Human Resources (HR) personnel are now specifically under the scrutiny of the antitrust enforcement agencies. The Department of Justice (DOJ) and Federal Trade Commission (FTC) are typically known for enforcing antitrust laws against price-fixers and bid-riggers. Recently they announced a new set of targets: anti-competitive agreements between employers related to hiring and compensation. For the first time, these agencies have warned HR personnel and their employers they may be criminally prosecuted for agreeing with other companies to fix employee pay (wage-fixing agreements) or not to recruit each other’s employees (no-poaching agreements). Criminal violations of the antitrust laws are felonies and threaten substantial fines and jail time.
Some employers require all, or most, of their employees to sign a non-competition agreement, rationalizing that even if not enforceable, at least the non-competition agreement will make the employee “think twice” before leaving, especially to a competitor. This practice has come under attack recently as anti-competitive.
The Securities and Exchange Commission (SEC) recently fined BlueLinx Holdings and Health Net, Inc. for including within severance agreements a provision designed to eliminate a former employee’s right to recover whistleblower incentives. In what is generally considered a standard provision in severance agreements, the companies’ agreements allowed for the former employees’ participation in any government investigation but required a waiver of the right to recover any incentive payments that the law provides for whistleblowers. The SEC issued substantial fines to these companies for this waiver requirement. The SEC explained that the whistleblower incentive is a key part of the SEC’s enforcement efforts and that any public company’s attempt to eliminate or limit that incentive violates the law.
The Department of Energy (DOE) has proposed an amendment to the Department of Energy Acquisition Regulation (DEAR) that, among other changes, clarifies that FAR Subpart 22.12, Nondisplacement of Qualified Workers Under Service Contracts, and the associated Department of Labor regulations, applies to subcontracts under DOE’s management and operating (M&O) contracts. M&O contractors and their subcontractors need to be aware of these changes, particularly the impact on the requirement to hire service employees working on incumbent contracts set forth in contract clause FAR 52.222-17.
FAR Subpart 22.12 implements Executive Order 13495 (January 30, 2009), and requires a successor contractor and its subcontractors to offer “service employees,” as defined by the Service Contract Act, under the predecessor contract (of the same or similar services at the same location) and whose employment will be terminated as a result of the successor contract award, a right of first refusal of employment under the new contract. Employment openings are generally prohibited until such right of refusal has been provided, meaning an incoming contractor will have limited opportunity to staff its current employees on the contract. Importantly, each bona fide express offer of employment must have a stated time limit of not less than 10 days for an employee response, a time period that successor contractors should account for when determining how long it will take to transition the contract. The contract clause, FAR 52.222-17, has to be flowed down to service subcontracts over the simplified acquisition threshold, typically $150,000. The requirements of FAR Subpart 22.12 do not apply to service contracts performed entirely outside the United States. 77 Fed. Reg. 75768 (Dec. 21, 2012).
In an article published on January 5, 2016, Law360 summarized the details of the employment class action case, Morton v. Vanderbilt. Bass, Berry & Sims attorney Bill Ozier represented Vanderbilt in the lawsuit. Continue Reading WARN Notice Is Not End of Employment, 6th Circ. Says
Employers should not rely on handbook provisions to create enforceable obligations on employees. The employers who do so took another loss recently. In Lorenzo v. Prime Commc’ns, LP, 2015 BL 386874, 4th Cir., No. 14-1622, 11/24/15, the federal Fourth Circuit Court of Appeals ruled that an arbitration provision, contained in an employee handbook, was not enforceable. The provision, said the Court, did not require an employee to take her wage and hour claims to arbitration. Rather, the employee was free to pursue those claims – including a collective action – in federal court.
Bass, Berry & Sims attorneys Tim Garrett and Dustin Carlton authored an article outlining the actions employers should take to avoid violating the Dodd-Frank Act relating to confidentiality agreements. Rule 21F-17 was adopted by the SEC to prevent employers from taking any action that would prevent an employee from “directly communicating with the Commission staff about a possible securities law violation.” To highlight the risk, Tim and Dustin provided details related to the SEC’s first enforcement action under Rule 21F-17 that was brought against a company for language found in the company’s confidentiality agreement. As pointed out in the article, “employers should review confidentiality provisions in employee handbooks/codes of conduct, severance agreements, and practices for internal investigations” for any language that conflicts with Rule 21F-17.
The full article, “Hidden Risks in Confidentiality Requirements” was published in the August/September 2015 issue of Today’s General Counsel and is available online.
Bass, Berry & Sims attorney Tim Garrett wrote an article summarizing the SEC’s April 1 announcement that it had settled an enforcement action over an employer’s use of a restrictive confidentiality agreement.
Tim made the point that the SEC’s action was consistent with similar efforts by the National Labor Relations Board and the Equal Employment Opportunity Commission. “These agencies have been reviewing critically the confidentiality provisions of severance agreements and documents used as part of internal investigations,” he wrote. “This announcement from the SEC is a further reminder that employers should have such confidentiality provisions reviewed by counsel or risk similar consequences.”
The full article, “SEC Settles Enforcement Action for Overly Restrictive Confidentiality Agreement” was published by Employee Benefit Adviser on April 2 and is available online.
Some employers use last chance agreements (“LCA”), particularly in union settings, to allow hourly employees “one last chance” to improve performance. In return, the employee waives the right to use the union’s grievance and arbitration process if later termination is due to continued failure to improve performance or due to another policy violation. Employers will explain that the employee otherwise would be terminated, but can remain employed in return for signing this “one last chance” agreement; if the employee fails to sign the LCA, the employee will be terminated for the underlying violation which led the employer to offer the LCA.
Some employers also require employees to release statutory civil rights in an LCA. As an employer recently learned, this practice is hazardous and can lead to significant liability.