Posts by: Michael Disotell

All Aboard! California Law Requires More Female Representation on Boards of Directors

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As part of its effort to close gender-based pay gaps, California will now require companies to increase female representation on boards of directors.

Currently, one in four publicly held corporations in California have no women on their boards of directors. SB 826, which Governor Jerry Brown signed into law at the end of September, requires that all publicly held corporations based in California have at least one woman director by December 31, 2019. That is not the end of the requirements; by December 31, 2021, companies with five authorized directors must have a minimum of two female board members, and companies with at least six directors must have a minimum of three females on the board. The California Secretary of State will publish the names of compliant and non-compliant companies on an annual basis. In addition to the “name and shame” provisions, non-compliant companies face fines of $100,000 for the first violation and $300,000 for subsequent violations.

The sponsors of the bill, Sens. Hannah-Beth Jackson (D-Santa Barbara) and Toni Atkins (D-San Diego), stated when introducing the bill: “More women directors serving on boards of directors of publicly held corporations will boost the California economy, improve opportunities for women in the workplace, and protect California taxpayers, shareholders, and retirees. . . . Yet studies predict that it will take 40 or 50 years to achieve gender parity, if something is not done proactively.”  The bill cites numerous independent studies stating that publicly held companies perform better in terms of profitability, productivity, and workforce engagement when women serve on their boards of directors. It follows the lead of Germany, France, Spain, Norway, and the Netherlands that have addressed the lack of gender diversity on corporate boards by instituting quotas requiring 30 to 40 percent of seats be held by female directors.

Gov. Brown noted in his signing letter that corporations have been considered “persons” for more than a century, so they should reflect the “persons” who make up America as a result.  The California Chamber of Commerce and a coalition of other businesses opposed the bill and argued that the mandate is unconstitutional and a violation of California’s civil rights statutes. While Gov. Brown acknowledged that the law could face legal challenges, he noted that “recent events . . . make it crystal clear that many are not getting the message.” Therefore, he felt signing the bill into law was a necessary measure.  No lawsuits have yet been filed.

In the meantime, California-based publicly held companies should act promptly to ensure that their boards of directors include the number of women directors needed to comply with the statute.

Belaboring The Point: Supreme Court Opens the Door to Dismantling Public Sector Union Membership in Janus v. AFSCME

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Just over two years ago, after the passing of Justice Antonin Scalia but before the confirmation of Justice Neil Gorsuch, the U.S. Supreme Court deadlocked in a 4-4 tie over whether unions could require non-members to pay “fair share fees.” The case challenged the Supreme Court’s 1977 Abood v. Detroit Board of Education precedent that allowed public sector unions to force non-union members to pay fees covering the cost of collective bargaining so long as the workers were not made to pay for a union’s political or ideological activities.

Recently, in Janus v. AFSCME, the Supreme Court returned to the issue. Ultimately, the Court held that allowing public sector unions to require non-union workers to pay fair share fees violates workers’ First Amendment rights, thereby overturning the Abood precedent.

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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 →

Pulling the Plug: New York City Bill Would Give Workers the “Right to Disconnect”

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It is now the norm to see passersby glued to their phones as they make their morning trek into work. And when those employees head home, they are often unable to “leave work at the office” as they continue to respond to evening messages, texts, and emails. Recent studies have shown that employees who spend time communicating about work matters and engaged in other work activities outside of working hours are less productive in the office and have a worse quality of sleep. Now, a novel bill introduced before the New York City Council seeks to end that practice by giving workers the ability to pull the plug on work communications during non-work hours.

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Take It Outside: Supreme Court Unanimously Holds That Internal Reporting Is Not Protected Under Dodd-Frank

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In the Supreme Court’s first decision interpreting Dodd-Frank’s whistleblower retaliation provisions, the Court unanimously held that internal whistleblowing is not protected under Dodd-Frank.  The highly anticipated ruling resolves a circuit split between the Second and Ninth Circuits, which held that such reporting was protected, and the Fifth Circuit, which held that it was not.  The Court sided with the Fifth Circuit’s textual reading and held that no Chevron deference to the SEC’s interpretation of the statute was warranted because the statutory definition of “whistleblower” was clear. READ MORE →

CEO’s Whistleblower Claims “Rest On Feet Of Clay”: Seventh Circuit Affirms Dismissal Of SOX and Dodd-Frank Case

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Earlier this month, the Seventh Circuit affirmed dismissal of a CEO’s whistleblower retaliation claims in a decision that should provide corporate defendants ammunition to fight SOX and Dodd-Frank whistleblower cases going forward.

In Verfuerth v. Orion Energy Systems, Inc., No. 16-3502 (7th Cir. Jan. 11, 2017), the plaintiff, founder and former CEO of Orion, claimed that Orion’s Board of Directors terminated him for cause in retaliation for making whistleblower complaints about perceived fraud on SEC reports and other managerial decisions.  Orion asserted that it terminated Verfuerth for numerous legitimate reasons, including falling stock prices, Verfuerth’s intimidating leadership style, high rates of senior management turnover, and other business disagreements such as reimbursement for Verfuerth’s costly divorce. 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 →

Laying Down the Law(son): Jury Returns Defense Verdict in First SOX Whistleblower Case to Reach the U.S. Supreme Court

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An individual who convinced a divided U.S. Supreme Court in 2014 that Sarbanes-Oxley’s (“SOX”) whistleblower protections extend to the employees of a public company’s contractors and subcontractors has ultimately lost her case before a federal jury in Massachusetts, thus ending her ten-year legal saga.

Lawson claimed that in 2005 she spotted what she believed were accounting irregularities at Fidelity that allowed the company to charge millions of dollars in excessive fees to mutual fund shareholders.  She never called Fidelity’s information hotline to report the inaccuracies, but instead filed a whistleblower tip a year later with the SEC regarding the alleged fraud.  While the SEC did not pursue an enforcement action against the company, Lawson claimed that Fidelity managers and employees harassed her and retaliated against her for the reporting by giving her lower performance ratings and bonuses.  Lawson resigned in 2007 and sought whistleblower protections under SOX. READ MORE →

Joint Responsibility: Companies Should Keep an Eye on the Shifting Legal Landscape of Joint Employment

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As Congress considers a bill to change the definition of joint employment under two federal statutes, the Supreme Court is poised to decide whether to take up the issue under the Fair Labor Standards Act, the U.S. Department of Labor has withdrawn administrative guidance issued by the prior administration, and several states have enacted or considered joint employment legislation.  In this rapidly evolving legal landscape, companies may want to keep a close eye on a doctrine that can lead to unexpected legal exposure. READ MORE →

Looking the Other Way: European Court of Human Rights Grand Chamber Determines Employer Monitoring of Electronic Communications May Violate Employees’ Privacy

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In a case highlighting the European Continent’s approach to worker privacy, the Grand Chamber of the European Court of Human Rights ruled that employers may violate employees’ rights when monitoring their electronic correspondence in the workplace.  In Barbulescu v. Romania, the Grand Chamber reversed a prior decision from a smaller panel of the European Court of Human Rights (“ECtHR”) which had determined companies have far-reaching authority to monitor employees’ electronic communications—a similar standard to that which exists in the United States. READ MORE →