With only two weeks to go until the Mayans’ end of days, what better way to spend your time than reading this week’s latest in Suits by Suits:
“Where’s that money, you silly, stupid old fool? Where's that money? Do you realize what this means? It means bankruptcy and scandal and prison! That’s what it means! One of us is going to jail... well, it’s not gonna be me!”
Who doesn’t remember those words from It’s A Wonderful Life, Frank Capra’s classic 1946 movie that gives small-town building-and-loan president George Bailey (Jimmy Stewart) the chance to see what the world would have been like if he had never been born. Throw in an angel trying to earn his wings and great performances by Lionel Barrymore and Donna Reed, soak it in so much populism J. Edgar Hoover called it communist, and you have a wonderful holiday tradition (despite the movie’s unique history in copyright law).
Anyone who has seen this movie remembers the ending. After Bailey’s forgetful Uncle Billy (Thomas Mitchell) loses an $8,000 bank deposit, Bailey is threatened with arrest and his small building-and-loan is out of cash and facing collapse (their search for the missing money leads George to say the lines at the top of this piece – and for an explanation of why a building-and-loan needed to deposit its money in the bank in the first place, see here). George’s goodwill with his customers and friends, however, leads them all to answer his wife’s call for a ground-up bailout of the bank. Impressed, the bank examiner even puts a few of his own dollars into the bailout fund, and the sheriff rips up the warrant that Old Man Potter had sworn out for his arrest.
Over the years, of course, there have been some other suggested endings – including this one from Saturday Night Live.
I’d like to hypothesize another alternative ending, and use it to answer some questions that executives should consider. Even if they don’t run their business using strings tied on their fingers.
To inaugurate the holiday season, we here at Suits by Suits decided to delve in to the history of Christmas as a work holiday in the United States. (This is not unprecedented; check out our post on “The History of Labor Day,” which aired on – you guessed it – Labor Day.)
Most of us here in the U.S. are familiar with Christmas as the Christian celebration of the birth of Jesus, on December 25. There’s the little baby in the manger, no room at the inn… that ties in with the Yule log somehow, doesn’t it? And wasn’t there something about candy canes looking like the shepherd’s crook? But where do those wonderful evergreen “Christmas trees” come in? What about the tradition of gift-giving, of Santa Claus, of stockings placed by the chimney with care? And what’s up with mistletoe?
It’s kind of complicated. Read on....
In November, Suits by Suits explored a number of developments that are relevant to high-level employees and their companies – including the just-released report on awards made to whistleblowers under Dodd-Frank, a ruling from the Virginia Supreme Court that managers may be personally liable for the wrongful termination of an employee, a First Circuit decision that Starbucks cannot make its baristas share tips with their supervisors, and the court-approved termination of an employee who mooned his bosses. We also looked at how exit fees for the Atlantic Coast Conference are like liquidated damages in employment agreements, the dangers of waiving contractual arbitration rights in employment agreements (part 1 and part 2), the possible cost of an affair in the work place, and blaming “hormones” for poor job performance.
Here is a full roundup of our posts from November:
And don’t forget to read our monthly roundup from September and October.
In our last installment, we described a dispute between CBS, on the one hand, and three former producers of the CBS show Big Brother, on the other, in which the former producers argued that CBS had waived its contractual right to arbitrate by spending months pursuing litigation against the former producers before demanding arbitration. Because many employment contracts have mandatory arbitration clauses, the possibility of waiver must be on the radar screens of parties to an employment dispute. We discussed the flipside of this issue, arbitration by estoppel, in July.
The threshold question is whether the party seeking arbitration acted inconsistently with the right to arbitrate.
On November 19, the University of Maryland announced that it is leaving the Atlantic Coast Conference, its home for 60 years, to join the Big Ten Conference. In weighing its decision, Maryland had to consider one big downside: the $50 million exit fee that ACC presidents voted to adopt in September 2012. Maryland hasn’t paid up, and the ACC sued it on November 27 in North Carolina state court, seeking to recover all $50 million.
The principal issue in the case will be whether the exit fee is a proper amount of “liquidated damages.”
Reality TV is a guilty pleasure for some - not us at Suits by Suits, mind you, as we prefer to focus our attention on the more pressing legal questions of our time. Reality TV is also a highly competitive industry and fertile ground for lawsuits between companies and star employees with lessons for all of us about employment contracts. In our last episode, MSNBC and the former host of My Big Obnoxious Fiance taught us about repudiating contracts. In this episode, CBS and three former producers of Big Brother teach us about waiving a contractual right to arbitrate an employment dispute.
The three former Big Brother producers - Corie Henson, Kenny Rosen and Michael O’Sullivan – eventually wound up working on the production of ABC’s The Glass House, which CBS has called a blatant rip-off of Big Brother, and which aired last summer. Before it aired, in May 2012, CBS sued ABC and the three former producers in federal court in Los Angeles. The former producers had signed non-disclosure agreements (NDAs) with CBS in connection with their work on Big Brother. CBS sought to temporarily restrain ABC from airing the first episode of The Glass House, claiming that ABC and the former producers had violated CBS’s copyrights and misappropriated its trade secrets in the production of the show. CBS also claimed that the former producers violated the NDAs by disclosing confidential information and trade secrets relating to technical, behind-the-scenes aspects of filming and producing Big Brother.
Jason Selch had a way of getting to the bottom of things.
Selch, an investment analyst at Columbia Wanger Asset Management, L.P. (a company under Bank of America’s corporate umbrella), was upset after his employer fired his friend. He went to find his boss, Charles McQuaid, and located him in a conference room with Columbia’s Chief Operating Officer. He asked them if he was subject to a non-compete agreement. When the two said no, he “proceeded to unbuckle his pants, pull them down, and ‘moon[ed]’” them. Selch v. Columbia Management, 2012 IL App (1st) 111434.
Once the mooning was complete, Selch’s bosses didn’t turn the other cheek.
As of now, SEC whistleblowers have a one-in-3,001 chance of receiving a whistleblower award. That’s according to the latest annual report from the SEC’s Office of the Whistleblower, which was established to administer the whistleblower bounty program established by the Dodd-Frank Act of 2010.
We’ve previously covered the only award made to date under the whistleblower program – a $50,000 payout, nearly 30% of what the SEC recovered in that particular case. But what we didn’t know at the time was how many tips had actually been made to the SEC by potential whistleblowers.
In an opinion that we have been awaiting, late last week, the U.S. Court of Appeals for the First Circuit affirmed the Massachusetts federal court’s ruling that Starbucks violated the Massachusetts Tip Act by requiring baristas to share with shift supervisors tips left by customers. The First Circuit agreed with the lower court that Starbucks shift supervisors have some managerial responsibilities and therefore cannot share in the tips. The Tip Act prohibits employers from requiring “wait staff employees” – who are defined in the Act as having “no managerial responsibility” and whom the parties agreed include Starbucks baristas – from sharing tips with anyone who is not a wait staff employee. Starbucks argued that its shift supervisors have no managerial responsibility because, just like baristas, they spend the vast majority of their time serving customers. The First Circuit wasn’t buying it, noting that the Act has a bright-line test for defining wait staff employees, that the “no” in “no managerial responsibility” means “no,” and that shift supervisors do not pass the test because they are, for example, “charged with opening and closing the store, handling and accounting for cash, and ensuring that baristas take their scheduled breaks.” The court also said that Starbucks’ internal documents explaining that shift supervisors “‘directly manage’ three to six other employees while on shift” were “potent evidence” against Starbucks. The First Circuit also left intact the lower court’s certification of a class of Massachusetts baristas and its award of damages to them of over $14 million – which includes $7.5 million in tips that Starbucks allocated to shift supervisors. We are still on the lookout for how the New York Court of Appeals will rule in a similar case challenging Starbucks’ tip pooling practices under New York Law.
As the regulatory and business environments in which our clients operate grow increasingly complex, we identify and offer perspectives on significant legal developments affecting businesses, organizations, and individuals. Each post aims to address timely issues and trends by evaluating impactful decisions, sharing observations of key enforcement changes, or distilling best practices drawn from experience. InsightZS also features personal interest pieces about the impact of our legal work in our communities and about associate life at Zuckerman Spaeder.
Information provided on InsightZS should not be considered legal advice and expressed views are those of the authors alone. Readers should seek specific legal guidance before acting in any particular circumstance.
John J. Connolly
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Andrew N. Goldfarb
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Sara Alpert Lawson
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