The SEC’s First Risk Alert of Fiscal Year 2017 Targets Registrant Rule 21F-17 Compliance

The Securities and Exchange Commission (SEC or Commission) Office of Compliance Inspections and Examination (OCIE) issued a Risk Alert on October 24, 2016, titled “Examining Whistleblower Rule Compliance.” This recent Risk Alert continues the SEC’s aggressive efforts to compel Rule 21F-17 compliance and puts the investment management and broker-dealer industries on formal notice that OCIE intends to scrutinize registrants’ compliance with the whistleblower provisions of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank). By way of background, Dodd–Frank established a whistleblower protection program to encourage individuals to report possible violations of securities laws. Importantly, in addition to providing whistleblowers with financial incentives, Rule 21F-17 provides that no person may take action to impede a whistleblower from communicating directly with the SEC about potential securities law violations, including by enforcing or threatening to enforce a severance agreement or a confidentiality agreement related to such communications. As discussed in our prior publications, the SEC’s Division of Enforcement (Enforcement) has instituted several settled actions against public companies for violating the “chilling effect” provisions of Rule 21F-17. During the past two months, the SEC has filed two additional settled enforcement actions, as summarized below. Thus, as the SEC embarks on the start of its 2017 fiscal year (FY2017), Rule 21F-17 remains an agency-wide priority, and issuers, investment management firms, and broker-dealers—if they have not done so already—need to take heed and proactively remediate any vulnerabilities that they may have regarding their Rule 21F-17 compliance.

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Illinois Employers Must Provide Qualifying Employees Two Weeks of Unpaid Child Bereavement Leave

Illinois is now the second state to require that employers provide unpaid bereavement leave to eligible employees under its Child Bereavement Leave Act. This Act provides that employers with at least 50 employees must provide two weeks (10 working days) of unpaid leave due to the loss of a child. In the event of death of more than one child in a 12-month period, an employee is eligible for up to six weeks of bereavement leave.

Coverage

The Act defines “employers” and “employees” in the same manner as they are defined under the Family Medical Leave Act (FMLA). Thus, an employee will be eligible for child bereavement leave under Illinois law if the employee has been employed by the employer for at least 12 months and has worked at least 1250 hours during the previous 12-month period. However, an employee who has exhausted his or her FMLA leave is not eligible for child bereavement leave under this Act.

While an employee’s eligibility for child bereavement leave is tied to the employee’s FMLA entitlement, the employee’s bereavement leave cannot be deducted from the employee’s available FMLA leave. In other words, an employee can take two weeks of bereavement leave and still be eligible for 12 weeks of FMLA leave for another qualifying event.

The Act defines “child” as “an employee’s son or daughter who is a biological, adopted, or foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis.”

Bereavement Leave

An employee may use bereavement leave to:

  • Attend the funeral or alternative to a funeral of a child;
  • Make arrangements necessitated by the death of the child; or
  • Grieve the death of the child.

Employees must take such leave within 60 days after the date on which they receive notice of the death of the child. Employees who wish to take bereavement leave must provide 48 hours’ advance to their employer, unless providing such notice is not reasonable and practicable.

Employers may require that an employee provide reasonable documentation, such as a death certificate, a published obituary, or written verification of death, burial, or memorial services from a mortuary, funeral home, burial society, crematorium, religious institution, or government agency.

Substitution of Paid Leave

Under the Act, employees may elect to substitute paid leave, including family, medical, sick, annual, or personal leave, that is available pursuant to federal, state, or local law, a collective bargaining agreement, or employment policy. Unlike FMLA provisions, the right to substitute paid leave rests with the employee and the Act does not provide any right to the employer to require an employee to use available paid leave.

Retaliation and Enforcement

An employer may not retaliate or take any other adverse action against any employee who:

  • Exercises rights or attempts to exercise rights under this Act;
  • Opposes practices which such employee believes to be in violation of the Act; or
  • Supports the exercise of rights of another under this Act.

If an employee feels that his or her rights have been violated under this Act, he or she may file a complaint with the Illinois Department of Labor or file a civil action in court within 60 days after the date of the violation.

An employer who violates this Act is subject to a civil penalty not to exceed $500 for the first offense and not to exceed $1,000 for the second offense.

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NLRB’s New Election Rule Implementation Update

In preparation for the NLRB’s new “quickie election” rules going into effect next week, the NLRB General Counsel yesterday published a 36-page Guidance Memorandum intended to explain how representation cases will be processed under the NLRB’s final rule. While the lengthy memorandum describes specific changes to Board procedures in great detail, it leaves unanswered significant questions such as how Regional Directors will process petitions on a “real world” basis, what opportunities employers are left with to challenge bargaining unit compositions, and ultimately, whether the NLRB’s “quickie elections” result in significantly shorter election time periods. Indeed, the GC acknowledges that the Board “will not be able to fully assess what impact the rule will have” until after it begins processing representation petitions.  The GC instead directs the NLRB’s Regional Directors to “continue to process representation petitions and conduct elections expeditiously” consistent with the Board’s revised rules.

What seems certain is that employers should prepare themselves for implementation of the Board’s new regulations on April 14th.   Last week President Obama vetoed a congressional resolution to disapprove the final rules, and while two pending federal cases challenge the Board’s statutory authority to publish the revised rules, it remains unlikely any such legal challenge will delay the Board’s implementation of its final rule next week.