EMPLOYEE BENEFITS BLOG
EMPLOYEE BENEFITS BLOG
Legal insights on employee benefits and executive compensation
EMPLOYEE BENEFITS BLOG
Legal insights on employee benefits and executive compensation
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Retention Agreements or Severance Pay Arrangements: What’s the Difference and What are the Considerations?

by | Oct 24, 2014 |

As the economy continues to rebound and the United States again starts to see more movement in the employment market, employers are once again revisiting their severance pay and retention policies and developing an underlying rational of whether or not to provide these benefits and if so, how broadly among their workforce. However, it has become apparent that not everyone really understands the difference between severance arrangements and retention agreements and when one should be used instead of the other. Each accomplishes a different purpose and understanding the fundamental differences between the two will allow professionals to make an educated decision regarding which option is best for a given organization depending on its existing circumstances.

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Reprinted with the permission of ThomsonReuters, © 2014, all rights reserved.



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UK Employment Alert: New Right To Time Off To Accompany A Pregnant Woman To Antenatal Appointments

by and | Oct 16, 2014 | ,

From today, 1 October 2014, employees and agency workers who have a “qualifying relationship” with a pregnant woman or her expected child are entitled to take unpaid time off during working hours to accompany the woman to two antenatal appointments.

This new right supplements the existing right of pregnant women to paid time off for such appointments.

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German Employment News: German Employer’s Obligation to Compensate for Break Times if Break Times Have Not Been Properly Allocated

by | Oct 2, 2014 |

The Regional Labour Court of Cologne (Regional Court) stated in a decision in late November 2013 that a German employer has the obligation to allocate break times of employees in an orderly manner, and presented the possible consequences of non-compliance with such obligation.

In the case under review, the German employer (a nursing home) had set up a work schedule for the night shift which, in total, included a one-hour break from work per shift per employee. However, the German employer did not allocate a certain timeframe (e.g., from 4 to 5 am) for the break times. Instead, the employees were supposed to arrange among themselves who, when and in what time intervals to take the one-hour break per shift.

The Regional Court stated in its decision that such practice does not fulfil the legal requirements of “breaks” that do not have to be compensated by the employer.  Under German law, only breaks from work within the meaning of § 4 German Working Hours Act (Arbeitszeitgesetz) do not need to be compensated. Importantly, to be covered by such statute, the breaks must be determined in advance. The German employer does not meet his statutory obligation to determine the breaks if it is up to the employees to freely arrange their breaks among themselves. The reasoning behind this ruling is the risk that the employees actually might not take a break at all because they lack the employer’s consent.

In summary, even though the German employer in this case took into account a one-hour break per employee and shift, it did not determine the organization or timing of such breaks. Therefore, the breaks did not fulfill the requirements of § 4 German Working Hours Act.  As a consequence, the German employer had to pay remuneration for the whole night shift (not taking into account any kind of break).

German employers should keep this decision in mind when scheduling breaks. The best option is to determine the conditions and the timing of breaks in the employment contract, or, if a works council exists, in a collective works council agreement binding upon all employees of the operation. Additionally, the German employers should control and monitor compliance with such determined break times in order to avoid unnecessary claims for remuneration.



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Protecting Your UK Business Against Departing Employees

by | Sep 25, 2014 |

Departing employees can represent a significant threat to UK business.  This is particularly so in the case of senior managers and employees who have access to confidential information or who exert influence over key relationships with actual or prospective customers, suppliers or key members of staff.

Many employers seek to manage this threat by obtaining an employee’s agreement to a broad range of contractual post-termination restrictions (PTRs), often referred to as restrictive covenants.  PTRs are generally designed to protect a business against a range of threats: former employees working for competitors, soliciting clients and poaching employees, etc.  When they work, PTRs can be a very effective weapon in an employer’s arsenal, but there are potentially significant hurdles that must be overcome before they will be enforced by the UK courts.

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Equity Investors: Be ForeWARNed

by | Sep 9, 2014 | ,

The Worker Adjustment Retraining and Notification Act (WARN Act) requires certain employers to give employees 60 days’ notice of plant closings and mass layoffs.  The goal of the WARN Act is to “provide workers and their families transition time to adjust to the prospective loss of employment, to seek and obtain alternative jobs and, if necessary, to enter skill training or retraining that will allow these workers to successfully compete in the job market.”  Employers who violate the WARN Act are liable to affected employees for up to 60 days of compensation and benefits.

On December 10, 2013, the Second Circuit in Guippone v. BH S&B Holdings LLC addressed whether a holding company (HoldCo) and certain investors (Investors) should be deemed “employers” under the WARN Act, and thus liable for violations thereof.  The Investors created various entities to purchase and manage Steve & Barry’s Industries, Inc., which it acquired out of bankruptcy.  HoldCo served as the holding company and sole managing member of another entity (Holdings), which employed the plaintiff and putative class members.  After the acquisition, Holdings experienced its own financial issues and subsequently filed bankruptcy.  On the same day of the bankruptcy filing, Holdings began sending WARN Act notices and termination to employees.  The plaintiff in Guippone filed a complaint against HoldCo and the Investors seeking damages on behalf of the terminated employees.

The Second Circuit adopted the following non-exclusive factors from the Department of Labor regulations to determine whether related entities are “single employers” under the WARN Act: (i) common ownership, (ii) common directors and/or officers, (iii) de facto exercise of control, (iv) unity of personnel policies emanating from a common source and (v) the dependency of operations.  Although equity investors are typically shielded from WARN Act liability, the court held that these five factors should also be applied to determine whether equity investors who exercise control over an operating company’s decision to terminate employees should be subject to WARN Act liability.  The court clarified that application of the five factors requires a fact-specific inquiry, no one factor is controlling, and all factors need not be present for liability to attach.

Ultimately, the court affirmed the district court’s order granting the Investors’ motion to dismiss, but reversed the district court’s order granting summary judgment in favor of HoldCo, instead finding that the evidence would have allowed a jury to conclude that Holdings was so controlled by HoldCo that it lacked the ability to make any decisions independently.

This case has important implications for private equity funds and other equity investors.  Although the Second Circuit dismissed the case with respect to the Investors, it did so only because the plaintiff had not presented sufficient evidence to satisfy the five-factor test for determining single players.  The implication that equity investors could find themselves liable for WARN Act claims serves as a reminder to current or future investors to ensure that legal separateness exists, is vigilantly enforced and that the company’s executives retain operational autonomy, especially with respect to closings and mass layoffs.



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Developments Impacting Benefits for Same-Sex Spouses

by and | Sep 2, 2014 | ,

As federal and state agencies and courts further examine the implications of the Supreme Court of the United States’ ruling on same-sex marriage in U.S. v. Windsor, the laws and regulations governing employee benefits for employees’ same-sex spouses continue to be clarified.  As a result, employers should monitor additional guidance as it is issued and continue to reevaluate the same-sex spousal benefits offered under their employee benefit plans.

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Employment Verification

by | Aug 27, 2014 |

Immigration and Customs Enforcement (ICE) takes its enforcement of employment eligibility verification requirements seriously, and employers need to ensure compliance with Form I-9 procedures even if they participate in the E-Verify program, McDermott Will & Emery attorney Joan-Elisse Carpentier writes in this BNA Insights article.

Carpentier looks at recent cases involving ICE sanctions against employers for I-9 violations and concludes that the agency will continue to ramp up its enforcement efforts.  As a result, she recommends that employers conduct internal audits to ensure compliance in order to prepare for a possible ICE audit.

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UK Pensions Auto-Enrolment Scheme

by | Aug 12, 2014 | ,

A radical change to UK pension law is expected to affect tens of thousands of organisations with UK-based employees in 2014.  This follows the imposition of an unprecedented obligation on employers to “automatically enrol” eligible employees in, and to contribute financially to, a pension scheme that meets specific, carefully defined criteria.

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More States Restrict Employers’ Access to Employees’ Social Media Accounts

by | Aug 7, 2014 | ,

As first discussed in McDermott Will & Emery’s Privacy and Data Protection 2013 Year In Review, state legislatures are enacting laws limiting employers’ ability to access the social media accounts of their employees.

Thus far in 2014, four more states – Louisiana, Oklahoma, Tennessee and Wisconsin – have enacted social media legislation, bringing the total number of states with such legislation to 16.

How State Social Media Laws Effect Employers

Generally, state social media laws bar employers from requiring or requesting that an employee or applicant provide log-in credentials for his/her personal social media account.  Some of these state social media laws also prohibit an employer from requiring an employee to add another employee or supervisor to a social media account “friends” or contacts list or to access personal social media accounts in the employer’s presence.  Many of the state social media laws also prohibit employers from basing adverse employment action on an employee’s refusal to comply with an employer’s request for social media account access.

While these laws offer employees added protection with respect to their personal social media accounts, most of the laws feature important carve-outs.  Among other exceptions, most state social media laws allow employers to: access publicly-available social media about employees, restrict employees’ access to social media during work hours and conduct certain types of employment-related investigations that may involve an employee’s social media account(s).

Notably, all four of the recently-enacted laws allow employers to monitor the social media activity of employees when employees access their social media accounts through employer-provided IT systems.

Compliance Tips

Since the terms of state social media laws vary, employers should consider establishing and following basic guidelines to ensure compliance with the myriad laws.  Key steps are:

  • Updating employer policies to clarify state-specific restrictions related to employee access to personal social media accounts through employer-provided information systems; and
  • Providing training to managers, Human Resources and IT professionals about the conduct prohibited by the different state social media laws.


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