May 28, 2010
Secunda on ERISA Attorney's Fees After Hardt
A recent Lawyers USA (subscription required) article on the recent Hardt case quotes our own Paul Secunda (Marquette). Hardt is the case in which the Supreme Court made it somewhat easier for ERISA plaintiff's to get attorney's fees and costs. According to Paul, this could be a big deal:
The decision could have a significant impact because the issue comes up frequently, said Marquette University Law School professor Paul M. Secunda.
“It is a frequent situation where plan administrators push the envelope and try not to pay a claimant benefits to save money, a lawsuit is filed, and rather than deciding the case, the court remands the case and tells the administrator that they missed a piece of evidence – which is court-speak for ‘Don’t make us overturn you,’” he explained.
But even if a plan administrator reversed the denial and awarded benefits, many claimants were then stuck with litigation costs and no means to recover attorney fees because the plan would argue that they were not the “prevailing party.” Now, under Hardt, claimants can argue that the remand order constitutes success in order to receive an award of fees.
The decision will prove beneficial to claimants and plaintiffs’ attorneys, who were less likely to take cases where they knew it would be unlikely they would get paid, Secunda added. “Plaintiffs’ attorneys will more likely than not get attorney fees [after Hardt] – but they still have to litigate in order to do so,” Secunda said.
ISLSSL Conference Report
I'm on the last day of the Americas conference of the International Society of Labor and Social Security Law. The conference is heavily dominated by Latin American countries. From the United States, there's only Steve Willborn, Carmelo Mesa-Lago, and me; from Canada, there's only Jeffrey Sack. There are about 450 delegates from the rest of the Americas. Steve, Jefff, and I have been talking a good bit about how we can attract more American scholars to ISLSSL, and to international/comparative labor/employment law generally. I'll be floating some ideas on this blog over the next several weeks.
Recently Published Scholarship: Competition in the Global Workplace
Competition in the Global Workplace: The Role of Law in Economic Markets
- Samuel Estreicher, Trade Unionism Under Globalization: The Demise of Voluntarism?, p. 415.
- Jeffrey M. Hirsch, Making Globalism Work for Employees, p. 427.
- Miriam A. Cherry, The Global Dimensions of Virtual Work, p. 471.
- Cesar F. Rosado Marzan, Of Labor Inspectors and Judges: Chilean Labor Law Enforcement After Pinochet (and What the United States Can Do to Help, p. 497.
- Martin H. Malin, The Canadian Auto Workers-Magna International, Inc. Framework of Fairness Agreement: A U.S. Perspective, p. 525.
- Kerry Rittich, Between Workers' Rights and Flexibility: Labor Law in an Uncertain World, p. 565
- Rolf Wank, The Role of Law in Economic Markets: Recent Cases of the European Court of Justice in Employment Law, p. 585.
May 26, 2010
Cert Petition in FLSA Attorney's Fees Case
My colleague Ben Barton (Tennessee) is currently writing a cert petition in a case that involves attorney's fees awards under the FLSA. His focus, as noted below, is more on the judicial power aspect of the case, but he's hoping that someone will write an amicus supporting cert from the L&E perspective.
The case is Sahyers v. Prugh, Holliday & Karatinos, in which a paralegal sued for unpaid overtime. The law firm made an offer of judgment under FRCP 68, which included attorney's fees as determined by the district court. The paralegal accepted the offer. The court entered judgment against the firm, but refused to award any attorney's fees because the plaintiff's firm never sent the defendant a letter or request for money before filing suit--in spite of the fact that the FLSA doesn't require either and does require attorney's fees to a victorious plaintiff. In a fractured en banc decision, the Eleventh Circuit affirmed, with the majority finding an exception to the general FLSA attorney's fees rule based on the courts' inherent powers to regulate attorney conduct.
Ben's petition is focusing on the argument that this new exception is an overreach of judicial power. But he'd also like the Court to see an argument in support of the petition discussing how the new exception affects the FLSA. If you're interested, you can email him for more info, including a copy of his draft petition.
Bodie on Employee Stock Options
Matt Bodie (St. Louis University) has on Jotwell's Worklaw section his essay, "Deconstructing Stock Options," which reviews David Walker's, "The Non-Option: Understanding the Dearth of Discounted Employee Stock Options." From his introduction:
In “The Non-Option,” David Walker expertly dissects one of the puzzles of employee stock option compensation: why stock options are always granted at the then-current market price for the stock, resulting in “at-the-money” options. If parties could tailor their compensation packages to individual needs and desires, one would expect that at least some firms would agree to give their employees stock options that had an exercise price lower than market price (known as “in-the money” options). Indeed, the desire for in-the-money options was so strong that hundreds of companies essentially created them through illegal option backdating. Recent changes to accounting rules were thought to have dampened the disparity in regulatory treatment between at-the-money and in-the-money options. Walker’s article, however, explains how tax law has stepped in to continue this familiar bifurcation in treatment.
As Matt also emphasizes, stock options are increasingly important for many types of employees--not just executives--and is worth paying more attention to. Of course, he explains it much better than that, so check it out.
May 24, 2010
S. CT: Disparate Impact Claims Start To Run When Results of Job Test Applied by Employer
This morning, the U.S. Supreme Court decided in unanimous fashion (Scalia writing for the Court) the important procedural disparate impact case of Lewis v. City of Chicago (U.S. 05/24/2010), which we have written about previously here and here.
Ross Runkel provides this helpful summary of the decision:
The City administered a written test to firefighter job applicants in 1995. The City notified applicants of the results at the end of January 1996. Plaintiffs filed an EEOC charge on March 21, 1997 claiming that the test had a disparate impact on black applicants and was not a valid test of firefighting aptitude. The charge was filed more than 400 days after the plaintiffs were notified, but within 300 days of the City's beginning to hire applicants. The trial court ruled that each hiring was a fresh violation of Title VII, so the plaintiffs' suit was timely. The 7th Circuit reversed, finding that "discrimination was complete when the tests were scored" and "was discovered when the applicants learned the results." Therefore, the EEOC charge was not filed on time.
The US Supreme Court unanimously reversed, holding that a plaintiff who does not file a timely charge challenging the adoption of a practice may assert a disparate-impact claim in a timely charge challenging the employer’s later application of that practice as long as he alleges each of the elements of a disparate-impact claim. Here, the question was not whether the claim based on the City's conduct was timely, but whether it can be the basis for a disparate-impact claim at all. The Court concluded that it can be. The Court said, "a plaintiff establishes a prima facie disparate-impact claim by showing that the employer 'uses a particular employment practice that causes a disparate impact' on one of the prohibited bases."
A little more from the syllabus of the decision:
Title VII plaintiff establishes a prima facie claim by showing that the employer “uses a particular employment practice that causes a disparate impact” on one of the prohibited bases. §2000e–2(k). The term “employment practice”clearly encompasses the conduct at issue: exclusion of passing applicants who scored below 89 when selecting those who would advance. The City “use[d]” that practice each time it filled a new class of fire-fighters, and petitioners allege that doing so caused a disparate impact. It is irrelevant that subsection (k) does not address “accrual” of disparate-impact claims, since the issue here is not when the claims accrued but whether the claims stated a violation.
So, as Jeff predicted here (even though not the unanimous decision), disparate impact claims under Title VII may be challenged within the 180/300 day statutory period from when the employer later applies the allegedly discriminatory test. Or put differently, the court has adopted the discovery rule, in which the plaintiffs win here because they had no reason to believe that being classified as "qualified" rather than "well qualified" definitively knocked them out of the running for these jobs.
ERISA Supreme Court Attorney Fees Case Goes Way of Plaintiffs
For those who care about ERISA participants and beneficiaries being able to find good counsel for their claims, the U.S. Supreme Court decision this morning in Hardt v. Reliance Insurance Co., No. 09-448 (U.S. May 24, 2010) is welcome news.
In a nearly unanimous opinion written by Justice Thomas (Justice Stevens wrote to concur in part), the Court held that:
A fee claimant need not be a “prevailing party” to be eligible for an attorney’s fees award under §1132(g)(1) [Section 502(g)(1)]. Interpreting the section to require a party to attain that status is contrary to §1132(g)(1)’s plain text. The words “prevailing party” do not appear in the provision. Nor does anything else in §1132(g)(1)’s text purport to limit the availability of attorney’s fees to a “prevailing party.” Instead, §1132(g)(1) expressly grants district courts “discretion” to award attorney’s fees “to either party.” (Emphasis added.) That language contrasts sharply with §1132(g)(2), which governs the availability of attorney’s fees in ERISA actions to recover delinquent employer contributions to a multiemployer plan. In such cases, only plaintiffs who obtain “a judgment in favor of the plan” may seek attorney’s fees.§1132(g)(2)(D). The contrast between these two paragraphs makes clear that Congress knows how to impose express limits on the availability of attorney’s fees in ERISA cases. Because Congress failed to include in §1132(g)(1) an express “prevailing party” requirement, the Fourth Circuit’s decision adding that term of art to the statute more closely resembles “invent[ing] a statute rather than interpret[ing] one.” Pasquantino v. United States, 544 U. S. 349, 359.
The case is interesting because it poses a common legal issue in ERISA litigation. The court, after pointing out problems with a plan administrator's interpretation of plan terms, remands the case back to the company and the company ends up awarding the initially requested benefits to the employee.
Employees in this type of situation generally file a motion under Section 502(g), a fee-shifting statute that applies in most ERISA lawsuits and provides that “the court in its discretion may allow a reasonable attorney’s fee and costs . . . to either party.”
Now, a court may award fees and costs under §1132(g)(1), as long as the fee claimant has achieved “some degree of success on the merits.” Ruckelshaus v. Sierra Club, 463 U. S. 680, 694.
Nice way to start the work week.
Hat Tip: Mark DeBofsky
Chapter 8 at the Mayflower
No shocks last week at the American Law Institute, which tentatively approved most of Chapter 8, Employee Duty of Loyalty and Restrictive Covenants. The Institute did not get to the section involving inevitable disclosure or those addressing employee/employer rights to inventions.
Which is not to say that there was not a lot of constructive give and take on various aspects of the sections that were approved. For example, there was a spirited discussion of the relationship between chapter 4, whistleblowing, and the duty not to disclose confidential information recognized by Chapter 8. More generally, there was a debate about whether it was appropriate to recognize a "privilege" to disclose "negative value" confidential information. The Reporters will be working out this question as they finalize the approved sections, and they may also tweak other language of the draft to reflect the contributions made by members of the Institute..