Friday, January 29, 2010

EEOC Sues New York Law Firm Kelley Drye & Warren For Alleged Age Discrimination

The New York Law Journal reports today that the United States Equal Employment Opportunity Commission ("EEOC") has sued New York-based law firm Kelley Drye & Warren, claiming that the firm's compensation system discriminates against partners based on their age. The lawsuit was filed in U.S. district court in Manhattan on behalf of 79-year-old partner Eugene D'Ablemont and other allegedly "similarly situated" employees. The lawsuit alleges that the firm discriminated against D'Ablemont and other attorneys by forcing them to give up their equity stakes once they turned 70, therefore making them earn less than younger firm lawyers with similar collections and billings. D'Ablemont remains employed by the firm in its New York office. The EEOC claims that D'Ablemont routinely brought in more than $1 million in fees from clients, but in 2008 his annual bonus was reduced from $75,000 to $25,000. The lawsuit is similar to the suit the Chicago-based law firm Sidley Austin settled with the EEOC two years ago, in which the EEOC accused Sidley Austin of age discrimination against 32 partners. Most of those partners at issue in that case were in their 50s and 60s when they were demoted to "counsel" status in 1999. Prior to settling that case, Sidley Austin had claimed that the demotions were based on performance.

Thursday, January 28, 2010

Judge Dismisses Northrop Grumman Corp. ERISA Case

A federal district court in California dismissed on Tuesday a putative class action lawsuit against Northrop Grumman Corp. The case, Charles D. Skinner, et al. v. Northrop Grumman Retirement Plan B, et al., CV 07-3923-JFW (JTLx) (Central District of California), involved claims relating to Northrop's acquisition of Litton Industries, Inc. in 2001 and Northrop's subsequent consolidation of the Litton Industries Pension Plan into a single, uniform plan (along with the plans of several other companies Northrop acquired). We will post additional information about the court's decision in the near future.

Thursday, January 21, 2010

What Can Employers Learn From The Jay Leno - Conan O'Brien Fiasco?

There is an interesting article in today's Wallstreet Journal suggesting that NBC's handling of the Jay Leno-Conan O'Brien succession provides lessons for employers and management in how not to handle promotion and succession issues. According to the article, management consultants feel that NBC made two critical missteps six years ago when the network signed Mr. O'Brien to replace Mr. Leno in 2009. It's a bad idea to promise someone a promotion in order to retain him, they say, and so is naming a successor too far in advance. [See]

Wednesday, January 20, 2010

Supreme Court to Hear ERISA Attorney Fee Case

The United States Supreme Court granted certiorari on Friday in Hart v. Reliance Standard Insurance Company where the issue before the Court will be whether only "prevailing parties" are entitled to attorneys fees in ERISA benefits actions. By way of background, Hardt sued Reliance Standard claiming that the insurer violated ERISA by wrongfully denying her long-term disability benefits. As is often the case in benefits matters, the district court did not overturn or approve Reliance Standard's benefits denial. Rather, the district court remanded the matter to Reliance Standard for reconsideration of Hart's disability benefits claim. Reliance Standard subsequentlyreversed its earlier decision and awarded Hardt full benefits. The district court then awarded Hardt $39,149 in attorney fees. The United States Court of Appeals for the Fourth Circuit ("4th Circuit") reversed the District Court's award of attorneys' fees to Hart. The 4th Circuit's holding was that (1) ERISA § 502(g)(1) provides a district court discretion to award attorney fees only to a "prevailing party," and (2) Hardt was not a "prevailing party" because her only request for relief was the award of benefits, which the District Court did not award (rather, as noted, the District Court remanded the case back to Reliance Standard). The Fourth Circuit's decision is in conflict with decisions of the Second, Fifth and Eleventh Circuits, who have declined to read a "prevailing party" requirement into § 502(g)(1). The two specific issues that will be presented to the Supreme Court are: (1)whether the Fourth Circuit erred in holding that ERISA § 502(g)(1) provides a district court discretion to award reasonable attorney’s fees only to a prevailing party; and (2) whether a party is entitled to attorney’s fees pursuant to § 502(g)(1) when, as in Hart's case, she persuades a district court that a violation of ERISA has occurred, successfully secures a judicially-ordered remand requiring a redetermination of entitlement to benefits and subsequently receives the benefits sought on remand.

Friday, January 15, 2010

Are Emotional Distress Damages In Employment Cases Tax-Exempt?

In Wells v. Commissioner, United States Tax Court Memo 2010-5 (Jan. 5, 2010) the United States Tax Court reiterated that damages received by a plaintiff for emotional distress (manifested in the form of depression) -- suffered as a result of alleged employment-related retaliation -- are not exempt from taxation as a "personal physical injury" under Internal Revenue Code Section 104(a)(2). The Tax Court explained that for the damages to be excludable under this provision, the underlying cause of action must be based in tort or tort-type rights and the proceeds must be damages received on account of personal physical injury or physical sickness. The Tax Court further explained that when, as in the instant case, the amount paid is pursuant to a settlement agreement, the nature of the claim that was the basis for settlement -- and not the validity of the claim -- controls whether such amount is excludable under section 104(a)(2). Althought the Tax Court found that the settlement agreement in the instant case expressly stated that payment was for emotional distress (and not wages), the Court nevertheless held that the payment was in fact "made as damages for emotional distress due to depression and, as a matter of law, such damages, not being attributable to physical injury or sickness, but to a nonphysical injury (namely, her claims of suffering gender-based discrimination and unlawful retaliation with respect to her employment) are not excludable from her gross income under section 104(a)(2) ...."

Thursday, January 14, 2010

Federal Judge Finds NYC Discriminated Against African-American Fire Department Applicants

The New York Times reported this morning that a federal judge ruled on Wednesday that New York City intentionally discriminated against black applicants to the Fire Department by continuing to use an exam that it had been told put them at a disadvantage. According to Judge Nicholas G. Garaufis of the United States District Court for the Eastern District of New York (in Brooklyn), it was not a “one-time mistake or the product of benign neglect....It was a part of a pattern, practice and policy of intentional discrimination against black applicants that has deep historical antecedents and uniquely disabling effects.” The Court did not rule on what remedy should apply, reserving judgment on that issue for a later date. In his Judge Garaufis highlighted in his decision how “black and other minority firefighters have been severely underrepresented,” characterizing that as a “persistent stain on the Fire Department’s record.” [For more information on this issue, please see]

DOL Issues Final Safe Harbor Rule On Employee Contributions To Small Pension And Welfare Plans

The U.S. Department of Labor ("DOL") today announced the publication of a final rule to protect employee contributions deposited to small pension and welfare benefit plans with fewer than 100 participants by providing a "safe harbor" period of seven business days following receipt or withholding by employers. According to the head of DOL's Employee Benefits Security Administration ("EBSA"), the new rule "will give employers greater clarity in remitting participant contributions to small pension and welfare plans in a timely manner." According to DOL's guidance, employers of all sizes currently must transmit employee contributions to pension plans as soon as they can reasonably be segregated from the general assets of the employer, but no later than the 15th business day of the month following the month in which contributions are received or withheld by the employer. Under current guidance, the latest date for forwarding participant contributions to health plans is 90 days from the date on which such amounts are received or withheld by the employer. The final rule amends the participant contribution rules to create a "safe harbor" period under which participant contributions to a small plan will be deemed to comply with the law if those amounts are deposited with the plan within seven business days of receipt or withholding. [For more information about this issue, please see]

Is "The Office" A Good Tool For Stopping Workplace Harassment?

National Public Radio today posted an interesting and amusing article on whether the television sitcom "The Office" can be used as a model for what human resources departments should not do. [See] The article discusses how the show is a good example of why companies need (and should provide) diversity training and harassment seminars.

Those readers/viewers interested in learning about B&E's views regarding the importance of diversity training and sexual harassment prevention seminars for employers, should feel free to contact a B&E attorney (our information is to the left of this posting, under "Welcome").

Wednesday, January 13, 2010

DOL Sues Illinois Trucking Company Over Failure To Protect Employee Pension and Health Benefits

The U.S. Department of Labor ("DOL") has sued the owners of bankrupt Mid-States Express Inc. of Aurora, Illinois for allegedly failing to protect the interests of the participants and beneficiaries in the company's 401(k) and health plans. DOL's lawsuit alleges that the owners failed to disclose to employees that their medical bills were not likely to be paid, even as the company continued to take deductions from their paychecks for medical coverage. As a result, despite the fact that $1.26 million in employee health plan contributions were withheld, $3 million in employee medical claims allegedly were not paid - a potential violation of the Employee Retirement Income Security Act ("ERISA"). DOL's lawsuit also alleges that the owners of Mid-States Express violated their fiduciary duties when they failed to remit $65,000 in contributions and loan re-payments, and to timely remit more than $1.5 million in 401(k) plan participant contributions and loan re-payments. The company allegedly retained these contributions and loan repayments for its own benefit at the expense of participants and beneficiaries. DOL's lawsuit seeks a court order to require that the defendants restore any losses, with interest, suffered by the plans or their participants and beneficiaries and to undo any prohibited transactions involving the plans. The suit also asks the court to remove the owners from their fiduciary positions to the plans and to permanently bar each of them from serving in a fiduciary capacity, or service provider, to any plan governed by ERISA. [See the DOL's website,, for more information on the case.]

New ERISA Class Action Filed Against Sterling Savings Bank

An ERISA class-action lawsuit was filed Monday by an employee of one of Washington State's largest commercial banks, Spokane-based Sterling Savings Bank. The lawsuit, filed in United States District Court, claims that the bank and its holding company failed to protect employees’ investment in company stock through the company’s 401(k) Plan. The lawsuit alleges that Sterling's stock price has imploded as the result of ill-advised commercial real estate, construction and land loans, improper accounting and inadequate capitalization. The lawsuit also alleges that Sterling and other defendants failed to properly manage pension funds by maintaining a large investment in Company stock long after the stock became an imprudent investment. The lawsuit also charges that the company deliberately misled employees and shareholders on the value of the stock and failed to secure adequate reserves against its credit portfolio. [For more information about the lawsuit, see the website for the Plaintiff's attorneys]

Monday, January 11, 2010

DOL Posts "A Safe and Sober Message About Workplace Parties and Drinking"

The United States Department of Labor ("DOL") recently posted "guidance" regarding workplace parties and alcohol consumption. The guidance notes that the workplace is frequently a place where employees and employers get together to celebrate special events and that such celebrations frequently include alcohol, which increases the potential for unfortunate consequences. The guidance also notes that improper use of alcohol may expose employers to liability under tort, workers' compensation or other laws. For example, according to the guidance, an employer may be held liable if a person consumes alcoholic beverages at a company-sponsored party and subsequently causes a crash. Some employers have been held liable because negligent acts by employees under the influence of alcohol consumed at employer-sponsored events were found to be within the scope of their employment. In other cases, individuals have been held liable merely because they provided alcohol to social guests. [For the DOL's complete "guidance" on this issue, see]

Friday, January 8, 2010

Wal-Mart Settles "Union Busting" Charges

Minnesota's "Finance and Commerce" business daily reports today that Wal-Mart Stores Inc. ("Wal-Mart") has settled charges lodged by a St. Paul-area union last summer that the retail chain threatened to fire a worker at its Hastings, Minnesota store over his alleged "union" activity. Under the settlement agreement, Wal-Mart has agreed to prominently post notices inside the Hastings store stating that Wal-Mart will not frustrate or threaten to terminate workers for engaging in "union activities," including the right to form or join a labor group. Wal-Mart has also agreed not to solicit employee grievances as a way to discourage workers from exercising their union rights. According to the Finance and Commerce daily, the settlement is a "symbolic if not substantive" victory for the United Food and Commercial Workers Local 789, which last July filed charges with the regional National Labor Relations Board while waging an organizing campaign at several Twin Cities area Wal-Mart stores. Under current labor law, the notice posting requirement is the maximum penalty for such activity.

85,000 Jobs Lost in December 2009

The Washington Post reports that the nation shed 85,000 jobs in December, worse than expected, according to a government report released Friday that suggests the economic recovery still is too weak to lead employers to add to their payrolls.

Thursday, January 7, 2010

Trends - Job Bias Claims Based On Disability, National Origin and Religion Increased In 2009

The Equal Employment Opportunity Commission ("EEOC") said Wednesday that the number of workers claiming job discrimination based on disability, religion or national origin increased to new highs last year, as federal job bias complaints overall stayed at near-record levels. According to the EEOC, charges of disability discrimination rose about 10% to 21,451 claims, the largest increase of any category. The increase coincided with changes to the Americans with Disabilities Act last year that made it easier for people with epilepsy, diabetes and other treatable conditions to say they are disabled. Overall, the EEOC received more than 93,000 discrimination claims during the 2009 fiscal year, a 2% decrease from the record set in 2008, but still the second-highest level in the commission's history. As in previous years, claims based on race, sex and retaliation were the most frequent. (See

Wednesday, January 6, 2010

Vanguard Group Settles EEOC Lawsuit Alleging Racial Bias

Vanguard Group Inc agreed on Monday to pay $300,000 to settle a U.S. Equal Employment Opportunity Commission ("EEOC") lawsuit accusing it of racial bias in hiring. In a Sept. 29 complaint, the EEOC alleged that Vanguard decided not to hire Barbara Alexander as a financial planning manager because she was black even after she was told throughout the hiring process, including at roughly 13 in-person interviews, that she was qualified for the job. Despite Alexander's 14 years of financial management experience and master's degree in finance, Vanguard instead offered the Charlotte, North Carolina job to two less qualified white men, and one accepted, the EEOC said. According to papers filed Monday with the federal court in Philadelphia, Vanguard will pay the $300,000 to Alexander, and entered a two-year consent decree calling for greater anti-discrimination training for managers and supervisors, and other remedies. It did not admit liability. The case is Equal Employment Opportunity Commission v. Vanguard Group Inc, U.S. District Court, Eastern District of Pennsylvania, No. 09-04424.

D.C. Circuit Rules in Favor of GEICO In FLSA Suit

In Robinson-Smith v. GEICO, auto damage field adjusters sued GEICO asserting claims for unpaid overtime compensation under the Fair Labor Standards Act ("FLSA"). The trial court granted summary judgment in favor of the employees. The DC Circuit reversed, concluding that the employees fell within the scope of the FLSA's exemption for "bona fide" administrative employees under the 2003 version of the "short test" set forth at 29 CFR Section 541.2. The principal issue on appeal was whether the employees' "primary duty" included work "requiring the exercise of discretion and independent judgment." The Court of Appeals held that it did, noting that the short test does not require that discretion and independent judgment be exercised "customarily and regularly." The Court of Appeals noted that "the damage adjuster exercises discretion as often as 60 times per year in negotiations with customers over total loss claims alone." The Court reasoned that "[t]he frequency of such negotiations may be enough to satisfy even the ‘customarily and regularly' requirement of the ‘long test.'"

Appeals Court Holds That Insurer's Benefits Determination Was "De Novo" Wrong

The United States Court of Appeals for the Eleventh Circuit (which hears and decides appeals of decisions from the federal courts in Florida, Alabama and Georgia) held yesterday that Aetna Life Insurance Co. violated ERISA by failing to properly investigate a benefits plan participant's benefits claim. See Capone v. Aetna Life Insurance (11th Cir 01/05/2009) (

By way of background, the participant/claimant suffered a spinal injury diving into the ocean after consuming alcohol. The conflicted plan administrator (acting as both evaluator and payor of claims) denied the claim under the insurance policy's alcohol exclusion provisions. The participant sued the plan administrator for violation of ERISA alleging wrongful denial of benefits. The trial court granted the plan administrator's motion for summary judgment. The 11th Circuit reversed.

On appeal, the 11th Circuit resolved the case applying the "de novo standard" of review and determined that the plan administrator's decision was "wrong," and reasonable grounds did not support the denial. Applying Georgia's "accidental means" test to the circumstances of the participant's accident, the Court of Appeals determined that the participant had established a prima facie case that an unforeseen wave had created a shallowness in the ocean that had not otherwise existed (i.e., the accident was an actual accident and not the result of the participant's intoxication). Because the Court of Appeals determined that the plan administrator had not properly investigated the participant's claim, the Court concluded that the denial of benefits without a proper investigation was "de novo wrong." Furthermore, the court found that the record did not sufficiently connect the participant's decision to dive with his state of intoxication - thus, the denial of benefits based upon the alcohol exclusion of the policy without more was "de novo wrong."

Tuesday, January 5, 2010

Radiocative Waste Processing Company Settles Race Discrimination Lawsuit

A Memphis radioactive waste processing company will pay $650,000 to 23 African American employees and provide other relief to settle a race and retaliation discrimination lawsuit filed by the U.S. Equal Employment Opportunity Commission ("EEOC"), the EEOC announced last week. According to the EEOC’s suit against Race, LLC, doing business as Studsvik, LLC (Civil Action No. 2:07-cv-2620, filed in U.S. District Court for the Western District of Tennessee, Western Division), Courtney Britton, who worked as a lead worker in the shop for Studsvik, and other African American employees, were subjected to racially offensive comments by their white supervisor. Further, the complaint alleged that Britton’s supervisor regularly referred to him and other African American employees with the N-word and other derogatory slurs, such as “boy.” In addition, the EEOC alleged, white managers subjected Britton and other African American employees to excessive radiation exposure, more than their white co-workers. The EEOC also charged that Britton was suspended for 15 days and then laid off in retaliation for complaining about the racial harassment. Besides the monetary relief, the three-year consent decree resolving the case enjoins Studsvik from discriminating against its employees because of their race and from retaliating against workers who assert their rights, and enjoins Studsvik from making assignments in the shop area based on race. Studsvik agreed to adopt and maintain an anti-discrimination policy prohibiting discrimination, to distribute the policy and complaint procedure to all employees, and to provide mandatory training to all employees regarding the policy

Monday, January 4, 2010

The Wall Street Journal published an interesting article today on small business owners and trends in working from home.


EEOC Sues Sparks Steak House for Alleged Male-On-Male Sexual Harassment And Retaliation

Sparks Steak House, an upscale restaurant in New York City, allegedly violated federal law by creating a hostile work environment for male employees, including physical and verbal sexual harassment, the U.S. Equal Employment Opportunity Commission ("EEOC") charged in a lawsuit it filed today. According to the EEOC’s suit, male managers and workers at Sparks subjected male employees to ongoing abuse. The misconduct allegedly included groping their buttocks, attempting to touch their genitals and rubbing their bodies into the employees while at work. The managers and co-workers also allegedly made numerous crude, obscene comments. The lawsuit against the steakhouse also charged that an employee who complained about the harassment was retaliated against by getting less desirable assignments and was ultimately terminated. All this alleged conduct violates Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination based on race, color, religion, sex (including sexual harassment or pregnancy) or national origin, and protects employees who complain about such offenses from retaliation. The EEOC filed the lawsuit in U.S. District Court for the Southern District of New York (civil number 09 CV 10601) after first attempting to reach a voluntary settlement out of court with the steakhouse.

“The managers’ and employees’ offensive conduct at Sparks has absolutely no place in any working environment,” said Charles F. Coleman, Jr., a trial attorney in the EEOC's New York District Office. “When employees spoke out against the abuse, their pleas were either ignored or resulted in punishment. With this suit, the EEOC is sending the message that this type of behavior is illegal and will not be tolerated.”

Sunday, January 3, 2010

Outback Steakhouse To Pay $19 Million For Sex Bias Against Women In "Glass Ceiling" Suit By EEOC

The U.S. Equal Employment Opportunity Commission ("EEOC") announced last week that Outback Steakhouse has agreed to pay $19 million and furnish significant remedial relief to settle a major class lawsuit alleging sex discrimination against thousands of women at hundreds of its corporately-owned restaurants nationwide. According to the EEOC, Outback discriminated against its female employees with respect to the terms and conditions of employment, and denied women equal opportunities for advancement. The EEOC alleged in the lawsuit that female employees hit a "glass ceiling" at Outback and could not get promoted to the higher-level profit-sharing management positions in the restaurants. The EEOC also alleged that women were denied favorable job assignments, particularly kitchen management experience, which was required for employees to be considered for the top management job in the restaurants. The settlement stems from a lawsuit filed by the EEOC in September 2006 under Title VII of the Civil Rights Act in U.S. District Court for the District of Colorado (EEOC v. Outback Steakhouse of Florida, Inc., and OS Restaurant Partners, Inc. d/b/a Outback Restaurants, No. 06-cv-01935). In addition to the monetary relief, the settlement, contained in a four-year consent decree signed by Federal Court Judge Christine M. Arguello, requires that Outback: (a) institute an online application system for employees interested in managerial and other supervisory positions; (b)employ a human resource executive in the newly created position of Vice President of People; (c)employ an outside consultant for at least two years who will determine compliance with the terms of the decree and analyze data from the online application system to determine whether women are being provide equal opportunities for promotion; and (d) report every six months to the EEOC on carrying out the terms of the decree. The $19 million in monetary relief contained in the settlement will be administered through a claims process in which an administrator will send letters to all female workers employed at corporately-owned Outback restaurants from 2002 to the present who have at least three years of tenure.

Saturday, January 2, 2010

U.S. Labor Department Publishes 2009 Form M-1 For MEWAs

The U.S. Department of Labor’s Employee Benefits Security Administration ("EBSA") announced this week the availability of the 2009 "Form M-1" annual report for multiple employer welfare arrangements ("MEWA"). Benefit plan administrators may use EBSA’s online filing system to expedite processing of the form. MEWAs typically are arrangements that offer medical benefits to the employees of two or more employers or to their beneficiaries. The filing deadline for the 2009 Form M-1 is March 1, 2010. However, administrators can request an automatic 60-day extension to May 3, 2010. The online filing system is available on EBSA’s Web site at

Friday, January 1, 2010

New Law Bans Certain Arbitration Agreements for Recipients of Federal Funds

On December 19, 2009, President Obama signed into law a new Defense Appropriations Act. The Act contains a provision with important implications for federal defense contractors and subcontractors that have implemented arbitration agreements for their employees. Specifically, the Act prohibits the federal government from awarding funds appropriated by the Act for any federal contract in excess of $1,000,000 if a contractor requires its employees or the employees of an independent contractor to arbitrate certain claims. The Act sets out two conditions that a defense contractor must meet in order to receive federal contracts in excess of $1,000,000. First, the contractor must agree not to enter into any agreement that requires, as a condition of employment, "that the employee or independent contractor agree to resolve through arbitration any claim under Title VII of the Civil Rights Act of 1964, or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention." Second, the contractor must agree not to take any action to enforce any agreement by an employee or independent contractor to arbitrate such claims. The new provision also covers defense subcontractors. It provides that defense contractors must certify that any subcontractor that has a federal contract in excess of $1,000,000 also agrees not to enter into or enforce arbitration agreements with its employees and independent contractors.