On May 26, the U.S. Court of Appeals for the Seventh Circuit held that a wage-and-hour class arbitration clause violated the National Labor Relations Act (NLRA), setting up a circuit split with the Fifth Circuit, and opening the door for the U.S. Supreme Court to weigh in on arbitration clauses in employment agreements containing class action waivers.
On February 2, 2016, the Third Circuit affirmed the dismissal of a long-running SOX whistleblower suit filed by Jeffrey Wiest, a former accounts payable manager for Tyco Electronics. The decision is the first in which the Third Circuit has defined the “contributing factor” causation standard for SOX retaliation cases and provides helpful guidance on the issue.
Asia Employment Law Update
Proposed Regulations May Complicate Reductions in Force in China
On December 31st, 2014, Ministry of Human Resources and Social Security (“MOHRSS”) issued a notice to solicit public opinions on the draft Regulations on Personnel Cutbacks by Enterprises (“Draft Regulations”). The Draft Regulations set out detailed implementing rules for “mass layoffs” (defined under the Labor Contract Law as being a layoff of more than 10% of the workforce or more than 20 employees) and, if adopted in their current form, will further complicate the process for conducting reductions in force in China.
On August 4, 2015 the Securities and Exchange Commission issued interpretive guidance elaborating its view that the anti-retaliation provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act apply equally to tipsters who claim retaliation after reporting internally, as well as those who are retaliated against after reporting information to the SEC. The guidance reflects that there is a split among federal courts over whether Dodd-Frank’s whistleblower retaliation provisions apply to internal as well as external reporting, and recognizes that the only circuit court to decide the issue to date, the Fifth Circuit, has taken a contrary position to that of the Commission in Rule 21F, the regulation the SEC adopted to implement the whistleblower legislation, holding that internal reports are not protected by Dodd-Frank. Whether internal reports qualify for Dodd-Frank coverage has important implications because, among other things, Dodd Frank provides enhanced recoveries (including two times back pay) and longer time frames (six years) for bringing a retaliation claim than would be available under the anti-retaliation provisions in the Sarbanes-Oxley Act of 2002.
In Berman V. Neo@Ogilvy LLC, 1:14-cv-523 (Dec. 4, 2014), Judge Gregory Woods of the Southern District of New York dismissed a Dodd-Frank whistleblower retaliation claim on the ground that internal reporting is not protected under the statute. In so holding, the court rejected the reasoning of a majority of district courts to address the issue to date (including several Southern District of New York decisions), as well as the SEC’s interpretation of the statute, and instead adopted the reasoning of the Fifth Circuit in Asadi v. GE Energy (USA), L.L.C. and a minority of district courts, which have held that “the language of the statute unambiguously requires that a person provide information to the [SEC] in order to qualify as a whistleblower under the Act.” You can find our prior blog posts on the split over this issue here (March 4, 2014), here (January 28, 2014), here (October 3, 2013), and here (July 18, 2013).
Thus, until the Second Circuit and other Circuit courts weighs in on this issue, the answer of whether internal reporting is protected under Dodd-Frank may hinge largely upon which district judge is assigned the case.
The Securities and Exchange Commission recently weighed in on a whistleblower case pending in the Second Circuit, urging the court in Liu v. Siemens, A.G. to adopt the SEC’s interpretation of the Dodd-Frank Act’s anti-retaliation provision. If the Second Circuit agrees, its ruling would create a circuit split over whether Dodd-Frank protects from retaliation internal whistleblowers who do not make a report to the SEC, likely teeing up the issue for resolution by the Supreme Court. READ MORE
On February 12, 2014, the Fifth Circuit in Villanueva v. U.S. Department of Labor held that an employee did not engage in protected activity under SOX when he reported alleged violations of Columbian tax laws to U.S. executives at his employer. READ MORE
Joining the ever growing list of opinions on the arbitrability of class claims, an NLRB Administrative Law Judge recently ruled that an arbitration agreement that did not expressly bar workers from bringing class or collective actions still violated federal labor law because the employer’s steps taken to enforce the agreement in court had the practical effect of doing so. READ MORE
On July 17, 2013, the Fifth Circuit issued the first circuit court decision interpreting Dodd-Frank’s anti-retaliation provision. In Asadi v. G.E. Energy (USA), L.L.C., the Fifth Circuit held that, to be protected under Dodd-Frank’s anti-retaliation provision, an individual must be a “whistleblower,” which is defined by the statute as an individual who has made a report to the SEC. Notably, this holding directly conflicts with the SEC’s regulations interpreting the Act, as well as five district court decisions that had all held that employees who make internal reports to company management are protected under Dodd-Frank even if they did not make reports to the SEC. Rejecting these analyses, the Fifth Circuit based its decision on the plain wording of the statute, which it found to be unambiguous in protecting only “whistleblowers” as defined by the Act. READ MORE
