THIS ISSUE'S HEADLINES

Recent ADA Decision Likely to Spur Employee Lawsuits

Primer on Fiduciary Duties and the Business Judgement Rule

SEC Proposes Conditional Exemption from Broker Registration Requirements for Certain “Finders”

Stay Informed – PLDO COVID-19 Resource Library


RECENT ADA DECISION LIKELY TO SPUR EMPLOYEE LAWSUITS

Employers in the four easternmost New England states should be aware of recent case law that may radically impact their obligations under the Americans with Disabilities Act (“ADA”). Federal courts in those states are subject to the guidance of the U.S. Circuit Court of Appeals for the First Circuit, which recently issued a decision in an ADA case that represented a significant departure from the prior decisions of not just every other Circuit Court, but of the First Circuit itself.

In Bell v. O’Reilly Auto Enterprises, LLC, the First Circuit addressed a store manager’s claim that his employer denied him a reasonable accommodation. The manager’s doctor provided a return-to-work clearance which stated that, because of the manager’s mental health issues, he should not be scheduled for more than 9 hours per day, 5 days per week: a total of 45 scheduled hours. The store’s policy, however, was that managers would be scheduled for 50 hours per week, and needed to be flexible for up to an additional 50 hours per week.

In overturning the District Court of Maine, which instructed the jury that the manager must prove that he “needed” an accommodation to perform the essential functions of his job, the First Circuit held that:

The District Court erred here when it instructed the jury that, for a disabled employee to make out a failure-to-accommodate claim, he must demonstrate that he needed an accommodation to perform the essential functions of his job.

The First Circuit then ruled that:

An employee who can, with some difficulty, perform the essential functions of his job without accommodation remains eligible to request and receive a reasonable accommodation.

This holding – that a disabled employee who can perform the essential functions of a job can nonetheless request and receive special accommodation so long as the employee faces “some difficulty” in performing those functions – can be expected to invite a flood of litigation.

The unfortunate reality is that many employees with disabilities face “some difficulty” in performing essential job functions. The Court in O’Reilly did not provide any guidance on when “some difficulty” rises to the level that it must be accommodated. This lack of guidance contrasts with the otherwise-settled principle that the duty to accommodate is triggered when the accommodation is necessary for the employee to perform the essential functions of the job. It can be expected that Plaintiff’s lawyers will seize upon the ambiguity of this new “some difficulty” standard. If you have questions or would like further information, please contact PLDO Partner Joel K. Goloskie and Attorney Randelle L. Boots at 401-824-5100 or email jgoloskie@pldolaw.com and rboots@pldolaw.com.

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PRIMER ON FIDUCIARY DUTIES AND THE BUSINESS JUDGEMENT RULE

As a general proposition, fiduciary duties of board members and officers are rules of conduct that require a person to act in the interest of someone else. Officers and directors are responsible for managing the assets of the corporation for the benefit of the shareholders. In essence, the shareholders benefit when officers and directors competently carry out their duties commensurate with their fiduciary obligation. The source of fiduciary duties is found in state statutes or common law, i.e., decided case law. The scope of fiduciary duties for officers and directors may vary from state to state. Many, if not most states follow the rules established by Delaware courts due to the breadth of experience and expertise of the courts’ decisions relating to fiduciary duties, which is constantly evolving due to new fact patterns.

Fiduciary duties serve as the foundation of what is referred to as the “business judgement rule.” The business judgement rule presumes that decisions are made by officers and directors on an informed basis, which is the duty of care in making a decision in good faith in the best interest of the corporation and ultimately, the shareholder. Making a decision based on informed judgement presumes that the decision maker was informed of all reasonably available and relevant information before making the decision. The information relevant to making an informed decision could include cost, potential exposure to liability, alternatives and other facts that a prudent person in a similar situation would rely upon before making a final decision.

In essence, the duty of care requires fiduciaries to act on an informed basis; whereas, the fiduciary duties of loyalty, which is at the heart of what it means to be a fiduciary in a corporate setting, obliges the fiduciary to put the interests of others before self. The business judgement rule and details regarding fiduciary duties are available in PLDO Managing Principal Gary R. Pannone’s latest business advisory, Fiduciary Duties and the Business Judgement Rule. The essay delves into considerations for making decisions, compliance issues and the need to avoid conflicts of interest by those entrusted with fiduciary duties as a corporate officer or director. Please click the link above or here to access the advisory. If you would like further information about fiduciary duties or other business matters, please contact Attorney Pannone at 401-824-5100 or email gpannone@pldolaw.com.

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On October 7, 2020 the Securities and Exchange Commission (the “SEC”) proposed a new conditional exemption from the broker registration requirements for certain “finders” who assist small businesses in capital raising transactions involving only accredited investors. If adopted, this new exemption would permit natural persons to engage in certain limited activities without first registering with the SEC as securities brokers. The SEC is soliciting comments to the proposed new exemption for a thirty (30) day period following publication in the Federal Register.

In general terms, federal securities laws require that persons and entities engaged in the business of “effecting securities transactions” must register as broker/dealers unless an exemption from the registration requirements applies. A significant body of law has developed over the years interpreting what constitutes “effecting securities transactions” and the courts have developed a multi-factor test to determine whether the party assisting in the capital raising activities is effecting securities transactions or, as typically alleged by the party, the activities are sufficiently limited that the person is really just a “finder.” Not surprisingly, the factor that is given the most weight in this analysis is whether the finder’s compensation is tied to the success of the capital raising transaction. Most often, this takes the form of a percentage of the capital raised by the “finder. As a practical matter, if the answer to that question is yes, the SEC will almost certainly take the position that the finder is required to register as a securities broker.

In the proposed exemption to the registration requirements for securities brokers, two classes of exempt finders are created: Tier 1 Finders and Tier 2 Finders. Both classes of finders would be permitted to accept performance or success-based compensation (e.g. a percentage of capital raised). However, the permissible involvement of Tier 1 Finders would be very limited, while the requirements for Tier 2 Finders are far less restrictive. The details of both categories and requirements are described by PLDO Partner William F. Miller in his advisory, SEC Proposes Conditional Exemption from Broker Registration Requirements for Certain Finders. Attorney Miller also offers practical advice relative to state securities laws regarding registration of securities brokers. If you have questions about the SEC’s proposal or would like to discuss other business matters, please contact Attorney Miller at 508- 420-7159 or email wmiller@pldolaw.com.

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STAY INFORMED – PLDO COVID-19 RESOURCE LIBRARY

As the COVID-19 pandemic evolves, information is key to addressing challenges that impact decision-making for our families, businesses and community. PLDO’s team of attorneys continue to provide updates and advisories that our accessible in our online Resource Library. Among the featured articles include the following:

• DOL Limits COVID-19 FMLA “Health Care Provider” Exemption
  
  
• Courts Start To Weigh In On Covid-19 Lawsuits
  
  
• How will the Coronavirus Impact Your Contracts
  
  
• Enhanced Bankruptcy Options for Small Businesses Under The CARES Act
  
  
• Mandatory Vaccines for Coronavirus? Likely Legal Under 115-Year Old U.S. Supreme Court Case

If you have questions and concerns about impacts to your organization, please contact your PLDO attorney directly in our Rhode Island, Massachusetts or Florida offices or call our toll free number at 866-353-3310 to discuss your legal matter. We are here to help.

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