It's Not Illegal to Fire Someone for Being 'Too Cute,' Manhattan Trial Court Rules

Attractive women are not a protected class under employment laws, even the expansive laws in place in New York City, the New York Law Journal reported Friday.

Lorelei Laird

May 20, 2016

http://www.abajournal.com/news/article/its_not_illegal_to_fire_someone_for_being_too_cute_manhattan_trial_court_ru

Dilek Edwards had sued her former employer for gender discrimination, alleging she was fired because her boss, Stephanie Adams, was concerned that her husband found Edwards attractive.

Edwards was hired as a yoga instructor and massage therapist by chiropractor Charles Nicolai. She says their relationship was strictly professional, and she had met Adams—Nicolai’s wife and co-owner of the practice—on one occasion. That encounter was cordial, Edwards says.

More than a year after Edwards started the job, Nicolai told Edwards his wife might be jealous because Edwards was “too cute.” Four months later, Adams sent Edwards a text telling her she was no longer welcome at the business and to “stay … away from my husband and family. And remember I warned you!”

Adams also allegedly reported to police that Edwards had made threatening phone calls, leading Edwards to make a defamation claim.

The lawsuit argued that under New York City’s Human Rights Law, the firing was gender discrimination because gender includes “a person’s gender identity, self-image, appearance, behavior or expression.” But Manhattan Supreme Court Judge Shlomo Hagler found this applies only to matters involving gender identity or transgender issues.

Hagler was unable to find a case in the city or state New York holding that spousal jealousy alone constitutes gender discrimination. In other jurisdictions, the judge wrote, courts have held that attractive females are not a protected class under anti-discrimination laws.

“With respect to whether appearance can be the basis of a discrimination claim under other statutory authority, courts have not found discrimination when the subject conduct or policy was not applied differently to men and women,” Hagler wrote.

The Iowa Supreme Court ruled in 2012 and 2013 that a dentist from Fort Dodge was within the law when he fired his assistant of 10 years, after growing worried that he might have an affair with her. That court rejected a claim that this was gender discrimination because the assistant “did not do anything to get herself fired except exist as a female.”

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In Scalia's Absence, Unions Get a Big Supreme Court Win

Lauren Camera

March 29, 2016

http://www.usnews.com/news/articles/2016-03-29/in-scalias-absence-unions-get-a-big-supreme-court-win

The Supreme Court on Tuesday announced it had deadlocked on a challenge to organized labor, handing unions a huge win in a case many anticipated would not go in their favor.

The 4-4 decision in Friedrichs v. California Teachers Association upholds a lower court ruling dealing with union fees and is a crushing blow for union opponents, who lost the potentially deciding vote in their favor when conservative Justice Antonin Scalia died in February.

"The U.S. Supreme Court today rejected a political ploy to silence public employees like teachers, school bus drivers, cafeteria workers, higher education faculty and other educators to work together to shape their profession," National Education Association President Lily Eskelsen García said in a statement following the ruling. "In Friedrichs, the court saw through the political attacks on the workplace rights of teachers, educators and other public employees. This decision recognizes that stripping public employees of their voices in the workplace is not what our country needs.

Agency fees are collected in 25 states, including California and the District of Columbia. Under federal law, unions cannot use the money for political purposes, like lobbying or voter registration drives.

The plaintiffs in the case argued that agency fees are an infringement on their First Amendment rights of free speech and free association, since collective bargaining is by nature political. In negotiating with school boards, for example, unions can take positions on things like tenure that nonmembers may not support, and therefore, teachers who decide not to join their local union should not have to contribute to those costs.

Meanwhile, the California Teachers Association and its parent union, the NEA, argued that the fees are not a violation of First Amendment rights because a portion of them is reimbursed annually, and also because the money covers things that benefit non-union members. Were it not for the fees, they said, nonmembers would be freeloading off of union members.

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The 4-4 split from the justices upholds the Supreme Court's 1977 decision in Abood v. Detroit Board of Education, which held that no one can be forced to join a union or contribute to its political activities, but that teachers unions can charge nonmembers a fee to cover the costs of nonpolitical activities, including collective bargaining.

In recent years, public sector unions have suffered blow after blow, with Republican governors and state legislatures successfully challenging collective bargaining rights in historic labor strongholds like Michigan and Wisconsin.

The Friedrichs case was not the first to challenge union fees. Last year, in Harris v. Quinn, the justices ruled 5-4, that Medicaid home health workers were not full public employees and therefore could not be compelled to pay collective bargaining union fees – a narrow decision but one that many Supreme Court watchers said was a sign the court seemed poised to overturn the longstanding precedent set by Abood.

As a result, the Friedrichs case was slated to deal the most serious blow yet to unions, overturning more than four decades of legal precedent and effectively converting every state into a right-to-work jurisdiction overnight.

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Fiduciary Role for Investment Planners

By Jacklyn Wille

June 9, 2016

http://www.bna.com/labor-department-faces-n57982073912/

June 9 — The Department of Labor is fighting a multi-front war to defend its recently finalized fiduciary rule, which attempts to cut down on the supposedly conflicted investment advice given to retirement savers.

As of press time, five separate lawsuits now attack the rule from seemingly every angle, from the way the department approached the rule-making process to the way the rule restricts the speech of investment professionals. Congressional Republicans also tried to undo the rule by passing a resolution, which President Barack Obama vetoed on June 8.

Far from being copycats of one another, these lawsuits raise a variety of claims against the rule itself and the department's efforts to pass it. Three of the lawsuits bring free speech claims under the First Amendment and one claims that portions of the rule are unduly vague in violation of the Fifth Amendment's Due Process Clause.

A common thread running through each lawsuit is dissatisfaction with the department's decision to subject fixed indexed annuities to the new best-interest standard governing investment advice. This move came as a surprise to many in the financial industry because the DOL's proposed rule provided an exemption for these products.

Notably, three of the five lawsuits were filed in the same federal court in Dallas, a move that may be strategic.

“Judges generally tend to reflect the dominant beliefs of the people in the region where they serve, and it’s fair to say that the people in Texas are more skeptical of federal regulation these days, than the people in, say, Massachusetts,” Richard J. Pierce Jr., a law professor at George Washington University, told Bloomberg BNA June 9.

The groups leading the legal challenges against the fiduciary rule include the U.S. Chamber of Commerce, the National Association of Fixed Annuities, the American Council of Life Insurers, the Indexed Annuity Leadership Council and Kansas-based insurance companyMarket Synergy Group Inc.

Groups Suing DOL Over Fiduciary Rule

U.S. Chamber of CommerceFinancial Services Institute Inc.

Financial Services Roundtable

Greater Irving-Las Colinas Chamber of Commerce

Humble Area Chamber of Commerce

Insured Retirement Institute

Lubbock Chamber of Commerce

Securities Industry and Financial Markets Association

Texas Association of Business

National Association for Fixed Annuities

American Council of Life Insurers

National Association of Insurance and Financial Advisors

NAIFA-Texas

NAIFA-Amarillo

NAIFA-Dallas

NAIFA-Fort Worth

NAIFA-Great Southwest

NAIFA-Wichita Falls

Indexed Annuity Leadership Council

Life Insurance Co. of the Southwest

American Equity Investment Life Insurance Co.

Midland National Life Insurance Co.

North American Co. for Life and Health Insurance

Market Synergy Group Inc.

Odds Favor DOL

Pierce, who has written more than 20 books on administrative law, said that lawsuits seeking to invalidate federal regulations are successful only about 30 percent of the time.

“With any case of this type, my starting point is pretty simple: There’s about a 70 percent chance that the rule will be upheld and a 30 percent chance that it will be rejected,” Pierce said.

According to Pierce, judges weighing these lawsuits typically focus on three questions: (1) is the rule consistent with the language of the statute? (2) does the data considered in the rulemaking process support the final rule? and (3) has the agency adequately explained why the data supports its decision?

Pierce also pointed out a factor that could give the challengers in one lawsuit an additional boost.

“For half a century, the D.C. Circuit has been tougher on agencies than the other circuits,” Pierce said. “Its rate of rejecting agency rules is about 10 percent higher than the rate of rejection of agency rules in other circuits.”

Only one of the groups chose to file its lawsuit in a Washington federal court: the National Association of Fixed Annuities.

That lawsuit is already shaping up to be an unusual one: Less than a week after it was filed, an individual investment adviser unconnected with the lawsuit asked the court for permission to file a brief arguing that age and racial discrimination caused federal regulators to ignore his expert advice on these issues.

‘It's About Money.'

Andrew D.W. Hill, a registered investment adviser in Naples, Fla., characterized the lawsuits as an attempt by some segments of the financial industry to protect fat profit centers that do little to benefit individual savers.

“It's about money,” he told Bloomberg BNA June 9.

According to Hill, the department's rule will make it nearly impossible for advisers to continue selling certain variable annuities, which he said generate big profits and carry commissions as high as 7 percent. Hill said that these annuities are virtually never in clients' best interests because they offer no additional value beyond the underlying mutual funds contained in the annuity.

Hill supports the DOL rule and its effort to curb these practices.

“Obama has done a lot of things that have frustrated the heck out of me, but this may be the one thing he's gotten right,” Hill said.

Law Firms Litigating Against DOL

Gibson Dunn & Crutcher LLPBryan Cave LLP

McKenna Long & Aldridge LLP

Wilmer Cutler Pickering Hale & Dorr LLP

Thompson Coe Cousins & Irons LLP

Sidley Austin LLP

Carlton Fields Jorden Burt P.A.

Walters Bender Strohbehn & Vaughan P.C.

What's an Adviser to Do?

Greta E. Cowart, an employee benefits attorney in Winstead PC's Dallas office, said that entities subject to the DOL rule shouldn't look at these legal challenges as a reason to delay moving toward compliance in time for the April 2017 effective date.

“If a regulated entity does not make changes to become compliant and the litigation challenges do not succeed or get resolved by April 10, 2017, they may be in the position of giving up a segment of their business opportunities and potential revenues or risking being non-compliant with the resulting taxes on the prohibited transactions and the potential breach of fiduciary duty lawsuits,” Cowart told Bloomberg BNA in a June 9 e-mail.

According to Cowart, complying with the rule is likely to be a significant undertaking involving multiple steps, including: identifying the relationships subject to the rule and the compensation structures of those relationships; retraining advisers and customer service representatives; creating new documentation and record retention rules; and revising agreements and compensation structures.

“The short deadline to accomplish so much may have been intended to force some industries to change their practices in hopes that once changes were made, they would not revert to old ways if the litigation challenges do prove successful,” Cowart said.

Cowart isn't involved in any of the lawsuits.

Specific Allegations

Taken together, the lawsuits lob an impressive 28 legal claims against the DOL, the rule and the rule-making process. In addition to challenging the department's regulation of fixed income annuities, the lawsuits allege that the DOL:

•  exceeded its authority under the Administrative Procedure Act by adopting an expanded definition of the word fiduciary that contradicts existing law;
•  unlawfully created a private right of action that would allow individual lawsuits to proliferate without proper authorization from Congress;
•  didn't provide sufficient notice of certain of its decisions and didn't adequately consider the comments it received from industry players;
•  impermissibly extended fiduciary obligations under the Employee Retirement Income Security Act to individual retirement accounts;
•  violated the First Amendment's free speech protections by unduly restricting the speech of investment advisers;
•  violated the Due Process Clause by adopting an unduly vague regulation;
•  failed to consider the rule's effects, particularly on small businesses; and
•  unfairly disfavored certain retirement products without reasonable justification.

The Chamber of Commerce's lawsuit was filed June 1 in the U.S. District Court for the Northern District of Texas by Gibson Dunn & Crutcher LLP.

The National Association for Fixed Annuities' lawsuit was filed June 2 in the U.S. District Court for the District of Columbia by Bryan Cave LLP and McKenna Long & Aldridge LLP.

The American Council of Life Insurers' lawsuit was filed June 8 in the Northern District of Texas by Wilmer Cutler Pickering Hale and Dorr LLP and Thompson Coe Cousins & Irons LLP.

The Indexed Annuity Leadership Council's lawsuit was filed June 8 in the Northern District of Texas by Sidley Austin LLP.

Market Synergy Group Inc.'s lawsuit was filed June 8 in the U.S. District Court for the District of Kansas by Carlton Fields Jorden Burt P.A. and Walters Bender Strohbehn & Vaughan PC.

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