. In the wake of the Court’s ruling and now uncertain future regarding the DOL’s new overtime rules, we thought it would be helpful to provide some interim guidance on frequently asked questions we have received since the Court’s ruling.  READ MORE

California Divide: What California Employers Can Expect In 2017

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As California goes, so goes the nation. When it comes to employment law, the Golden State is continuing down a path of increased regulation. With 2017 right around the corner, here are some new laws California employers must prepare for – all effective Jan. 1, 2017 unless otherwise stated: READ MORE