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US companies have been granting various forms of share-based awards to employees around the globe for many years, and companies in other countries are increasingly following suit.

Because share-based awards are ubiquitous, and for many companies an important part of the total pay package, we are now also seeing an increasing number of lawsuits and other disputes involving such awards.

Broadly, these disputes can be categorized as follows:

Entitlement Claims

These can arise if a company is eliminating or paring back a previously offered share program. In this case, employees who are no longer eligible for awards or receive less/reduced awards may claim that they have become entitled to the awards, such that the company cannot unilaterally eliminate/reduce the program without otherwise compensating the employee. Employees may also try to raise constructive dismissal claims.

A related issue in this situation is whether a company has to notify or consult with existing Works Council or other employee representative bodies regarding the changes to the share program. If Works Council is found to have a consultation right, implementing the change without such consultation can be very problematic and Works Council can take the company to court.

Increased Severance Pay

If an employee is involuntarily terminated, they are often entitled to statutory severance pay. Severance pay is typically calculated based on the employee’s salary paid during a certain period prior to termination. If share-based award income has to be included as salary for this purpose, this can increase (in some cases, significantly) the amount of severance pay due to the employee.Continue Reading Mitigation Strategies for Claims Related to Share-Based Awards

Even employee claims of sexual harassment that occurred before the effective date of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA) may end up in court. In Olivieri v. Stifel, Nicolaus & Co., the Second Circuit Court of Appeals held that acts occurring before the effective date of the EFAA can be deemed to be part and parcel with acts occurring after the effective date–so that all of the claims accrue as of the later date and are subject to the EFAA.

What happened

Patricia Olivieri filed suit against her employer Stifel, Nicolaus & Co. (Stifel) and several coworkers in 2021 alleging gender-based discrimination, hostile work environment and retaliation claims under Title VII and the New York State Human Rights Law (NYSHL). Olivieri alleged her manager sexually assaulted and repeatedly sexually harassed her, and that after she reported her manager to the company, the defendants allegedly subjected her to a hostile work environment characterized by discrimination and retaliation.

Stifel moved to compel arbitration of Olivieri’s claims based on an arbitration clause in the plaintiff’s employment agreement. The US District Court for the Eastern District of New York initially granted Stifel’s motion to compel in late March 2022, not having been made aware of the enactment of the EFAA on March 3, 2022 by any party. (The EFAA allows a plaintiff alleging sexual harassment or sexual assault to void a pre-dispute arbitration agreement at their discretion. Claims under the EFAA accrue “on or after” March 3, 2022.) In light of the EFAA, Olivieri subsequently moved for reconsideration of the district court’s order requiring her to arbitrate her claims, and the district court turned course, vacating its prior decision and denying the employer’s motion to compel arbitration. The district court concluded that the plaintiff’s hostile work environment claims–which alleged a hostile work environment and retaliation both before and after the effective date of the EFAA–were subject to the continuing violation doctrine of accrual and accrued after the EFAA’s effective date. Therefore, the EFAA applied to allow the plaintiff to void her pre-dispute arbitration agreement. On appeal, a three-judge panel of the Second Circuit unanimously affirmed.Continue Reading Before, After, or Both? Second Circuit Rules Pre-EFAA Activity Can Go to Court Instead of Arbitration

In June, we offered our annual Global Employment Law webinar series sharing expert insights on the business climate in major markets around the world for US multinational employers. Baker McKenzie attorneys from over 20 jurisdictions outlined the key new employment law developments and trends that multinationals need to know in four 60-minute sessions.

ICYMI: click below to hear updates for the Americas, Asia Pacific, Europe and the Middle East and Africa and contact a member of our team for a deeper dive on any of the information discussed.

Session 1: The Americas 

Presenters: Andrew Shaw, Clarissa Lehmen*, Daniela Liévano Bahamón, Benjamin Ho, Liliana Hernandez-Salgado and Matías Gabriel Herrero

Click here to watch the video.

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

Continue Reading Summer Replay: Tune In To Our Global Employment Law Update Series (Recordings Linked!)

On July 1, 2024 California Governor Newsom signed “compromise” PAGA reform bills into law (AB 2282 and SB 92) (PAGA Reform), which took the PAGA repeal initiative we told you about in May (see here) off the November 5, 2024 ballot.  

On the bright side for employers, the new law shows leniency toward employers who can show they have taken reasonable steps toward PAGA compliance, through (among other things) caps on damages and expanded cure provisions. That said, employers will still need to be diligent to avoid wage and hour violations. One reason: while the ballot initiative (if passed) would have prevented plaintiffs’ attorneys from recovering fees, the PAGA Reform still allows plaintiffs to collect reasonable attorneys’ fees and costs. In addition, the PAGA Reform allows employees to keep a greater percentage of the recovery than before, meaning there is still plenty of incentive for employees to file PAGA claims–even with the employer-friendly changes.

We hit the highlights of the PAGA Reform here.

Effective date

The PAGA Reform applies to PAGA civil complaints and notices of PAGA claims provided to the California Labor & Workforce Development Agency (LWDA) on or after June 19, 2024. Prior PAGA rules will apply to claims pending on or before June 19 or based on notices sent prior to June 19. (Though note that certain cure provisions do not take effect until October 1, 2024–see more below.)

Stricter standing requirements, and statute of limitations questions clarified

Under PAGA Reform, employees are now required to show they “personally suffered” each of the violations of the Labor Code they seek to pursue in a representative capacity under PAGA. Before the new law, if an employee could prove a single Labor Code violation, the employee could sue in a representative capacity on the same or any other Labor Code violation–even if the employee had not been personally affected by the other violations. (Note, the new standing requirement does not apply to certain nonprofit legal aid organizations that have served as counsel of record for PAGA civil actions for at least 5 years prior to January 1, 2025.)

In addition, PAGA Reform clarifies that the statute of limitations to bring a PAGA claim is one year (the period prescribed under Section 340 of the Code of Civil Procedure)–dismissing interpretations that stemmed from the California Court of Appeals decision in Johnson v. Maxim Healthcare Services, Inc. that the PAGA statute of limitations defines the liability period for a PAGA claim, but otherwise places no time restriction on who may pursue a PAGA claim.

However, even if an employee meets the statute of limitations under PAGA, if the LWDA (or any of its departments, divisions, commissions, boards, agencies or employees) has already–on the “same facts and theories”–timely cited an employer for violation of the same section of the Labor Code under which the employee is attempting to recover a civil penalty, or initiated a proceeding under Section 98.3 (allowing the Labor Commissioner to prosecute certain violations, including wage-related violations), the employee is barred from pursing that civil penalty. This restriction remains from prior PAGA rules, and helps to ensure employers are not penalized twice for the same conduct.

Courts’ power to manage PAGA claims clarified

Under PAGA Reform, courts have specified power to manage PAGA claims, including by limiting the scope of any claim to ensure it can be effectively tried, and limiting the evidence presented at trial–following the lead of the California Supreme Court decision Estrada v. Royal Carpet Mills, Inc., which held that though trial courts do not have inherent authority to strike PAGA claims on manageability grounds, a trial court can use its case management procedures to ensure that PAGA claims can be tried effectively.

Injunctive relief and attorneys’ fees

PAGA plaintiffs can now seek injunctive relief in any circumstances under which the LWDA could seek injunctive relief–in addition to the civil penalties and reasonable attorneys’ fees and costs PAGA plaintiffs can seek. However, injunctive relief is not available for violation of a posting, notice, agency reporting or filing requirement, unless the filing or reporting requirement involves mandatory payroll or workplace injury reporting.Continue Reading PAGA Reform: A Breath of (Some?) Fresh Air for Employers

On the eve of the Fourth of July, the FTC rule banning most noncompetes is going up in smoke after a federal court in Texas held the US Chamber of Commerce and a tax firm are likely to prevail on their argument that the agency overstepped its authority to adopt the nationwide prohibition.

The decision, on the heels of the US Supreme Court’s ruling reining in federal agency power under the Chevron doctrine, demonstrates the challenge the FTC faces in promulgating substantive regulations dealing with competition in the economy.Continue Reading Red, White and Blocked: Federal Judge Pauses FTC’s Ban on Employment Noncompetes

This fall, California voters will have the opportunity to decide the fate of the state’s Private Attorneys General Act (PAGA). After receiving more than the 700,000 signatures in support, the “California Employee Civil Action Law and PAGA Repeal Initiative” has qualified for the November 5, 2024 state ballot. If the initiative passes, PAGA will be repealed and replaced with the “Fair Pay and Employer Accountability Act,” which will double the statutory and civil penalties for willful state labor law violations, require 100% of monetary penalties be awarded to employees, and provide resources to employers to ensure compliance with wage and hour laws. The new law will preclude plaintiffs’ attorneys from recovering any fees in actions brought under the statute and impose other requirements to effectively “de-deputize” citizen attorneys general.

What Would the New Law Do?

In response to wide ranging criticism of PAGA, the ballot initiative seeks to repeal and replace PAGA with the Fair Pay and Employer Accountability Act. If passed, the initiative would:

  • Double statutory and civil penalties for willful violations;
  • Award 100% of monetary penalties to employees (instead of the current 25%);
  • Provide resources to employers to ensure labor compliance and allow employers opportunities to cure violations without penalties;
  • Require that the Division of Labor Standards Enforcement (DLSE) be a party to all labor complaints;
  • Prohibit award of attorneys’ fees (which are currently permitted under PAGA); and
  • Require that the state legislature fully fund the DLSE to meet the division’s requirements by law.

Continue Reading Is the End in Sight for PAGA Actions? Californians May Vote “YES” on November 5, 2024.

Last week, a unanimous US Supreme Court held that an employee need only show “some harm” from a change in the terms and conditions of employment, rather than a “significant” employment disadvantage, to assert a claim for discrimination under Title VII. The decision resolves a circuit split over the showing required for discrimination claims based on changes less drastic than demotions, terminations, or pay reductions, and underscores the continued importance of taking a thoughtful approach to any change in the terms and conditions of an employee’s employment.Continue Reading Less is More: SCOTUS Shifts Title VII Threshold to “Some” Harm (Though Plaintiffs Must Still Show Discriminatory Intent)

The Department of Labor’s “new” rule for classifying workers as employees or independent contractors under the Fair Labor Standards Act took effect March 11, 2024. The DOL’s Final Rule returns employers to a familiar pre-Trump administration totality of the circumstances test that focuses on the “economic realities” of the worker’s situation. The practical impact is that it is now harder for businesses to classify workers as independent contractors, and it will likely increase federal wage and hour claims.

There are mounting legal challenges to the Final Rule contesting the DOL’s rulemaking authority. However, to date, none of the suits have been successful at blocking implementation of the Final Rule. So, for now, it stands.

Practice pointer: different legal tests for different laws

Employers new to the US are often baffled to learn that no single test exists to evaluate independent contractor status for all purposes. This means compliance is complicated since different tests may apply depending on the context. And yes, this also means that it’s feasible for a worker to be an independent contractor for some purposes and an employee for others (such as under state and federal law, for example). Continue reading for a summary of the key tests that come up most often for US multinationals.Continue Reading New DOL Rule Makes it Harder to Classify Workers as Independent Contractors (Plus a Quick Recap of the Key Misclassification Standards Across the US)

Special thanks to Celeste Ang and Stephen Ratcliffe.

We launched the seventh annual edition of The Year Ahead: Global Disputes Forecast, a research-based thought leadership surveying 600 senior legal and risk leaders from large organizations around the world and highlights key issues we anticipate to be crucial for disputes for this year.

We are pleased to share a recent SHRM article, “EEOC General Counsel: Anti-Discrimination Damages Caps Are Too Low,” with insights from our own JT Charron. Million-dollar jury verdicts in equal employment opportunity cases sometimes mask large cuts in final judgment due to federal caps on compensatory and punitive damages. Karla Gilbride, the EEOC’s general…