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Employee Benefits Blog

Insights on Employee Benefits and Executive Compensation

Are No Hiring and No Poaching Agreements Enforceable in Germany?

Posted in Employment

No poaching agreements between leading companies in the IT sector have recently caused a substantial scandal in Silicon Valley, California, resulting in tech industry businesses settling a major lawsuit by paying a reported US$324 million.  Such agreements can be found all over the world; but are they enforceable in Germany?

Read the full article.

UK Employment Alert: UPDATE: Unite Will Not Appeal Holiday Pay Ruling

Posted in Employment

Unite, the trade union that backed the majority of the claimants in Bear Scotland v Fulton regarding the calculation of holiday pay, has announced it will not appeal the Employment Appeal Tribunal decision. To read our alert on the decision, please click here.

What Has Happened?

One effect of the EAT’s judgment was to dramatically limit workers’ rights to bring Employment Tribunal claims for historic underpayments of holiday pay. It had been widely expected that Unite would lead an appeal to the Court of Appeal, so the union’s announcement that it won’t will be music to the ears of employers who are concerned about the potentially significant cost of such claims.

The bad news is that Unite’s decision not to appeal is not necessarily the end of the issue. Many cases were stayed pending a decision in Bear Scotland, and it is likely that these cases will now proceed and a new test case may well work its way up to the Court of Appeal.

What Does This Mean For Employers?

The EAT’s judgment is highly unlikely to be overturned within the next 12 months. In the meantime, employers can stand firm on requests made or claims brought for significant back pay that are outside outside the parameters set by the EAT.

By way of reminder, the EAT decided that a Tribunal can only deal with a claim for an unlawful deductions from wages if it is brought within three months of: i) the date of underpayment; or ii) if there has been a series of deductions, within three months of the last deduction in the series (unless the Tribunal decides that the deadline should be extended because it wasn’t reasonably practicable for the claim to have been brought in time).

As it is only the four weeks (20 days for a full-time worker) mandatory holiday required to be given to workers by the European Working Time Directive that must include overtime, etc., an underpayment claim relating to more than one period of holiday may only be considered by a Tribunal if periods of mandatory holiday have been taken within three months of each other. The EAT said that it made sense for mandatory holiday to be treated as having been taken first in the holiday year. This means that any additional holiday taken towards the end of the year will tend to break up the periods of mandatory holiday and so disrupt a workers’ ability to claim for them.

Please Join McDermott Partner Todd Solomon at the Illinois Fiduciary Summit

Posted in Fiduciary and Investment Issues

On Thursday, December 11, 2014, Chicago partner, Todd Solomon will speak at the Illinois Fiduciary Summit at Hyatt Lodge at McDonald’s Campus. Joined by additional keynote speakers from Wells Fargo and Crowe Horwath, Todd will discuss various topics important to retirement plan committee decision makers, including:

  • Top 10 Fiduciary Pitfalls 401(k) & 403(b) Plan Sponsors Need To Avoid
  • Fiduciary Obligations & Reducing Your Liability
  • How to Measure Plan Success
  • Evaluating Service Providers & Maximizing Vendor Negotiations
  • Outlook on the Bond Market and Recent On Goings at PIMCO

This event free of charge to McDermott clients and is certified for three hours of CPA/CPE credit and HRCI/SPHR/PHR general credit.

To register for the event, click here.

View From McDermott: A New Type of ERISA-Based Hold-Up—The Rise of Out-of-Network Provider Suits Against Self-Funded Health Care Plans

Posted in Benefit Controversies, Employment, Retirement Plans

Over the past decade, there has been a significant increase in the number of physicians who have dropped out of Preferred Provider Organization (PPO) and Health Maintenance Organization (HMO) networks and attempted to negotiate their own financial reimbursement with insurance companies and self-funded health care plans related to medical treatment provided to participants whose plan are governed by the Employee Retirement Income Security Act of 1974, as amended (ERISA).

These moves have led to a corresponding increase in the number of health care benefit suits brought by out-of-network physicians and treatment centers seeking to gain through litigation that which they could not get through direct negotiations with insurers and plan administrators—higher reimbursement amounts for health care treatment from ERISA-governed medical plans.

Read the full article.

UK Employment Alert: Restrictive Covenants: An Important Reminder for Employers

Posted in Employment

The UK Court of Appeal has handed down its decision in Rodgers v Sunrise Brokers LLP [2014] EWCA Civ 1373, a case in which the High Court ruled that an employee who resigned in breach of contract remained employed by the employer, and was not entitled to be paid if he refused to come back to work. You can access our alert on the original High Court decision here.

Although the Court of Appeal rejected Mr Rodgers’ appeal in its entirety, it made some interesting observations, which should be taken into account by employers seeking to enforce restrictive covenants.

Background

Mr Rodgers had entered into a fixed-term employment contract with Sunrise Brokers LLP (Sunrise), under which he could not lawfully terminate the contract until September 2015. Thereafter, he was subject to a suite of restrictive covenants of between six and 12 months’ duration, which he accepted were reasonable.

Mr Rodgers walked out on 27 March 2014. Before doing so, he had accepted employment with one of Sunrise’s competitors and agreed to start work for that competitor at a later date. He refused to honour the rest of his contract with Sunrise.

Sunrise chose not to accept Mr Rodgers’ purported resignation, as it was in breach of the terms that had been agreed. The company instead took the view that the contract remained live, but refused to pay him on the basis that he was refusing to come to work.

The High Court Decision

Sunrise voluntarily agreed to shorten the length of the contract so that it would end in October 2014 instead of September 2015. The High Court issued an injunction holding Mr Rodgers to the terms of his employment contract until that date, but only enforcing his restrictive covenants until 26 January 2015. The restrictive covenants were therefore enforced for less than the six month period specified in Mr Rodger’s contract of employment.

The Court of Appeal Decision

The Court of Appeal sanctioned this approach. In doing so, it confirmed that the High Court was entitled to enforce the restrictive covenants for less than the six month period contained in Mr Rodger’s employment contract.

The Court of Appeal’s judgment is a useful reminder that, in order to obtain injunctive relief against an employee for the full duration of a restrictive covenant, an employer must show both that

  • The covenant was reasonable at the date it was agreed; and
  • It is still appropriate for the Court to enforce it at the date the injunction is issued.

It is easy to fall into the trap of only addressing the first of these requirements, but employers wishing to enforce restrictive covenants should assess whether or not they have an arguable case on both fronts. If they fail to do so, they could find themselves with a covenant that is both reasonable and theoretically enforceable, yet with no, or a reduced period of, protection from the Court.

IRS Releases Highly Anticipated Cash Balance Plan Regulations

Posted in Retirement Plans

Recently issued regulations provide long-awaited guidance to sponsors of hybrid retirement plans on a variety of issues, including the market rate of return requirement and required changes for plans using crediting rates that do not meet this requirement. In a change from earlier regulations, hybrid plans are now allowed to offer subsidized survivor and early retirement annuity benefits. The regulations also provide some guidance concerning pension equity plans.

Read the full article.

A Personal Interest in Compliance

Posted in Employment, Labor

All individuals involved in a proposed sale transaction have a personal stake in full federal, state and local legal compliance because of expanding doctrines of personal liability and successorship liability, notwithstanding transaction documents that purport to disclaim assumption of seller’s liabilities.

Read the full article.

New Information Rights for French Employees of SMEs that May Be Sold

Posted in Employment

A law has been passed in France to encourage French employee buy-outs of small and medium-sized companies (SMEs). In companies with fewer than 250 employees, an owner will be required to inform French employees of an intent to sell the business or a majority share of the business no later than two months before the sale. Failure to comply with this new obligation may result in the sale being nullified.

Read the full article.