Compliance Blog

Posted by Anthony Demangone

Here are a few items worth noting on this fine Wednesday morning.

Bankruptcy Discrimination in Employment.  Is bankruptcy discrimination impermissible for credit unions in the employment context?  Read this fine blog post to dive into the issue. (Kaufman & Canoles.)  Here's their take:

That depends.  According to the Bankruptcy Code, private employers may not terminate or discriminate against current employees on the basis of bankruptcy.  By comparison, public or governmental employers are forbidden not only from terminating employment or discriminating against current employees on the basis of bankruptcy, but also from denying employment on the basis of bankruptcy.  Interestingly, what that means is private employers are not prohibited from denying employment on the basis of bankruptcy.  As a practical matter, private employers who may wish to deny employment on the basis of bankruptcy are reminded to not hire employees until proper credit checks are complete.  Once hired, the additional protections applied to employees complicate matters significantly.

Some of you may have groaned when you read the first two words of their post: It depends.  Stop that groaning!  There are so few black and white areas of the law or compliance these days, I tend to get very nervous when I don't see that phrase.  You may want to forward this post to your HR division.

Listen to What They Say.  Sometimes, you can get a peek into the future with what appears to be a casual statement.  I call this "reading the tea leaves."  One does have to be careful when trying to read too much into such things, but I think it is not wise to look for such statements.  Examples?

1.  CFPB and Credit Cards. Following a recent conference that looked at credit cards since the CARD Act, the CFPB took away four lessons.  Here's one of their take-aways. 

Prior to the CARD Act, there was a wide gap between the initial stated interest rate for a credit card and the actual cost of the credit over time. The CARD Act curtailed certain practices in the credit card industry that created unanticipated costs for consumers. The result has been more transparent pricing: while front end pricing has increased, the overall cost of credit has not.

Now, look at what they said.  The CARD Act curtailed the ability of the credit card industry to led to unanticipated costs for consumers.  This leads to better "front-end" pricing.  I see this to mean the following: All things being equal, the CFPB would like to see front-end pricing.  Non-interest income on loans, and fee-income on share accounts will be under increased pressure from the CFPB and other regulators.  In the past, we've seen credit card penalty fees and overdraft fees being regulated. Next year, it could be NSF fees, account maintenance fees, and the like.  

2.  NCUA and Risk.  If you read NCUA Letter to Credit Unions 11-CU-03, you'll see that NCUA is concerned about three major areas.  

•  
  • Credit risk.
  • Interest rate risk.
  • Concentration risk.

I am no rocket scientist, but when I see a list like this, and NCUA says it will "continue to close monitor and supervise" in these areas - I pay attention. 

I Read This Stuff So You Don't Have To.  I really like Inside Counsel.  While the magazine is focused on in-house law departments, many of the articles are very useful for any business. And as far as I can tell, it is free.  From the latest issue:

1. Here's a nice article on some basic principles regarding attorney-client privilege.  Yes, discussions with in-house attorneys can gain the protections of this privilege. 
2. This article talks about possible ways to improve ethics training.  
3. The print edition had an article about a recent decision from the 1st Circuit.  In Ahern v. Shinseki, the court basically held that anti-discrimination rules do not protect employees against every "unpleasant" work experience. Here's a snippet:

Toiling under a boss who is tough, insensitive, unfair, or unreasonable can be burdensome, but Title VII does not protect employees from the "ordinary slings and arrows that suffuse the workplace every day." Smith v. F.W. Morse & Co., 76 F.3d 413, 425 (1st Cir. 1996). Nevertheless, generally disagreeable behavior and discriminatory animus are two different things.

Absent some showing that gender-based discrimination polluted the workplace, the plaintiffs' constructive discharge claim must fail. See Wagner v. Devine, 122 F.3d 53, 55 n.4 (1st Cir. 1997) (explaining that "a finding of constructive discharge . . . require[s] some showing that the challenged conduct actually was attributable to the alleged discrimination"); see also Carter v. George Washington Univ., 387 F.3d 872, 883 (D.C. Cir. 2004); Konstantopoulos v. Westvaco Corp., 112 F.3d 710, 718 (3d Cir. 1997).   We add that, notwithstanding the plaintiffs' repeated references to employees taking stress leaves, the work environment that they depict, though far from ideal, was not so difficult or noxious that a reasonable person would have felt compelled to resign. Roman v. Potter, 604 F.3d 34, 42 (1st Cir. 2010); Suárez, 229 F.3d at 54-55. Indeed, the vast majority of the employees who worked under Khatib, male and female, were subjected to the same treatment and chose to stay. This fact underscores the absence of any foundation for a claim of constructive discharge. See Greenberg v. Union Camp Corp., 48 F.3d 22, 28 (1st Cir. 1995).

Now, you may think that because the court ruled in favor of the employer, that this was a victory for the employer. I sure don't see it that way.  This case made it to the federal circuit court.  This employer likely has paid a king's ransom in legal bills.  I'm betting that the affected workplace was full of stress during depositions, discovery, etc. Claims of discrimination can tear a workplace apart.  Boorish behavior by management, while not always impermissible - can lead to large expenses and disruptions.  I've always felt that such behavior increases the risk that an organization will receive a claim of discrimination.   

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