Posted on March 9th, 2009 by Chad De Groot | No Comments »
Filed under: ., Employee Benefits | 
Today, the U.S. Supreme Court granted review of a 7th Circuit decision which held that a mutual fund advisor’s fee was not excessive and an action brought under the fiduciary obligations of section 36(b) of the Investment Company Act was not appropriate unless it could be demonstrated that the advisor misled the fund’s directors who approved the fee.
In its October term, the Supreme Court shall review the decision in Jones v. Harris Associates, L.P., 527 F.3d 627 (7th 2008) . In Jones v. Harris Associates the 7th Circuit reasoned that because the advisors fee was approved by the directors of the fund, it could not be deemed excessive, unless it could be shown that the advisor materially misled the directors to gain such approval. The court determined that there is enough competition among mutual fund advisors to keep the fees they charge in check. In other words, it was not up to the court to determine a limit, or or put a cap on such fees.
Obviously, this case is of great importance to mutual fund advisors everywhere, and will be closely followed. Currently, millions of individuals have vast amounts of wealth tied up and invested in mutual funds for retirement and other investment initiatives, so the outcome in this case could loom large.
Posted on January 28th, 2009 by Chad De Groot | 1 Comment »
Filed under: ., Employee Benefits, HR Issues |
On Monday, the Supreme Court unanimously ruled that a plan administrator must act in accordance with plan documents in determining who is a proper beneficiary under a plan even though that beneficiary previously waived his/her rights to a benefit under the plan via divorce decree.
Kennedy v. Plan Administrator for DuPont Savings and Investment Plan has a fact pattern that is quite common in the HR realm, and a decision that should be heeded by all plan administrators. Mr. Kennedy was a participant in the DuPont Savings and Investment Plan. Under the plan, Liv Kennedy, his wife at the time, was named beneficiary. The two were later divorced and under the divorce decree Liv waived her rights as beneficiary under the plan. Mr. Kennedy, however, never changed his beneficiary designation under the plan prior to his death. Following his death, Mr. Kennedy’s daughter, as executrix of his estate, requested that the assets of his account under the plan be distributed to the estate. The plan administrator, however, relying on the plan documents and the beneficiary designation thereunder, paid the benefits to Liv.
The Court held that because a plan administrator has a duty, in accordance with Section 404(a)(1)(D) of ERISA (29 U.S.C. 1104 for you labor people), to administer a benefits plan in accordance with the plan documents, and the plan documents, or Mr. Kennedy’s beneficiary designation, named Liv as his beneficiary, the plan administrator was acting in accordance with the plan documents when it distributed Mr. Kennedy’s assets to Liv, even though they had divorced.
Although the outcome seems unfair, it is a necessary one to ensure consistent plan interpretation and operation. Mr. Kennedy had every opportunity to change that beneficiary designation. Although the divorce decree may have led him to believe that the beneficiary designation would be voided, the onus of determining proper beneficiaries cannot be put on the plan administrator. To do so would require every plan administrator to shoulder the additional burden of determining a deceased participant’s intent irrespective of his beneficiary designation.
Posted on January 26th, 2009 by Tim Eavenson | No Comments »
Filed under: ., Discrimination, HR Issues |
The Supreme Court issued (another!) unanimous decision today, holding that Title VII of the Civil Rights Act prohibits retaliation against employees who participate in internal investigations of discrimination.
The opinion should help both employees and businesses by settling what “opposing” discrimination means in plain, unambiguous language.
[UPDATE: Paul Mollica, of Daily Developments in EEO Law, points out that not everything is so settled:
One issue not resolved by this case ... is whether and how employees must manifest a reasonable belief that they are complaining about a prohibited activity under Title VII. Here, Ms. Crawford was specifically asked by the employer about harassment, and volunteered facts that few reasonable people would dispute constitute some kind of hostile work environment. But where the behavior is fuzzier, employees will continue to run into the argument that the conduct they "opposed" -- though possibly offensive -- did not violate Title VII at all, such as the notorious Jordan v. Alternative Resources Corp., 458 F.3d 332, 98 FEP 1400 (4th Cir. 2006) (racial comment by a co-worker -- "They should put those two black monkeys in a cage with a bunch of black apes and let the apes f**k them" -- not harassment). This area will require some fine-tuning in the future.
Fine tuning, indeed.]
Actually, the case, Crawford v. Metro. Gov’t. of Nashville & Davidson Cty., 06-1595, would never have made it this far if the antiretaliation rules hadn’t been so odd in the first place.
The Backstory
The School District in Nashville and Davidson County, Tennessee was investigating its employee relations director for sexual harrassment.* During the investigation, an HR employee questioned Vicky Crawford about any “inappropriate behavior” she’d witnessed. Crawford had worked for the District for 30 years.
Crawford answered the question, as summarized by Justice Souter:
[O]nce, Hughes [the Employee Relations Director] had answered her greeting, “‘Hey, Dr. Hughes, what’s up?,’” by grabbing his crotch and saying “‘[Y]ou know what’s up’”; he had repeatedly “‘put his crotch up to [her] window’”…
and did some other things that won’t be restated here. Suffice it to say that rarely has the word “crotch” been used so recurrently in a Supreme Court decision. Two other employees recalled similar incidents.
The District acted on all of this information by issuing the Director a formal, verbal reprimand. Then it fired Crawford and the other two employees for allegedly embezzling money.
Crawford filed a charge against the District, claiming that it retaliated against her for participating in the investigation. (Go figure.)
The Law
Title VII’s antiretaliation provision makes it unlawful “to discriminate against any … employee[] … because he has opposed any practice made unlawful” by the statute. Crawford figured that since her comments about the Employee Relations Director got her fired (allegedly – the embezzlement thing never really panned out), she had a valid retaliation case under this section of the law.
But the federal district court told her she was wrong, and the Sixth Circuit Court of Appeals agreed. Their reasoning was that Title VII’s antiretaliation provision didn’t apply to employees who simply participate in an investigation that was initiated by someone else. According to the Sixth Circuit, the opposition clause, at it’s called, “demands active, consistent “opposing” activities….”
In other words, if you tell your boss about discrimination, he can’t fire you for it, but if he asks you about discrimination, and you tell him what you know, all bets are off.
Sound crazy? The Supreme Court thought so. Writing for a unanimous Court, Justice Souter noted that people passively opposed slavery, as they do capital punishment today. He then said:
There is, then, no reason to doubt that a person can “oppose” by responding to someone else’s question just as surely as by provoking the discussion, and nothing in the statute requires a freakish rule protecting an employee who reports discrimination on her own behalf but not one who reports the same discrimination in the same words when her boss asks a question.
That’s right. Freakish. All nine Supreme Court justices agreed to calling the rule “freakish.” And Justice Souter wasn’t done. Later, the admonishment continued:
We find it hard to see why the Sixth Circuit’s rule would not itself largely undermine … the statute’s “primary objective” of “avoid[ing] harm” to employees. If it were clear law that an employee who reported discrimination in answering an employer’s questions could be penalized with no remedy, prudent employees would have good reason to keep quiet about Title VII offenses…
Analysis
So who won? Well, Vicky Crawford, obviously (though she still has to try her case – this was an appeal of summary judgment). But the opinion’s straightforward explanation of what “oppose” means should really help everyone – employees and employers alike.
I know at first blush, a unanimous decision publicly chastizing an appellate circuit for reducing workers rights seems like a loss for employers. But let’s face it – a simple reading of Title VII shows how off base the Sixth Circuit’s reasonsing has been – how can “oppose” be a terminological separator of those who bring a claim and those who participate in another claim? That’s the kind of ridiculousness Congress would have to spell out in the statute itself.
But the Supreme Court’s broad view of the opposition clause leaves little room for anyone to misread the statute, or take a case to trial because the law in their circuit is ambiguous at best. It will require employers to be more careful about validly terminating people who have recently brought discrimination claims, but that’s a pretty small number of situations on the whole. For those cases where a person was wrongfully retaliated against, the Court’s decision will keep cases out of court by laying such a clear explanation on the table that an employer’s attorney will know early on whether to settle or not.
It’s also important to note that, while the Court’s strong language is partially directed at the Sixth Circuit, this case would not have ever gotten this far had the District’s actions not been so egregious in the first place.
Accusing a 30-year employee of embezzlement, and firing her and her two colleagues while retaining “Dr. Hughes” (who I suspect must have received his “Doctor” title from “the Todd“…) is just bad, bad business. And these bad business decisions at least partially led to the Court’s pointed language, which now leaves little room for employers to maneuver in court. This should serve as a cautionary tale for every HR exec during their next conversation with their employment counsel. I know I’d bring it up.
My last point on why this is good for business in the long run: people who perform pelvic thrusts at coworkers’ windows are are hardly ever good employees. Encouraging others to report them will only help the company’s bottom line. The Court cited an article which concluded that fear of retaliation is the number one limiter of employees’ willingness to bring claims. So the Court’s opinion should give employers more chances to investigate charges that will eventually lead to a more productive company.
No? Not buying it? Well, it was worth a shot. Honestly, unlike much of employment law, anti-discrimination statutes should probably be followed broadly just because it’s the right thing to do.
*[Ed. Note: Look, if your "Employee Relations Director" is being investigated for sexual harrassment, you have bigger problems than losing a procedural Title VII case before the Supreme Court.]
