Employee Election Rights

For those of you who might be interested in the topic, Professor Rafael Gely of the University of Cincinnati College of Law reports that “the majority of states have laws requiring companies to give employees time off to exercise their right to vote.” He provides a list of links to state laws requiring companies to provide time off to employees to vote, or which provide for other types of protections for employees participating in elections. Professor Gely just recently started the LaborProf Blog as part of the Law Professor Blogs Network.

Finding the Place to Vote

From Inter Alia:

Hate having to search through the tiny listings in your local newspaper to find where your polling place is located? Try My Polling Place. Just enter your street address and zip code, and get the name of your polling place along with a map and links to driving directions.

By the way, one thing I look forward to every week is Inter Alia’s weekly newsletter called the “Internet Legal Research Weekly.” You can subscribe to it here if you like. It’s free and the archives are here.

<![CDATA[Is Market-Timing Activity Protected under ERISA? It depends . . . ]]>

Suppose an employer discovers that some of its employees are market-timing* in the employer’s 401(k) plan and rightly decides that such practices are detrimental to the rest of the participants. Suppose the employer asks the employees to cease the market-timing and all employees heed the request, except one. Could the employer terminate the rebellious employee who fails to comply with its request? Or how about just warning the employee that his employment and career at the company could be impacted if the employee doesn’t stop? Wouldn’t such action on its face appear necessary in light of recent mutual fund scandals? Does an employee have a right to engage in market-timing in a 401(k) plan?

A federal district court in Iowa grappled with these very issues in a fascinating case decided last year. The case was Borneman v. Principal Life Ins. Co., 291 F. Supp. 2d 935 (S.D. Iowa Nov. 25, 2003) [pdf (62 pages)]. According to the court in Borneman, if the plan document allows market-timing, i.e. does not contain any restrictions on market-timing, the employer could be held to violate section 510 of ERISA if it takes adverse action against an employee in order to hinder the employee from exercising his or her rights under the plan. In other words, the court reasoned that, if the plan document allows market-timing, the participant then would have a supposed right to engage in market-timing, and any adverse action taken against the employee to prevent his or her exercise of such right could violate Section 510 of ERISA. (That section provides that “It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan, this subchapter . . . or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan [or] this subchapter.”)

The court in Borneman stated:

An integral part of Plaintiff’s § 1140 claim for retaliation is a showing that he exercised a right to which he was entitled under the terms of his employee benefit plan or under ERISA itself: There is no dispute in this case that throughout the time period relevant to this lawsuit, the market timing trading that Mr. Borneman was engaging in was permitted under the terms of his Plan. Mr. Borneman freely engaged in market timing trading until approximately June 14, 2001. Until that time, there had been no market timing trading restriction in place. Principal had requested that Plaintiff voluntarily limit his trading, but such request does not constitute a limitation under the Plan. Plaintiff’s trading to that point was a protected activity. After June 14, 2001, it is undisputed that Mr. Borneman did not trade in excess of the $30,000 limit imposed by Principal, which this Court has found that Principal had the right to impose. Thus, any trading after June 14, 2001 was a protected activity as well. Consequently, any retaliation by Principal on the basis of Plaintiff’s market timing trading throughout the duration of his employment would have been prohibited under § 1140. At all times, market timing trading in the amounts engaged in by Plaintiff was a right to which he was entitled under his employee benefit plan.

The court went on the analyze the different actions taken by the employer, and determined whether or not they were actions which could constitute “adverse employment actions” interfering with plaintiff’s right to engage in market-timing under ERISA. The court made the following interesting determinations:

(1) Amazingly, terminating the employee did not interfere with his right to engage in market-timing, said the court, since the “[p]aintiff retained his employee benefit plan after termination” and would have been “able to continue market timing trading even after his employment was terminated.”

(2) However, the court held that the adverse performance reviews and even “threats” about the employee’s future at the company could interfere with the employee’s exercise of his “right” of market-timing and section 510 claims should be allowed to survive a Motion for Summary Judgment on those issues:

Although these threats do not immediately affect the terms and conditions of a claimant’s employment, they do materially affect whether or not such employee can freely exercise his ERISA rights. By prohibiting retaliation and interference, § 1140 creates a seamless web of protection for participants and beneficiaries. Participants and beneficiaries are protected from attempts to discourage them from exercising rights under ERISA or their employee benefit plans, and they are protected if exercise of these rights actually results in an adverse employment action. If interference did not encompass protection against threats of discrimination, employers would be free to threaten employees with severe adverse employment actions, including termination, for exercising their rights.

While many plan documents now contain such market-timing restrictions or give discretion to impose market-timlng restrictions, many still do not address the issue. Putting the restrictions in the plan document may protect the employer from liability under section 510 of ERISA. In addition, the DOL has indicated (in guidance issued last February on the subject of fiduciary response to the mutual fund scandals) that plan documentation is important with respect to the market-timing issue:

The imposition of trading restrictions that are not contemplated under the terms of the plan raises issues concerning the application of section 404(c), as well as issues as to whether such restrictions constitute the imposition of a “blackout period” requiring advance notice to affected participants and beneficiaries.

*”Market-timing” is a trading strategy that involves frequent purchases and sales of securities (with the securities being held for short periods) in an effort to anticipate changes in market prices.

<![CDATA[Is Market-Timing Activity Protected under ERISA? It depends. . . ]]>

Suppose an employer discovers that some of its employees are market-timing* in the employer’s 401(k) plan and rightly decides that such practices are detrimental to the rest of the participants. Suppose the employer asks the employees to cease the market-timing and all employees heed the request, except one. Could the employer terminate the rebellious employee who fails to comply with its request? Or how about just warning the employee that his employment and career at the company could be impacted if the employee doesn’t stop? Wouldn’t such action on its face appear necessary in light of recent mutual fund scandals? Does an employee have a right to engage in market-timing in a 401(k) plan?

A federal district court in Iowa grappled with these very issues in a fascinating case decided last year. The case was Borneman v. Principal Life Ins. Co., 291 F. Supp. 2d 935 (S.D. Iowa Nov. 25, 2003) [pdf (62 pages)]. According to the court in Borneman, if the plan document allows market-timing, i.e. does not contain any restrictions on market-timing, the employer could be held to violate section 510 of ERISA if it takes adverse action against an employee in order to hinder the employee from exercising his or her rights under the plan. In other words, the court reasoned that, if the plan document allows market-timing, the participant then would have a supposed right to engage in market-timing, and any adverse action taken against the employee to prevent his or her exercise of such right could violate Section 510 of ERISA. (That section provides that “It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan, this subchapter . . . or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan [or] this subchapter.”)

The court in Borneman stated:

An integral part of Plaintiff’s § 1140 claim for retaliation is a showing that he exercised a right to which he was entitled under the terms of his employee benefit plan or under ERISA itself: There is no dispute in this case that throughout the time period relevant to this lawsuit, the market timing trading that Mr. Borneman was engaging in was permitted under the terms of his Plan. Mr. Borneman freely engaged in market timing trading until approximately June 14, 2001. Until that time, there had been no market timing trading restriction in place. Principal had requested that Plaintiff voluntarily limit his trading, but such request does not constitute a limitation under the Plan. Plaintiff’s trading to that point was a protected activity. After June 14, 2001, it is undisputed that Mr. Borneman did not trade in excess of the $30,000 limit imposed by Principal, which this Court has found that Principal had the right to impose. Thus, any trading after June 14, 2001 was a protected activity as well. Consequently, any retaliation by Principal on the basis of Plaintiff’s market timing trading throughout the duration of his employment would have been prohibited under § 1140. At all times, market timing trading in the amounts engaged in by Plaintiff was a right to which he was entitled under his employee benefit plan.

The court went on the analyze the different actions taken by the employer, and determined whether or not they were actions which could constitute “adverse employment actions” interfering with plaintiff’s right to engage in market-timing under ERISA. The court made the following interesting determinations:

(1) Amazingly, terminating the employee did not interfere with his right to engage in market-timing, said the court, since the “[p]aintiff retained his employee benefit plan after termination” and would have been “able to continue market timing trading even after his employment was terminated.”

(2) However, the court held that the adverse performance reviews and even “threats” about the employee’s future at the company could interfere with the employee’s exercise of his “right” of market-timing and section 510 claims should be allowed to survive a Motion for Summary Judgment on those issues:

Although these threats do not immediately affect the terms and conditions of a claimant’s employment, they do materially affect whether or not such employee can freely exercise his ERISA rights. By prohibiting retaliation and interference, § 1140 creates a seamless web of protection for participants and beneficiaries. Participants and beneficiaries are protected from attempts to discourage them from exercising rights under ERISA or their employee benefit plans, and they are protected if exercise of these rights actually results in an adverse employment action. If interference did not encompass protection against threats of discrimination, employers would be free to threaten employees with severe adverse employment actions, including termination, for exercising their rights.

While many plan documents now contain such market-timing restrictions or give discretion to impose market-timing restrictions, many still do not address the issue. Putting the restrictions in the plan document may protect the employer from liability under section 510 of ERISA. In addition, the DOL has indicated (in guidance issued last February on the subject of fiduciary response to the mutual fund scandals) that plan documentation is important with respect to the market-timing issue:

The imposition of trading restrictions that are not contemplated under the terms of the plan raises issues concerning the application of section 404(c), as well as issues as to whether such restrictions constitute the imposition of a “blackout period” requiring advance notice to affected participants and beneficiaries.

*”Market-timing” is a trading strategy that involves frequent purchases and sales of securities (with the securities being held for short periods) in an effort to anticipate changes in market prices.

Health Law Blogs

Over in the sidebar on the right, I added a section of links to blogs relating to health law and HIPAA:

A Total Lunar Eclipse

Happening now, as discussed here. Awesome!

Overtime Pay for Contract Attorneys?

The New York Lawyer has a very interesting article on contract attorneys and the issue of overtime pay: “BigLaw Contract Attorneys Struggle With Their Identity as ‘Lawyers.’” The article notes that a law firm recently settled for $700,000 a class action suit seeking overtime pay and paid rest breaks for contract lawyers handling document review. Walter Olson at Point of Law has a comment here regarding the development.

ERISA Fiduciary Lawsuits on the Rise

Don’t miss this interesting article by PlanSponsor.com called “Lawyering Up” discussing how ERISA lawsuits are at an “all-time high.” ERISA experts make the following comments about the up-tick in lawsuits as follows:

  • “. . . more 401(k) litigation now than ever”
  • “[T]the trend has snowballed. . . ”
  • “[T]he current spate of salacious scandals at major corporations has fanned the flames . . . ”
  • “The law is in a state of flux” and “evolving.”

    What should plan fiduciaries be doing in light of the trend? Hiring a qualified ERISA attorney to advise the plan sponsor and fiduciaries about best practices and “prudent process and procedures” is really the best first step that a plan sponsor can take in protecting the company and fiduciaries from liability due to unexpected ERISA lawsuits. Burying one’s head in the sand is not an option, as the fiduciaries mentioned in this previous post here found out the hard way.

    In addition, it is always amazing to me how little attention is given to plan documents and communication materials that are really the source for determining the fiduciary structure of an ERISA plan. If you have read and kept up with this “evolving” ERISA law, you will note that plaintiffs’ attorneys do a good job of exploiting and uncovering all of the weaknesses of a plan document in making their case for a fiduciary breach. (For instance, the plan document will be the starting point for determining whether or not a board of directors will be considered to be fiduciaries under ERISA.) In fact, many documents are never reviewed by an attorney experienced in ERISA, and many employers are not even aware of the weaknesses in their documentation and materials until they are uncovered in a lawsuit.

  • ERISA Fiduciary Lawsuits on the Rise

    Don’t miss this interesting article by PlanSponsor.com called “Lawyering Up” discussing how ERISA lawsuits are at an “all-time high.” ERISA experts make the following comments about the up-tick in lawsuits as follows:

  • “. . . more 401(k) litigation now than ever”
  • “[T]the trend has snowballed. . . ”
  • “[T]he current spate of salacious scandals at major corporations has fanned the flames . . . ”
  • “The law is in a state of flux” and “evolving.”

    What should plan fiduciaries be doing in light of the trend? Hiring a qualified ERISA attorney to advise the plan sponsor and fiduciaries about best practices and “prudent process and procedures” is really the best first step that a plan sponsor can take in protecting the company and fiduciaries from liability due to unexpected ERISA lawsuits. Burying one’s head in the sand is not an option, as the fiduciaries mentioned in this previous post here found out the hard way.

    In addition, it is always amazing to me how little attention is given to plan documents and communication materials that are really the source for determining the fiduciary structure of an ERISA plan. If you have read and kept up with this “evolving” ERISA law, you will note that plaintiffs’ attorneys do a good job of exploiting and uncovering all of the weaknesses of a plan document in making their case for a fiduciary breach. (For instance, the plan document will be the starting point for determining whether or not a board of directors will be considered to be fiduciaries under ERISA.) In fact, many documents are never reviewed by an attorney experienced in ERISA, and many employers are not even aware of the weaknesses in their documentation and materials until they are uncovered in a lawsuit.

  • Pension Accounting

    The New York State Society of CPAs has published a good article on pension accounting: “Pension Accounting: The Continuing Evolution.” This exhibit to the article here [pdf] provides a summary of the new disclosure requirements, and this exhibit here [pdf] provides a summary of the disclosure requirements retained from the “old” SFAS 132R.