The Dodd-Frank Act's Whistleblower Provisions: The Act's Best Hope For Exposing Financial Wrongdoing
In this BNA Insights article, Outten & Golden attorneys Tammy Marzigliano and Cara E. Greene take a close look at these provisions and the effects of preceding laws, such as the Sarbanes-Oxley Act, to examine what their future impact might be. Bloomberg BNA, Workplace Law Report, 10/22/2010.
On Sept. 15, 2008, Lehman Brothers collapsed, sending shock waves through the financial services industry and portending the industry's broader meltdown. Less than two weeks later, Washington Mutual was seized by the federal government and placed into receivership. Over the next year, more than 100 banks folded, Americans saw $13 trillion in wealth evaporate, and massive securities fraud, like that committed by Bernie Madoff, shook investor confidence to the core. The housing market collapsed, the number of people out of work hit 15.6 million, and the federal deficit ballooned. America was in the midst of the Great Recession.
In response, on July 21, 2010, the federal government enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “act” or “Dodd-Frank Act”), which overhauls and strengthens federal oversight of the financial system. While it is impossible to know whether the financial meltdown could have been avoided had the act's provisions been adopted in 2007 instead of 2010, the question on everyone's mind is whether the Dodd-Frank Act will keep it from happening again. Only time will tell if it will have the desired and intended impact, but the act's whistleblower provisions attempt to ensure that in the future financial fraud and irregularities are exposed long before they corrupt the entire system.
The Epidemic Of Employer Misclassification Of Employees As Independent Contractors Under The Fair Labor Standards Act, And The Courts' Response
Justin M. Swartz, and Mariko Hirose, and contributions by Piper Hoffman, 2009
The Fair Labor Standards Act (FLSA)’s compensation requirements, such as minimum wages and overtime pay, apply only to “employees.” Chao v. Mid-Atl. Installation Servs., Inc., 16 F. App'x 104, 105 (4th Cir. 2001). Employers can get around these requirements and lower their tax bills at the same time by classifying workers as “independent contractors” instead of “employees.” Employers classify as independent contractors many workers who do not meet the legal definition: the Department of Labor estimates that up to 30% of U.S. employers misclassify workers. Courts have found rampant violations across certain industries.
Arbitrability Of Sarbanes-Oxley Whistleblower Claims
This article explores the arguments presented by member firms and registered employees, and outlines what arbitration panels have decided. Laurence S. Moy. Pearl Zachlewski, Linda Neilan, and Katherine Blostein. The Neutral Corner, Newsletter of FINRA Neutrals, Volume 1, 2008.
Since the passage of the Sarbanes-Oxley Act of 2002 (SOX), arbitrators handling employment claims may be faced with a throny question concerning SOX whistleblower claims: Should a SOX claim be litigated in court or arbitrated? Ultimately, the question comes to whether SOX whistleblower claims constitute "employment discrimination" claims, and are thus exempt from arbitration under Rule 13201 of the Code of Arbitration Procedure for Industry Disputes (Code). This article explores the arguments presented by member firms and registered employees and outlines what arbitration panels have decided.
Justin Swartz and Rachel Bien, Section of Labor & Employment Law, American Bar Association, Vol. 35, Number 4, Summer 2007
Few doubt the merits of diversity in the workplace. Indeed, a host of organizational leaders from chief executive officers to top military brass have recently touted the importance of a diverse labor force. As a result, an entire industry has emerged, geared toward eradicating workplace inequality.
Many thoughtful ideas have made their way onto "best practices" lists that identify methods to increase the representation of historically underrepresented groups in corporations and firms.
Despite all of this attention, however, the challenge of actually achieving diversity remains. As Alexandra Kalev, Frank Dobbin, and Erin Kelly wrote in a recent article examining the effectiveness of employers' efforts to promote diversity, "We know a lot about the disease of workplace inequality, but not much about the cure." "Best Practices or Best Guesses? Assessing the Efficacy of Corporate Affirmative Action and Diversity Policies," 71 Am. Soc. Rev. 589, 590 (August 2006).
At the 2007 National Conference on Equal Employment Opportunity Law in Charleston, South Carolina, the Section's Equal Employment Opportunity Committee (EEOC) presented two panels that focused on efforts to increase diversity in private sector workplaces, including law firms. The consensus that emerged from both panels was clear: truly overcoming inequality in the workplace requires more than changing hearts and minds. It demands a structural, top-down approach with incentives for meeting concrete diversity goals.
Ethics Corner: Third Circuit Vindicates Plaintiff's Attorney
Justin M. Swartz and Cara E. Greene. July, 2007. Ethics Corner is a regular contribution by the ABA, Labor & Employment Law Section’s Ethics and Professional Responsibility Committee.
The Third Circuit recently overturned a district court order disqualifying a plaintiff’s attorney who had conducted an ex parte interview of the defendant’s administrative assistant. EEOC v. HORA, Inc., No. 05-5393, 2007 U.S. App. LEXIS 15705 (3d Cir. June 29, 2007) (unpublished decision). Characterizing the disqualification as “draconian,” the Circuit held that the district court abused its discretion because the lawyer did not violate any ethics rules, and, even if she had, there was no prejudice to the defendant.
The plaintiff’s lawyer, Jana Barnett, represented Manessta Beverly in a sex harassment and retaliation case against a Days Inn franchise and its management company. During discovery, Barnett conducted an ex parte interview of Debbie Richardson, an administrative assistant at the Days Inn. The district court disqualified Barnett for conducting the interview, finding that she violated Pennsylvania Rules of Professional Conduct (“PRPC”) Rules 4.2, 4.4, and 5.7.
The Third Circuit reversed, holding that Barnett did not violate Rule 4.2 because the administrative assistant was not a member of the organization with whom ex parte contact was forbidden. The Third Circuit recently overturned a district court order disqualifying a plaintiff’s attorney who had conducted an ex parte interview of the defendant’s administrative assistant.
Whose Clients Are They? Contacting Putative Class Members
Cara E. Greene and Jill Maxwell, Labor and Employment Law, Vol. 35, No. 3, Spring 2007 www.abanet.org/labor
The prosecution and defense of class actions involve an abundance of ethical considerations. Attorneys must balance zealous advocacy with the governing rules of professional responsibility. For instance, ex parte communications are often an effective and cost-conscious way to glean information, but attorneys on both sides must consider whether contact with putative class members is permissible and, if so, what form that contact may take. With a little forethought, however, lawyers can ensure that they do not overstep ethics rules when contacting putative class members.
Challenges To Law Firm Mandatory-Retirement Policies
Employment law attorney Cara E. Greene writes about Challenges to Law Firm Mandatory-Retirement Policies. This article originally appeared in Law Journal Newsletters' Accounting and Financial Planning for Law Firms, February 2007. For more information, visit www.ljnonline.com. Authored with Gary Phelan.
A 2006 survey report indicated that 57% of law firms with 100 or more attorneys have mandatory retirement age policies. See, L. Jones “Pitfalls of Mandatory Law Firm Retirement,” National Law Journal, May 24, 2006. But legal challenges to mandatory retirement policies at law firms are likely to become more common as baby boomers reach retirement age.
The debate over whether a law firm can have a mandatory retirement age has focused on the threshold question of whether the “partner” is deemed an “employer” or an “employee.” For each class of lawyer, this article explores possible legal remedies.
Whistleblower Claims Under The Sarbanes-Oxley Act Of 2002
Laurence S. Moy, Linda A. Neilan, and Hollis Pfitsch (Summer Associate), Practising Law Institute, October 7-8, 2004, and December 9-10, 2004.
In the wake of recent accounting and corporate scandals, Congress passed the Sarbanes-Oxley Act of 2002 (hereinafter, “Sarbanes-Oxley,” “SOX,” or the “Act”), Public L. No. 107-204, Sec. 806, codified at 18 U.S.C. § 1514A.1 In addition to providing greater oversight of the accounting industry and protecting investors, the Act prohibits employers from retaliating against whistleblowers. (“Whistleblower” might be considered a misnomer since the Act’s scope is not limited to employees who “blow the whistle” by refusing to engage in illegal or wrongful acts or by reporting such activities to the employer or the appropriate authorities.) The Act provides extensive coverage to employees who report improper conduct as well as employees who participate in proceedings relating to same. Companies that fall under the purview of Sarbanes-Oxley are prohibited from discharging, demoting, suspending, threatening, harassing, or discriminating against any employee who engages in protected activity. 18 U.S.C. § 1514A(a).
Prior to Sarbanes-Oxley’s enactment, federal and state whistleblower statutes provided limited protection for a narrow class of employees. The False Claims Act covers employees only if they report fraud on the federal government. 31 U.S.C. § 3730(h).2 In New York, a state statute had provided pre-Sarbanes-Oxley whistleblowers with extremely limited coverage. That statute, New York Labor Law § 740, only protects an employee who “discloses, or threatens to disclose to a supervisor or to a public body an activity, policy or practice of the employer that is in violation of law, rule or regulation which violation creates and presents a substantial and specific danger to the public health or safety.” N. Y. Lab. Law § 740(2). Thus, Sarbanes-Oxley has vastly changed the horizon of protection for whistleblowers in the private sector.
This paper addresses the whistleblowing provisions of the Act and its accompanying regulations, provides guidance to lawyers advising companies responding to potential whistleblower complaints of improper conduct, and reviews the duties of lawyers to report wrongful conduct as per the Securities and Exchange Commission’s (“SEC” or “Commission”) new regulations.