Companies want to attract talented leadership, and protections for officers and directors against lawsuits can be part of the total package.
This is one reason why many businesses incorporate in Delaware—Delaware law provides significant assistance to officers and directors who are named in legal proceedings connected to their corporate role. Delaware courts don’t hesitate to uphold this protection when circumstances warrant. And in Horne v. OptimisCorp, the Delaware courts again vindicated an officer’s broad rights to indemnification under Delaware law.
When the calendar flips from December to January, it’s a good time to take stock of what to expect over the next 12 months. Here are four major issues in employment law that we’ll be watching in 2018:
Tracy Chapman famously sang about needing “one reason to stay here.” But when severance is involved, employees may look for one reason to leave—one “Good Reason.”
While Ms. Chapman didn’t sing about them, many employment contracts include a “Good Reason” clause, which allows the employee to resign and still receive severance if certain conditions are met.
For example, many Good Reason clauses provide that an employee can receive severance upon resignation, so long as the employee has suffered from a reduction in salary or benefits, diminution of duties or responsibilities, or due to a forced relocation. In some cases, these Good Reason clauses only apply when an employee resigns following a change in control of the employer (for example, a merger or acquisition).
When Congress passed the Dodd-Frank Act in 2010, it bolstered protections for whistleblowers who report certain kinds of misconduct, such as violations of securities law. At the time, the Sarbanes-Oxley Act already provided many of these whistleblowers with a cause of action for retaliation. But the new Dodd-Frank cause of action included a longer statute of limitations, a more generous damages remedy, and a right to proceed straight to federal court rather than first bringing the claim to the Department of Labor (as Sarbanes-Oxley requires).
Sarbanes-Oxley provides protection for individuals who blow the whistle internally. But courts have struggled with whether Dodd-Frank provides that same protection, or if Dodd-Frank protects only individuals who report misconduct to the Securities and Exchange Commission (SEC) directly.
A party seeking to enforce a contract has to show mutual assent, also referred to as “a meeting of the minds.” In other words, both parties actually have to agree on the same thing. If the parties don’t agree, then a contract does not exist.
In a recent case, T3 Motion, Inc. (a Segway competitor) used a lack of mutual assent to avoid arbitration of its claims against its former CEO, William Tsumpes. This posture was somewhat unusual - typically, employers try to enforce arbitration agreements, and employees try to avoid them so that they can present their claims publicly in court, before a jury of their peers.
Ghosts, ghouls, and ghastly liability; the last is certainly enough to spook any employer. For this Halloween, we take a trip down Elm Street to revisit the most startling nightmares we’ve ever covered.
It Came From the General Counsel’s Office. In March of this year, we told the story of an in-house attorney who won a $14.5 million verdict against his employer after he raised concerns about FCPA violations at the company. The company’s case faltered when the trial revealed that a negative review of the attorney had been backdated.
Under federal law, employers must pay employees time-and-a-half if they work over 40 hours in a workweek, unless the employees are exempt from the overtime law. Employers don’t usually think of an employee who takes home $900,000 in a year as a non-exempt employee who needs to receive overtime pay. But the case of Pierce v. Wyndham Vacation Resorts Inc. shows that these employers may need to think again, especially when those employees are mainly paid on commission.
In Pierce, a class of commissioned sales representatives sued Wyndham—a resort chain—claiming that they were not exempt from the Fair Labor Standards Act’s (FLSA) overtime provisions. Wyndham moved for summary judgment on some of the claims, arguing that certain sales reps earned more than $100,000 per year. Most made well over that amount, with some taking home upward of $700,000 or even $900,000 in a given year. Wyndham also argued that these reps performed “executive duties.”
An employer isn’t immune from a discrimination claim when an employee quits instead of being fired. An employee who quits can still bring a “constructive discharge” claim, arguing that his working conditions were intolerable and that he had no other option but to quit.
This is a high bar to clear. For example, in the recent case of Coleman v. City of Irondale, the employer won summary judgment on a constructive discharge claim, despite racial slurs, inappropriate screensavers, and—yes—a pro wrestling photo.
When a company believes that an employee has breached a non-compete agreement by going to work for a competitor, one remedy it can seek is a preliminary injunction. A preliminary injunction is meant to preserve the status quo in a case pending a trial on the merits. In the context of non-compete litigation, this means that an employer can file a lawsuit and quickly obtain an order barring its competitor from hiring the employee.
Getting such an injunction isn’t so easy, however, as shown by an Illinois federal court’s recent decision in Cortz, Inc. v. Doheny Enterprises, Inc.
White male discontent has been a major media talking point since the presidential election, and even long before. This talking point has made its way into the workplace, where tech firms are now being targeted for allegedly discriminating against white males in favor of women or non-white males.
Of course, discrimination lawsuits aren’t just for women or minorities; a white male can also sue for discrimination. A claim of discrimination by a white male based on gender or race is sometimes referred to as “reverse discrimination”—discrimination based on membership in a historically majority or advantaged group.
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.