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

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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