Posts by: Mike Delikat

The Whistle Blows North of the Border: Canadian Securities Regulator Makes First-Ever Whistleblower Awards

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This article was co-authored by Omar Madhany, Associate at Borden Ladner Gervais LLP [1], and Mike Delikat, who co-heads the Whistleblowing Taskforce at Orrick.

On February 27, 2019, the Ontario Securities Commission (OSC)—Canada’s largest securities regulator—announced that it had awarded $7.5 million to three whistleblowers who provided tips that led to enforcement actions. (see OSC news release here). The awards are the first ever made under Ontario’s whistleblower bounty program, which was patterned closely after the bounty provisions of Dodd-Frank.  While these awards are small by comparison to recent SEC bounty awards of $54 million to two whistleblowers in September 2018 and a separate composite mega-award of $83 million to three whistleblowers in a single enforcement action on March 19, 2018, nonetheless these Canadian awards have garnered significant attention and press coverage in Canada.

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Employers: What FINRA’s Cryptocurrency Complaint Signifies For You

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Last week, the Financial Industry Regulatory Authority (“FINRA”) filed its first disciplinary action involving cryptocurrencies, conforming with its stated 2018 goal of monitoring and supervising the largely unregulated cryptocurrency market. FINRA’s actions reflect a long-anticipated and increased scrutiny on entities—including employers—dealing with cryptocurrency.

In the September 11 disciplinary complaint, FINRA alleged that a former Massachusetts broker, Timothy Tilton Ayre, committed securities fraud by avoiding registration requirements and selling an unregistered, cannabis-focused cryptocurrency security called HempCoin. Ayre purchased HempCoin in June 2015 and immediately advertised as “the first minable coin backed by marketable securities.” Ayre transformed the cryptocurrency into a security tied to his company, Rocky Mountain Ayre (“RMTN”), valuing each HempCoin as 0.1 shares of RMTN and trading over the counter. Investors mined over 81 million HempCoins through late 2017. However, Ayre failed to register HempCoin with the U.S. Securities and Exchange Commission (“SEC”).

FINRA’s action, coupled with recent joint statements by the Commodity Futures Trading Commission (“CFTC”) and the SEC addressing plans for heightened oversight of virtual currency regulation, reflect potential obstacles entities may face in dealing with cryptocurrency, or blockchain technology more broadly.

Growing start-ups or legacy companies with new industry sectors should be particularly mindful of the novel and transformative legal issues related to these emerging areas. For instance, although blockchain technology is generally expected to make data more secure, employers should continue to monitor their use of this technology for data privacy concerns related to information storage and programs for employment-related decisions. Further, employers should note that cryptocurrency is not currently recognized as legal tender in the United States.

The Federal Labor Standards Act (“FLSA”) mandates “payments of the prescribed wages, including [minimum wage and] overtime compensation, in cash or negotiable instrument payable at par.” 29 CFR § 531.27(a). The phrase “payable at par” allows cryptocurrencies to be a lawful method of payment under the FLSA, but employers should proceed with care if considering whether to use cryptocurrency to pay employee wages, particularly due to challenges with minimum wage and overtime calculations. Indeed, the legal designation for tax purposes is also unsettled: the SEC classifies cryptocurrency as a security; the CFTC says cryptocurrency is a commodity; and since 2014, the IRS has defined cryptocurrency as taxable property.

Given these ambiguities and emerging issues, employers dealing with cryptocurrency and incorporating blockchain technology into their practices should be aware of the potential legal implications and oversight in areas beyond the traditional employment law arena.

Connecticut Employer’s Defenses on Medical Marijuana User’s Discrimination Claim Go Up in Smoke

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A federal court in Connecticut recently granted summary judgment to a prospective employee on an employment discrimination claim brought under Connecticut’s Palliative Use of Marijuana Act (PUMA). The case, Noffsinger v. SSC Niantic Operating Co., LLC, d/b/a Bride Brook Nursing & Rehab. Ctr. (D. Conn. Sept. 5, 2018) adds to an evolving area of litigation regarding employees who use medical marijuana pursuant to a valid state-approved program. READ MORE →

The SEC Ends the Summer with Another Bountiful Award of over $54 Million to Two Whistleblowers

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On September 6, the SEC issued awards totaling more than $54 million to two whistleblowers who provided critical information and continued assistance to the agency in an enforcement action. This large award follows another composite mega-award of $83 million to three whistleblowers in a single enforcement action on March 19, 2018.

The September 6 award of $39 million to one claimant constitutes the second-largest award in the SEC whistleblower program’s history. The agency awarded the second whistleblower $15 million. Jane Norberg, Chief of the SEC’s Office of the Whistleblower, stated that whistleblowers “serve as invaluable sources of information, and can propel an investigation forward by helping [the SEC] overcome obstacles and delays in investigation.” READ MORE →

Can You Hear The Whistle Now? SEC Proposes New Rule Amendments To Bolster the Bounty Program

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On June 28, the Securities Exchange Commission (“SEC” or “Commission”) voted to propose amendments to its whistleblower program. As SEC Chair Jay Clayton explained, the proposed changes would “strengthen the whistleblower program by bolstering the Commission’s ability to more appropriately and expeditiously reward those who provide critical information that leads to successful enforcement actions.” The SEC issued a press release outlining the proposed rules, which would: (1) provide the Commission with additional tools in making whistleblower awards; (2) clarify the requirements for anti-retaliation protection under the whistleblower statute; (3) provide interpretive guidance to help clarify the meaning of “independent analysis”; (4) increase efficiencies in the whistleblower claims review process; and (5) clarify various miscellaneous policies and procedures. READ MORE →

Employment Law in Germany – Practical Bilingual English-Chinese Guidelines for Chinese Businesses and Investors

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Every Chinese investor not only needs to be aware of cultural differences when considering investing in Germany, but also has to have a basic understanding of legal issues.

German employment law provides for a good level of employee protection, for example in case of termination of employment. Being familiar with some basic principles of German employment law can help Chinese investors avoid pitfalls that may lead to severe sanctions by authorities as well as financial obligations towards employees.

Our Orrick Germany China Desk gives a brief outline of German employment law and what Chinese investors and businesses investing or doing business in Germany need to know in our bilingual English-Chinese guideline.

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Epic News for Employers: Class Action Waivers in Arbitration Agreements are Enforceable

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Employers across the country started the work week with some positive and long-awaited news.  On Monday, May 21, 2018, the U.S. Supreme Court ruled in a landmark case that employment arbitration agreements with class action waivers do not violate federal labor law.  The Court’s 5-4 decision in Epic Systems Corp. v. Lewis, No. 160285 (U.S. May 21, 2018), consolidated with Ernst & Young LLP et al v. Morris et al., No. 16-300, and National Labor Relations Board v. Murphy Oil USA, Inc., et al. , No. 16-307, was authored by Justice Gorsuch, and settles the longstanding dispute over whether arbitration agreements containing class waivers are enforceable under the Federal Arbitration Act (FAA) despite the provisions of Section 7 of the National Labor Relations Act (NLRA).   READ MORE →

Works Council Elections 2018 in Germany – Are You Ready?

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In Germany, regular works council elections are held every four years. The next election period is quickly approaching, starting on March 1, 2018.

Companies with business in Germany should prepare for the election process and employee initiatives to elect a works council. Our bilingual guide, based on years of experience, provides practical tips and legal considerations, navigates you through the election process and helps you avoid pitfalls that can be costly.

To access the full guide, please click here. If you have any questions, feel free to reach out to André Zimmermann, Head of our German Employment Law Practice, or Mike Delikat, Chair of our Global Employment Law Practice.

Legislators Quick to Respond to #Metoo

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Introduction

Since Anita Hill’s testimony in the early 1990s, sexual harassment has become a familiar term. At the federal level, Title VII prohibits harassment, discrimination, and retaliation on the basis of sex and gender, among other things. On the state level, the New York State Human Rights Law (“NYSHRL”) expands on the categories of protected classes covered by Title VII but is interpreted by the courts in largely the same manner as Title VII. Under California’s Fair Employment and Housing Act (“FEHA”), harassment is defined to include verbal harassment (such as derogatory comments), physical harassment (including physical interference with movement), visual harassment (such as derogatory cartoon or drawings), and sexual favors. FEHA prohibits sexual harassment because of a person’s sex, gender, gender identity, gender expression, sexual orientation, transgender status, pregnancy, and childbirth, breastfeeding, and related medical conditions. Harassment based on the perception of any of these characteristics is also prohibited, and sexually harassing conduct need not be motivated by sexual desire to be considered unlawful. READ MORE →

The Whistle Keeps Blowing: SEC Whistleblower Office Releases Its 2017 Annual Report

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The SEC released its Fiscal Year 2017 Annual Report (the “Report”) to Congress on the Dodd-Frank Whistleblower Program on November 16, 2017. 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, and discusses the OWB’s efforts to combat retaliation and other actions that muzzle whistleblowers. READ MORE →