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The Eleventh Circuit Holds That the National Bank Act Preempts State-Law Whistleblower Claims by Terminated National Bank Officers

The United States Court of Appeals for the Eleventh Circuit just recently held that an officer of a nationally-chartered bank regulated by the National Bank Act (NBA) had no claim for wrongful termination under a Florida whistleblower statute.  According to the federal court, the state-law whistleblower claims were preempted by 12 U.S.C. § 24 (Fifth) of the NBA, which gives a national bank the power to dismiss bank officers “at the pleasure” of the board of directors.  Consistent with decisions by other federal circuits, the Eleventh Circuit interpreted “at the pleasure” to be equivalent to at-will employment and held that the Florida whistleblower statute at issue was preempted because, contrary to the nature of at-will employment, it prohibited dismissal of an employee for complaining about certain improper activities by an employer.  Further, there was no comparable employment protection in federal law (e.g., Title VII) that would indicate congressional intent not to preempt the Florida statute through 12 U.S.C. § 24 (Fifth) of the NBA.  This is a useful employment law decision for national banks that helps preserve their freedom to employ, or not employ, their officers as they see fit and avoid certain types of miscellaneous wrongful termination lawsuits under …

Final IRS Regulations Issued on Restricted Stock Grants

Restricted stock grants have been a popular executive compensation component for over a decade now. With a restricted stock grant, the employer gives shares of stock to the employee, but subject to two main conditions. One condition is a vesting condition, which generally requires the employee to remain continuously employed with the employer for a period of years, satisfy performance targets, or both. If the employee fails to satisfy the vesting requirements, the employee forfeits the stock. The other condition is that during the vesting period, the employee is prohibited from selling or otherwise transferring the stock.

Restricted stock is popular because it provides a link between the performance of the company and the compensation of the employee. At the same time, unless a complete disaster occurs, the employee generally is guaranteed of receiving some payment because the compensation is equal to the value of the stock, rather than only the appreciation in the value of the stock. In a turbulent economy, that protection is valued by employees.

With any executive compensation arrangement, however, it is important to consult the tax rules. Generally, the value of the stock to the employee who receives a restricted stock grant is not taxed …

Major Changes to Affirmative Action Requirements Become Effective March 24, 2014

Financial institutions and other types of businesses that are covered by federal affirmative action obligations have some major changes for which to prepare. Financial institutions should be aware, both for themselves and their business clients, that the Office of Federal Contract Compliance Programs (OFCCP) has issued two new rules which take effect March 24, 2014. The new rules expand the affirmative action requirements for covered veterans and disabled persons.

For more than 30 years, regulations under the Vietnam Era Veterans Readjustment Assistance Act of 1974 (VEVRAA) and Section 503 of the Rehabilitation Act of 1973 have required covered employers to engage in good-faith efforts to recruit and employ covered veterans and disabled persons. The requirements include the obligation to invite applicants and employees to “self-identify” as a veteran or disabled person and to take additional affirmative action measures. Contractors with more than 50 employees and covered contracts that exceeded certain trigger limits also must prepare annual written affirmative action plans (AAPs) for veterans and disabled persons. However, until now, there was no obligation for employers to develop and retain hiring and other employment data or to set numeric goals for employment of veterans or disabled persons, as is required in …

U.S. Supreme Court decision: U.S. Airways, Inc. v. McCutchen

Our colleagues at the Employee Benefits Law Report recently posted an overview of the April 16 U.S. Supreme Court decision in U.S. Airways, Inc. v. McCutchen. The decision will be of interest to bankers and other financial executives because it provides a basis for the control of health care plan costs, and premiums, at a critical time when plans are gearing up for 2014 health care reform cost increases. Read more
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Nonqualified Deferred Compensation Incentives for Bank Executives

In this post, we share a few thoughts about recent developments and trends regarding nonqualified deferred compensation incentives for key bank employees. Banks are seeking ways to attract and retain talent, while ensuring that compensation arrangements are aligned with newer statutory guidance, such as the Dodd-Frank Act and Section 409A of the Internal Revenue Code (the “Code”).

409A Penalties

Code Section 409A added new rules for “nonqualified deferred compensation.” Even if an executive compensation arrangement such as an employment agreement, severance agreement, change in control agreement, or equity compensation plan does not provide “nonqualified deferred compensation,” the arrangement may be required to follow strict deferral election and payment timing rules under Section 409A.

Executives are at risk of early income inclusion, a 20% penalty tax, and interest charges if their compensation arrangements violate the evolving 409A guidance. So the first question is whether the IRS is enforcing the potentially harsh penalties, even as to parties who have made a good faith compliance effort while guidance has evolved. In a word, yes. …

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