Employment Law This Week®: Non-Solicitation Violation, SOX 304 Clawback, NLRB’s Joint-Employer Standard, OSHA’s “Walk Around” RuleEpisode 43: Week of September 26, 2016 September 26, 2016
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This week’s stories include ...
(1) Non-Solicitation Violation Leads to $6.9M in Damages
Our top story: Former employees turned competitors in Pennsylvania are hit with $4.5 million in punitive damages. An insurance brokerage firm sued a group of employees, claiming that they violated their non-solicitation agreements by luring away employees and clients to launch a new office for a competitor. A lower court awarded the firm nearly $2.4 million in compensatory damages and $4.5 million in punitive damages because of the defendants’ outrageous conduct. On appeal, the appellate court agreed and upheld all damages. Anthony Laura, from Epstein Becker Green, has more.
“Punitive damages were awarded in this case for what I think were several reasons. Initially, the court did sustain tort claims against these defendants, which supports an award of punitive damages. Secondly, the defendants’ conduct in this case was particularly egregious. They willfully took information from their former employer; that was the plan that they had all along. And, in fact, their first year of business was derived solely from the clients of their former employer. . . . And lastly, I think the court was annoyed with these particular defendants for having ignored his discovery rulings and orders in the case, and, in fact, having violated a preliminary injunction order that the court put in place. That’s certainly a recipe for punitive damages.” For more on this story, click here: http://bit.ly/2cWCcLw
(2) No Personal Misconduct Required for SOX 304 Clawback
Executive pay is subject to clawback regardless of fault, the U.S. Court of Appeals for the Ninth Circuit says. The Securities and Exchange Commission recently sued a former CEO and CFO, seeking to take back compensation under Section 304 of the Sarbanes-Oxley Act (SOX), after their former company restated its financial results due to accounting improprieties. The executives argued that they personally did not engage in misconduct, so their pay should not be subject to the clawback. The Ninth Circuit disagreed, finding that Section 304 applies whenever companies restate results due to misconduct. While we’ve seen similar rulings from lower courts, this is the first time a federal circuit court has taken this view.
(3) EEOC Supports NLRB’s Joint-Employer Standard
The Equal Employment Opportunity Commission (EEOC) voices its support for the National Labor Relations Board’s (NLRB’s) new joint-employer standard. In an amicus brief filed with the D.C. Circuit, the EEOC backed the NLRB’s new joint-employer test, which eliminates the requirement that a joint employer exercise “direct and immediate” control over employees. In its brief, the EEOC argues that its own joint-employer standard is consistent with the NLRB’s test and that the flexible nature of the test is necessary in our current economic climate. Click here for more on the NLRB’s joint-employer standard: http://bit.ly/2dmRA1U
(4) Business Organization Sues OSHA
The Occupational Safety and Health Administration’s (OSHA’s) new “walk around” rule is facing a legal challenge. The National Federation of Independent Business (NFIB) filed a suit against OSHA over its new rule for walk-around rights during inspections. The agency recently released guidance stating that non-union employees could designate a union representative to accompany OSHA officers during a workplace inspection. In the past, this walk-around representative was generally limited to being an employee of the workplace. The NFIB alleges that OSHA made this change to allow unions easier access to non-represented employees but failed to comply with the procedural requirements for amending federal regulations.
(5) Tip of the Week
Denise Davin, Attorney and Senior HR Executive, is here with some advice on best practices in risk management.
“Risk management helps to ensure the ongoing health of our organizations as well as the success of new business ventures. It is key that we include the ‘people’ aspect in our analyses of risk management and not just focus alone on corporate legal matters, financial health, and reputation. . . . Examine the talent management programs and processes of your organization. Undertake an analysis of whether you have talent in your key roles with the right skills and capabilities, a productive succession-planning process, and an analysis of whether there are any recruitment, retention, or engagement initiatives that might impact your success.”
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