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Cypen & Cypen
NEWSLETTER
for
MARCH 17, 2005

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001

1. ONE NOT PREGNANT AT THE TIME CAN ALLEGE DISCRIMINATION UNDER PDA:

In 1978, Congress amended Title VII to add the Pregnancy Discrimination Act:
The terms “because of sex” or “on the basis of sex” include, but are not limited to, because of or on the basis of pregnancy, childbirth, or related medical conditions; and women affected by pregnancy, childbirth, or related medical conditions shall be treated the same for all employment-related persons ... as other persons not so affected but similar in their ability or inability to work ...

In using such broad language, PDA makes clear that its protection extends to the whole range of matters concerning the childbearing process. Kocak resigned from her position as an obstetric nurse due to pregnancy complications. After delivery of her child, she applied for a part-time position with her former employer. Although not hired, she did not file a charge of discrimination with the Equal Employment Opportunity Commission. She subsequently reapplied for a part-time position, but met with vehement opposition from her former co-workers, who had found her difficult to get along with, unreliable and not a team worker. This time, Kocak filed a charge for discrimination with the EEOC. She testified that the personnel manager had asked her if she was pregnant or intended to have more children. She also testified that her former supervisor would not hire her because of complications in scheduling caused by her past pregnancy. Having received a right to sue letter, Kocak filed a PDA claim. However, the United States District Court entered summary judgment against Kocak, upon the conclusion, inter alia, that since Kocak was not pregnant at the time of her second application and no medical conditions related to pregnancy manifested themselves during the time of her application, she was not protected by PDA. On appeal, although Kocak did not prevail because she produced no direct evidence of discrimination, the court of appeals held that Kocak was covered by PDA: PDA prohibits an employer from discriminating against a woman “because of her capacity to become pregnant.” An employee cannot be refused employment on the basis of her potential pregnancy. Kocak v. Community Health Partners of Ohio, Inc., Case No. 03-4650 (U.S. 6th Cir., March 11, 2005).

2. TERMINATED DISABILITY RETIREE HAS STANDING TO CHALLENGE TERMINATION:

Copelin-Brown worked for New Mexico State Personnel Office. Health problems led to her inability to perform the tasks her position required. She applied for numerous other positions in SPO but was not transferred to another position. SPO informed Copelin-Brown that she would be fired if unable to perform her job, pursuant to a state regulation. This regulation applied only to employees who are physically or mentally unable to perform their jobs. The regulation, unlike the one concerning termination for non-disabled employees, did not provide the terminated employee with the right of appeal. The regulation did, however, require that the employer make reasonable efforts to find other suitable vacant positions, and document all efforts to accommodate the employee’s medical restrictions. Copelin-Brown filed suit and won summary judgment in the district court. On appeal, SPO claimed, among other things, that Copelin-Brown lacked standing because she had suffered no injury in that she receives total disability benefits and thus could not have prevailed if a hearing were provided. On appeal, the court of appeals affirmed: although Copelin-Brown conceded she was permanently disabled, she argued that SPO violated state regulations by failing to document attempts to accommodate her medical restrictions and make reasonable efforts to find other suitable positions. Thus, at time of her termination, there was a significant dispute between Copelin-Brown and SPO that could have been resolved in a post-termination hearing. Copelin-Brown v. New Mexico State Personnel Office, Case No. 04-2099 (U.S. 10th Cir., March 1, 2005).

3. NATURE OF DEFINED BENEFIT PLANS CHANGES:

Watson Wyatt Worldwide reports that the composition and character of retirement plans for U.S. workers have changed over the past few decades. For small employers, the change has often meant abandoning traditional defined benefit plans in favor of a defined contribution approach. Larger employers, on the other hand, have tended to retain their defined benefit plans, but to make important changes in how these plans determine benefits. In a research brief that examined design of defined benefit plans sponsored by large employers over the last 15 years, Watson Wyatt noted two important trends. The first is the emergence of hybrid plans, such as cash balance and pension equity plans, which now constitute nearly one-third of large DB plans. Second, even companies that have retained their traditional DB plans are changing their design. These changes generally include modest reductions in accrual rates and more significant reductions in early retirement subsidies. Plan sponsors should understand the changes that are occurring in the defined benefit landscape to see how their plans compare with current trends.

4. SEC HEAD SCOLDS ATTORNEYS FOR (LACK OF) ETHICS:

From the Daily Business Review we learn that U.S. Securities and Exchange Commission Chairman William Donaldson has given hedge fund lawyers a piece of his mind for their roles in the recent market-timing scandals and late-trading abuses that have rocked the industry. He believes much anguish could have been avoided if a few more lawyers had pointed out to their hedge fund clients that late trading of mutual fund shares is illegal, as are duplicitous market-timing arrangements. The SEC sued some of the largest U.S. mutual funds within the past two years, accusing them of market-timing -- allowing hedge funds to trade rapidly in their funds -- in violation of their internal by-laws. The rapid buying and selling of fund shares is not illegal, but many funds were prosecuted for saying they did not permit market-timing, only to allow hedge fund clients to engage in the activity. The agency also found that some fund managers allowed illegal late trading -- placing same-day orders after the official 4:00 P.M. end of trading on the New York Stock Exchange -- in their funds by managers of hedge funds in return for investments by the hedge funds. And the beat goes on.

5. SEC WILL VOTE ON BEST-PRICE PROPOSAL:

And speaking of the U.S. Securities and Exchange Commission, that agency will soon vote on a proposal to guarantee investors the best price (as opposed to speed) on their trades. Known as the “Trade-Through Rule,” Regulation NMS requires that a market would have to match or beat a price or bounce the order back to the broker who sent it. The SEC estimates a one-time $150 Million cost to the industry and savings of up to $750 Million a year for investors. Unlike an earlier version of the proposal, the latest plan would not allow investors to opt for faster execution over price. According to Bloomberg News, the Trade-Through Rule already applies to stocks listed on the New York and American Exchanges. The SEC proposal could require the Nasdaq to do more shopping for better prices.

6. COMPANY BREACHED FIDUCIARY DUTY BY SENDING INCORRECT BENEFITS STATEMENTS:

Schaffer began working for Westinghouse Electric Corp. in 1970 at its South Carolina plant. In 1989, he moved to a Georgia site operated by a subsidiary of Westinghouse. Before he agreed to move, and after he did so, management personnel informed him that his service for pension purposes would include his years at both Westinghouse and the subsidiary. In fact, for eleven years, the subsidiary sent Schaffer annual benefits statements indicating that both his eligibility for a pension and the amount thereof would be based on his combined years of service. However, in 2001, the subsidiary informed Schaffer that the annual benefits statements it had been sending him since 1990 were inaccurate because his years at the subsidiary should have counted for pension eligibility only and not for calculating the amount of his pension. Schaffer brought suit against the subsidiary, alleging that the terms of its pension plan or promises made by it entitled him to certain pension benefits. Alternatively, he sought “appropriate equitable relief” under ERISA, for breach of the subsidiary’s duty to provide him with accurate information about pension benefits. The United States District Court granted summary judgment to the subsidiary. On appeal, the United States Court of Appeals affirmed in part, vacated in part and remanded to the trial court. The appellate court agreed that the plan could not be read to require that Schaffer’s 19 years at Westinghouse could be used in calculating an amount of his pension from the subsidiary. The appellate court also agreed that promises made to Schaffer were too vague to constitute a promise to count his years at Westinghouse in calculating his subsidiary-provided pension, because the comments could be interpreted merely as guaranteeing that his years at Westinghouse would be counted to determine eligibility for his subsequent pension. However, the appellate court disagreed with the lower court’s conclusion that no equitable remedy existed for the subsidiary’s admitted breach of its fiduciary duty to provide accurate information. Thus, the appellate court remanded the question of an appropriate equitable remedy: “In making its determination, the court should consider whether the pension Schaffer would have received had he returned to [Westinghouse] would have been greater than the combined value of the pension he will receive from [the subsidiary] for his fifteen plus years of service at the [Georgia] site and the pension he will receive from [Westinghouse] for his nineteen years at the [South Carolina] facility.” Schaffer v. Westinghouse Savannah River Company, Case No. 04-1347 (U.S. 4th Cir., March 11, 2005).


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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.


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