Employment Law Lookout

Third Circuit Allows Termination of Expired CBA Obligations

Posted in NLRB

By Paul Galligan and Samuel Sverdlov

Employers scored a big victory in In re Trump Entertainment Resorts, a case of first impression in the Third Circuit, which held that a debtor-employer can terminate their obligations under an expired Collective Bargaining Agreement (CBA) and implement the terms of a final offer.


By way of background, Trump Entertainment employs 1,467 unionized workers in the Trump Taj Mahal casino in Atlantic City, New Jersey, most of whom are represented by UNITE HERE Local 54. Although the Taj Mahal is one of the preeminent casinos in Atlantic City, it filed for Chapter 11 bankruptcy protection on September 9, 2014. Trump Entertainment made several proposals aimed at keeping the Taj Mahal afloat, but the union staunchly refused the terms and engaged in a corporate campaign communicating with the Taj Mahal’s customers who had scheduled conferences at the Casino to urge them to take their business elsewhere.

The CBA expired on September 26, 2014, and Trump Enterprises filed a motion pursuant to 11 U.S.C. § 1113, “seeking to reject the CBA and implement the terms of [Trump Enterprise’s] last proposal to the union.” Section 1113 allows a Chapter 11 debtor to ‘reject’ its CBAs under certain circumstances, with the Bankruptcy Court’s approval. If the Bankruptcy Court denied Trump Entertainment’s motion, then Trump Entertainment would have to maintain the “status quo” and continue the terms of the expired CBA until it bargained to a legal impasse with the Union, a potentially long drawn out process.

The Bankruptcy Court for the District of Delaware balanced the need for an expedited process by which debtors could restructure labor obligations and protections necessary for union employees, and held that § 1113 was applicable to both expired and unexpired CBA’s. (519 B.R. 76 (Bankr. D. Del. 2014)).  However, the Court noted that “the Union was not focusing its efforts on negotiating to reach agreement with Debtors.”  The Court held that  it had the authority to authorize Trump Enterprise “to modify the expired CBA and implement the terms of [its] proposal.” UNITE HERE Local 54 thereafter appealed the Bankruptcy Court’s decision to the Third Circuit.

Third Circuit Decision

The Third Circuit affirmed the finding of the Bankruptcy Court. The Circuit Court only considered “whether the Bankruptcy Court may grant a motion to reject an expired CBA under § 1113.” Trump Enterprise, in the opinion of the Court, illustrated the very essence of a § 1113 rejection of a CBA.  Trump Enterprises needed to reject the CBA in order to restructure their company, and if they were unable to do so, they would be forced to liquidate.  Furthermore, the Court held that Trump Enterprises was very willing and forthright in their efforts to bargain in good faith, while the Union “stalled the bargaining sessions engaged in picketing, and attempted to harm [Trump Enterprise’s] business.”  As, Judge Roth explained, “it is preferable to preserve jobs through a rejection of a CBA, as opposed to losing the positions permanently by requiring the debtor to comply with the continuing obligations set out by the CBA.”

Advise for Employers

In the wake of this precedential opinion, employers entertaining a Chapter 11 bankruptcy can explore a § 1113 motion to reject their obligations under an expired CBA.  However, employers must remember that “before the bankruptcy court will consider an application to reject, the debtor must make a proposal, provide relevant information, meet at reasonable times, and confer in good faith.”  In this respect, employers would do well to follow in the footsteps of Trump Entertainment Resorts, and engage the union proactively as Trump Enterprises did with UNITE HERE.

It is important to note that Bankruptcy Courts are divided on whether § 1113 permits debtors to reject CBAs and to what extent. For instance, in Hostess Brands, Inc., 477 B.R. 378 (S.D.N.Y. 2012), the court refused to relieve a debtor from maintaining its obligations under an expired CBA under similar circumstances. Therefore if you are considering filing a Chapter 11 bankruptcy, and you have outstanding CBA obligations, you should contact your local Seyfarth Shaw attorney to decide whether a § 1113 is an available option.

Workplace Violence Prevention: DHS Promotes “Active Shooter Preparedness” Programs – Is Your Company Ready?

Posted in Investigations/Inspections, Workplace Policies and Processes, Workplace Violence

By Adam R. Young and Craig B. Simonsen

Violence, often involving firearms, is an increasingly common occurrence in the 21st century workplace.  The Federal Bureau of Investigation notes that even though homicide is “the most publicized form of violence in the workplace, it is not the most common.”

The FBI defines workplace violence as “any physical assault, threatening behavior or verbal abuse occurring in the work setting.” While some types of these acts “may not be interpreted immediately as violence … many people will witness them in their lifetimes.”

The FBI warns that it is “vital that employers create a sense of hypervigilance in their employees by providing formal training in workplace violence prevention.” To help employers prevent workplace violence, the U.S. Department of Homeland Security (DHS) has recently released an “Active Shooter Preparedness” website intended to make training and other resources available to employers.

Of particular interest are the Active Shooter Webinar materials, including a ninety minute Webinar that the DHS has provided for the private and public sector to “understand the importance of developing an emergency response plan and the need to train employees on how to respond if confronted with an active shooter.” Emphasis added. These Webinar materials include specific tools designed to aid employers in creating and updating policies and procedures to prevent and respond to active shooter scenarios.

Issues covered in the materials include the following:

  • Profile of an active shooter;
  • Responding to an active shooter or other workplace violence situation;
  • Training for an active shooter situation and creating an emergency action plan; and
  • Tips for recognizing signs of potential workplace violence.

The materials include a desk reference guide, a reference poster, and a pocket-size reference card.

By utilizing these materials, employers may help prevent harmful workplace violence incidents. Conflict resolution training and employee assistance programs can help reduce the likelihood of workplace violence and active shooter scenarios.  Employee training and emergency preparedness can help minimize the harm from incidents and ensure that employees safely exit the workplace.

These measures also will help insulate employers from negligence claims alleging a failure to maintain a safe work environment for employees. Consider also that under the Occupational Safety and Health Act, employers must protect employees from known hazards in the workplace.  Employers who fail to implement measures to prevent workplace violence may face citations and increasingly aggressive OSHA enforcement actions.

Accordingly, employers should review DHS’s recommendations for active shooter prevention and preparedness and update their policies and practices as appropriate. Of course, active shooter training and policies are only one piece of an effective workplace violence prevention program.  All employers should assess their workplaces and develop comprehensive workplace violence prevention programs and training.

For further information, please contact the author(s), or your Seyfarth attorney.




When Will We Know If Title VII Applies To Cases of Sexual Orientation Discrimination?

Posted in EEOC

By Sam Schwartz-Fenwick and Kylie Byron

A Judge in the Northern District of Illinois has found that the protections of Title VII of the Civil Rights Act of 1964 do not extend to cases of discrimination on the basis of sexual orientation.

This ruling is in line with longstanding judicial reluctance to expand the scope of Title VII to encompass claims of sexual orientation discrimination. However, the decision is at odds with the interpretation of the law espoused by the Equal Employment Opportunity Commission and the Obama Administration.  Indeed, both the EEOC and the administration have been firm in vocalizing their position that the protections of Title VII extend to claims of sexual orientation discrimination.

The EEOC made its position clear in its seminal 2015 Baldwin v. Foxx administrative decision.  There it held that Title VII’s protections extend to claims of sexual orientation discrimination.  It reasoned that sexual orientation discrimination is a form of sex discrimination, as it is based upon expectations of which sex a person of a particular sex should prefer.  While Baldwin is an administrative decision, and therefore not necessarily binding on federal courts, it provided both guidance from the EEOC and a firm statement of the EEOC’s position.

Since Baldwin, which we blogged about here, it has been an open question whether Federal Courts will reconsider their historic reluctance to adopt a more expansive view of Title VII.  If the holding in Igasaki v. Illinois Dept. of Financial and Professional Regulation, is any indication, the answer is a resounding NO.

The court in Igasaki reiterated that the sex-discrimination protections of Title VII do not apply to individuals claiming discrimination on the basis of their sexual orientation.  In reaching this decision it focused on the language of the statute, noting that sexual orientation is not one of the listed protected categories.

It is unknown whether the Seventh Circuit will uphold the interpretation of Title VII espoused in Igasaki.  Indeed, the issue is presently before the court in the pending matter of Kimberly Hively v. Ivy Tech Community College, which we blogged about here.

How the Seventh Circuit ultimately decides this issue will give insight into whether Federal Courts are willing to look beyond past precedent and adopt the EEOC’s view that sexual orientation discrimination is a form of sex discrimination and thus barred under the current text of Title VII. If the holdings of other courts are any indication, it appears that there is at least some judicial willingness to interpret Title VII more broadly to cover these types of claims.  For instance, in Chavez v. Credit Nation Auto Sales, LLC, 2016 U.S. App. LEXIS 598 (11th Cir. Jan. 14, 2016), the Eleventh Circuit held that gender identity discrimination is prohibited by Title VII.  While gender identity is distinct and different from sexual orientation, both rely on an expansive interpretation of “sex” discrimination rather than on a textual interpretation of the language of the statute itself.

Stay tuned, as we will continue to blog on forthcoming developments in this rapidly evolving area of the law. If you have any questions about this topic, please contact the author or your Seyfarth Shaw attorney.

New EEOC Pay Report Proposed For Employers in 2017

Posted in Diversity, Retention & Pay Equity, EEOC, Wage & Hour Compliance

By Christine Hendrickson, Valerie J. Hoffman, Lawrence Z. Lorber, Annette Tyman

If there was any doubt that pay equity is major risk area for employers, that doubt should now be erased.  This morning, on the seventh anniversary of the signing of the Lilly Ledbetter Fair Pay Act, the EEOC made a startling announcement.

The EEOC announced its intention to submit to the Office of Management and Budget (OMB) a major revision to the Employer Information Report (EEO-1) which will require that all employers with more than 100 employees submit compensation data to the EEOC beginning in 2017.  At a White House ceremony, President Obama, Secretary of Labor Perez and EEOC Chair Yang announced the new initiative stating that the availability of pay data will allow the EEOC and the OFCCP to better target compensation issues and address pay disparities.

This proposal suggests that the new EEO-1 form will take the place of the Department of Labor’s Office of Federal Contract Compliance Programs’ (OFCCP) pending “Equal Pay Report” regulations, which would have affected only federal contractors and subcontractors. For more information, see our earlier alert on the Equal Pay Report here.

Written comments to the EEOC’s proposal will be due 60 days after it is published in the Federal Register, an action that is expected to occur on Monday, February 1, putting the close of the comment period in early April 2016. We expect that hundreds, if not thousands of comments will be received.

What is Currently Required?

Currently, employers with more than 100 employees, and federal contractors or subcontractors with more than 50 employees are required to collect and provide to the EEOC information about employees’ race/ethnicity and sex in each of ten job categories (e.g., Executive & Senior-Level Officials and Managers, First/Mid-Level Officials & Managers, Professionals, Technicians, Sales Workers, Administrative Support Workers, Craft Workers, Operatives, Labors and Helpers, and Service Workers).

What Pay Data Would Be Required?

Beginning in September 2017, employers with more than 100 employees would also be required to report on the W-2 earnings and hours worked for all employees by race/ethnicity and gender.  Federal contractors and subcontractors with between 50 and 99 employees will only be required to submit the current EEO-1 form without compensation data.

For each of the ten EEO-1 job categories, the proposed EEO-1 report will require compensation data to be categorized in twelve pay bands. The pay bands track those used by the Bureau of Labor Statistics in the Occupation Employment Statistics Survey as follows:

Pay Band 1 >19,239
Pay Band 2 $19,240-$24,439
Pay Band 3 $24,240-$30,679
Pay Band 4 $30,680-$38,999
Pay Band 5 $39,000-$49,919
Pay Band 6 $49,920-$62,919
Pay Band 7 $62,920-80,079
Pay Band 8 $80,080-$101,919
Pay Band 9 $101,920-$128,959
Pay Band 10 $128,960-$163,799
Pay Band 11 $163,800-$207,999 and
Pay Band 12 <$208,000

So, for example, an employer would report that it employs ten African-American men who are Craft Workers in the second pay band ($19,240-$24,439) or that it employs four White women in the Professional job category who are in the seventh pay band ($62,920-$80,079).

Unlike the OFCCP’s proposal, which required year-end W-2 compensation data, the EEOC’s proposal will require W-2 earnings for the previous twelve months from any pay period between July 1st and September 30th (same as the current EEO-1 report). As the proposal requests W-2 information, this will include salary, bonuses, commissions, tips, taxable fringe benefits, and other forms of reportable earnings. The EEOC suggests that such a requirement will not be burdensome to employers as HR data systems allow W-2 wage reporting by any specified date range.  This does not necessary align with employers’ experience, however, especially when pulling commission data. The proposal estimates the new requirements will cost less than $400 per employer the first year and a few hundred dollars per year after that, a gross underestimation of the burden on employers to collect and report this information.

To help address the concerns anticipated in response to the OFCCP’s proposal, the EEOC’s proposal requires that part-time or partial year employment be normalized by also requiring employers to publish hours worked by the employees in each job category and pay band.  For example, an employer would report that the ten African-American men who are Craft Workers in the second pay band worked a total of 10,000 hours.  This data is still largely meaningless to assess pay equity, however, as eligibility for overtime, commissions, bonuses are typically not the same for full-time, and partial-year or part-time employees.

Impact on Employers

It is difficult to overstate the impact that this could have on employer.

The EEOC explicitly says it will use the pay information to “discern potential pay discrimination.”  It will do so by comparing variations within and across job categories. However, the pay bands do not take into effect legally accepted variables, such as seniority, level of responsibility, and education.  We expect many false positive results with employers then needing to defend their compensation systems.  When the OFCCP published its proposed regulations in 2014, the Agency indicated that it would use the compensation data to create industry compensation standards which will then be used as benchmarks for both the OFCCP and the contractor community and would have been part of the methodology used to prioritize which contractors will be selected for OFCCP audits. Because the OFCCP will have access to the new reports, their agenda will likely not change.

Further, because EEO-1 information is reported by enterprise (i.e., the parent company and all subsidiaries), this will allow the EEOC to compare compensation within a location, across the organization and enterprise-wide.  In addition, the EEOC said it will use the data to compare employers by industry or metropolitan area.

There are also significant unaddressed data privacy concerns for employers. The proposal acknowledges that the EEOC cannot release EEO-1 data and therefore the company supplied EEO-1 cannot be disclosed pursuant to a Freedom of Information Act or otherwise.  However, EEO-1 data can be used in litigation.  The OFCCP states that it will review requests for the report under Exemption 4 of the Freedom of Information Act and the Trade Secrets Act.  While we have been successful opposing requests for disclosure of the EEO-1 form to the OFCCP in individual cases, the new form will undoubtedly be subject to additional scrutiny and requests for disclosure.

It’s More Important than Ever to Act Proactively!

So where do we go from here? In light of this development, the OFCCP’s focus on fair pay, and recent state action on pay equity (including in California, New York, and Massachusetts), all employers would be well-advised to conduct a proactive pay equity analysis now, to address any areas of concern before data is reported to the EEOC and/or the OFCCP.   Seyfarth Shaw’s Pay Equity Cross-Practice L&E Team, coordinates the efforts of its Employment Analytics Group, Workplace Counseling and Solutions Group, and its Complex Discrimination Litigation Group.  We are ready to help guide you through this process.

The Legality of Tracking Employees By GPS

Posted in Privacy Legislation, Workplace Policies and Processes

By Karla Grossenbacher

Over the past several years, technology has dramatically increased employee accountability in the workplace. For example, in an office environment, employees are expected to respond to emails immediately because they are either sitting in front of their computers or carrying a mobile device on which they can access their email.  As for employees who work outside the office, the availability of employer-issued phones and, alternatively, the proliferation of BYOD policies, has resulted in off-site employees being generally just a phone call away.  In specific industries in which employees drive motor vehicles while conducting business for the employer, yet another method of accountability exists: Global Positioning Systems (GPS).

For businesses that provide transportation or delivery services, it is not surprising to find that such employers have installed GPS devices in the vehicles used by their employees. The use of such devices can benefit both the employer and the employee in situations in which delivery status needs to be checked or a vehicle breaks down.  In all likelihood, the employee in these situations is aware that a GPS device has been installed on the company vehicle he or she is driving and that the employee’s movements are being tracked while on duty.  Privacy issues tend to arise, however, when employers use GPS data in connection with investigating  alleged misconduct in the workplace.

There cases in which courts have addressed the legal parameters of an employer’s use of GPS devices to track workers in order to investigate potential misconduct are few but nonetheless instructive.

In Elgin v. Coca-Cola Bottling Co. (E.D.Mo. 2005), the employer attached a GPS device to a company-owned vehicle used by the employee to service vending machines after a cash shortage was reported on a number of machines.  Although the employee was cleared of any wrongdoing in the investigation, when he found out that a GPS device had been installed on the company vehicle he drove during the investigation, he filed a claim for intrusion upon seclusion under state law.  The court rejected this claim, noting that the vehicle was owned by the employer and the only information potentially revealed by the alleged “intrusion” was the whereabouts of the company vehicle.  In another case, Tubbs v. Wynne Transport (S.D. Texas 2007), the court dismissed an invasion of privacy claim against an employer who had used information gathered by a GPS device that had been installed as a matter of course on a company-owned vehicle driven by the employee to perform his duties as a truck driver.  The court did not, however, provide any substantive analysis regarding its decision to dismiss the claim.

Elgin and Tubbs both involved employers attaching GPS devices to company-owned vehicles.  The balance between the employer’s interest in rooting out misconduct and the employee’s individual privacy rights shifts, however, when an employee’s personal vehicle is at issue — even if it is used for work purposes.  In Cunningham v. New York Department of Labor (NY Ct. App. 2013), a state employee was under investigation for falsifying time records and voucher information related to work travel and had used his personal vehicle during work hours in connection with some of the suspected misconduct.  As part of its investigation into the alleged misconduct, the employer had a GPS device installed on the employee’s personal vehicle to gather information about his movements during periods in which he was suspected of misconduct.  The employee was ultimately discharged and filed suit to exclude the GPS data from evidence at his disciplinary hearing based on federal and state constitutional grounds.

The New York Court of Appeals held that installation of the GPS device on the employee’s personal vehicle was an unreasonable search under constitutional law principles. Although the Court held the search was reasonable at its inception because the employer had a reasonable suspicion that the employee was engaging in workplace misconduct, the search was unreasonable in its scope because it had not been designed to obtain only the information the employer needed to determine if workplace misconduct had occurred.  Rather, the employer had monitored the employee’s personal vehicle 24/7, as opposed to only during working hours, and made no attempt to remove the device prior to the employee’s scheduled vacation.  The Court concluded that “[w]here an employer conducts a GPS search without making a reasonable effort to avoid tracking an employee outside of business hours, the search as a whole must be considered unreasonable.”

However, the extent to which a personal vehicle is used for work purposes can alter the analysis. In two cases involving the revocation of a New York City taxi cab driver’s license for over-charging passengers, two New York city state courts held that taxi drivers had no legitimate expectation of privacy in GPS data gathered from the Taxi Technology System (TTS) installed on the cabs.  The court also held that, even if the drivers had a legitimate expectation of privacy in the data, the city had a legitimate interest in determining whether or not the driver was overcharging passengers and had narrowly tailored its search to obtain information from the TTS only during the driver’s work hours.  In these two cases, even though the cabs were personally owned by the drivers, the court found that the cab drivers had limited privacy rights with respect to the vehicles because they were open to public use and subject to regulation by the state.  The regulatory authority required that all city cabs have the TTS equipment installed and drivers were required to use the system to transmit information regarding location, trip and fare information to the regulatory authority.

The takeaway from these cases is that, although an employer appears to be on solid ground attaching a GPS device to a company-owned vehicle and using data gathered by the device in an investigation of workplace misconduct, especially where the employee is aware the device is on the vehicle and the information is only being gathered while the employee is on duty, caution should be taken in attaching a GPS device to a personal vehicle used by the employee for work purposes. Employers also need to be mindful of complying with state laws regarding electronic surveillance.  California, Connecticut, Delaware and Texas all have laws requiring either notice or consent prior to placing a GPS on another person’s motor vehicle.

As the foothold of technology sinks deeper into the terrain of the workplace, the privacy issues confronted by employers will only grow in complexity. However, courts have been reticent about making broad pronouncements about the intersection of law and technology in the workplace.  As the Supreme Court stated in United States v. Kwon, a case involving a state employer’s review of an employee’s text messages on a state-issued pager, “[t]he judiciary risks error by elaborating too fully on the Fourth Amendment implications of emerging technology before its role society has become clear.”  This restraint, while understandable, can leave employers with unanswered questions about how to balance the competing interests of legitimate business needs and individual privacy concerns in the workplace, particularly where technology is involved.   Perhaps in 2016, the courts will offer more guidance in this area.  Stay tuned.

FTC Publishes Big Data Report – Provides “Recommendations to Business”

Posted in EEOC, Fair Credit Reporting Act, FTC

By Pamela Q. Devata and Craig B. Simonsen

The Federal Trade Commission (FTC) has just released a report on Big Data: A Tool for Inclusion or Exclusion? Understanding the Issues (Report), January 6, 2016.

The FTC Chairwoman Edith Ramirez indicates in the FTC news release on the Report, that “big data’s role is growing in nearly every area of business, affecting millions of consumers in concrete ways….  The potential benefits to consumers are significant, but businesses must ensure that their big data use does not lead to harmful exclusion or discrimination.”

The Report examines “possible risks” that could result from biases or inaccuracies about certain groups, including:

  • Individuals mistakenly denied opportunities based on the actions of others;
  • Exposing sensitive information;
  • Creating or reinforcing existing disparities
  • Assisting in the targeting of vulnerable consumers for fraud;
  • Creating higher prices for goods and services in lower-income communities; and
  • Weakening the effectiveness of consumer choice.

The Report reviews various laws that may apply to the use of big data, concerning possible issues of discrimination or exclusion, including the Fair Credit Reporting Act, Federal Trade Commission Act, and other equal opportunity laws. Perhaps helpfully, from the Agency’s perspective, the Report also provides a “range of questions for businesses to consider” when they examine whether their big data programs comply with these laws.

The Report also suggests four key “policy questions” that the Agency claims are drawn from research, into the ways big data can both present and prevent harms. The policy questions posed by the FTC “are designed to help companies determine how best to maximize the benefit of their use of big data while limiting possible harms….” Companies are intended to consider, and perhaps answer the questions of accuracy and built-in bias that may exist, and whether the company’s use of big data raises “ethical or fairness concerns.”

The Commission voted (4-0) to issue the Report. The Report was issued along with Commissioner Maureen Ohlhausen’s separate statement.

For employers, especially now with this heightened scrutiny and attention from the FTC, it may be a good time for you to consider seriously the “range of questions” as to whether your company’s big data programs comply with these laws.

Those with questions about these issues or topics are encouraged to reach out to the authors, your Seyfarth attorney, or any member of the Global Privacy & Security Team.





Post-Paris and San Bernandino: The EEOC Weighs In on Anti-Muslim Workplace Discrimination

Posted in EEOC, Hiring, Testing & Selection

By Dawn Solowey

In the wake of Paris and San Bernandino, the EEOC has issued new “Questions and Answers” for employers concerning workers who are, or are perceived to be, Muslim or Middle Eastern.  The agency issued companion questions and answers for employees.

It’s a timely topic as employers seek to protect all employees’ rights at a time when terrorism, workplace violence, and anti-Muslim rhetoric are the subject of headlines, viral social media posts, and water-cooler conversation.

The EEOC starts with the basics: an employer cannot discriminate based on religion, ethnicity, national origin, or race; must reasonably accommodate religious beliefs unless to do so would impose an undue hardship; and cannot retaliate for discrimination or harassment complaints.

The agency then provides hypothetical scenarios and guidance on hiring and employment decisions; harassment; religious accommodation and background investigations.

Hiring and Other Employment Decisions

The EEOC opines, consistent with prior Guidance on religious garb, that an employer cannot deny an employee a position due to customer preferences. For example, a store cannot refuse to hire a Muslim wearing a hijab as a cashier because customers may be uncomfortable.  Nor can the store assign the employee to a non-customer-facing position.

The EEOC also opines that a temporary agency cannot comply with a client’s request for the agency to either have the employee remove the hijab, or to substitute an alternative temporary employee. The EEOC’s position is that the temporary agency must explain to the client the duty to accommodate the hijab, and if the client still refuses the worker, must reassign the worker to a different assignment at the same pay, and decline to send the client an alternative worker.


The EEOC posits various hypotheticals about harassment against employees who are, or may seem to be, Muslim or Middle Eastern, such as a Muslim employee called “ISIS,” or drawn into unwanted discussions of Islam and terrorism, by a coworker.

The EEOC points out that clear, effective policies against harassment, and a confidential reporting mechanism for harassment, are crucial elements of an anti-harassment strategy. When harassment is reported, the employer must take prompt remedial action.  The nature of that remedial action if fact-driven; in one situation, the employer might solve the problem by facilitating a discussion between employees, in others, corrective action such as counseling, a warning, or more severe discipline, may be warranted.


The EEOC notes that accommodations for Muslim employees (like those of other religions) may include time off for religious holidays, or exceptions to dress and grooming codes. The EEOC also offers a hypothetical in which Muslim employees ask to use a conference room for prayer.  While offering little analysis, the agency states that the company may be able to deny the use if the room is needed for business, but that in “many circumstances” allowing the use may not impose an undue hardship.  The EEOC also opines that if normal work breaks are not sufficient, the employer may need to consider the feasibility of longer breaks.  The agency notes that the company should not deny an accommodation based solely on “speculation” that other Muslim employees will seek the same, but should consider the instant request on its merits, making later adjustments as necessary.

Background Investigations

Background checks are a current hot topic for the EEOC. Here, the EEOC states that the employer can impose the same pre-hire background checks imposed on other applicants, but “may not perform background investigations or other screening procedures in a discriminatory manner.”  The agency notes that “security clearance determinations for positions subject to national security requirements under a federal statute or an Executive Order are not subject to review under the equal employment opportunity statutes.”

Key Takeaways

  • The very fact that the EEOC issued this publication speaks to a renewed focus on anti-Muslim discrimination and foreshadows an uptick in litigation in this area.
  • The current climate is an opportunity for employers to take a fresh look at its anti-discrimination and harassment policies, complaint mechanisms, and accommodation practices, to ensure compliance and efficacy.
  • Effective training not only helps prevent litigation, but can assist a defense. Companies should train managers on nondiscriminatory hiring practices, and how to manage employee complaints and accommodation requests.
  • When an employee complains of alleged discrimination or harassment, the employer should investigate promptly, and if a violation is found, take prompt remedial action.
  • The EEOC’s brief guidance does not wrangle with all of the complexities that its hypotheticals raise. Further, states and localities may impose different or additional requirements.  An employer facing such scenarios would be wise to consult employment counsel to help protect employees’ rights while minimizing legal risk.

U.S. and China Sign Financial Intelligence Cooperation Memorandum

Posted in China, International, White Collar

By Andrew S. Boutros, Wan Li, and Craig B. Simonsen

The U.S. Financial Crimes Enforcement Network (FinCEN) and the China Anti-Money Laundering Monitoring and Analysis Center (CAMLMAC) recently signed a Memorandum of Understanding (MOU) to create a “framework to facilitate expanded U.S.-China collaboration, communication, and cooperation” between each agency’s financial intelligence units (FIUs). News Release (December 11, 2015).

In announcing the MOU, FinCEN Director Jennifer Shasky Calvery stated that “this MOU provides an important foundation for a reciprocal exchange of extremely valuable financial information to help thwart terrorism and money laundering in these perilous times…. Building this mutually beneficial bridge of cooperation will serve each country’s vital interests and help protect the citizens of both of our countries from the damage that criminals and terrorist financiers can inflict.”

As an increasing amount of business is conducted between the United States and China, the MOU serves important investigative interests shared by both countries, namely, to allow for the sharing of “extremely valuable information to provide leads, expose criminal networks, and help thwart illicit activity in the vast and interconnected global economy,” as stated by the FinCEN press release.  For China, signing the MOU is also an important action to push forward its domestic anti-corruption campaign, internationally.

Those with questions about any of these issues or topics are encouraged to reach out to the authors, your Seyfarth attorney, or any member of the White Collar, Internal Investigations, and False Claims Team.

New Jersey Supreme Court Takes on Preemption of CEPA Whistleblower Claims

Posted in Uncategorized

By: Christopher Lowe, Robert T. Szyba, and Samuel Sverdlov

On Wednesday, January 6, 2016, the New Jersey Supreme Court heard arguments in Puglia v. Elk Pipeline, Inc., on whether claims under the New Jersey Conscientious Employee Protection Act (“CEPA”) were preempted by the federal Labor-Management Relations Act (“LMRA”).

The road to the Supreme Court. The plaintiff in Puglia was a laborer on a public works project. After discovering that he was being be paid less than what was required under the New Jersey Prevailing Wage Act (“PWA”), he made numerous complaints to management, resulting in an increase in his pay. As the project was winding down, however, plaintiff was laid off purportedly due to lack of work. Plaintiff commenced an action claiming that he was laid off in retaliation for his complaints under the PWA, pointing to the fact that he had more seniority than certain employees who were not laid off. The plaintiff’s employment, however, was governed by a collective bargaining agreement (“CBA”) between the employer and the plaintiff’s union, which contained a complicated seniority policy that takes into consideration both objective and subjective elements to determine an employee’s seniority.

The trial court granted summary judgment in favor of Elk Pipeline, and “rejected plaintiff’s claims as cognizable under CEPA, instead finding they were based on an interpretation of the parties’ CBA, and redress was governed by federal law.” In short, his claims were preempted.

The Appellate Division affirmed summary judgment, noting that the employer’s “assessment of [plaintiff’s] seniority status, as compared to that of his colleagues who continued working, can only be reviewed by an analysis of the CBA’s factors.” Therefore, the “[p]laintiff’s attempt to limit review exclusively to whether he engaged in protected whistle-blower activities for which he was laid off ignores that the project neared completion causing Elk to trim labor based upon seniority, a defined term of art under the CBA.” Although plaintiff tried to stave off dismissal by reframing his CEPA claim as solely a whistleblower claim, the court saw through this attempt and found that “[a]n analysis of plaintiff’s retaliatory discharge claim shows it is not limited to his report of Elk’s wrongful payment practices,” rather, the claim “is grounded on a violation of plaintiff’s seniority status, as defined in the CBA, a negotiated provision governing his employment, and thus, invoked provisions of the NLRA, requiring administrative review by the NLRB.” While the Appellate Division could not definitively determine whether the plaintiff’s complaints qualified as “protected concerted activity,” and thus was unable to determine whether plaintiff’s claim was preempted by the NLRA, the court determined that plaintiff’s claims were preempted by the LMRA.

Supreme Court Arguments. The Supreme Court is now considering whether plaintiff’s CEPA claim is preempted under the LMRA and the NLRA. The plaintiff is pushing a new spin on his prior argument: that even if plaintiff’s claim is preempted under the LMRA, CEPA claims should be exempt from preemption because the local importance of CEPA outweighs the federalism concerns underlying preemption. The defense, however, has pointed out that that most courts to consider this line of argument have nevertheless held that a plaintiff’s claims are preempted if they require the interpretation of a CBA. Due to the subjective element of the CBA’s seniority policy, the CBA must be interpreted to assess plaintiff’s CEPA claim.

The plaintiff also argued that he complained about the prevailing wage for exclusively his own benefit, thus preventing his complaint from being protected concerted activity. In response, the defense pointed out that in his deposition the plaintiff admitted that he made the complaint about his wages with another employee and strategized with a group of employees about how to recover their wages. Thus, the plaintiff acted in concert with the other employees, and his complaint was concerted protected activity, bringing it under the jurisdiction of the NLRA.

Why this case matters? In determining the issues in this case, the New Jersey Supreme Court is positioned to impact the balance between state and federal law where one has to give way to the other. The Court’s decision may provide a welcome bright line for employers seeking predictability as to how such contests end. Employers with a unionized workforce should also pay close attention, as a reversal of the Appellate Division might result in employees having the ability to bypass procedures in their CBA’s in favor litigating their union disputes under the guise of CEPA complaints. Additionally, although New Jersey’s Law Against Discrimination (“LAD”) was not implicated in this case, the two statutes are often subject to uniform interpretation, so it is entirely possible that if CEPA is considered to be worthy of the local importance exception to preemption, then the LAD, may be as well.

Stay tuned. We anticipate a decision from the Supreme Court within the next few months. Keep an eye out here for a follow-up blog post containing our analysis of the Supreme Court’s ultimate decision.

SEC Whistleblower Report Shows Increase in “Tips”

Posted in SEC, Whistleblower

By Ada W. Dolph, Adam R. Young, and Craig B. Simonsen

The Securities and Exchange Commission’s (SEC) Office of the Whistleblower (Office) recently released its 2015 Annual Report on the Dodd-Frank Whistleblower Program (Report) (November 16, 2015).

In Fiscal Year 2015 alone, the Commission paid more than $37 million to reward eight whistleblowers for their provision of original information that led to successful Commission enforcement actions with monetary sanctions totaling over $1 million; one whistleblower received over $30 million in a single award.  This flurry of awards followed the Commission’s active Fiscal Year 2014, in which the Commission authorized fourteen whistleblower awards and paid nine.  The Commission also registered a record year by issuing Final Orders or Preliminary Determinations on over 150 whistleblower award claims.

The Commission received 3,923 whistleblower tips, a 10% increase over Fiscal Year 2014 and nearly a 30% increase over the number of tips received in Fiscal Year 2012, the first year for which there is a full-year of data. The Commission received tips from all 50 states and 95 foreign countries. The most common complaint categories reported by whistleblowers included Corporate Disclosures and Financials (17.5%), Offering Fraud (15 6%), and Manipulation (12.3%).  In relative terms, the Commission reported the largest increases in Unregistered Offerings (150, up from 102) Trading and Pricing (213, up from 144) and Market Event (192, up from 139).  The Commission reports that it is currently tracking over 700 matters in which a whistleblower’s tip has caused an investigation to be opened or which have been forwarded to enforcement staff.

Notably, the Report also indicated that “to date, almost half of the award recipients were current or former employees of the company on which they reported information of wrongdoing.”  Approximately 80% of those individuals raised their concerns internally to their supervisors or compliance personnel, or understood that their supervisors or compliance personnel knew of the violations, before reporting information to the Commission.

The Report highlighted the Commission’s August 4, 2015 guidance clarifying the interaction of the anti-retaliation provisions and the award provisions of the Whistleblower Rules (17 C.F.R § 241) with respect to internal reporting under Dodd-Frank.  Though not universally accepted by the federal courts, the Commission has taken the position that whistleblowers who make only internal reports have engaged in protected activity under Dodd-Frank’s anti-retaliation provisions. (See our blog on this issue here).

The Report noted several ground-breaking 2015 decisions, including:

  • An April 28, 2015 award in which the Commission provided a maximum whistleblower award in its first anti-retaliation case (In the Matter of Paradigm Capital Management, Inc. and Candace King Weir, File No. 3-15930 (June 16, 2014));
  • An April 22, 2015 award of more than one million dollars to a compliance professional. This award was the first under the “substantial injury” exception, which permits awards for a compliance professional’s reports on conduct which the professional had a reasonable basis to believe would “cause substantial injury to the financial interest or property of the entity or investors” (Order Determining Award Claim, Exchange Act Rel. No. 74781, File No. 2015-2 (Apr. 22, 2015));
  • An March 2, 2015 award of over $500,000 to a company officer. This award was the first awarded under an exception permitting awards to an officer who reports information to the Commission more than 120 days after other responsible compliance personnel possessed the information and failed to address the issue adequately. (Order Determining Award Claim, Exchange Act Rel. No. 744404, File No. 2015-1 (Mar. 2, 2015)).

The Report also highlighted the Commission’s 2015 focus on employers’ use of confidentiality, severance, and other kinds of agreements to, in its view, interfere the ability of individuals to report potential wrongdoing to the SEC.  From the report, it is clear that assessing confidentiality agreements for compliance with Rule 21F-17(a) will continue to be a top priority for OWB into Fiscal Year 2016.

Employers should take note and revise their form severance agreements accordingly. For more information on the efforts of the Commission in these areas, also see our previous article,  “Aggressive Enforcement Efforts Will Continue After KBR, Per SEC Whistleblower Chief.”

Ada W. Dolph is a partner in Seyfarth’s Chicago office and Team Co-Lead of the National Whistleblower Team. Adam R. Young is an associate in the firm’s Chicago office and a member of the National Whistleblower team. Craig B. Simonsen is a senior litigation paralegal in the firm’s Chicago Office. If you would like further information on this topic, please contact a member of the Whistleblower Team, your Seyfarth attorney, Ada W. Dolph at adolph@seyfarth.com, Adam R. Young at ayoung@seyfarth.com or Craig B. Simonsen at csimonsen@seyfarth.com.

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