May 20, 2006
Sereboff and the Future of ERISA Remedies
By Guest Blogger: Prof. Colleen Medill, University of Nebraska College of Law
This is the first of what I hope will be a regular addition to the Workplace Prof Blog - comments and observations on legal and regulatory developments in employee benefits law. Chief Justice Roberts spoke at the American Law Institute meeting about 30 minutes after the decision in Mid-Atlantic Medical Services v. Sereboff was announced. In his remarks to the ALI members, Chief Justice Roberts characterized Sereboff as one of four decisions announced that morning by the Court that were "9-0" decisions that "simplified" the law. The audience was, of course, duly impressed with the new Chief Justice. Justice Roberts (who wrote Sereboff) could "simplify" ERISA. Wow!
Having had a few days to reflect on the opinion in Sereboff, and its future implications for ERISA remedies, I think "subtle change," rather than "simple," is a more accurate adjective. Although only 11 pages long, with only two footnotes (a true breath of fresh air after Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002)), this decision marks a turning point in the Court's philosophical approach to determining the scope of "appropriate equitable relief" under ERISA Section 502(a)(3). This change looks to be at three levels, described below, starting from most narrow to the most far reaching:
1. By characterizing the plan's reimbursement claim as an "equitable lien based on an agreement," rather than as a claim for subrogation, the Court neatly sidesteps the quagmire of the common fund doctrine and the make whole doctrine, equitable principles developed in the context of state insurance law claims for subrogation. As the Court says on p. 11 of the opinion, this "parcel of equitable defenses" to a subrogation claim "are beside the point" when the plan claim is characterized as an equitable lien based on an agreement (i.e., the terms of the plan). The "lien/agreement" theory suggests that at least a majority of the Court would enforce a plan reimbursement provisions that provide the plan must be fully reimbursed BEFORE the participant (or the participant's attorney, who likely took the tort case on a contingency fee). I discuss a caveat to this point, however, in point #3 below.
2. In Sereboff, the Court clearly is shifting the focus of judicial debate away from the technical nuances of the 18th century chancery court (emphasized by Great-West) toward a more flexible, conceptual approach to determining what remedies are "equitable." Otherwise, the Sereboffs' technical arguments concerning equitable tracing rules and the requirement that the lien funds must be identified at the time the agreement is made would have carried more weight in the decision. At the top of p. 8 of the opinion, the Court strongly signals that Great-West in the future will be limited to its unique facts (for those unfamiliar with Great-West, the crucial fact was that the defendant and plan participant in Great-West, Knudson, did not possess the tort recovery funds herself; rather, the funds were held by the trustee of a special needs trust for the benefit of Knudson).
Bottom line: After Sereboff, for a remedy under ERISA Section 502(a)(3) to qualify as "equitable," the Court is no longer going to require "application of all restitutionary conditions." In other words, the scope of potential remedies that could qualify as "equitable" under Section 502(a)(3) is going to broaden out considerably, having been freed of strict compliance with all of the possible (ancient) technical requirements for relief imposed by a chancery court of equity.
3. Having broadened out the scope of potential equitable remedies available under Section 502(a)(3), the future judicial battleground is signaled by footnote two of the opinion on p. 11. In footnote two, the Court notes that the Sereboffs' appear to have raised an additional argument for the first time in their arguments before the Court -- that even if the plan's claimed remedy is "equitable," the remedy is not "appropriate."
ERISA teachers will recall that the word "appropriate" has drawn the Court's attention once before, in its decision in Varity Corp. v. Howe, 516 U.S. 489 (1996). In Varity, the Court pointed to the word "appropriate" as a limitation on remedies available under Section 502(a)(3) by suggesting that where the plaintiff's claim could be brought under another, more specific provision of Section 502 with a more limited remedy than Section 502(a)(3) (in Varity, the alternative claim provision at issue was Section 502(a)(1)(B), which authorizes claims for wrongfully denied plan benefits), nornally more generous equitable relief under Section 502(a)(3) would not be "appropriate."
So, what does this all mean for the future of equitable relief available under Section 502(a)(3)? On the one hand, Sereboff is likely to broaden the scope of possible equitable remedies under Section 502(a)(3), particularly the potential for make whole relief under the common law of trusts for injury resulting from a breach of ERISA fiduciary duty. On the other hand, the Court has signaled in footnote two that it may still use the "appropriate" language in Section 502(a)(3) as a limitation. Harkening back to point #1 above, questions of unfairness in the allocation of a tort settlement where the recovery is far less than the participant's medical expenses (most likely due to the tort defendant's insurance coverage limitations) may creep back in through the back door of the "appropriate" language.
The crucial question left unanswered by footnote two is the criteria that the Court will use to determine "appropriate" equitable relief. Is it simply fairness as to the parties (this is, after all, supposed to be "equitable" relief)? Or will the Court consider ERISA's policy objectives, too? Such as a chilling effect on employers and plan service providers of a generous monetary award against them?
In conclusion, I think that characterizing Sereboff as a "simplification" of ERISA is, well, overly simplistic. Is weighing and balancing the appropriateness of a given equitable remedy a "simple" conceptual approach for the Court to take? No, clearly a bright line, "one size fits all cases" rule would be much easier to apply. Is Sereboff is a harbinger of a more sophisticated, and hopefully more equitable, judicial approach to relief available under Section 502(a)(3)? I think so. For merely suggesting the possibility, Chief Justice Roberts gets a grade of A+ from this professor for his opinion in Sereboff.
Top-5 Employment SSRN Downloads
- Christopher M. Fairman, Fuck (618).
- Eric Goldman, Co-Blogging Law (98).
- Brian K. Powell & Richard A. Bales, HIPAA as a Political Football and Its Impact on Informal Discovery in Employment Litigation (86).
- Cass R. Sunstein (left) & Christine Jolls (right), The Law of Implicit Bias (71).
- Scott A. Moss, Against 'Academic Deference': How Recent Developments in Employment Discrimination Law Undercut an Already Dubious Doctrine (65).
Top-5 Labor SSRN Downloads
- Robert A. McCormick & Amy C. McCormick, The Myth of the Student-Athlete: The College Athlete As Employee (58).
- James J. Brudney, Isolated and Politicized: The NLRB's Uncertain Future (49).
- Katherine Van Wezel Stone, Legal Protections for Workers in Atypical Employment Relationships (45).
- Stephen A. Broome, An Unconscionable Application of the Unconscionability Doctrine: How the California Judiciary is Circumventing the Federal Arbitration Act (28).
- Thomas C. Kohler (photo above), The Notion of Solidarity and the Secret History of American Labor Law (23).
Top-5 International Employment & Labor Law SSRN Downloads
- Rob Euwals, Daniel J. van Vuuren, & Ronald P. Wolthoff, Early Retirement Behaviour in the Netherlands: Evidence from a Policy Reform (22).
- Wolfgang Franz & Friedhelm Pfeiffer, Reasons for Wage Rigidity in Gemany (18).
- Marie-Jeanne Moreau, Restructuring and the European Works Council (13).
- Alan Hyde (photo above), A Stag Hunt Account and Defense of Transnational Labor Standards -- A Preliminary Look at the Problem (12)
- Marcel Fafchamps & Jackline Wahba, Child Labor, Urban Proximity, and Household Composition (11).
Top-5 Benefits/Compensation//Pension SSRN Downloads
- J. Michael Orszag & Neha Sand, Pensions: Corporate Finance & Capital Markets (90).
- Brian K. Powell & Richard A. Bales, HIPAA as a Political Football and Its Impact on Informal Discovery in Employment Litigation (86).
- Jennifer G. Hill, Regulating Executive Remuneration: International Developments in the Post-Scandal Era (76).
- Bengt R. Holmstrom (photo above), Pay Without Performance and the Managerial Power Hypothesis: A Comment (69).
- Katherine V.W. Stone, Legal Protections for Workers in Atypical Employment Relationships (45).
The Importance of a Firm Handshake
HR.BLR.com recently posted an interesting story about what impact a job candidate's handshake can have on how he or she is viewed by prospective employers.
According to a survey conducted by the National Association of Colleges and Employers (NACE):
More employers say a job candidate's handshake would likely have a strong influence on their opinion of the individual compared with those say the same about a candidate's body piercing or obvious tattoos . . . .
Thirty-three percent of employers said a candidate's handshake would have a strong influence on their opinion of a job candidate compared with 31 percent who say the same about a body piercing. Twenty-nine percent of respondents said obvious tattoos would have a strong influence on their opinion of a job candidate.
I have to admit a little surprise that so many respondents still care about a good handshake.
Strikes me all as a little silly. And doesn't this just perptuate behaviors that are more comfortably engaged in by men (who try many times to break the other person's arm off)?
My thoughts on what would be better? How about the Japanese ritual of handing one another your business card, evaluating what's on the card, and then deciding the appropriate way to interact with that person?
Just a thought.
OSHA Issues Guidance on Workplace First Aid Programs
The US Newswire is reporting that OSHA yesterday issued new guidelines for developing company first aid programs, entitiled "Best Practices Guide: Fundamentals of a Workplace First-Aid Program."
The OSHA Guide seeks to practically break down workplace first aid programs into four essential elements: "management leadership and employee involvement;
worksite analysis; hazard prevention and control; and safety and health
According to the article, the Guide also includes:
[B]est practices for planning and conducting safe and effective first-aid training. OSHA recommends that training courses include instruction in general and workplace hazard-specific knowledge and skills, incorporating automated external defibrillator (AED) training in to CPR training if an AED is available at the work site, and periodically repeat first-aid training to help maintain and update knowledge and skills.
May 19, 2006
The Story of the Swimsuit Model, Bank Vice-President
The reason why this case especially sticks out is because the female employee in question was a high-level bank vice-president and she was fired for modeling the latest swimwear in the Lifestyles section of the local newspaper. Not exactly scandalous behavior.
From the PlanSponsor.com story:
The Chattanoogan reports that Sheri Doub is suing Citizens Tri-County Bank and bank officials Glenn Barker and C. Ann Smith. According to the suit, the same day Doub's picture appeared in the lifestyle section of the Chattanooga Times Free Press along with other young women modeling the latest in swimwear, Barker and Smith came to her and told her she was terminated.
She said she was told by Barker "she ought consider a career in modeling, since she would no longer have a career in banking," according to the Chattanoogan. Doub said she was also told the photo had caused the bank "great embarrassment."
Now I don't believe that Tennessee has an off-duty activity statute that would protect the employee here in engaging in this rather harmless, off-duty activity. Unfortunately, as the law currently exists, there is probably little an employee like this can do to fight against the moral scruples of her employer and the law protects, with a few notable exceptions, the employer generally in running its business as it sees fit.
But even though the employee here probably does not have a claim (unless she can show somehow gender discrimination which seems unlikely under the circumstances), it does not stop me from telling the bank officials that they really ought to get a life.
Moberly on Sarbanes-Oxley’s Structural Model
Richard Moberly (Nebraska) has posted on SSRN his upcoming piece in the Brigham Young Law Review: Sarbanes-Oxley’s Structural Model to Encourage Corporate Whistleblowers.
From the abstract:
Recent corporate scandals demonstrate that rank-and-file employees often remain silent in the face of significant fraud. This silence is unfortunate because corporate employees have inside knowledge of misconduct that gives them an information advantage over more traditional corporate monitors, such as independent directors and government regulators.
To address this problem, the Sarbanes-Oxley Act utilized a new approach that encourages employee whistleblowers to disclose information about corporate wrongdoing. This approach, which [I] label the “Structural Model,” requires that corporations provide a standardized channel for employees to report organizational misconduct to official monitors within the corporation.
This Article offers an original framework for analyzing the effectiveness of Sarbanes-Oxley’s Structural Model. Utilizing behavioral science research that analyzes whistleblower motivations, [I] find that the Structural Model reduces difficulties corporate employees experience in disclosing misconduct, and thereby provides an improved mechanism to encourage employees to become more active and effective corporate monitors. However, the Structural Model has significant flaws, which [I] address by offering several suggestions for improving the model’s usefulness as a tool against corporate crime.
Check out this very timely and interesting article here.
Nance Appointed Dean at Arkansas-Fayetteville
Cynthia Nance (Arkansas-Fayetteville) has just been appointed the new Dean at the University of Arkansas-Fayetteville School of Law. According to the AALS minority listserv, Cynthia was just recently promoted to full professor and was the first African American female to have started at UA-Fayetteville and make it to full professor in the entire university.
Cynthia holds a Juris Doctor
with distinction and Master of Arts in Finance from
the University of Iowa and has completed the course work for a
Ph.D. in Industrial Relations (also from Iowa). Prior to
teaching, she worked as a Labor Educator at the University of Iowa Labor Center.
Her teaching and research areas include labor and employment law as well as torts.
She is also an Executive Board member of the Interfaith Committee for Worker Justice and a Steering Committee member of the Northwest Arkansas Workers Center. She is past president of the American Association of Law Schools Employment Discrimination and Labor and Employment Law Sections. She serves on the Arkansas Bar Association's Jurisprudence and Law Reform Committee, Commission on Diversity and Lawyer Assistance Program Committee. Cynthia is also plaintiff's co-chair of the American Bar Association Labor and Employment Law Section, Ethics and Professionalism Committee and Chair of the Law School Admissions Council's Finance and Legal Affairs Committee and a Board member of that organization.
Congratulations Cynthia! It is always great to see one of our own labor and employment law professor people ascend to the top.
Hat Tip: Chris Cameron
May 18, 2006
Did Controversial Speaker Cause EEOC to Cancel Public Meeting?
Here's an interesting story from Peter Lattman over at the Wall Street Journal Law Blog.
Apparently, Roger Clegg (pictured above), president and general counsel of the Center of Equal Opportunity, a think tank which is opposed to racial and ethnic preferences, was asked to speak at an EEOC public meeting on affirmative action in corporate America.
According to the Law Blog, after the EEOC got wind of what Clegg was prepared to say, they at first disinvited him from speaking and then when Clegg pressed the matter, the EEOC eventually cancelled the entire meeting.
Here's the 26-pages of testimony that allegedly caused Clegg to be disinvited from the public meeting.
Clegg believes that he was not allowed to speak because of his beliefs that while corporate America is celebrating diversity, it is simultaneously granting unlawful racial and ethnic preferences in the workplace, in violation of Title VII. You can read Clegg in his own words in this piece in the WSJ's Opinion Journal.
I certainly do not agree with Clegg, but with apologies to Voltaire, I would defend his right to say what he wishes on the topic.
And isn't there this concept about the marketplace of ideas and how by letting all views be heard that good ideas will be embraced and bad ideas will be rejected?
Until I hear some other explanation (and I know there are always two sides to a story), I am frankly disappointed with the EEOC and think it has some explaining to do.
Krispy Kreme Settles ERISA Class Action Suit
Business Insurance is reporting:
Krispy Kreme Doughnuts Inc. will pay $4.75 million to members of its 401(k) and profit sharing plans as part of a settlement of an Employee Retirement Income Security Act class action lawsuit filed against the company and several members of its board of directors, officers and employees.
If approved by the court, the Winston-Salem, N.C.-based company will make a one-time cash payment and merge the two plans. The settlement money, less expenses, will be shared by plan participants from Jan. 1, 2003, through May 12, 2006.
The company had been sued for breach of fiduciary duty with regard to the administration and management of the two plans in March of 2005.
This Guy Does NOT Want to Keep His Day Job
As featured on the Carnival of the Insanities #21.
How do you think your boss would react if you told him or her that you have a cameo in a porno?
Well, this guy is about to find out (via the Front Page of the Daily News):
Thirty-one year-old Manhattan native Kimani Rogers got lucky last Saturday — well, kind of.
The private banker, married to a schoolteacher, won a role in a porn film — albeit a "non-active" cameo.
Rogers was the winner in an online contest that allowed him to make his adult-film acting debut in a scenario that brings a whole new meaning to "reality viewing."
The project: A skin flick starring and written by porn vixen Joanna Angel. And his wife was even okay with it.
And even his wife approved? Am I missing something here?
And even his wife approved? Am I missing something here?Hat Tip: Wasted Blog
Survey: Let's Not Do Lunch
The survey results indicate that lunch breaks are nowhere close to one hour and that a lot of employees take either about half and hour or eat lunch at their desk.
Here are the numbers from PlanSponsor.com:
[M]ore than 50% of employees surveyed report they now take 30 minutes or less for lunch in an effort to get more work done.
More than 60% of office workers surveyed said the 60-minute lunch is the biggest myth of office life.
In addition, 58% of respondents admitted to eating lunch at their desks while continuing to work.
This poll reflects what a lot of us already us know about modern day workplace realities: time off for lunch is becoming a luxury for many workers who are being pressed by both work time and home responsibilities.
Maybe someone someday will just invent some form of IV drip with the necessary vitamins and nutrients for employee survival and be done with it.
May 17, 2006
Here's a preview of the forthcoming issue of Berkeley Journal of Employment and Labor Law
(vol. 27, # 1, 2006). The print edition will be available in about a month. Thanks to Eli Naduris-Weissman, BJELL EIC, for passing along the link.
- Scott A. Moss (left), Against ‘Academic Deference’: How Recent Developments in Employment Discrimination Law Undercut an Already Dubious Doctrine.
- William R. Corbett (center), The Narrowing of the National Labor Relations Act: Maintaining Workplace Decorum and Avoiding Liability.
- Pat K. Chew & Robert E. Kelley, Unwrapping Racial Harassment Law.
- Daniel J. Libenson (right), Leasing Human Capital: Toward a New Foundation for Employment Termination Law.
- Charles Morris, Minority Union Collective Bargaining: A Commentary on John True’s Review Essay on The Blue Eagle At Work, and a Reply to Skeptics Regarding Members-Only Bargaining Under the NLRA.
- Miriam A. Cherry, No Longer Just Company Men: The Flexible Workforce and Employment Discrimination.
- Saru Jayaraman, Making Movement: Communities of Color and New Models of Organizing Labor: Morning Keynote Address.
- Maria Elena Durazo, Afternoon Keynote Address.
Parsons on Benefit Generosity in Voluntary Severance Plans
Donald Parsons (George Washington, Dept. of Economics) has posted on SSRN his piece on Benefit Generosity in Voluntary Severance Plans: The U.S. Experience.
From the abstract:
Mandated severance benefits have been the focus of much analysis, motivated largely by firing cost concerns. Less attention has been paid to voluntary systems, as in the U.S., although theory would suggest that these too induce firing costs. In a voluntary system, of course, benefit generosity is likely to be limited, unless firing cost distortions are modest or job displacement insurance is unusually valuable.
Bureau of Labor Statistics (BLS) surveys indicate that approximately one-quarter of the U.S. workforce is covered by a severance pay plan, but the BLS does not systematically collect information on program generosity. We are instead forced to rely on private surveys by associations, management consulting firms, and others for plan descriptions.
Although differing in sample and survey instrument design, these studies reveal remarkable uniformity of the basic benefit formula over the last half-century, with most plans offering scheduled benefits equal to a specified number of weekly wage payments for each year of service up to a service or benefit maximum. This benefit algorithm, similar to those in many mandated plans worldwide, mimics well-established empirical regularities in job displacement losses. The benefits however are modest. The modal private plan offers one week of pay per year of service for all but the highest levels of management, perhaps one-fourth of average capital losses from a job displacement.
You can download this thought-provoking article here.
Federal Union Wants More Funds for EEOC
The union which represents workers for the EEOC is claiming that the current funding of the agency is gutting the agency and making it more difficult for the agency to fulfill its mission of eradicating employment discrimination from society. Consequently, the union is starting a public relations campaign.
The American Federation of Government Employees is starting a media campaign this week with radio and newspaper ads criticizing budget cuts and reductions in staffing at the EEOC. The union claims about 20 percent of staff has been cut in the last five years.
New offices are being opened and the number of complaints are growing at a time when the agency is trimming its budget request, the group said. By AFGE estimates, that staffing shortage has resulted in a backlog of cases that will approach 50,000 by the end of 2007.
EEOC Commissioner Stuart Ishumaru said staffing cuts over the last five years "raise questions of whether we'll be able to effectively manage our workload." The EEOC currently has about 2,300 employees, according to union estimates.
The union is spending up to $100,000 for radio ads running Wednesday through the end of June in the following cities: Atlanta; Austin, Texas; Baltimore; Birmingham, Ala.; Cheyenne, Wyo.; Chicago; Dallas; El Paso, Texas; Miami; Montgomery, Ala.; San Francisco; and the Washington, D.C. metropolitan area. The campaign will include newspaper ads in several of the cities.
May 16, 2006
Employer Blogging Policies
- Only minorities of top executives surveyed are convinced to “a great extent” that corporate blogging is growing in credibility either as a communications medium (5%), brand-building technique (3%), or a sales or lead generation tool (less than 1%). In contrast, most executives are somewhat or not at all convinced of blogs’ growing credibility in these areas, (62%, 74%, and 70% respectively).
- Nearly half of senior executives polled do not have corporate policies pertaining to blogging, although 77% believe that their organizations should address such policies.
- Even though 12% of senior executives say their companies have taken legal or other action in response to a blog, only 20% report having a formal process in place for monitoring blogs written about the company.
- A minority (15%) say that someone in their organization is currently writing a blog related to the company or its activities.
- Only one in five (21%) report reading business-related blogs once a week or more frequently.
- Only 30% of senior executives report that they have a thorough understanding of the term “Internet blog.”
- Forty percent believe that their companies should have corporate policies to address the writing of blogs unrelated to the company or its activities. This compares with the 77% who believe their companies should have such policies concerning the authoring of blogs sanctioned by the company.
- Further, 8% report organizing a team of dedicated people to write sanctioned blogs about the company and its activities.
- Three percent said their company changed its product, service, or policies because of publicity generated by a blog written about it.
"New Wave" Union Organizing Symposium in NYLS Law Review
50 New York Law School Law Review (2005-06)
- Seth D. Harris (top left), Don’t Mourn - Reorganize! An Introduction to the Next Wave Organizing Symposium Issue, p. 303.
- Charles Heckscher (top middle), Organizations, Movements, and Networks, p. 313.
- Fred Feinstein (top right), Renewing and Maintaining Union Vitality: New Approaches to Union Growth, p. 337.
- Danielle D. Van Jaarseld center row, left), Overcoming Obstacles to Worker Representation: Insights from the Temporary Agency Workforce, p. 355.
- Alan Hyde (center row, center), New Institutions for Worker Representation in the United States: Theoretical Issues, p. 385.
- Janice Fine (center row, right), Worker Centers: Organizing Communities at the Edge of the Dream, p. 417.
- Victor Narro, Impacting Next Wave Organizing: Creative Campaign Strategies of the Los Angeles Worker Centers, p. 465.
- Jim Pope (bottom left), Next Wave Organizing and the Shift to a New Paradigm of Labor Law, p. 515.
- Rosanna M. Kreychman & Heather H. Volik, The Immigrant Workers Project of the AFL-CIO, p. 561.
- Helena Lynch, Industrial Areas Foundation, p. 571.
- Joshua N. Leonardi, The National Employment Law Project, p. 579.
- Lauren Snyder, Working America, p. 589.
- Sarah N. Kelly & Christine Tramontano, Working Today, p. 597.
- Emily Stein, The Workplace Project, p. 607.
World Cup Soccer and the German Worker
Not to be outdone by the Netherlands and its insurance companies offering employee disability plans for World Cup Soccer absences, Reuters is reporting that the head of a major union in Germany, the country that is hosting the World Cup, is arguing that employers should give employees some time off to catch the 3:00 p.m. kick-offs of World Cup soccer games.
According to the story:
[T]he chief of one of Germany's most powerful unions argued that workers should be given the chance to see at least part of the games.
"Employers should be flexible about working hours in order that their workforces can follow the matches," Frank Bsirske, head of the public services union Verdi, told the Berliner Zeitung newspaper in an article on the paper's Web site.
Companies such as Adidas, which are sponsoring the World Cup in Germany, have agreed to allow their employees to watch the matches at their desks, the paper said. Others, like Postbank, are organizing parties for some of the matches.
Given that Germany is the host nation and one of the most soccer-obsessed country, it is not like any work is going to get done anyway when matches are being played.
Why not just throw some parties and write off the time as the price of doing business in Germany once every four years?