by Paul McGrath and Sharon Tan
The Employment Appeal Tribunal (EAT) has handed down an important decision for UK employers, limiting the right of workers to carry forward holiday entitlement accrued during a period of long-term sickness absence.
To read the full article, click here.
by Joseph S. Adams, Todd A. Solomon and Jacob Mattinson
Obergefell v. Kasich and Cozen O’Connor v. Tobits may reflect a growing trend of courts and other bodies to recognize same-sex marriages validly celebrated elsewhere even if the couple’s current state of residence does not recognize such marriages. Pending further guidance, employers should begin discussing plan amendments and administrative procedures that may be necessary to clarify benefit eligibility for same-sex spouses and partners.
To read the full article, click here.
On June 24, 2013, the Appellate Court of Illinois (First District) issued a decision in Fifield v. Premier Dealer Servs., 2013 IL App (1st) 120327, that will make it more difficult for Illinois employers to enforce post-employment non-compete agreements against newly hired employees who are employed for less than two years and leave, for whatever reason, and join a competitor. The issue in Fifield was whether the promise of at-will employment to a new employee, without more, constitutes consideration adequate to support post-employment restrictive covenants. Fifield lost his job after his employer was acquired but was subsequently offered employment with the successor company. As a condition to his employment with the successor company, Fifield signed a two-year post-employment non-compete agreement. The agreement contained a carve-out allowing Fifield to work for a competitor if he was fired without cause within the first year of employment. Three months later, Fifield resigned and joined a competitor. He and his new employer obtained a declaratory judgment that Fifield’s non-compete agreement was not enforceable because Fifield had not received adequate consideration. The Illinois Appellate Court upheld that decision.
Illinois Courts have long since held that the promise of continued “at-will” employment may not be sufficient consideration to support a non-compete agreement signed by a current employee, due to the illusory nature of the promise. In particular, many Illinois Courts have held that if the employee remains employed for less than two years, the non-compete may not be valid unless it is supported by other consideration. The Fifield Court applied that rule to circumstances where a new employee is required to sign a non-compete agreement as a condition of employment.
Unless the Fifield decision is narrowed or reversed, employers in Illinois should evaluate whether they need a post-employment restrictive covenant from a new-hire and, if so, offer additional consideration beyond the job. Employers should also consider the need for post-employment restrictive covenants when making acquisition strategy decisions and calculating acquisition costs. In the deal context, it is common for employees to be terminated by the seller before the deal closes and hired by the buyer after the deal closes. In light of Fifield, buyers should carefully consider which of the seller’s employees have trade secrets or other information such that it is important to restrict that employee from working for a competitor. If that is the case, the buyer should consider offering a fixed-term employment agreement or other consideration such as a signing bonus to avoid the result in Fifield. Alternatively, the buyer may consider structuring the deal so that key employees of the seller are bound by non-compete agreements with the seller that are transferred upon the closing of the transaction.
by Katie Clark and Paul McGrath
In Dresdner Kleinwort and Commerzbank v Attrill & others, the Court of Appeal of England and Wales has upheld a High Court decision that 104 former employees were contractually entitled to bonuses totaling more than £50 million. Significantly for employers, the entitlement arose out of an announcement made by the bank’s then CEO to a group of employees in a Town Hall meeting.
To read the full article, click here.
by Prashant Kolluri and Nancy G. Ross
Kenseth v. Dean Health Plan, Inc., represents a significant departure from the decades of law prior to Cigna v. Amara holding that employees could not recover for misrepresentations by employers over benefit coverage if the plan terms were clear.
To read the full article, click here.
by Todd A. Solomon, Ruth Wimer and Brian J. Tiemann
Employers providing benefits for employees’ same-sex spouses may want to consider the availability of federal payroll tax refunds if the Supreme Court of the United States finds Section 3 of the Defense of Marriage Act (DOMA) unconstitutional. Employers currently must impute income to an employee for the fair market value of benefit coverage for a non-dependent same-sex spouse. Such imputed income is subject to federal income and payroll taxes, as well as state income taxes in the majority of states.
To read the full article, click here.
July 2, 2013
11:00 am – 12:00 pm EDT
To register, click here.
As a result of the federal Defense of Marriage Act (DOMA), same-sex relationships have not been recognized for any purpose under any federal law, including the Employee Retirement Income Security Act, the Internal Revenue Code and COBRA. Historically, this has created significant implications for the administration of benefit plans covering same-sex partners, including the taxation of health, dental and vision benefits and survivor benefits under retirement plans. Employers that have extended equal benefits to lesbian, gay, bisexual and transgender employees have faced significant administrative and other challenges. Employers that have not extended benefits to same-sex partners have struggled to understand their legal obligations.
Earlier this year, the Supreme Court of the United States heard arguments on the constitutionality of DOMA and on California’s “Proposition 8,” which denies same-sex couples the right to marry in that state. The Supreme Court is expected to issue its rulings in these cases in June. Based on this, McDermott Will & Emery invites you to a webcast to discuss the impact of these landmark decisions on employee benefit plan sponsors and to address key considerations for employer-provided plans, including:
McDermott Speakers
Joseph S. Adams, Partner
Todd A. Solomon, Partner
Brian J. Tiemann, Associate
For more information, please contact Carolyn Verscaj.
by Lionel Lesur and Lisa A. Linsky
On April 23, 2013, the French Parliament gave final approval to a bill allowing same-sex couples to get married and adopt children. This makes France the 14th country in the world to legalize marriage between same-sex couples, and the 9th in Europe. Law No.2013-404, approving marriages between same-sex couples, was signed into law by the French President on May 17, 2013 and published in the Official Journal on May 18, 2013. To read the full article, click here.
by Katie Clark and James Noble
Following recent discussions on this topic, lawmakers in the European Parliament have now adopted legislation intended to cap the value of bonuses paid to certain bank staff.
Background
The measure forms part of the Capital Requirements Directive IV package of reforms implementing the Basel III regulatory framework, which aims to improve stability in the financial sector. The proposed reforms will apply to a range of credit institutions and investment firms.
The final text will be subject to a detailed review of the legal drafting and translation into the official EU languages, before being presented to the Council of Ministers for formal adoption later this year.
What Does This Mean for Employers?
If formally adopted, the new rules will limit the potential bonus entitlement of certain staff at credit institutions and investment firms, whether they work within the European Union (regardless of their employer’s country of origin), or abroad (if working for a European bank covered by the rules).
The rules will apply to employees whose professional activities have a material impact on their risk profile — such as senior managers, risk takers and staff performing control functions — and to other employees who receive equivalent remuneration. The European Banking Authority will develop criteria to help employers identify staff covered by the rules.
The proposals envisage that the default position for all staff covered by the rules will be a cap on annual bonus payments of 1 x salary. An institution could increase the cap to 2 x salary with shareholder approval. This would require the votes of at least 66 per cent of shareholders owning half the shares represented, or 75 per cent of votes if there is no quorum. An element of long-term deferral will also be necessary for any bonus payment exceeding 1 x salary. The European Banking Authority will, again, prepare guidelines in this regard.
It is envisaged that, once adopted, the new measures will affect bonuses paid in 2015 in relation to performance in 2014. This will clearly have a considerable impact on remuneration practice in the financial services sector, particularly given the potential effect on any bonus years that fall wholly or partly after the rules come into effect.
Employers in the United Kingdom will also eagerly await details of how, if adopted, the legislation will be implemented domestically, given the shift in emphasis from deferral to fixed remuneration that the new rules will have in practice.
What Happens Next?
The final text of the legislation will be prepared and presented to the Council of Ministers for formal adoption later this year. If approved and published before 1 July 2013, which appears likely, the rules should then be implemented into the laws of each Member State by 1 January 2014.
We will keep the situation under review and will issue a further update as it develops. Please contact your usual McDermott lawyer or Katie Clark if you would like to discuss in more detail.
by Joseph S. Adams and Jeffrey M. Holdvogt
In a corporate spin-off, both the existing company and the new company (spinco) must consider the implications for employees, employee benefit plans and executive compensation arrangements. Benefit plans and compensation arrangements can represent significant liabilities and responsibilities, and typically are expressly allocated in an employee matters agreement (EMA). This article provides a brief summary of some of the key employee benefit plans issues to consider in a spin-off.
To read the full article, click here.
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