Deli Platter Discipline

Personal use of company expense accounts or outright fraud on company expense accounts is not that uncommon and it usually results in severe consequences. Most businesses will not put up with employees who exhibit dishonesty in their basic financial dealings.  Even minor inconsistencies, under circumstances where there is little or no doubt about intent, can result in immediate termination for the most senior executives.  

But the same general rules that apply to any employee discipline situation apply here as well. Discipline that seems unfair or that is performed in a way that casts doubt on the employer's motives can have significant blowback.  

Such was the recent case of a California JP Morgan account manager who was terminated over a business expense of less than $700 for a deli tray that was ordered as part of a Super Bowl party. JP Morgan terminated the executive, a 20-year employee with major account responsibility, because the company believed he had expensed food for a private gathering for family members to his $10,000 personal corporate expense account.  

The circumstances surrounding the actual party are a little unclear. The executive invited a dozen people but only two or three actually showed up. The people who did show were related to the executive, although the key guest was registered on JP Morgan's potential client list and apparently was a bona fide business contact. Given the uncertainty, you would think that a company would think carefully before terminating a two-decade, recently promoted senior manager over an expense item that was less than 10% of his annual account expense. Apparently, that didn't happen. Instead, during the internal probe of the claim, the company began assigning the executive's clients to other brokers even before he was formally interviewed about the expense issue.

The executive's wrongful termination claim went before an arbitration panel under the FINRA (Financial Industry Regulatory Authority) rules for employment disputes.  The arbitrators took a dim view of the bank's actions, as evidenced by the $4.2 million award to the executive, as well as an order recommending the expungement of the bank's reason for termination and termination explanation in the official records.  

JP Morgan indicates it will appeal the arbitration decision, but that will be an uphill fight. I suspect there is some serious reflection about personnel decisions based on expense accounts taking place in the bank's human resources department as a result of this decision. 

Lifting the Robe a Little Too Much?

Every now and then, a story comes along that is likely to dominate the blogosphere and, because it relates to an employment situation, demands HR Law Guy's attention. 

Here is such a case. 

The 11th Circuit, which is headquartered in Atlanta and administers the federal courts in the southeastern part of the United States, issued an order recently, following a judicial complaint about one of its judges (who is not identified), alleging conduct that under almost any other circumstance would be disqualifying. Amazingly, the judge has not been recommended for impeachment or removed from hearing cases but merely given a private reprimand for: engaging in multiple sex acts inside chambers, doing so with a high-ranking police official (who is also not identified), having such a good time that it was audibly apparent to the clerks that the judge was having sex in chambers, lying about it to judicial investigators when this conduct was reported, and then targeting the clerk that the judge believed made the initial report of judicial misconduct.  

A couple of points.  In addition to providing a new definition for the legal term "noisy withdrawal" (sometimes the jokes write themselves, folks), this situation raises a host of fairly serious issues.  First and foremost is why the 11th Circuit Judicial Council, which acts as a kind of human resources department for federal judges, felt it was appropriate to just reprimand a judge who lied about crucial matters being investigated by his/her employer.  In almost any other corporate setting, mendacity like this gets you terminated.* This is particularly true when the potential fallout from the misconduct is so wide-ranging; depending on the actual role of the police official, the judge's romantic involvement could put at risk dozens, if not hundreds, of criminal convictions in which this official or his/her reports were involved.  

If that wasn't enough, you have the relatively straightforward issue of illegal retaliation directed against a clerk who was simply doing the right thing in reporting judicial misconduct. That also should get you more than a wrist-slap.

And it's not like this is the first time a situation like this occurred. Fairly recently, a federal judge in Alaska who engaged in a tryst with one of the attorneys that appeared before him was forced to resign.  Why the different result?

Finally, I'm hoping that some enterprising attorney who knows the identities in this matter files a bar complaint against the judge. There should be some kind of professional and permanent hit for this type of conduct on the part of an official that the public relies on for guidance and temperament.  

*Federal judges are appointed for life, and can only be removed by impeachment and trial in Congress.

NFL Fumbles DEI Policies

An interesting blend of sports and employment law is developing down in Florida, where the attorney general has launched an inquiry into the National Football League's hiring practices. 

No, this isn't a challenge to the Dolphins’ lousy draft picks over the last several years. Rather, it relates to the NFL’s so-called “Rooney Rule,” which mandates that clubs seeking to hire for certain positions must interview minority candidates as part of any hiring process. The intent of the Rule originally was to diversify NFL coaching ranks, allegedly in light of the fact that although the majority of the league's players were African American, only about 10 to 15% of the head coaches were black.  The Rule has since expanded to require NFL teams to interview at least two candidates who are either persons of color and/or women for open head coach, general manager and offensive and defensive coordinator positions.  The League used the same principle to encompass several other hiring requirements, some of which the AG maintains were clearly discriminatory because they required teams to hire minority or women staff members or game officials.

 In response to the AG’s challenges, the NFL immediately modified some of its policies' language, which didn't make them look guilty or anything, and which simply aroused the suspicions of the AG investigative team. The Attorney General also points to other statements from the NFL indicating that it was looking to increase the number of minorities hired across its senior management positions. 

 You can read the letter here . What seems to be happening to the NFL is the same thing that is happening to a number of corporate entities across the country that embraced DEI policies over the last 10 years. Outright expressions of racial or gender preferences in those DEI policies now make those companies targets for both federal investigators and state Attorneys General looking for high profile cases with relatively straightforward evidence of illegal preferences in hiring or promotion.

 This one's going to drag on for a while. Stay tuned.

Follow-up:  Just in case you thought this wasn't going to reach any other major corporate players, the Attorney General of Texas just announced that his team is going after CVS with an eye to cutting their Medicaid participation because of their announced DEI policies.  We're talking some real money here now.  

Zion Williamson Case Finally Ends?

The 4th Circuit recently closed down a long running legal case involving the NBA's New Orleans Pelicans star Zion Williamson and a problematic sports agent. I followed this case with particular interest because Williamson played his one year of college basketball at Duke (where I matriculated a long time ago) and I was an NFL agent for several decades. 

This case had all of the elements that make sports agency, and particularly sports agency representing college players about to turn pro, such a messy business.  Williamson was heavily recruited out of high school and widely identified as a potential superstar in the NBA. Or, in layman's terms, a “cash cow.” These kinds of players attract all the wrong attention as agents vie for their business and the potential to make millions. Frequently this vying involves under-the-table cash payments to the player, his family, his friends, or anyone else the agent thinks is likely to help secure the business. And it often involves an unseemly haste to get ink on a deal, often in violation of school recruiting policy and occasionally state law. 

That's what happened here. Williamson signed an agreement with a sports agent who was not licensed to do business in North Carolina. Mistake one. The agent had Williamson sign a representation agreement that did not comply with the requirements of North Carolina law. Mistake two. Court filings indicated that the agent sent Williamson's father $100,000 as an advance on their sports marketing agreement, and obviously as part of an inducement to sign. Mistake three. 

Then Williamson backed out of the agreement and signed with somebody else. The agent sued Williamson for $100 million in federal court. Mistake four. The trial court quickly ruled that the agent's failure to comply with even the most basic elements of North Carolina law rendered her agreement with Williamson void and denied her any recovery of the money she allegedly paid Williamson's father. That decision was upheld on appeal, here.

Lots of morals to this story. I guess the first is not to let greed override your judgment in pursuing that golden calf. That's very likely what happened here- the rush to get to Williamson and sign him to a multi-year agreement that effectively guaranteed a huge payoff for the agent caused her to simply ignore basic legal requirements, about which I'm sure she was aware. Now she's out the 100 grand, her attorney's fees, and very likely her reputation as someone who knows what she's doing. Given how every other sports agent will use this little episode against her, she's likely thinking of some other line of marketing work in the near future. 

Here's where DEI leads you in practice

As you will note from my previous entries in this blog, I believe DEI ("Diversity, Equity, and Inclusion") programs to be problematic and virtually impossible to implement legally under the laws of the United States. Here's an example of how DEI plays out in practice: a media company that committed itself to DEI practices gets sued because, in trying to maintain its writing standards, it did not give black employees full creative control over content creation. 

As is typical with DEI programs, there is no mention of merit with respect to the claims made by the minority writers. Their selection for the jobs in question was to be based solely on their race. 

I can't square this with the requirements of federal civil rights law and I suspect no one else can, either. 

Addendum:  A sure sign that this practice is opening companies up to legal liability (and apparently has adherents who view it like some religion they must defend) is a corporate attempt to rebrand the concept.

No More Non-Competes?

The Federal Trade Commission took the extraordinary step last week of issuing a nationwide ban on non-competition agreements.  The implications of the FTC's actions are significant and worth a quick discussion.

First of all, there is serious doubt whether the Commission has the constitutional authority to rewrite law across the country in such a manner. There is no statute from Congress authorizing such a move; the Commission made this sweeping change based on its determination that non-compete agreements, which are matters of individual employment contracting, fall within the Commission's purview to regulate anticompetitive actions between businesses. Given the Supreme Court's recent and pronounced disfavor with federal executive actions that effectively usurp congressional power, I think it's unlikely that this action will survive even an initial court review. Although it is highly likely to be in effect at least through the presidential elections this fall, which I suppose is the actual goal of the Commission's action.

Secondly, the Commission's action removes an irreplaceable tool for employers to protect their investment in senior management employees. There are very few means for a company to prevent the loss of corporate and business expertise when a manager intimately familiar with product development, marketing demographics, sales strategy, and the like, departs for a competing business.  Often the business expertise of the departing manager developed over years with a particular company and is a direct product of the company's efforts to train and develop her talent. A transferring senior manager instantly makes the gaining company a formidable competitor, but without the time and investment made by the former employer.  

The Commission asserts that current trade secret law is sufficient to protect the losing company's interests.  Sometimes I wonder if the federal bureaucrats making these decisions spend any time working in the private sector. There is no way to extend trade secret or other intellectual property protection to the kind of long-term business practice expertise that non-competes, properly employed, are designed to protect.  The Commission's actions, like the actions of so many of our federal executive agencies, simply add to the burden and risk of hiring employees for the long term.

Acronym Soup-NPR and the NLRA

The saga of Uri Berliner, a senior editor at NPR, has some interesting angles from an employment law perspective.

Berliner published an article in The Free Press that detailed a lack of political and intellectual diversity at NPR that he claimed significantly damaged its journalism. He criticized the monoculture and groupthink mentality that supposedly permeates NPR's decision-making with respect to the stories that it covers and how it covers them. NPR's new CEO came in for specific criticism in the article, which was published without prior coordination from NPR management, and which violates NPR's internal policies.

The organization's reaction was immediate- it suspended Berliner for five days without pay and warned him that if he spoke or provided content to another outside media entity without prior NPR approval he would be fired.

My first reaction upon reading this was that NPR's actions were almost certainly a violation of Section 7 of the National Labor Relations Act, which prohibits employers from retaliating against employees who engage in so-called “protected concerted activity.” “Protected concerted activity” has two elements- the activity, typically a complaint or other demonstration of dissatisfaction, must relate to the terms and conditions of employment, and it must relate to circumstances that affect other members of the organization, not just the individual raising the concern. The term has recently been litigated before the National Labor Relations Board which adopted a “totality of the circumstances” analysis to determine whether employee conduct falls under the coverage of Section 7. 

It's clear that Berliner’s comments fall within the ambit of this term. The issue is whether NPR suspended him for this conduct or for the alleged violation of its internal policies. And here I think NPR has some problems. For one thing, there are apparently other instances where NPR members either granted interviews or wrote for other outside media without facing disciplinary action. Perhaps more importantly, the immediate response by NPR management against a long-time senior employee with little or no investigation and only a whiff of progressive discipline is indicative of a response based on the content of the column and not its lack of coordination.

Berliner has indicated he will not challenge the suspension but this widely publicized story is a cautionary tale for management. In situations like this, avoid the immediate, knee-jerk response to hit back at the employee. NPR would have been better served by taking its time, performing an investigation (and especially an investigation that looked at other examples of this conduct and the discipline meted out), and then dealing with the employee. The company may have dodged a bullet here.