The Law Planet Blog

The world's second largest home improvement retailer, Lowes Home Improvement, will see “off the clock” in an entirely new light, after the recent, class action lawsuit settlement of $29.5 million. It is important to note that Lowes Home Improvement does not does not admit to any wrongdoing and believes it is in compliance with all laws and regulations.

It is hard to believe that a retailer so large would think that they could get away with all of the allegations brought against them. Some of the Plaintiff’s claims against Lowe’s Home Improvements include: making the Plaintiff’s work “off the clock” when not clocked in and requiring them to work after they clocked out, locking plaintiff's in the Lowe’s Home Improvement stores at the end of their shifts and not giving uninterrupted rest breaks and/or meal breaks as required by law. After all of these allegations, it is not hard to believe that the defendant did not pay the plaintiff’s the required overtime.

Continue reading "Lowes Home Improvement settles overtime class action suit for nearly $30 million" »

Starbucks corp has 100 million reasons to smile. The cas in question is Chau V Starbucks Inc. (D053491 (Super. Ct. GIC836925))

The California Appeals Court recently ruled that San Diego County Superior Court Judge Patricia Cowett's decision to award baristas $86 million in restitution plus about $20 million in interest was was not based properly. The Appeals Court also felt that the shift supervisors "essentially perform the same job as baristas."

The court also stated in its opinion:

The court's ruling is unsupported. Section 351 does not contain any language prohibiting an employer from equitably dividing tips placed in a collective box among the employees who provided the service. The trial court's reliance on the "mandatory tip pooling" judicial decisions was misplaced. These decisions were premised on factual scenarios different from here and do not apply where customers leave tips in a collective tip box for service rendered by a "team" of employees.

The court's ruling is also at odds with legislative objectives. Section 351 was enacted to prevent employers and their agents from using their positions of authority to demand that employees give up their earned gratuities as a condition of employment. The undisputed evidence shows that no barista was required to give up any part of a tip left for the barista. Rather, Starbucks's policy ensured the collective tips were equitably distributed to those who earned them.

Section 351 was also enacted to prevent fraud on the tipping public. (§ 356.) The Legislature wanted to prohibit a business owner from deceiving a customer who left a tip for an employee by requiring that the employee later transfer any part of the tip to the employer or the employer's agent. It is undisputed here that the tipping public intended to collectively tip both the baristas and the shift supervisors—for their work as a "team." Requiring these collective tips to be given solely to baristas would mislead the public. Because the trial court's interpretation of section 351 was not supported by the statutory language and led to a result contrary to the fundamental purpose of the statutory scheme, it is one that the Legislature could not have intended. We reverse the judgment in its entirety.

This case stems from a 2004 lawsuit brought by a former a former employee, Jou Chau, and 100,000 current and former Starbucks employees. The angle of the suit was that Starbucks baristas were not legally entitled to share in employee tips. Have you ever seen the community tip jar on the counter when getting your Grande Frappucino?

A few Blawgs commenting on this Starbucks "tip sharing" case include:

Your Honor I Object. In this blog, the blogger brings out the following in his post: "Starbucks wins the 86 Million Tips Sharing Class Action"

What maybe should have been sued upon in the first place was the actual formula used to calculate the share of the tips rightfully earned by the shift supervisors (certainly less than a full hour per hour amount) and whether any substantial adverse impact actually befell to the baristas as a whole.

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Legal Blogger Dennis Westlind, from the law blawg "The World of Work", chimes in on the ruling in his post "Starbucks obtains reversal of $105 million "Tip Sharing" case."

Legal Blogger, Shaun Martin from the law blawg "The California Appellate Report" gives excellent commentary on the Starbucks ruling in the post "Chau v. Starbucks (Cal. Ct. App. - June 2, 2009)"

All eyes are on the legal team representing the baristas and Mr. Chau. According to an LA Times article, Attorney David Lowe is quoted as saying:

"Up to this point, every court that has addressed this issue has found that an employer cannot pay supervisors from a tip pool. This is the first case that goes in a different direction," We will be looking to the California Supreme Court to fix this error."

I guess that when I go into Starbucks later today and wish to thank my barista for the excellent customer service provided, I should hand them the tip directly and "INSIST" that they keep it. This way, I am ensured that my tip was given to the proper person, the person that served me.

Let's see if this case will go to the Supreme Court or settle for a nominal amount to make it go away. Time will tell, if this case will continue to the Supreme Court of California. Starbucks shares settled at $15.20 yesterday, according to the Investor Relations section of the company's website.

Posted by LaBovick Law | Permalink | Email This Post | Comments (1)

Posted In: Labor & Employment

Any broker who has moved from one firm to another has heard about, or received, them. They go by various names - Transitional Compensation, Employee Forgivable Loan, and Recruiting Bonus are among the names given to these payments. Essentially, the brokerage firms are hiring experienced brokers and "loaning" the broker money to ease the transition between firms. If a broker is successful at moving the vast amount of his or her production, then the forgivable loan becomes extra money in a good year.

But the past 18 months have been lean ones for brokers. Clients are unhappy. They are hesitant to change firms and follow a broker whom they blame for their losses. Brokers whose books of business are fee-based have seen their fees decrease as their clients' account values decrease.

Even worse off are the bottom quintile (20%) of the production force. The brokerage firms view these brokers, many of whom may have been better producers during better times, as expendable. As part of the consolidation and contraction of the brokerage business, the firms are letting these lower producers go. And the firms want their money back.

I have spoken with an in-house lawyer at a major wirehouse who told me that his firm's collection people are aggressively pursuing these lower quintile producers who were fired or let go in a "reduction in force" layoff. In today's economic times, this hardly seems fair that a broker is hit with the double-whammy of a loss of a job and a demand for repayment from an employer who no longer found the employee desirable. This does not make sense.

Virtually all of these cases must go to arbitration. Soon, we will begin to see an increase in the filing of collection case against former employees. In about nine to twelve months, we will see an increase in arbitration decisions. It will only be then that we will know whether the arbitration system thinks that these firms were being fair.

I was recently retained to represent a client who was both an insurance agent and a registered representative with a related entity. The client was terminated by the insurance company and the broker-dealer. The U-5 that was filed became a problem.

The broker-dealer disclosed on the U-5 that there were two customer complaints from insurance customers regarding fixed insurance products. While this was true that there were two complaints, I felt (actually, I knew but I was being modest) that the disclosure was improper. I wrote to the company and told them to change things.

The company's lawyer wrote back and advised that he felt that the disclosure was proper under U-5 question question 7E(3)(a), which references U-4 question 14I(3)(A). This is essentially a question about the existence of yet-unreported customer complaints. The insurance company/broker-dealer felt that fixed (as opposed to variable) insurance complaints were reportable. I knew they were not.

The FINRA website held the key. FINRA advises that only complaints concerning a security, variable contract that is subject to regulation under the federal securities laws, or commodity exchange product are reportable . Other complaints are not.

There is one caveat, however. If the complaint relates to fixed insurance and alleges forgery, theft, or misappropriation or conversion of funds or securities, then it is reportable on a U-5. This is a slight, but important, difference.

After being educated in their wayward ways, the broker-dealer agreed to arrange to remove the improper disclosures.

That's the view from The Law Planet, Jupiter, Florida.

In another installment of the incompetent/malevolent broker/dealer guidebook, Barclays Capital partially prevailed on a Motion to Vacate Arbitration Award filed against one of its former employees. In Barclays Capital Inc. vs. Elizabeth Bing Shen, 2008 N.Y. Misc. LEXIS 2327, a NY Supreme Court judge (the lowest level trial court, interestingly enough) found that the ruling in Rosenberg v. MetLife barred recovery of punitive damages.

Rosenberg, as those who have been following this issue will recall, held that incorrect statements on a U-5 Termination Notice were absolutely privileged. In my opinion, regardless of whether you represent a firm or the broker, this is a wrong-headed decision that was decided by judges who ignored the impact on a broker's life a U-5 can have. There has been some discussion by commentators that there are ways "around" Rosenberg. Certainly, one of them is to avoid New York law in contracts. There are others as well, but if I shared them I'd have to shoot you.

Back to Ms. Shen. She was apparently owed a bonus and her U-5 was found to be erroneous by the arbitrators. By the description in the court's opinion, she does not qualify for "Employee of the Year" status by any means, but the arbitrators clearly felt that she didn't deserve the disclosure she received. They awarded her punitive damages.

The court found that the punitive damages could only have been for the U-5 defamation claim and, therefore, vacated that part of the award. We are currently representing brokers whose U-5s, we believe, are defamatory. We are not concerned about the New York choice of law provision because we feel that there are valid arguments against it when the the broker is in Florida. Nevertheless, this creates more stress and anxiety and creates a "free defamation zone" for broker-dealers, honorable and not.

That's the view from The Law Planet - Jupiter, Florida.

The Eleventh Circuit Court of Appeals has ruled that, under the Fair Labor Standards Act ("FLSA") domestic service employees, such as "granny nannies," are exempt from overtime rules under certain conditions. In Buckner v. Fla. Habilitation Network, Inc. held that overtime is not due to an employee of a home health care service who worked more than 40 hours in a week. The key point in this decision was that the Plaintiff was not a direct employee of a family but was paid by an agency who employed her.

The decision is a blow to home health care workers employed directly by employment agencies throughout the state of Florida. Such employees now need to negotiate the terms and conditions of their employment more carefully or be required to work burdensome work weeks far in excess of 40 hours without the possibility of overtime pay.

That's the view from The Law Planet, Jupiter, Florida

Some of you will recall the ill-conceived and ill-fated transaction where Merrill Lynch acquired the assets, including the human assets of Advest from Axa Financial.. It was a disaster for Merrill and unpleasant for the Advest brokers, a vast majority of whom left the firm.

We represented a few of those brokers, and talked with others, who did not feel that Merrill was a good fit and chose to move on. The problem was that these brokers all had transition contracts in place. In one case we handled, the NASD arbitration panel amortized the bonus money and ordered our client to pay back a lower amount than Merrill was seeking. In a more recent case, Brian Buckstein of our office represented a client whose contract contained language that voided the agreement in the event that Advest closed his office and did not open one within 50 miles.

Brian tried the case against Merrill for two days and Merrill tried to argue that a Merrill office would qualify as an Advest office for the purpose of the agreement. The arbitration panel apparently disagreed with Merrill's position and awarded Merrill nothing.

The lesson to be learned from this is to read any agreement carefully and, if you don't want to end up working for an entity you didn't choose, put language in the agreement that gives some protection.

That's the view from The Law Planet, Jupiter, Florida.

Every day, a stockbroker is asked to sign an amendment to NASD Form U-4, the securities industry's Uniform Application for Securities Registration. A brokerage firm is required to amend the Form U-4 upon the occurrence of certain specified events as described in the form. In particular, customer complaints and arbitrations which allege damages over the dollar thresholds must be disclosed.

Unfortunately for the brokers, truthful allegations are given the same weight as untruthful ones. A customer can allege unauthorized trading, for example. The firm is required to repeat that allegation on the Form U-4. The firm is not permitted, however, to pass judgment on whether or not the allegations are truthful. For a broker with no particular experience with amendments to the form U-4, signing a form with such heinous allegations is especially distasteful. What's a broker to do in this situation?

Box 28 is the answer. A little-publicized fact is that the broker has the right to provide his/her rebuttal to the disclosure in Box 28. The instructions say that this rebuttal should be written "in the space provided." In many instances, Box 28, when printed, has no space at all. But there is space available for the asking.

What should go in Box 28? A broker should write a brief, truthful, factual rebuttal to the allegations that the firm has disclosed. For instance, in the case of unauthorized trading, if the broker is 100% certain that all trades were discussed with the client prior to entry, a broker could write this fact. In the case of a client who makes allegations of losses in a portfolio, a broker could write that the client's account was profitable for the period the broker handled the account. Again, the Box 28 text must be truthful and, I suggest, should not be opinion, only fact.

In the case of a manager named for "Failure to Supervise," the manager could write in Box 28, if truthful, that the manager was not the manager during the time of the allegations.

Why fill in Box 28? When a customer or prospective employer requests a full CRD printout, Box 28 language will print out along with the customer's allegations. CRD reports are sometimes introduced into evidence at arbitration hearings. Having Box 28 completed with factual, objective, rebuttal language will take some, but not all, of the sting out of disclosing the complaint in the first place.

A lawyer is not required to complete the language for box 28. However, an experienced securities attorney can assist the broker in crafting the rebuttal in a light most favorable to the broker. This entire process, barring any unforeseen glitches, shouldn't take very long and will give the broker some peace of mind and feeling of involvement in the process.

That's the view from The Law Planet, Jupiter, Florida.

Dobin & Jenks, LLP, the sponsor of The Law Planet Blog, represented Nicholas C. Hodges, CPA, CFP in an NASD Securities Arbitration in Jackson, MS. The dispute involved issues of defamation, copyright ownership, breach of fiduciary duty, diversion of corporate opportunities. After almost 8 days of arbtration hearings, Mr. Hodges was awarded $75,000 in damages, ownership of the copyright to his book, The Lazy CPA’s Guide for Adding Financial Services to Your Tax Practice, and attorneys' fees of more than $86,000.

The arbitration award can be found here.

Perhaps the best part of this case was our two clients, Nick Hodges and Toni Nurnberger. They were two of the nicest people we have ever represented and the award represented the culmination of nearly two years of litigation and hard work. Nick, "The Lazy CPA" is anything but lazy. Toni, his associate for several years, keeps everything from boiling over. When my kids ask me what I do for a living, I tell them that I help people and think of people like Nick and Toni.

Nick has made a movie. Thankfully, he doesn't sing or dance and he keeps his clothes on.

A big thanks to Nick and Toni and to all our clients who have helped us keep the doors open since 1999.

That's the view from The Law Planet, Jupiter, Florida.

Under Florida law, the courts have upheld a qualified privilige on disclosures made on NASD form U-5, the Uniform Termination Notice for Securities Registration. Eaton Vance Distributors, Inc. et al. v. Ulrich, 692 So. 2d 915 (Fla. App. 2nd DCA 1997). However, there are a number of brokerage firms that use a New York "choice of law" provision in their employment contracts. A recent decision was initially thought to be the death knell for defamation actions.

In Rosenberg v. Metropolitan Life Insurance Company et al., 2007 NY Slip Op 2627, the New York Court of Appeal, the state's highest court, ruled that statements made on a Form U-5 are protected by an absolute privilege. The ruling, at first blush, appeared unequivocally devastating to registered representatives wishing to assert U-5 defamation claims employed in New York and/or governed by enforceable New York choice-of-law provisions. Fortunately, however, the Second Circuit Court of Appeals, after it received the Rosenberg case back from the New York Court, identified a very legitimate and glaring hole in the Court of Appeals’ analysis. Op. issued June 14, 2007 at n. 1.

The Court of Appeals recognized that statements in a Form U-5 that are not “material and pertinent to the issues to be resolved” are probably not protected. Specifically, the court recognized that not all statements placed on a broker’s Form U-5 may be absolutely protected:

Consequently, we need not decide if there are circumstances in which statements on a Form U-5 are not absolutely privileged under Rosenberg II. We note, however, that in the context of judicial or quasi-judicial proceedings, statements made by parties, attorneys, and witnesses are absolutely privileged only ‘so long as they are material and pertinent to the issue to be resolved in the proceeding.'

While initially devastating to broker U-5 defamation claims under New York law, the Second Circuit’s latest per curiam decision holds out hope that brokers are not completely without recourse when false language is contained within a Form U-5. Moreover, because U-5 defamation analysis is governed by state law, states such as Florida that reject an absolute privilege in U-5 defamation cases remain unaffected by Rosenberg.

Here at The Law Planet, we continue to receive inquiries from recently-terminated stockbrokers about getting help with the language on a form U-5. Most brokerage firms are savvy enough to realize that getting the broker's input on the language is a major step towards avoiding defamation litigation. Our role as counsel is to make sure that the brokerage firm discharges its regulatory obligation while minimizing the impact on our client's career.

That's the view from The Law Planet, Jupiter, Florida.