Employment, Labor & Benefits

Employment, Labor & Benefits

Update

January 17, 2011

Masuda Funai’s Employment, Labor & Benefits Update is provided as a free service of the firm regarding legal developments. It is not a substitute for legal counseling and may constitute advertising material. ©2011 Masuda, Funai, Eifert & Mitchell, Ltd. All rights reserved

TOPIC OVERVIEW

Three Masuda Funai Attorneys Recognized as Illinois Super Lawyers1

Use of Union-Free Plan to Respond to NLRB’s Required Posting1

ABuyer of Assets Does Not Automatically Assume Plan Liabilities2

Illinois Chamber of Commerce Meeting Highlights Legislative Proposals3

Three Masuda Funai Attorneys Recognized as Illinois Super Lawyers

Alan M. Kaplan and Nancy E. Sasamoto have been named as 2011 Illinois Super Lawyers among attorneys practicing primarily in Employment and Labor law.Super Lawyers are selected using a multiphase rating process, starting with peer nominations and evaluations, combined with third-party research.No more than 5% of all attorneys in Illinois are considered Super Lawyers.In addition, Frank J. Del Barto has been selected as an Illinois Rising Star for 2011.To be eligible for consideration, a candidate must be either 40 years old or younger, or in practice for less than 10 years.Fewer than 2.5% of the attorneys in Illinois are named Rising Stars.

Use of Union-Free Plan to Respond to NLRB’s Required Posting

By Alan M. Kaplan

When asked, many human resource professionals say that their companies are not vulnerable to a union drive. Their answers may now change.

On December 21, 2010, the National Labor Relations Board (“NLRB”) filed a Notice of Proposed Rulemaking in the Federal Register. The NLRB wants all companies within its jurisdiction to post a notice similar to notices required to be posted by other federal and state employment law agencies. This is because a union only needs two employees in one company to organize a union. Unlike other notices, the NLRB’s notice will inform employees of their rights to organize a union, strike, picket and take other concerted activity.

The Rule will go into effect after the end of a 60-day comment period. Unless the NLRB changes the Proposed Rule, the Final Rule will require companies to physically post the notice in multiple languages and also post the notice electronically. An employee has only 180 days to file a case against a company. If a company fails to post the notice, unlike other postings, the NLRB will toll the statute of limitations. This

could result in the time period for employee claims continuing indefinitely until the company posts the notice. The NLRB may also allege in its prosecutions that the mere failure to post this notice is evidence of the company’s intent to engage in unlawful activity.

By spring, the conversations will start. Employees will ask their supervisors about unions. The supervisors may agree with the employees they supervise that a union may help the employees. Employees may be encouraged to complain in groups about their working conditions. Human resource professionals will need to know how to respond.

To prepare for the posting requirement, companies need to begin or continue to implement aunion-freeplan. Theplan helps companies prepare for the discussions which will take place in the workplace between employees and their supervisors. As part of theplan, companies are considering counter-postings to give correct and full information to employees about their rights, the company’s rights and the truth about unions and negotiations. Other companies are providing training to their supervisors, including specific provisions in employee handbooks to respond to potential union organizing, and taking steps to be prepared for the conversations and possible union organizing campaigns. Importantly, human resource professionals know that actions taken after a union organizing campaign begins may violate the law, because the action was taken because of the union. To learn more about these plans, please contact your relationship attorney.

ABuyer of Assets Does Not Automatically Assume Plan Liabilities

By Frank J. Del Barto

On January 6, 2011, the United States Court of Appeals for the Seventh Circuit (the “Court”) in Chicago considered the rights of retirement plan participants when the plan sponsor sells all of the assets from which plan benefits might be paid, distributes the proceeds from the sale, maintains its corporate existence but the buyer of the company’s assets does not assume any of the seller’s liabilities under the plan.After considering the issue, the Court held that a buyer of assets does not necessarily assume the seller’s liabilities under an ERISA plan.See Feinberg, et al. v. RM Acquisition, LLC., No. 10-1890, (7th. Cir. 2011).

In the case, Rand McNally (“RM”) sponsored a supplemental pension plan to provide senior executives with deferred compensation in addition to compensation provided by RM’s pension plan.These plans, referred to as “top hat” plans, are unfunded.In 2003, RM declared bankruptcy but no part of the top hat plan had been discharged or modified in bankruptcy.In 2007, several years after emerging from bankruptcy, RM sold all of its assets to RM Acquisition, LLC (“RMA LLC”), a company created by a private equity firm. Although RMA LLC purchased the assets and some of RM’s liabilities, it did not purchase the liabilities of the top hat plan.After the sale, RM had no assets from which to pay benefits to the senior executives.

The senior executives sued RM, the top hat plan itself and RMA LLC.Later, because RM was simply a corporate shell with no assets, the executives dropped it and the plan from the suit.The district court approved RMA LLC’s motion to dismiss for failure to state a claim.On appeal, the executives argued that RMA LLC is liable for the promised benefits to the executives because (1) it is the de facto plan administrator and (2) the plan document designates as an administrator “any successor to Rand McNally by reason of merger, consolidation, the purchase of all or substantially all of Rand McNally’s assets or otherwise…”However, the Court found that RM LLC was not the plan administrator and, notwithstanding the plan document language, RMA LLC would have to consent to be a successor. Further, although, RMA LLC was the successor in the sense of owning the assets of RM, the Court noted that the purchase of a company’s assets, even all of them, does not automatically make the purchaser the owner of the seller’s liabilities.

In analyzing the facts, the Court reviewed the common law test for successor liability and the test for claims arising from a violation of federal rights.The Court held that “you can purchase all the assets of a company and explicitly decline to assume any of its liabilities, and your declination will be valid unless the transaction is a fraud against creditors or the selling and the purchasing company aren’t meaningfully separate, as in a corporate reorganization.”Under the common law test, the Court found that RMA LLC was not liable under a successor liability theory because it did not assume the top hat plan liabilities, did not appear to “connive” with RM to deprive participants of their benefits and was not a mere continuation of RM under another name.

Then, noting that “a complication occurs” when the claim arises from a violation of federal rights (here ERISA rights), the Court indicated that the executives may sue the purchaser of a violator’s business, even in a true sale, provided two conditions are met: (1) the successor had notice of the claim before the acquisition and (2) there is substantial continuity of the operations of the business before and after the sale, no major changes are made in the operation.Here, according to the Court, “the federal rule cannot help Feinberg without a showing that no major changes were made in the operation of Rand McNally’s business after the sale to RM.” As a result, the executives claim for nonpayment of ERISA benefits fails.

Because most details of corporate mergers, acquisitions and divestitures are 85% to 90% negotiated before a corporate manager or a corporate lawyer even considers the possible health and welfare plan liabilities, this case serves as a useful reminder of the importance of getting benefits counsel involved in business transactions as early as possible.

Illinois Chamber of Commerce Meeting Highlights Legislative Proposals

By Alan M. Kaplan

On January 13, 2011, Masuda Funai participated in the meeting of the Illinois Chamber Employment Law Council. Attended by employment lawyers from Chicago and downstate Illinois, the Council considered important changes to propose to the Illinois Legislature during the spring session. These include proposed changes to the Illinois Human Rights, Wage Payment and Collection and Prevailing Wage Acts. In addition, Ray Luna, Chief Legal Counsel of the Illinois Department of Human Rightsexplained how the Department is implementing the injunction issued against the Department by the Chicago federal courts. See Cooper v. Salazar, 196 F.3d 809 (7th Cir. 1999). According to the injunction, the Department may not make credibility findings when determining whether to dismiss a charge or finding substantial evidence to believe a violation of the Act occurred. The injunction has resulted in an increased number of cases in which the Department has found substantial evidence, resulting in more trials by the Illinois Human Rights Commission and in Illinois courts. However, the Department is still able to dismiss charges of discrimination under specified circumstances. See Budzileni v. Department of Human Rights, 910 N.E.2d 1190 (1st Dist. 2009). In addition, Mr. Luna reported that the Illinois Legislature will be considering important procedural changes to the Human Rights Act.If enacted, all companies will need to understand and act in response to these changes. Currently, however, the lawyers in attendance emphasized the importance of every company having procedures for responding quickly and appropriately when charges of discrimination are served on a company.

For more information about this or any other employment law topic, please contact Alan Kaplan, Chair of the Employment, Labor & Benefits Group, at 312.245.7500 or via email at.

About the Employment, Labor Benefits Group
Masuda Funai’s Employment, Labor & Benefits Group provides expertise in all aspects of employment, labor and benefits law. Our attorneys represent management in everything from day-to-day counseling to drafting, negotiations, litigation in federal and state courts, executive and employment agreements, mergers and acquisitions, reorganizations, benefits and compensation plans, OSHA issues, union campaigns, collective bargaining, unlawful picketing and trust fund contribution matters. Our attorneys regularly conduct employment audits, present in-house supervisory training programs and seminars and publish articles and newsletters to help keep our clients up to date about the ever-changing world of employment, labor and benefits law. / About Masuda Funai
Masuda Funai is a full-service law firm representing international and domestic companies operating and investinginthe United States.Our 45 attorneys located in Chicago, Schaumburg and Los Angeles counselclients in every aspect of business, including establishing, acquiring, and financing operations;ownership, development and leasing of real estate; transfer of overseas employees to the U.S.; employment, labor, and benefits counseling and dispute resolution; intellectual property, copyright and trademark; business litigation;creditors'rights and businessrisk management;structuring the distribution and sale of products and services throughout the U.S.; and estate planning and administration.
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