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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

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.

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