Banking and Finance Law Report : Banking & Finance Lawyer & Attorney : Porter Wright Morris & Arthur Law Firm : Bankruptcy, Commercial Lending

As we reported previously, the National Labor Relations Board ("NLRB") issued a rule in August requiring all employers to post workplace notices about employee rights to join a union. This effort by the NLRB to require posting about union organizing rights in all workplaces has caught the attention of the employer community more than any NLRB action in recent memory. The rule reaches into the workplace of all employers except for those few which are outside of the NLRB's jurisdiction. [See our earlier post that outlines NLRB jurisdiction]. Briefly, if you are wondering if you are covered, you probably are covered. The original effective date for the rule was to have been November 14, 2011, but that effective date was delayed when lawsuits were filed in two federal district courts challenging the NLRB's authority to issue such a rule. The new effective date is January 31, 2012 and the arguments in the lawsuits challenging the posting rule are beginning to take shape.

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The continuing struggle to improve the economy leaves many financial institutions of all sizes still looking for ways to improve  efficiency and profitability. Often the resulting business strategy includes cut backs in personnel.  But a reduction in the workforce that is not carefully planned and documented can result in costly and sometimes difficult to defend lawsuits and other legal challenges that can off-set the intended economic benefit. It is very common after a reduction-in-force for legal claims to be pursued by terminated employees, sometimes as multiple-plaintiff lawsuits. Possible claims include allegations that the reason for selection of a person to be terminated was illegal (i.e., age, race, sex, medical condition, use of FMLA, whistleblower, etc.). A successful defense requires showing not just that there were legitimate reasons to reduce the workforce but also the specific legitimate reason that the complaining employee was selected for termination. Not having a carefully planned and documented approach to the decision-making can result in time-consuming and expensive litigation. Also, a well-planned and documented approach to the reduction-in-force will promote reasoned, careful, and sound business decisions, which support the Company’s overall objective for reducing costs and improving efficiency.

 Here is a brief outline of steps that should be included in any plan for implementation of a reduction-in-force:

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On December 27, we wrote a blog post regarding the NLRB proposed rule-making to require all employers to post notices advising employees of their rights to engage in union organizing. After a period of public comment, during which about 7,000 responses were submitted to the NLRB, the NLRB has now issued its final rule requiring the posting.

Effective November 14, 2011, all private sector companies covered by the National Labor Relations Act are required to post in the workplace a specific notice advising employees of their rights under the National Labor Relations Act to engage in union organizing, to bargain through a union with their employers, and to refrain from those activities. The notice also gives examples of employer and union conduct which is considered illegal and tells employees of actions they can file with the NLRB to enforce their rights. Here is a link to the NLRB announcement, which includes a copy of the required posting (as an Appendix.)  The NLRB promises that by November 1st, the posting will be available for downloading from the NLRB web site and that hard copies will be available from NLRB Regional Offices. All employers will be required to post the notices in conspicuous areas of the workplace where other employment notices are posted. Also, employers that routinely post notices regarding personnel rules or policies on an Internet or intra-net site will be required to post the new NLRB notice on those sites. However, employers are not required to distribute the notice to employees by email or other technological means. In workplaces where at least 20% of the workforce are not proficient in the English language, translated copies must be posted. The NLRB has indicated they will make copies available in various languages.

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Due to recent guidance from the U.S. Department of Labor, financial institutions should examine their classification of mortgage loan officers and similar employees. Last month, the DOL’s Wage and Hour Division released its first Administrator Interpretation (Interpretation No. 2010-1). In the Interpretation, the Division concluded that mortgage loan officers – and employees performing the typical duties of a mortgage loan officer – do not qualify as administrative employees exempt from the provisions of the Fair Labor Standards Act.

The Interpretation states that the typical job titles given to such employees include "mortgage loan representative," "mortgage loan consultant," and "mortgage loan originator."  It also lists the job duties of such individuals as:  receiving internal leads, contacting potential customers, collecting required financial information from loan applicants, entering collected financial information into a computer program that identifies which loan products may be offered to customers, assessing the loan products identified, discussing with the customers the terms and conditions of particular loans, compiling customer documents for forwarding to an underwriter or loan processor, and/or finalizing loan documents for closings.

Administrative employees are exempt from the minimum wage and overtime requirements of the FLSA. In a 2006 opinion letter, the DOL had previously opined that mortgage loan officers were administrative employees, and therefore exempt under the FLSA. See FLSA2006-31. However, the agency specifically withdrew that opinion letter in its recent Interpretation, finding that such employees are “production, rather than administrative employees” because they have a primary duty of sales, rather than of performing administrative functions for the financial institution.

While its recent Interpretation represents a shift in the DOL’s opinion on the issue, there have been many court opinions, including Chao v. First National Lending Corp., 516 F.Supp.2d 895 (N.D. 2006), holding that mortgage loan officers are non-exempt. Nevertheless, due to DOL’s recent Interpretation, it is now more clear than ever that mortgage officers – and any other employees performing the job duties listed above – must be paid overtime for any hours worked over 40 in a week. Of course, the job title given to an employee will not control whether they are exempt or not. If the employee’s primary duty is the performance of one or more of the tasks listed above, they are likely covered by this Interpretation. Therefore, all financial institutions employing such employees should examine their current classification and determine whether changes need to be made as a result of this guidance.

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Ohio employers will want to pay close attention to H.B. 434, which was proposed by House Representative Kenny Yuko, D-Richmond Heights, last week. The Bill is similar in nature to the Worker Adjustment and Retraining Notification Act ( “WARN”), but goes further than the federal law in several respects. For example, the Bill would require an employer in Ohio laying off 25 or more employees in any 30-day period to give at least 90-days’ advance written notice of the layoff to affected employees, local workforce policy boards, and certain state departments and local elected officials. The notice period would be expanded to 120 days for employers planning to lay off 250 or more employees. Also, the penalties for violations include double back pay for all affected employees, as well as the full value of their employee benefits.

The Bill does contain exceptions similar to those found in WARN, including exceptions for temporary facilities, layoffs arising from “circumstances that were not reasonably foreseeable,” caused by “physical calamity, natural disaster, or act of war,” or where the employer can show that "notice would have blocked incoming capital which might have prevented the layoff.” 

H.B. 434 is still in the very early stages of the legislative process. However, because it would expand employer advance notice obligations in several respects beyond WARN’s requirements, it bears watching – and perhaps warrants a call to your State representative.  You can stay updated on H.B. 434 by subscribing to www.employerlawreport.com, a blog on employment related matters from Porter Wright Morris & Arthur.

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 Ohio and federal courts continue to recognize an effective but seldom used preemption defense under the National Bank Act (“NBA”). This legal defense, available only to national banking associations, can be asserted against certain employment claims brought by terminated bank officers. 

Specifically, the NBA grants national banks the power: To elect or appoint directors, and by its board of directors to appoint ... officers, define their duties, require bonds of them and fix the penalty thereof, dismiss such officers or any of them at pleasure, and appoint others to fill their places.

Courts continue to hold that the NBA’s “at-pleasure” provision preempts state-law tort and contract wrongful discharge claims brought by terminated bank officers. For instance, recently in Schweikert v. Bank of America, Case No. 06-2137 (4^th Cir. April 1, 2008), Bank of America terminated Schweikert, a senior vice president in private banking, for failing to cooperate with the bank’s and the FBI’s investigation of a client for whom Schweikert had arranged several loans. Schweikert sued the bank for wrongful and abusive discharge under Maryland law. The trial court held the NBA’s “at-pleasure” provision preempted the claims and dismissed the complaint. The federal Court of Appeals for the 4^th Circuit upheld the trial court’s application of the NBA’s “at-pleasure” provision. In so ruling, the 4^th Circuit cited with approval the 9^th Circuit’s nearly twenty-year-old ruling in Mackey v. Peoria National Bank, 867 F.2d 520, 525-26 (9^th Cir. 1989), where the 9^th Circuit held that the NBA’s “at-pleasure” provision preempts a terminated bank officer’s state tort and contract claims.

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As a follow up to our recent post on e-Verify [link], many of our financial institution clients have been asking whether they are required to comply with the new federal e-Verify requirements for federal contractors.

Under federal affirmative action laws, many banks are considered federal contractors because they are issuing and paying agents for U.S. savings bonds or they are insured by FDIC. However, as explained below, issuance and payment of U.S. savings bonds and FDIC insurance do not trigger e-Verify obligations.

Clarifying language in the e-Verify regulations states that:

Agreements or activities performed by financial institutions that are not subject to the FAR (Federal Acquisition Regulation) are not required to comply with the e-Verify provisions and clauses of the FAR.

This statement in the e-Verify regulations is given in response to a specific question about whether banks and other financial institutions whose federal contracts are limited to serving as issuing and paying agents for U.S. savings bonds or being insured by the FDIC should be excluded from e-Verify requirements. Since issuance of or payment on U.S. savings bonds and FDIC insurance are not covered by FAR, they do not trigger e-Verify obligations. Similarly, the clarification notes that financial agency agreements (FAAs) between banks and the federal government are not subject to FAR and, therefore, do not trigger e-Verify obligations.

For all of these reasons, so long as the only federal contracts for your bank are of the sort described above, you can rest assured that you do not have to comply with the federal e-Verify requirements. 

The e-Verify regulations do not address specifically federal share insurance of the sort that credit unions have under the National Credit Union Insurance Fund. However, the rationale for concluding that FDIC insurance does not trigger e-Verify requirements would apply also to federal share insurance for credit unions. 

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