Most responsible corporate boards took measures to address codes of conduct issues and sexual harassment in the wake of the “MeToo” movement. However, a flurry of recent stories involving misbehaving CEOs suggests otherwise. In this Forbes article, Michael Peregrine says these scandals should be a wake-up message to corporate boards.
On February 15, 2023, employers in California regained the ability to enforce mandatory arbitration as the US Court of Appeals for the Ninth Circuit ruled that Assembly Bill 51 (AB 51), which prohibited “forced arbitration” as a condition of employment, was pre-empted by the Federal Arbitration Act (FAA).
After years of litigation, the Ninth Circuit’s ruling upholds a federal district court’s preliminary injunction that temporarily blocked California from enforcing AB 51 and all but guarantees that AB 51 will never be enforceable. While California could seek review from the Ninth Circuit (en banc) or the Supreme Court of the United States, given the Supreme Court’s line of cases upholding FAA pre-emption, we think this decision will stand.
That said, US President Joe Biden’s Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (HR 4445) must not be ignored. Employers may include sexual harassment and sexual assault claims in a voluntary arbitration agreement, but an employee may choose to file these particular claims in court.
On January 25, 2023, the Delaware Court of Chancery held, for the first time, that the rationale for a duty of oversight (Caremark duty) owed by directors of Delaware corporations applies equally, if not to a greater degree, to officers. In re McDonald’s Corp. Stockholder Derivative Litigation, C.A. No. 2021-0324-JTL (Del. Ch. Jan. 25, 2023).
However, this officer duty of oversight will be more context-driven than the duty owed by directors. Some officers, like a chief executive officer or a chief compliance officer, will have company-wide oversight duties while other officers with more constrained areas of responsibility will have a more constrained duty of oversight (i.e., establishing information reporting systems and upward reporting of red flags will be based on the particular officer’s responsibilities and authority). Additionally, as with a director’s duty of oversight, oversight liability for officers will require a showing of bad faith, meaning a plaintiff will need to establish that the officer consciously failed to make a good faith effort to establish information reporting systems or consciously ignored red flags.
The new Chicago Ordinance on sexual harassment, effective July 1, 2022, requires that an employer maintaining a business facility within the geographic boundaries of Chicago must have a written policy—including a conspicuously displayed notice poster in English and Spanish—documenting the prohibition of sexual harassment.
Employment law continues to evolve, and it can be a challenge amid an ever-changing landscape of local employment laws for human resources executives and employment counsel at multinational businesses to maintain a consistent global corporate culture.
McDermott’s Global Employment Law Update brings you the key highlights from across Asia, Africa, Europe, Latin and North America. Developed in collaboration with peer firms operating in more than 50 countries, this resource guide contains summaries of the laws and significant court decisions that impacted employers and employees all over the world. It includes:
Given the rise of the #MeToo movement, companies are having to deal with many issues when drafting employee agreement contracts. In a presentation, Evan Belosa discussed these issues, including triggering events, nondisclosure agreements and restrictive covenant changes. He also addressed latest trends in state and local law affecting hiring and management of the workforce.
The increased focus on issues of harassment is putting corporate culture under a microscope. Corporate management and board members—regardless of whether the entity is private, public or charitable—must adjust the way they think about harassment in the workplace and how to respond to allegations of misconduct.
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