United States: Employment, Labor & Benefits Update - June 2017

Masuda Funai's Attorneys Speak on Employment and Benefits Matters

Advertised in Crain's Chicago Business, Alan M. Kaplan and Frank J. Del Barto presented a program on Onboarding & Terminating Employees on May 3, 2017, to Illinois workNet in Arlington Heights, Illinois.

On May 1, 2017, Frank presented an "Overview of USERRA" and its application to employee benefit plans at The John Marshall Law School's 14th Annual Employee Benefits Symposium. On May 16, 2017, Frank presented a program on 401(k) plan fee and expense litigation to over 150 retirement plan auditors at the Illinois CPA Society's Employee Benefits Conference.

Does Your Company Need an Employment Agreement? Advantages and Disadvantages

By Masanari Katsumi

Your company is planning to hire a new accounting manager. You have already decided whom to hire, and you are now working on new employee orientation packet. One of the pending questions you need to resolve is whether to require the manager to sign an employment agreement.

Is an employment agreement necessary in this situation? What type of agreement is necessary and should the agreement be limited to certain provisions? The answers depend upon your company's needs. In short, not all employment relationships require employment agreements and sometimes employers are better off not executing an agreement with their employees. What are the pros and cons of employment agreements?

Advantages

Solves specific needs – To attract the candidate, the employment agreement may include a provision promising to pay him a sign-on bonus. To protect your company, the employment agreement may include a provision in which the new employee promises not to disclose confidential information he learned while working at his previous employer.

Clarifies rights and obligations – The best time to clarify the rights and responsibilities of the parties is at the beginning of the employment relationship. For example, the employee may want a guarantee that his place of employment is limited to the geographical area of your company's headquarters. Your company may want to include a provision that the employee is required to travel to its different facilities and overseas as part of his job.

Includes a finite Duration – If there is no employment agreement, the employment relationship is "at will." In an at will relationship, either your company or the employee may terminate the relationship at any time, with or without notice and for any lawful reason. An employment agreement may state that the relationship is at will or set a definite duration of employment, require notice of termination and/or automatically renew for additional periods of time. With a predetermined duration of employment, both your company and the manager may prepare and plan for anticipated future events.

Therefore Provides security – By signing an employment agreement, the manager may have a sense of security, and this may increase his morale, productivity and loyalty to your company. In addition, your company may have a sense of security that it is able to invest in the employee's training and will help ensure the lack of turnover.

Protects an employer's interests – Your company may include provisions that protect its interests. For example, a restrictive covenant enables your company to require the manager not to disclose confidential information and trade secrets. If the employee will be inventing a product, a trade secrets provision will ensure that his inventions are "works for hire" and his rights are automatically assigned to your company. Other restrictive covenants could prohibit the manager from working for one of your company's competitors for a certain period of time after his employment ends and could prohibit the manager from soliciting other employees in your company to leave and work for another company. In addition, many employers include a clause requiring the parties to resolve disputes through alternative dispute resolution methods, such as arbitrations, instead of going to court.

Disadvantages

Gives additional remedies for the employee – If there is no employment agreement and your company terminates the employment relationship, the employee may file a lawsuit under different statutes or judge-made (i.e., "common") law. However, when there is an employment agreement, the employee has contractual rights and may sue for breach of the agreement.

Makes terminations more difficult – If there is no employment agreement, the employment relationship is "at will" and either party may terminate it at any time, with or without notice and with or without cause. However, depending upon the wording of an employment agreement, a court may require your company to terminate the relationship only for "good cause." Good cause is a legal concept with many meanings, some of which could be included within the agreement. Also, depending upon the state, the courts may require "good faith and fair dealing" between your company and the manager. Thus, your company's ability to terminate the employment relationship becomes more difficult, because the manager acquires contractual rights to contest his termination.

Creates administrative burdens – Drafting employment agreements consume resources of your company to draft agreements for each employment relationship. In addition, some employment agreements contain notice requirements and different renewal dates. Keeping track of these requirements for each existing employee could be cumbersome.

Requires a court's interpretation – If a dispute arises out of the agreement's implementation, an arbitrator or court will need to interpret the contractual provisions. Unless the provisions are clearly written, disputes will occur and the third party may interpret the provisions differently than your company originally intended.

Whether to execute an employment agreement with employees is a major decision for your company, particularly because the parties may be governed by the agreement's provisions for years to come. Therefore, your company may decide to include provisions guaranteeing employment for a period of time or limit the employment agreement to specific terms, such as restrictive covenants protecting your company's confidential information and competitive advantages. The employment agreement is part of your company's Employment Tool Box. Thus, an employment agreement may be a very useful tool that enables the parties to protect their interests while creating and maintaining a mutually beneficial relationship.

Chevron 401(k) Suit Dismissed With Prejudice

By Frank Del Barto

On May 31, 2017, the U.S. District Court for the Northern District of California granted Chevron Corporation's motion to dismiss a first amended complaint which alleged various breaches of fiduciary duty related to Chevron's 401(k) Plan (the "Plan"). As of December 31, 2014, the Plan had more than $19 billion in assets and over 40,000 participants. Noting that the plaintiffs failed to correct the deficiencies noted by the Court in its prior order, this dismissal was with prejudice. Charles White, et al., v. Chevron Corporation, et al., Case No. 16-cv-0793-PJH.

Plaintiffs, who are participants in the Plan, filed a class action against defendants Chevron Corporation, the Plan's investment committee, and 20 DOEs (who were alleged to be "current and former members of the investment committee"). In granting the defendant's motion to dismiss, the Court reviewed plaintiff's allegations that defendants (1) breached their duties of loyalty and prudence by selecting a money market fund versus a stable value fund in violation of the plan's investment policy statement, (2) caused the plan to pay unreasonable investment management fees, (3) retained a particular fund in the plan that drove investment revenue to Vanguard, (4) caused the plan to pay excessive recordkeeper fees, and (5) failed to monitor fiduciaries.

In short, like most 401(k) suits, the plaintiffs alleged that because defendants selected funds with lower returns and higher administrative and management fees, the value of the their individual accounts decreased. If true, how does a plan fiduciary know if its fees and expenses are reasonable? First, plan sponsors must understand the various fee and expense components of their particular plan. For this initial step, we recommend that the plan sponsor's consider utilizing the 401(k) Plan Fee Disclosure Tool provided by the U.S. Department of Labor.

The DOL has provided the tool in order to help plan fiduciaries understand and determine the "total cost of the plan" by identifying the various investment product, administrative, start-up and termination fees. Once a plan administrator has determined the source of all plan fees and expenses, we recommend benchmarking those fees and expenses via the retention of an investment advisor and / or engaging in a competitive bidding process. By benchmarking plan fees and expenses, plan sponsors will have a better understanding of the reasonableness of their plan's fees and expenses and help ensure that they continue to meet their fiduciary duty to defray the reasonable costs of the plan.

Naturally, the benchmarking process may lead to a change in 401(k) providers, or it may prompt the existing provider to provide alternative funds, share classes, and /or simply improve its pricing to retain the business. Because a 401(k) account balance is likely the plan participant's greatest asset, it is critically important to periodically review and benchmark plan fees and expenses.

Masuda Funai Presents Company-Specific Webinars and Training Programs

With managers and employees located in different facilities around the country and overseas, Masuda Funai's employment lawyers now present webinars as part of the training programs its presents. Presented from one of the Firm's offices, one of the Firm's attorneys presented a webinar on the Family & Medical Leave Act to over 80 site managers and administrators who implement the FMLA on a daily basis and need to comply with the certification and recertification of leave as well as intermittent and fraudulent use of FMLA leave. Two other attorneys traveled to a client's facilities in Michigan, Ohio and Tennessee to present a series of seminars on anti-competitive business behaviors and price fixing under U.S. anti-trust laws, working with foreign officials and governments, and harassment prevention. Future in-house seminars are scheduled on the importance of a code of conduct and confidentially and non-compete agreements. If there is an employment topic that you are interested in learning more about and it would fit into a webinar format, please be sure to contact your Masuda Funai relationship attorney.

The U.S. District Court for the Northern District of Illinois Awards Excellence in Pro Bono Service to Frank J. Del Barto and David J. Stein

Frank J. Del Barto and David J. Stein received awards for excellence in pro bono service at the Eighteenth Annual U.S. District Court for the Northern District of Illinois and the Chicago Chapter Federal Bar Association Awards Ceremony held on May 24, 2017.

Judge Elaine E. Bucklo nominated Frank and David for the award to recognize their work on behalf of Loretta Morse in Morse v. Illinois Department of Corrections, Case No. 12 C 10263. In presenting the award to Frank and David, Judge Bucklo remarked that they provided outstanding representation to their client who filed an age discrimination case against her former employer, the Illinois Department of Corrections. After years of discovery, successfully opposing summary judgment, and conducting a three day trial, the case settled on very favorable terms.

In his remarks, Frank said that "having invested over three and one-half years helping Ms. Morse pursue her claims, the favorable settlement terms which will enable Ms. Morse to move on with her life reinforces my belief that all lawyers should consider representing those individuals who may not have a voice in our legal system."

David added, "it was a pleasure to represent Ms. Morse and advocate on her behalf to see that she obtained just compensation for the discriminatory treatment she suffered at the hands of her former employer."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.