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Equity Investors: Be ForeWARNed

by jrjohnson | Sep 9, 2014 | Employment, Labor

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.

Developments Impacting Benefits for Same-Sex Spouses

by Brian Tiemann and Todd Solomon | Sep 2, 2014 | Employment, Health and Welfare Plans

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.

Read the full article.

Employment Verification

by Joan-Elisse Carpentier | Aug 27, 2014 | Employment

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.

Read the full article.

UK Based Employees Who Refuse to Work Their Notice Period

by McDermott Will & Emery | Aug 19, 2014 | Employment

If an employee walks out, refusing to work his notice period, can an employer elect to keep the contract of employment alive, without paying the recalcitrant employee?

In the case of Sunrise Brokers LLP v Rodgers [2014] EWHC 2633 (QB), the High Court held that the answer to this question is yes.

Read the full article.

UK Pensions Auto-Enrolment Scheme

by McDermott Will & Emery | Aug 12, 2014 | Employment, Retirement Plans

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.

Read the full article.

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

by McDermott Will & Emery | Aug 7, 2014 | Employment, Privacy and Data Security

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.

Supreme Court Prohibits Warrantless Mobile Phone Searches, Underscores Individual Right to Privacy

by David Quinn Gacioch | Jul 22, 2014 | Employment, Privacy and Data Security

The Supreme Court of the United States’ recent decision prohibiting warrantless mobile phone searches incident to arrest underscores unique privacy concerns raised by modern technology. The decision has an immediate impact on an individual’s rights under the Fourth Amendment, and may also have an impact on evolving areas of white collar and employment law.

Read the full article.

UK Employment Alert: Flexible Working Flexes

by Irina Denisova | Jul 3, 2014 | Employment

by Katie Clark and James Noble

With effect from 30 June 2014, the right to request flexible working has expanded so that it now applies to any employee with at least 26 weeks’ service. Employers should amend their flexible working policy documents to reflect the changes to the regime and plan in advance how they will deal with a possible increase in the number of requests.

Read the full article

Proposed Ban on Non-Competes in Massachusetts

by Anthony A. Bongiorno and Andrew Liazos | Jun 19, 2014 | Employment

Proposed legislation introduced by Governor Patrick to eliminate most forms of non-competition agreement in Massachusetts may be enacted before July 31, 2014. This legislation creates significant risks for employers with employees in Massachusetts who are currently subject to non-competition agreements.

Read the full article.

Rights of Job Applicants in Germany

by Dr. Gudrun Germakowski and Dr. Sandra Urban-Crell | May 29, 2014 | Employment, Labor

The German Federal Labor Court made a very clear ruling regarding job applicants in Germany who are not offered the position for which such applicants applied. In the Federal Labor Court’s view, a rejected applicant has no right to know whether another applicant was offered or accepted the position. (Federal Labor Court, verdict dated April 25, 2013, case number 8 AZR 287/08)

This case concerned a plaintiff who was born in the former Soviet Union in 1961. She applied for a position that was advertised by a German company, the defendant in this case. Even though the plaintiff fulfilled all required qualifications, she was rejected and did not receive a job offer. The plaintiff presumed that this decision was based on discrimination for her gender, age and origin. The Federal Labor Court submitted the case to the European Court of Justice to determine whether the job applicant had a right to information regarding why she was not selected, or if another applicant was selected for the position. The European Court of Justice rendered its verdict on April 19, 2012 (case number C415/10), and stated that rejected job applicants had no right to this information under European law.

The German Federal Labor Court dismissed the case because it could not detect any evidence of discrimination. The mere refusal of the defendant to disclose any information related to the application process and/or the hiring could not establish the presumption of an inadmissible discrimination, according to Section 7 of the German General Equal Treatment Act.

However, this ruling has to be viewed with great caution. The German decision is not in line with the aforementioned ruling in the same matter of the European Court of Justice. The European judges, in contrast to the German Court, stressed that the complete refusal to give out any information regarding the hiring could actually be evaluated as a presumption of possible discrimination. This remarkable difference in the two verdicts was not explained by the German judges and as long as their reasoning remains unclear, German employers should provide a short explanation to rejected applicants when they ask the reason why they have been rejected for an open position (e.g., the other candidate better satisfies the qualification profile, made a better impression at the job interview, seems to be a more motivated and energetic person, etc.).

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