Jennifer L. Achilles, Brooke T. Iley, Anthony A. Mingione, Shawn M. Wright, and Amelia Clegg
Employers will not be able to take full advantage of the DOJ’s new program if their compensation systems do not permit clawbacks from wrongdoer employees. Companies should review their existing compensation systems and consider updating them before problems arise, so that they will be in a position to take full advantage of the DOJ program should it become necessary to do so. In updating compensation systems to permit clawbacks, or expand the scope of existing clawback provisions, employers must also take appropriate steps to maintain compliance with the wage and hour laws in the jurisdictions in which they operate. Navigating these sensitive issues will be complicated and will require more coordination between employment counsel and white-collar counsel than ever before.
The Roman lawyer and orator Cicero phrased personal responsibility thus in his De Oratore: “ut sementem feceris, ita metes”—“just as you sow, so you shall reap”. This turned out to be particularly fitting for Cicero himself–after his death at the hands of Mark Antony, Antony’s wife Fulvia took Cicero’s severed head and stabbed his tongue repeatedly with her hairpin to exact revenge for his barbed attacks on her and her husband. It appears that the Department of Justice (“DOJ”) has taken Cicero’s advice to heart when drafting the revised corporate compliance policies unveiled last week at the ABA White Collar Crime Conference in Miami. The revisions reflect an ethos that corporate employees who engage in misconduct, as well as the supervisors who enable such conduct, should suffer the consequences of their misdeeds. Accordingly, the DOJ will now reward corporations for clawing back compensation from both corporate wrongdoers and their supervisors.
On March 2, Deputy Attorney General Lisa Monaco both cemented the DOJ’s recent amendments to its corporate self-disclosure program (for more detail, please see here) and announced the launch of a novel pilot program on compensation incentives and clawbacks.
Under the pilot program:
- Every corporate resolution involving the Criminal Division will now include a requirement that the resolving company develop compliance-promoting criteria within its compensation and bonus system. Companies subject to a resolution will need to revise their performance and bonus metrics to include compliance-related components. Companies may implement a system whereby executives and employees are required to forfeit their bonuses if they fail to meet certain compliance-related objectives.
- The Criminal Division will reduce fines for companies who seek to claw back compensation from corporate wrongdoers. Companies that pursue clawbacks in good faith, but are unsuccessful, may receive a fine reduction of up to 25 percent of the amount of compensation sought.
In other words, companies will be able to reduce criminal fines by clawing back, or attempting in good faith to claw back, compensation from wrongdoers and their supervisors, and the companies will be able to keep any recovered funds.
To read the full client alert, please visit our website.
Brian Wm. Higgins ●
The U.S. Department of Commerce’s National Institute of Standards and Technology (“NIST”) last week released an Artificial Intelligence Risk Management Framework (“AI RMF 1.0”). Calling it a guidance document for voluntary use by organizations in designing, developing, deploying, or using AI systems, the framework can be used to contextualize and manage the potential risks of harm posed by AI systems, technologies, and practices in all areas where they may be used.
AI-related risk management is an increasingly important issue. Documented harms traceable to AI technologies have been widely reported and threaten to undermine people’s trust in AI. Companies that make AI systems, and those that use AI to automate decisions across their organizations or enterprises, may have policies and procedures for evaluating general corporate risks from AI. But with several states and localities implementing laws requiring data-centric risk assessments, data privacy impact assessments, and bias audits around data-based technologies like AI (including New York City’s Law No. 144 that requires audits by those who use automated employment decision tools), and with Congress poised to consider national data privacy legislation containing economy-wide risk provisions, it is important for companies and organizations that make or use AI to review to ensure their approaches to risk management around AI are comprehensive and comply with applicable laws and regulations.
Continue reading “NIST Issues Guidance to Help Companies and Organizations Operationalize AI Risk Management”
Kevin M. Passerini and Daniel L. Morgan ●
The Ban on Non-Compete Agreements Amendment Act of 2020 (the “Act”) passed by the D.C. Council over the summer will take effect on October 1, 2022, imposing new substantive and procedural restrictions on D.C. employers’ use of noncompetes, new compensation thresholds below which such noncompetes are now banned, and creating new administrative and civil enforcement measures, including administrative penalties for noncompliance.
The New Law in a Nutshell
The Act defines “noncompete provision” as “a provision in a written agreement or a workplace policy that prohibits an employee from performing work for another for pay or from operating the employee’s own business.” Consequently, the law covers both agreements containing noncompetes and workplace policies restricting employee’s competitive or outside activities, subject to several exceptions summarized below.
Most notably, the Act imposes two new income thresholds for “noncompete provisions” with “highly compensated employees”—those who earn at least $150,000—and “medical specialists”—licensed physicians earning at least $250,000. Both thresholds are subject to adjustments in accordance with increases in the Consumer Price Index beginning in 2024, and any “noncompete provisions” with employees below those levels are effectively banned by the Act.
The Act clarifies that wages, salary, bonuses or other cash incentives, commissions, overtime premiums, vested stock and restricted stock units, and other payments provided on a regular or irregular basis may all be included in determining who qualifies as a “highly compensated employee.” The Act excludes the value of noncash fringe benefits, but because it does not define “fringe benefits,” there is uncertainty as to what noncash benefits may constitute “other payments provided on a regular or irregular basis.”
To read the full client alert, please visit our website.
Caroline Powell Donelan ●
Gov. Newsom signs California’s newest and broadest pay transparency law, SB 1162, requiring California companies to disclose pay data starting next year.
Read more: Big Brother Just Got Bigger: Expanded Pay Data Reporting Expected to Hit the Golden State
As always, Blank Rome’s employment team stands by ready to assist.
Caroline Powell Donelan ●
As our team has previously reported, California currently requires private employers with 100 or more employees, and who are required to file an annual EEO-1 report, to submit certain employee pay data to the state’s Civil Rights Department, formerly known as the Department of Fair Employment and Housing (“DFEH”), including pay data on the number of employees by race, ethnicity, and sex, in each of the 10 EEO-1 specified job categories.
As pay transparency rules continue to sweep the nation, the California legislature—never to be outdone—has passed its own amendments which will significantly expand employers’ current pay data reporting requirements and wage range disclosure obligations. The newly passed bill, “SB 1162,” is currently sitting on Governor Newsom’s desk for signature (or veto). With a potential compliance date of May 10, 2023 (and reporting due each year thereafter on or before the “second Wednesday of May”), Golden State employers are advised to take inventory now of additional steps they need to take in order to adequately prepare for and timely comply with SB 1162, including:
- Gathering median and mean hourly rate data for specific job categories, further categorized by their race, ethnicity, and sex;
- For employers with multiple establishments, preparing a separate pay data report for each establishment, doing away with the current requirement of a consolidated report;
- Gathering pay scale information by position, which would need to be provided to applicants and current employees upon request;
- For employers with 15 or more employees, preparing pay scale information to be added to current job postings and shared in any new job postings, including postings by third parties (not just upon request); and
- For employers with 100 or more employees hired through labor contractors, submitting a separate pay data report for those employees, so long as one employee is in California.
If enacted, SB 1162 also allows courts to impose civil penalties “not to exceed one hundred dollars ($100) per employee upon any employer who fails to file the required report and not to exceed two hundred dollars ($200) per employee upon any employer for a subsequent failure to file the required report.”
Governor Newsom has until September 30, 2022, to sign the bill, which would trigger a January 1, 2023, effective date and have massive impacts across the state. As we learned earlier this year, an ounce of prevention is worth a pound of cure. Blank Rome’s employment team stands by ready to assist.
Caroline Powell Donelan and Caitlin I. Sanders ●
Last week, the United States Supreme Court issued its long-awaited decision in Viking River Cruises, Inc. v. Moriana (US 20–1573 6/15/22) (“Moriana”). The singular question presented to the Court was whether the Federal Arbitration Act (“FAA”) requires enforcement of arbitration agreements waiving an employee’s right to assert “representative” claims under California’s Private Attorneys General Act (“PAGA”). In response, the Court provided two answers: (1) wholesale waivers of an employee’s right to bring any PAGA claims in any forum will not be enforced; yet (2) arbitration agreements can require an employee to arbitrate their own individual PAGA claims, leaving the absent employees’ claims subject to dismissal.
For context, PAGA is a decades-old law that allows private citizens to step into the shoes of the Labor Commissioner, essentially turning “aggrieved” employees into bounty-hunters for the State’s Labor and Workforce Development Agency (“LWDA”). Specifically, PAGA litigants are authorized to recover civil penalties on behalf of the State for certain Labor Code violations, which would otherwise be recoverable only by the Labor Commissioner. If successful, employees receive a 25 percent share of civil penalties recovered, with the remaining 75 percent going to the LWDA. And another thing, PAGA allows for the recovery of attorneys’ fees and costs, which are often exponentially larger than the underlying civil penalties and statutory damages recovered—leaving no surprise as to why PAGA has become such a popular vehicle for plaintiffs’ attorneys.
Continue reading ““C” Is for Consent When It Comes to Arbitration in California: U.S. Supreme Court Holds that Representative Action Waivers Are Enforceable to Compel “Individual” PAGA Claims to Arbitration”
Caroline Powell Donelan and Howard M. Knee
California is infamous for its hostility towards employers. On May 23, the California Supreme Court continued on its unwavering mission to solidify that well-earned reputation by issuing a 45-page decision in Naranjo et al. v. Spectrum Security Services, Inc., a case we have been closely monitoring at Blank Rome.
For context, the failure to pay wages in California triggers not only an award of those unpaid wages, but potentially steep and costly statutory and civil penalties as well, including so-called: (1) “waiting time penalties”—up to 30 days’ wages for former employees; and (2) “wage statement penalties” when the unpaid wages render the employee’s pay stub inaccurate. Wage statement penalties start at $50 for the first violation and rise to $100 for subsequent violations. When claims are brought on a classwide basis, these penalties can become astronomical, as they are all assessed on a per-employee, per-pay-period basis.
Continue reading “Employer Alert: California Puts Another “Premium” on Meal Period Compliance”
Alix L. Udelson
President Biden is expected to soon sign into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “Act”), which was recently passed by both houses of Congress. President Biden has long supported measures to limit mandatory arbitration clauses in general and specifically endorsed the Act, which received bipartisan support.
The Act will amend the Federal Arbitration Act to limit every employer’s ability to mandate predispute arbitration of an employee’s claims of sexual harassment or sexual assault. The salient language provides:
Notwithstanding any other provision of this title, at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct, no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.
Continue reading “Congress Passes Bipartisan Legislation Prohibiting Mandatory Arbitration of Sexual Harassment Claims”
Caroline Powell Donelan
On December 15, the U.S. Supreme Court changed course and announced that it would decide whether representative claims brought under California’s Private Attorneys General Act (known as “PAGA”) can be waived by an otherwise enforceable arbitration pact—taking on a years-long conflict between the California Supreme Court’s 2014 Iskanian v. CLS Transportation Los Angeles, LLC decision (holding that arbitration agreements cannot bar PAGA claims) and the U.S. Supreme Court’s own 2018 Epic Systems Corp. v. Lewis decision (holding that courts must enforce arbitration agreements under the Federal Arbitration Act (“FAA”), including those containing class/collective action waivers). You can read more about the Epic Systems holding in Epic Shift: Supreme Court Enforces Class Action Waivers in Arbitration Agreements and The Epic Systems Decision: Where Do Employers Go from Here?
Critics of Iskanian and its progeny essentially argued to the U.S. Supreme Court that it allowed an end run around the FAA, which preempts any state law that restricts the enforceability of arbitration agreements.
The petition was filed on behalf of Viking River Cruises, one of many filed by employers across the Golden State this year, each asking the U.S. Supreme Court to weigh in on the Iskanian versus Epic Systems PAGA conflict.
The Blank Rome team will be watching this one closely and with bated breath, as the Supreme Court’s ruling will impact thousands of businesses and have fundamental and profound effects on representative litigation both in California and across the United States.
Oliver R. Katz, Brooke T. Iley, and Jason E. Reisman
With COVID-19 surging once again across the United States, yesterday, September 9, 2021, President Joe Biden announced a six-part plan for tackling the rising number of COVID-19 cases throughout the country. President Biden’s announcement includes a mandate that large employers require vaccines or weekly COVID-19 testing for their employees, as well as a mandate that all federal workers and contractors be vaccinated. Estimated to affect 100 million American workers, here are some important details employers should know:
Continue reading “President Biden Announces Sweeping New Requirements Aimed at Combatting the Surging COVID-19 Delta Variant”
- All employers with 100 or more employees must ensure their workforce is fully vaccinated or require any workers who remain unvaccinated to produce a negative COVID-19 test at least on a weekly basis prior to coming to work.
- Covered employers are required to provide paid time off to employees to get vaccinated or recover from any side effects of getting vaccinated.
- All federal executive branch workers and employees of contractors that do business with the federal government are required to be vaccinated, with no ability to opt out and instead be subject to regular testing (Blank Rome’s government contractor FAQs about the executive order can be found on our Government Contracts Navigator blog).
- Large entertainment venues like sports arenas, large concert halls, and other venues where large groups of people gather are asked to mandate that their patrons are vaccinated or show a negative COVID-19 test for entry.
- Healthcare facilities receiving Medicare and Medicaid reimbursement, including but not limited to hospitals, dialysis facilities, ambulatory surgical settings, and home health agencies, must vaccinate their employees.
- The vaccination requirement for nursing home facilities will now apply to nursing home staff as well as staff in hospitals and other Centers for Medicare and Medicaid Services regulated settings, including clinical staff, individuals providing services under arrangements, volunteers, and staff who are involved in direct patient, resident, or client care.