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Special thanks to Geoff Martin and Maria Piontkovska.

On March 3, 2023, the Criminal Division of the United States Department of Justice (“DOJ”) published details of a three year Pilot Program Regarding Compensation Incentives and Clawbacks (the “Compensation Pilot Program”). The Compensation Pilot Program is effective March 15, 2023 and from that date it will be applicable to all corporate criminal matters handled by the DOJ Criminal Division. At the same time, DOJ also updated its Evaluation of Corporate Compliance Programs guidance document to reflect the criteria introduced by the Compensation Pilot Program, among other updates.
 
Background and Objectives of the Compensation Pilot Program

The concept of incentivizing corporate compliance by structuring compensation programs to reward compliant behaviors and punish non-compliant ones, is nothing new. For example, prior editions of the Evaluation of Corporate Compliance Programs addressed appropriate incentives for company management and executives to promote good governance and compliance, and expectations about the consistent application of discipline against employees found to be involved in misconduct.

However, in a September 2022 memo to DOJ prosecutors titled: “Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with Corporate Crime Advisory Group“, Deputy Attorney General Lisa Monaco indicated that DOJ intended to go further on this particular topic. In the memo, Monaco indicated that DOJ would expect companies to design compensation structures not only to incentivize and reward good compliance practices, but also to financially penalize individual employees found to have been engaged in misconduct, including by clawing back compensation after the fact.

DOJ’s objective in this initiative is to encourage companies to redistribute some of the cost and penalties associated with individuals’ criminal conduct away from the company (and its shareholders) and onto the individuals themselves. Because misconduct is often discovered after the fact, measures that enable retroactive discipline and clawback of compensation already paid, are of particular importance to DOJ. These measures also reinforce DOJ’s continued focus on individual accountability which has been another of DOJ’s recent areas of focus in addressing corporate criminal matters.

Six months after Monaco’s memo, the Compensation Pilot Program now puts concrete DOJ policy in place to implement those objectives. At the end of the three year pilot period, DOJ will determine whether the Compensation Pilot Program will be extended or modified. If it is deemed a success, we can expect the Compensation Pilot Program to be fully adopted by DOJ. …

Continue Reading Practical Considerations When Addressing New DOJ Compensation Incentives and Clawbacks Program

Together we navigated operational challenges caused by the pandemic, and together we will weather this. What follows is information and practical advice for employers concerned with satisfying their payroll obligations in the near term in the face of their bank falling into receivership.

  • Identify the “universe” of employment-related expenses. This will include payroll, benefits, bonus and commission comp, insurance, and severance obligations.
  • Understand that liability for unpaid wages can be significant. For example, liability in California includes:
    • Back payment of any unpaid wage amounts that employees prove they were legally entitled to.
    • Interest of up to 10% of the unpaid wages.
    • Penalties for late payment of wages equal to: (i) $100 for the first violation; and (ii) for each subsequent violation, $200 plus 25% of the amount unlawfully withheld. Penalties may apply for each pay period that wages remain unpaid.
    • If any employees leave the company after the payday date, the company can be liable for waiting time penalties for late payment of final wages. Waiting time penalties are equal to 1 day’s wages for each day an employee’s final wages are unpaid, up to a maximum penalty of 30 days’ wages.
    • Companies may be required to pay employees’ attorney’s fees if the employees prevail in litigation.
    • Criminal liability for wage theft if the act is “intentional.” Felony cases are punishable by up to 3 years in prison.  

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Continue Reading Navigating Fallout From a Bank Receivership | Practical Tips for US Employers

On February 21, the National Labor Relations Board (NLRB) issued a decision in McLaren Macomb holding that employers may not offer employees separation or severance agreements that require employees to broadly waive their rights under the National Labor Relations Act (NLRA). In McLaren, a hospital furloughed 11 employees, presenting each with a severance agreement and general release that contained confidentiality and non-disclosure provisions. (See the exact provisions copied below.) The Board majority held that merely “proffering” a severance agreement containing unlawful confidentiality and non-disparagement provisions violated the NLRA because conditioning the receipt of benefits on the “forfeiture of statutory rights plainly has a reasonable tendency to interfere with, restrain, or coerce the exercise of those rights.”

At first blush, this may feel like a sweeping change requiring immediate action. However, it is important to consider this decision with a grain (or two) of salt, breathe and thoughtfully plan your next steps. The key points identified below are designed to help you think through a tailored approach for your organization¾there is not a one-size-fits-all solution. Your approach will depend on the type of workforce you have, your risk tolerance and what you are trying to protect. We are standing by, ready to assist, should you need further guidance.

Key Points

  • For most private, nonunion employers, the risk of an unfair labor practice charge is relatively low. While it is absolutely true that the NLRA does indeed apply to most private sector employers, the NLRB and unions tend to focus more on unionized workplaces. (If you have a unionized or partially unionized workforce, the risk is higher but read on.)

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Continue Reading You’ve Heard That The NLRB Restricted The Use of Confidentiality & Non-Disparagement Provisions In Separation Agreements. Here’s What Employers Need To Do About It.

The Ninth Circuit recently addressed the issue of whether an employer is required to provide pay for employees taking short-term military leave when it offers other types of short-term paid leave. In Clarkson v. Alaska Airlines, Inc., the Ninth Circuit revived a class action claiming discrimination under the Uniformed Services Employment and Reemployment Rights Act (USERRA) for the failure to pay short-term military leave.

What is USERRA?

USERRA—a federal law applicable to both private and public employers—provides that a service member employee is entitled to the same “rights and benefits” during a military leave as similarly situated employees on non-military leave. Under USERRA , where the benefits of comparable non-military leaves differ, the employer must give the service member “the most favorable treatment” accorded to any comparable non-military leave.…

Continue Reading Paid Leave For USERRA? We Recommend a Comparability Analysis

The new year always brings new challenges for employers, but California employers in particular face a world of change in 2023.

In our 75-minute “quick hits” format, we help you track what California employers need to keep top-of-mind for 2023 and provide practical takeaways to help you navigate the new landscape.

This webinar helps to…

Studies are showing that around 98% of CEOs in the US and across the EU are preparing for a recession in the next 12-18 months.

With inflation increasing the cost of goods and certain services, some companies may find themselves in an immediate economic bind and needing to engage in cost-cutting methods to reorganize and…

Special thanks to presenters Matias Herrero (Buenos Aires), Liliana Hernandez-Salgado (Mexico City), Maria Cecilia Reyes Jaimes (Bogota), Leticia Ribeiro (Trench Rossi Watanabe, Sao Paulo*) and Andrew Shaw (Toronto)

*Trench Rossi Watanabe and Baker McKenzie have executed a strategic cooperation agreement for consulting on foreign law

Our four-part Navigating the World webinar series features US moderators…

Join us for a four-part webinar series as our US moderators welcome colleagues from around the globe to share the latest labor and employment law updates and trends. US-based multinational employers with business operations in Europe, the Americas, the Middle East and Africa, and Asia Pacific regions will hear directly from local…

The writing is on the wall: remote work is here to stay. According to data collected by Ladders, three million professional jobs in the US went permanently remote in the fourth quarter 2021 alone. By the end of 2021, 18 percent of all professional jobs in the US were remote. Ladders projects that number will be close to 25 percent by the end of 2022. Of course, this leaves employment lawyers and HR professionals wondering — what employment laws apply to our distributed workforce?

One particularly thorny issue facing employers in this context is the permissibility of post-termination non-competition agreements. Non-compete laws and their requirements differ greatly from state to state. For example, in Illinois, one of the requirements is that the employee must earn at least $75,000 annually in order to enter into an enforceable post-termination non-compete, but in Oregon, that minimum annual income threshold increases to $100,533 — and that same employee would be subject to no income threshold if Missouri law applied. On the other hand, in Colorado, where post-termination non-competes are generally unlawful, the employer could soon face misdemeanor criminal liability for seeking to enforce an unlawful post-termination non-compete against any employee, and in California, the employer could be exposed to compensatory and punitive damages if a claim is accompanied by other deemed tortious conduct (e.g., interference with the employee’s future employment prospects by seeking to enforce the unlawful agreement).

In this post, we analyze how remote work further muddles the already complicated landscape of post-termination non-competes and how employers can best navigate this complex backdrop.

What law applies? Guidance from recent case law

One issue arising out of remote work is knowing what state’s law will apply when it comes to the enforceability of non-compete restrictions. With remote work, long gone are the days where an employer can be relatively certain that the state where an employee is located at the beginning of the employment relationship will be the same state that employee is living and working in at the end of the employment relationship. As a result, when the need to enforce non-compete restrictions arises, the parties may dispute what state’s law should apply to the non-compete (e.g., the state where the employee was located when they entered into the contract, the state where the employee began work for the employer, or the state whether the employee was living or working at the end of the employment relationship).…

Continue Reading Navigating The Intersection Of Remote Work And State-Specific Post-Termination Non-Compete Laws

Many thanks to our data privacy colleagues for co-authoring this post: Lothar Determann, Helena Engfeldt and Jonathan Tam.

2022 is looking to be an unprecedented year for California companies’ privacy law obligations. The California Privacy Rights Act (CPRA) takes effect on January 1, 2023, with a twelve-month look-back that also applies to the personal data of employees and business contacts. The new California Privacy Protection Agency is preparing regulations that will sit on top of existing rules from the California Attorney General. Meanwhile, the California Legislature is enacting privacy laws even though it has not repealed or streamlined any of the myriad California privacy laws that continue to apply in addition to the California Consumer Privacy Act (CCPA).

On March 1, we held a webinar focused on the employment law implications stemming from these significant changes and covering a handful of critical hot topics (e.g., how to process vaccination information, the treatment of employees of PEOs, and EORs). If you missed it, here are the major highlights you should know!

Employment Takeaways

Preparing for CCPA / CPRA Compliance
  • CPRA amendments to CCPA take effect January 1, 2023; this ends the transitional exemptions for “HR” and “B2B contact information” and includes a 12-month look-back to January 1, 2022.
  • “At collection notices” have been required since January 1, 2020, with increased disclosure requirements since December 16, 2020. For more detail, click here.
  • Businesses must declare on January 1, 2023, in privacy policies whether they have been selling or sharing personal information of employees and B2B contacts in the preceding 12 months and, if yes, offer opt-out mechanisms and alternatives without discrimination.
  • Businesses must update service provider agreements, including with recruiters and IT, cloud, payroll, benefits, and other providers.
  • Businesses must offer broad access, deletion, rectification, portability and other rights to California employees and B2B contacts, and prepare for what may be the end of confidentiality in the employment area; employers should conduct training, and implement robust data governance policies (incl. deletion and discovery).
Data Access / Deletion Requests from Employees
  • Under existing employment law, California employees (not contractors) have the right to inspect and receive a copy of the personnel files and records that relate to their performance or any grievance concerning them within 30 days of their written request. The existing right to inspect does not extend to records relating to the investigation of a possible crime, letters of reference, or various ratings or reports.
  • By contrast, the new “right to know” under the CPRA/CCPA goes further. It encompasses two distinct rights: (i) the right to a disclosure explaining how the employer collects and handles the individual’s personal information; and (ii) the right to copies of “specific pieces of personal information.” The “right to know” applies to California consumers, which goes beyond employees (i.e., including contractors). In theory, it could extend the scope of the “right to know” from simply the personnel file to include, for example, informal communications about the employee, investigations, etc. Employers must generally comply with such requests within 45 days.
  • The “right to know,” however, is not absolute, and employers can refuse if the request is manifestly unfounded or excessive (e.g., if the purpose is to harass) and does not cover privileged information (e.g., communications with in-house and external counsel).
  • The CPRA/CCPA also introduce a new right to “data deletion.” This right is not absolute either. An exception should apply for most categories of personal information reasonably necessary to managing or administering current or past employment or contract work relationship.
  • Finally, the CPRA/CCPA gives California residents other rights including the right to limit the processing of sensitive information. There are exceptions to the right to limit the processing of sensitive information, but none of the statutory exceptions apply squarely to HR data.

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Continue Reading A Quick Primer On New Privacy Law Obligations For California Employers