- Posts by John F. Fullerton III
Member of the FirmWhen large global financial services, accounting, and consulting companies need to investigate claims of discrimination, retaliation, harassment, bullying, or other forms of alleged misconduct, they turn to attorney John ...
On June 25, 2018, President Trump signed into law the Whistleblower Protection Coordination Act (the “Act”), permanently reinstating the Whistleblower Ombudsman Program, which was created in 2012 to encourage employees of federal government administrative agencies to report wrongdoing but expired on November 27, 2017 due to a five-year sunset clause.
The Act, which Congress passed with bipartisan support, reauthorizes a “Whistleblower Protection Coordinator” at each administrative agency’s Office of Inspector General (“OIG”) to educate agency ...
We published an article with Thomson Reuters Practical Law summarizing key employment issues for financial services employers, highlighting those rules applicable to registered representatives regulated by Financial Industry Regulatory Authority (FINRA). With Thomson Reuters Practical Law’s permission, we have attached it here.
On March 19, 2018, the SEC issued an Order jointly awarding two whistleblowers more than $49 million, and awarding a third whistleblower more than $33 million, for reporting information to the SEC that led to its successful prosecution of an enforcement action against the perpetrators of securities violations.
In 2010, the Dodd-Frank Act amended the Securities Exchange Act of 1934 to include Section 21F, entitled “Securities Whistleblower Incentives and Protection.” Among other things, Section 21F established a whistleblower “bounty” program that entitles ...
On February 21, 2018, the U.S. Supreme Court resolved a circuit split and ruled in Digital Realty Trust, Inc. v. Somers that Dodd-Frank’s anti-whistleblower retaliation provision (15 U.S.C. § 78u–6(h)) does not protect employees who report alleged securities violations only to their employers, and not to the SEC.
Paul Somers ("Somers"), a former Vice President of Portfolio Management for Digital Realty Trust, claimed that his employer violated the whistleblower protections of Dodd-Frank by terminating him in retaliation for complaining to management about suspected ...
Last August, we reported on two significant cease-and-desist orders issued by the SEC that, for the first time, found certain language in the confidentiality and release provisions of separation agreements to violate the SEC’s Rule 21F-17(a), which precludes anyone from impeding any individual (i.e., a whistleblower) from communicating directly with the agency.[1] Since then, the SEC has continued its aggressive oversight of separation and confidentiality agreements, with substantial repercussions for some employers. These orders, a select number of which we summarize ...
Twice in the past two weeks, the Securities and Exchange Commission (“SEC” or “Commission”) issued a cease-and-desist order settling proceedings against companies for using confidentiality and waiver of claims provisions in employee separation or severance agreements that violate an SEC rule promulgated after passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The rule in question is designed to encourage and allow whistleblowers to freely disclose information to the SEC without impediments and ensure that they are (and ...
Businesses of all sizes and in virtually every industry face the daily threat of a data breach or other cybersecurity event, as well as the challenge of managing the potentially catastrophic economic and reputational harm that can flow from such an incident. Further complicating matters is that these threats can come from any number of sources: hackers, phishers, spammers, bot-network operators, spyware and malware authors, insiders, other nations, organized criminal groups, and terrorists. SEC regulations require registered financial institutions—including ...
Section 806 of SOX prohibits publicly traded companies, as well as their subsidiaries, contractors, subcontractors, and agents, from taking adverse personnel actions against employees for reporting activity that they reasonably believe constitutes mail fraud, wire fraud, bank fraud, securities fraud, or a violation of any Securities and Exchange Commission (“SEC”) rule or federal law relating to fraud against shareholders. In recognition of the legislative intent underlying SOX—to provide strong and broad-based protections for employees who report suspected ...
On February 25, 2016, Congressman Elijah E. Cummings (D-MD) and Senator Tammy Baldwin (D-WI) introduced the Whistleblower Augmented Reward and Nonretaliation Act of 2016 (or WARN Act of 2016) (pdf). The bill proposes expanded protections for individuals who blow the whistle on financial fraud and securities violations and, if enacted, could have significant implications for financial services employees and employers alike. Specifically, the WARN Act of 2016 aims to strengthen the protections and incentives available to financial crimes whistleblowers by amending the ...
As we mentioned before the holiday, I was recently interviewed on our firm’s new video program, Employment Law This Week. The show has now released “bonus footage” from that episode – see below.
I elaborate on my recent post with Jason Kaufman, “2nd Circuit Expands Dodd-Frank Anti-Retaliation Protection to Cover Internal Whistleblowing.”
[embed]https://youtu.be/YQWiGxbm8wI?list=PLi4sj4jEe5heNkhVnjMTh94ipZhPPpMVh[/embed]
On September 10, 2015, the Second Circuit Court of Appeals ruled in Berman v. Neo@Ogilvy LLC that an employee who reports an alleged securities violation only to his or her employer, and not to the SEC, is nevertheless covered by the anti-retaliation protections afforded by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”).
Berman, a former finance director of Neo@Ogilvy, claimed that his employer and its corporate parent, WPP Group USA, Inc., violated the whistleblower protections of Dodd-Frank by wrongfully terminating him for raising ...
On August 4, 2015, the SEC issued an "Interpretation of the SEC's Whistleblower Rules Under Section 21F of the Securities Exchange Act of 1934." (pdf). Unsurprisingly, and consistent with the position that it has been taking in amicus briefs on the issue, the SEC states that a whistleblower need not report suspected wrongdoing to the Commission in order to be protected by the anti-retaliation provisions of Dodd-Frank. Rather, internal whistleblowing that is protected under the Sarbanes-Oxley Act is protected activity sufficient to state a claim under Dodd-Frank, according to ...
On June 10, 2015, the much-anticipated joint final standards (“Final Standards”) issued by six federal agencies (“Agencies”) in accordance with Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("Act") for assessing the diversity policies and practices of the entities that they regulate (“Covered Entities”) were published and became effective. Covered Entities include financial institutions, investment banking firms, mortgage banking firms, asset management firms, brokers, dealers, financial services entities ...
On April 1, 2015, the SEC issued its first-ever enforcement action against a company for using overly restrictive language in one of its confidentiality agreements in violation of SEC Rule 21F-17(a). We posted previously regarding the settlement order between the SEC and KBR, Inc. In that Order, KBR, Inc., agreed to include the following language in its confidentiality agreements:
“Nothing in this Confidentiality Statement prohibits me from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the ...
Can an employee who blows the whistle on alleged securities law violations within the company (and is therefore protected by the anti-retaliation provision of the Sarbanes-Oxley Act), but does not blow the whistle externally to the SEC, also invoke the more advantageous anti-retaliation protections of the Dodd-Frank Act in a private lawsuit? Or is Dodd-Frank limited to protecting external whistelblowers? There is a growing split of authority on this question among various federal appellate and district courts. On June 17, 2015, the Second Circuit heard oral arguments on this ...
My colleague Laura A. Stutz at Epstein Becker Green has a Retail Labor and Employment Law blog post that will be of interest to employers doing business in New York City: “New York City Investigation of Hiring Practices:.
Following is an excerpt:
New York City’s Commission on Human Rights is now authorized to investigate employers in the Big Apple to search for discriminatory practices during the hiring process. This authority stems from a law signed into effect by Mayor de Blasio that established an employment discrimination testing and investigation program. The program is ...
My colleague Nathaniel M. Glasser recently authored Epstein Becker Green’s Take 5 newsletter. In this edition of Take 5, Nathaniel highlights five areas of enforcement that U.S. Equal Employment Opportunity Commission (“EEOC”) continues to tout publicly and aggressively pursue.
My colleagues Michael S. Kun and Jeffrey H. Ruzal at Epstein Becker Green wrote a Wage and Hour Defense blog post that will be of interest to all financial services employers: “Proposed DOL Rule To Make More White Collar Employees Eligible For Overtime Pay.”
Following is an excerpt:
More than a year after its efforts were first announced, the U.S. Department of Labor (“DOL”) has finally announced its proposed new rule pertaining to overtime. And that rule, if implemented, will result in a great many “white collar” employees previously treated as exempt becoming ...
It is important for financial services employers to remember that the National Labor Relations Act protects their employees even when those employees are non-union, and that when groups of employees engage in discussions about their terms and conditions of employment via the employer’s email system, that conduct may constitute protected activity for which the employees may not be punished. A recent example is highlighted by my colleague Nancy L. Gunzenhauser at Epstein Becker Green in a Management Memo blog post: “NLRB Dramatically Educates Private School on Meaning of ...
My colleague Joshua A. Stein at Epstein Becker Green has a Hospitality Labor and Employment Law blog post that will be of interest to many of our readers: “DOJ Further Delays Release of Highly Anticipated Proposed Website Accessibility Regulations for Public Accommodations.”
Following is an excerpt:
For those who have been eagerly anticipating the release of the U.S. Department of Justice’s proposed website accessibility regulations for public accommodations under Title III of the ADA (the “Public Accommodation Website Regulations”), the wait just got even ...
In its May 28th, 2015 decision in Rhinehimer v. U.S. Bancorp Investments, Inc. (pdf), the Sixth Circuit Court of Appeals ruled that an employee who reports alleged unlawful conduct has engaged in protected activity for the purposes of a retaliation claim under the Sarbanes-Oxley Act (“SOX”), 18 U.S.C. § 1514A, as long as he or she has an objectively reasonable belief that the activity reported is prohibited under SOX. The Sixth Circuit has joined the Second and Third Circuit Courts of Appeal in rejecting the previously adopted standard that an employee’s conduct must ...
The number of whistleblower complaints is on the rise, according to the 2014 Annual Report to Congress on the Dodd-Frank Whistleblower Program, and defending against them can be costly and disrupt business operations. Taking appropriate steps in response to internal complaints can go a long way toward minimizing the risk that the issue becomes an external dispute at OSHA or in court.
Understanding the Objectives A prompt investigation and an understanding of the objectives of the investigation are paramount. Employers should decide, for example, whether the goal is to create a ...
On May 5, 2015, the Eleventh Circuit Court of Appeals ruled in Wiersum v. U.S. Bank, N.A. (pdf) that the National Bank Act (“NBA”), 12 U.S.C. §24 (Fifth), preempted a bank officer’s state law whistleblower claim that he was wrongfully terminated for opposing the bank’s alleged unlawful conduct. This was a first-impression issue for the Eleventh Circuit, and the majority concluded that the state law claim was preempted because it directly conflicted with the power Congress vested in federally chartered banks to dismiss officers “at pleasure.”
Wiersum, a former Vice ...
By Aime Dempsey and John F. Fullerton III
For financial services industry employers that participate in arbitrations administered by FINRA, the composition of the arbitration panel may have as much, or more, of an impact on the outcome of the dispute than the facts or the law. This is because FINRA arbitrators are not bound to follow case precedent or strictly apply principals of law and can render awards based on their own notions of “fairness” or “justice.” The important process of selecting an acceptable arbitration panel, however, can be opaque, as the information that ...
On March 5, 2015, the Occupational Health and Safety Administration (“OSHA”) issued its “Final Rule” establishing the procedures for handling retaliation complaints brought under Section 806 of the Sarbanes-Oxley Act (“SOX”). Section 806, as amended by Dodd-Frank, protects employees of publicly traded companies, as well as employees of contractors, subcontractors, and agents of publicly traded companies, from being retaliated against for reporting fraudulent activity or other violations of SEC rules and regulations. The Final Rule addresses the comments ...
To register for this complimentary webinar, please click here.
I’d like to recommend an upcoming complimentary webinar, “EEOC Wellness Regulations – What Do They Mean for Employer-Sponsored Programs? (April 22, 2015, 12:00 p.m. EDT) presented by my Epstein Becker Green colleagues Frank C. Morris, Jr. and Adam C. Solander.
Below is a description of the webinar:
On April 16, 2015, the Equal Employment Opportunity Commission (“EEOC”) released its long-awaited proposed regulations governing employer-provided wellness programs under the American’s with ...
My colleagues Frank C. Morris, Jr., Adam C. Solander, and August Emil Huelle co-authored a Health Care and Life Sciences Client Alert concerning the EEOC’s proposed amendments to its ADA regulations and it is a topic of interest to many of our readers.
Following is an excerpt:
On April 16, 2015, the Equal Employment Opportunity Commission (“EEOC”) released its highly anticipated proposed regulations (to be published in the Federal Register on April 20, 2015, for notice and comment) setting forth the EEOC’s interpretation of the term “voluntary” as to the ...
My colleague Peter Steinmeyer published a post on the Trade Secrets and Noncompete Blog that will be of interest to many of our readers: “Chicago District Judge Issues Primer On Declaratory Judgment Actions Regarding The Enforceability Of Non-Compete Agreements.”
Following is an excerpt:
Last week, Chicago district judge Charles Kocoras dismissed a declaratory judgment action challenging the enforceability of a facially broad form non-compete agreement signed by all employees of the Jimmy John’s sandwich chain. Judge Kocoras held that the dispute was not judiciable ...
It is important for financial services employers not to lose sight of the fact that the National Labor Relations Act applies to their non-supervisory workforce even though most employees in the industry are not unionized. This means that employee handbooks and similar policies must comport with the statute to the extent that they govern the non-supervisory workforce. In connection with these considerations, my colleagues Steven M. Swirsky and Adam C. Abrahms published a Management Memo blog post that will be of interest to many of our readers: “NLRB Issues Critical ...
Our colleagues Adam C. Solander, August Emil Huelle, Stuart M. Gerson, René Y. Quashie, Amy F. Lerman, Frank C. Morris, Jr., Kevin J. Ryan, and Griffin W. Mulcahey contributed to Epstein Becker Green’s recent issue of Take 5 newsletter. In this special edition, we address important health care issues confronting financial services employers:
My colleague Lee T. Polk authored Epstein Becker Green’s recent issue of its Take 5 newsletter. This Take 5 features five considerations suggesting the advantages of employee benefit plans as programs that are beneficial to both employers and employees.
- Tax Aspects of Qualified Retirement Plans Can Save Money For Both Employers and Employees
- The Benefits of a Contractual Claims Limitation Period
- The Benefits of a Contractual Venue Selection Clause
- The Standard of Judicial Review in the Context of Top Hat Plan Benefit Disputes
- Fiduciary Exception to the Attorney-Client ...
Last week, the U.S. Securities and Exchange Commission’s Office of the Whistleblower, created in 2011 pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, released its mandated report to Congress on operations for Fiscal Year 2014, ending on September 30, 2014. A number of interesting facts, statistics and developments were reported. Here is a selection of particularly relevant highlights:
- FY 2014 was the most active year yet in terms of whistleblower awards. The SEC has made awards to 14 whistleblowers since inception of the program, including 9 in ...
When the Supreme Court held in American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013), that the Federal Arbitration Act does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery, many employers in the financial services industry, if they had not done so already, strengthened the language of their mandatory arbitration provisions and policies to include explicit class action and class arbitration waivers. ...
The Ebola virus disease (“Ebola”) has become a worldwide threat, which, among many other effects, has forced employers to think about how to protect their employees. Employers also must consider how Ebola might impact employment policies and procedures, including, but not limited to, those addressing attendance, leaves of absence, discipline, and medical testing.
My colleagues Susan Gross Sholinsky; Frank C. Morris, Jr.;William J. Milani; Steven M. Swirsky; Nancy L. Gunzenhauser; and Maxine Adams have written a comprehensive Act Now advisory ...
One of many changes wrought by passage of the Dodd-Frank Act is that employers cannot compel potential whistleblowers to report known or suspected unlawful activity to the company before reporting such information to the Securities Exchange Commission (SEC). Employees are eligible for a bounty award from the SEC even if they do not first – or ever – report internally. The SEC’s position is that mandatory internal reporting could discourage at least some potential whistleblowers. Consistent with that position, SEC Whistleblower Rule 21F–17 provides:
No person may take ...
By John F. Fullerton III and Jason Kaufman
In its recent decision in Santoro v. Accenture Federal Services, LLC [pdf], the Fourth Circuit Court of Appeals has joined the Fifth Circuit [pdf] in narrowly interpreting the prohibition against predispute arbitration agreements in the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) -- and employers can breathe a further sigh of relief.
Dodd-Frank amended the Sarbanes-Oxley Act (“SOX”) to, among other things, prohibit agreements requiring predispute arbitration of SOX claims (see 18 ...
By John F. Fullerton III and Jason Kaufman
Almost four years after it was enacted in 2010, the full impact of the Dodd Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) on the enforceability of predispute arbitration agreements is not completely clear. Some whistleblower retaliation claims are still subject to mandatory arbitration agreements, while others plainly are not, depending upon when the arbitration agreement was executed, the statute under which the claim is brought, and the jurisdiction in which the employer and employee find themselves.
My colleague Jason Kaufman and I put together “Five Hot Topics for Financial Services Industry Employers” in this month’s Take 5 newsletter. Below is an excerpt:
The economy may be improving, but challenges remain for employers in the financial services industry. From ever-increasing whistleblower claims to new diversity and inclusion regulations and recent IRS determinations affecting bonus payments, financial services industry employers will have to navigate a number of new developments and potential pitfalls in 2014. Here are five issues to keep an eye on in the new ...
The Department of Labor (DOL) announced yesterday that whistleblowers covered by any one of 22 statutes administered by the Occupational Safety and Health Administration – which includes whistleblower retaliation complaints under Section 806 of the Sarbanes-Oxley Act (SOX) -- can now file complaints online. Section 806 of SOX affords protection to employees who have allegedly suffered an adverse action because they complained, externally or even just to their supervisor, that the company has committed a violation of various fraud statutes (frauds and swindles, wire fraud ...
A New York federal district court has become the second court to hold that the Dodd-Frank anti-retaliation provision, 15 U.S.C. § 78u-6(h)(1)(a), which prohibits retaliation against a whistleblower who makes disclosures required or protected by the Sarbanes-Oxley Act, among other laws, does not apply extraterritorially. In Meng-Lin Liu v. Siemens A.G. (pdf), a judge of the Southern District of New York, consistent with a decision earlier this year by a Texas district court, held that a Taiwanese compliance officer working for a Chinese subsidiary of a ...
The Second Circuit has given class action waivers another shot in the arm. In Parisi v. Goldman, Sachs & Co. (pdf), plaintiff argued that because she had agreed to arbitrate statutory employment discrimination claims against her employer, but could not proceed in a class-wide arbitration, she must be permitted to pursue her Title VII pattern-or-practice sex discrimination claim as a class action plaintiff in court; otherwise, her arbitration agreement would constitute an impermissible waiver of a substantive statutory right. The Court firmly ...
On March 5, 2013, the U.S. Second Circuit Court of Appeals clarified the burden-shifting framework applicable to whistleblower retaliation claims under Section 806 of the Sarbanes-Oxley Act, 18 U.S.C. § 1514A. In Bechtel v. Administrative Review Board et al., (pdf), the Court issued a decision, consistent with prior decisions of several other Circuits, that affirmed the burden of proof standard applied by the Administrative Review Board (ARB) in its decision, which affirmed an administrative law judge’s (ALJ) decision that had dismissed the ...
By: John F. Fullerton III and Matthew J. Tronzano
Mandatory class action waivers may have received an important seal of approval as the result of a recent decision arising in the financial services industry. On February 21, 2013, a Financial Industry Regulatory Authority (FINRA) disciplinary hearing panel permitted Charles Schwab & Company, Inc. to maintain its predispute arbitration provision in its customer agreement that includes a class action waiver (pdf). With this development, now may be the time for firms to evaluate and consider class action waivers in their arbitration ...
As a direct result of the financial crisis, an increasing number of states have enacted or are considering statutes that prohibit or restrict employers from obtaining and using credit reports for making hiring and other employment decisions. Eight states have now passed such legislation - California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Washington and Vermont. Similar legislation is pending in many other states - including New Jersey and New York - and bills have been introduced at the federal level as well. In most states that have ...
On May 16, I co-hosted a small roundtable discussion here at the firm entitled “Employee Misclassification Issues in the Financial Services Industry: Preventive Maintenance and Proactive Strategies.” The topics included proper application of the administrative exemption from federal and state overtime laws; the nettlesome employee v. independent contractor question; and contingent workforce issues. In attendance was a healthy mix of in-house employment counsel, human resources professionals, management consultants and outside counsel. ...
This is the third in our series of posts on practice and procedure in employment-related arbitrations before FINRA. Check back often for future posts, subscribe by e-mail (see the sidebar), or follow @FSemployer on Twitter so you don’t miss any updates!
Once upon a time, it was mandatory under Form U4 that registered representatives file any statutory claims of discrimination (such as age, gender, or race discrimination) in arbitration rather than in court. A well known Supreme Court case decided in 1991, Gilmer v. Interstate/Johnson Lane Corp.
This is the second in our series of posts on practice and procedure in employment-related arbitrations before FINRA. Check back often for future posts, subscribe by e-mail (see the sidebar), or follow @FSemployer on Twitter so you don’t miss any updates!
As a general rule, it is more common to read about employers who have been sued in court by a former employee attempting to compel the claims into arbitration than an employer trying to compel arbitration claims to be filed in court. Yet, under the occasionally overlooked FINRA Rule 13803, employers who ...
This is the first of a series of posts on practice and procedure in employment-related arbitrations before FINRA. Check back often for future posts, subscribe by e-mail (see the sidebar), or follow @FSemployer on Twitter so you don’t miss any updates!
More than one lawyer has been burned by a FINRA arbitration panel that seemed ideal on paper, but then, at the hearing, just did not “get it.” Conversely, a panel that initially looks troubling sometimes does a great job at the hearing and gets the decision right (i.e., in your favor, of course). And there ...
The New York Court of Appeals recently upheld a jury verdict in favor of a brokerage firm employee who claimed that his employer breached an oral promise (and violated New York wage law) when it failed to pay him a guaranteed bonus of $175,000, to be paid at the end of his first year of employment. The discussions with the hiring manager regarding compensation were not put in writing. Nevertheless, the employee subsequently signed an acknowledgment in the formal employment application that “compensation and benefits are at will and can be terminated, with or ...
A recent New York state court decision granted a fairly unique petition to disqualify the attorney for a group of former employees from representing them in an intra-industry arbitration at FINRA. Why? Because the lawyer had turned himself into a fact witness by negotiating the termination explanation in the U5 notice of two of the employees. The decision raises an interesting question about whether the same logic could be applied in a U5 expungement hearing at FINRA when there have been discussions between counsel about the U5 language, regardless of whether ...
The placement of a large, inflatable rat balloon at an employer’s facility, a sight familiar to many urban dwellers, was upheld in a recent 3-1 decision by the National Labor Relations Board, which found that a union that had stationed the rat near a hospital in Florida to protest work being performed by a non-union construction contractor at the facility did not violate the federal law against secondary boycotts in labor disputes. Sheet Metal Workers International Association, Local 15 (Galencare, Inc. d/b/a Brandon Regional Medical Center), 356 N.L.R.B. No. 162 (2011). (PDF) ...
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