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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

March 14, 2023, is recognized as Equal Pay Day in the US. This date symbolizes how far into the year women must work to earn the same amount that men earned in the previous year. Because women earn less, on average, than men (according to the US Census Bureau), they must work longer for…

We are pleased to share a recent HRD America article, “Severance agreements can’t include non-disparagement, confidentiality clauses,” with quotes from Michael Brewer. This article discusses the recent NLRB ruling that companies can no longer offer severance agreements that include non-disparagement and confidentiality clauses. This ruling could potentially discourage some companies from offering severance packages altogether, while other…

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.

Special thanks to Maura Ann McBreen.

The short answer is “no.”

Typically the enforceability of non-compete clauses has been subject to state law and more recently, many states have imposed limitations on the enforceability of non-competes. Some states, like California, North Dakota and Oklahoma, ban them entirely. However, the Federal Trade Commission (FTC) on January 5, 2023 issued a proposed rule that would significantly restrict the use of non-compete clauses between employers and employees as a matter of federal law. The FTC said that the proposed rule would apply to independent contractors and anyone who works for an employer, whether paid or unpaid. It would also generally prohibit employers from using non-compete clauses and make it illegal for an employer to:

  • Enter into or attempt to enter into a non-compete with a worker;
  • Maintain a non-compete;
  • Represent to a worker that he or she is subject to a non-compete under certain circumstances.

The proposed rule would generally not apply to other types of employment restrictions, like non-solicitation and non-disclosure agreements, unless such other employment restrictions were so broad as to function like non-competes. Since this function test is clearly open to interpretation, the reach of the proposed rule may be further expanded.…

Continue Reading My Company Requires Employees Sign Non-competes. Should We Panic Due To The FTC’s Proposed Rule?

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

As we find ourselves firmly in the middle of Q1 of 2023, the avalanche of layoff headlines that started last quarter just keeps coming. Whether you follow the school of thought that the US entered a recession in summer of 2022 (after two consecutive quarters of negative gross domestic product) or not (given a strong labor market and corporate earnings growth), more and more companies are having to address overzealous pandemic hiring and the backlash from soaring company valuations. One comparatively “easy” place for multinational companies to cut costs — US workforces, where employment is generally “at-will” and absent contractual entitlements or triggering statutory notice requirements, layoffs can be carried out relatively quickly. With that said, as always, moving too quickly can create headaches that actually can be avoided — or at least dulled — with a little planning. 

Here are four tips to keep in mind when planning layoffs in the US:

  1. Beware of the WARN(ings)  

Larger layoffs have the potential of triggering the Worker Adjustment and Retraining Notification Act of 1988 (WARN Act) (and analogous state laws, known as state “mini-WARN acts”) statutes. These statutes impose notice and information obligations, which can be tricky to keep track of, and carry potentially heavy penalties for noncompliance.

Federal WARN requires employers to give advanced notice to affected employees in the event of a covered mass layoff or plant closing. Under the WARN, employers must provide 60 days’ notice of termination to the impacted employees, union representatives (if applicable), and certain government authorities. Under some state mini-WARN acts, 90 days’ notice is required. Click here for more on WARN.

  • Tip: WARN should become part of the layoff checklists (again), with teams (re)sensitized to the impact on timing and costs if triggered.

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Continue Reading 4 Tips To Avoid (Or At Least Dull) Headaches When Conducting Layoffs In The US

Special thanks to Bradford Newman and Nandu Machiraju.

Employers have been keeping a close watch for rulemaking and action by the Federal Trade Commission (FTC) restricting non-competes. Earlier this month, the FTC answered the Executive Order’s call with enforcement activities and a proposed rule signaling a considerable effort to prioritize employer-employee non-compete covenants as…

Special thanks to Scott McMillen.

Looking Ahead: Exploring the Key Themes and Recommendations for US and Global Employers in 2023

Between maintaining business continuity and keeping your workforce safe, we know there’s been little time to track the rapidly changing employment, compensation and mobility law landscape — in Illinois, across the US, and globally.…