Court Report

Guns prohibition upheld; plan sponsor did not have to notify plan participants of feesharing arrangement; more.

May 1, 2009
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Enforceability of Guns Prohibition Depends on State Law

Ramsey Winch Inc. v. C. Brad Henry, 10th Cir., No. 07-5166 (Feb. 18, 2009), and Plona v. UPS Inc., 6th Cir., No. 08-3512 (March 6, 2009).

In February, the 10th U.S. Circuit Court of Appeals determined that Oklahoma laws supporting the right of individuals to possess firearms in locked vehicles on company property are not pre-empted by the federal Occupational Safety and Health Act (OSH Act) and therefore are enforceable. That decision rested on the facts that the Oklahoma state statutes were instituted to regulate employees as members of the general public and not as workers and, therefore, that the statutes did not conflict with Occupational Safety and Health Administration (OSHA) standards.

Professional PointerWhile workplace safety should remain employers’ primary focus, remain alert to state and local laws and developing case law related to firearms to avoid liability for inadvertent violations.

Courts that have addressed the issue of violence in the workplace have found gun-related incidents not to be "work-related" and have specifically recognized that an employer’s duty to maintain a safe workplace "does not extend to the abatement of dangers created by unforeseeable or unpreventable employee misconduct," according to the 10th Circuit.

If gun-related violence is not within the ambit of the OSH Act, such workplace issues can be regulated by state or local laws. In fact, OSHA itself has stressed its deference to "other federal, state and local law enforcement agencies to regulate workplace homicides." Further, OSHA has issued voluntary guidelines for employers seeking specifically to reduce the risk of workplace violence but has not promulgated any mandatory standards regarding those incidents.

In an interesting follow-up in a separate case, the 6th Circuit addressed a similar issue from a different perspective and upheld an employer’s anti-firearm policy.

In that case, an individual’s employment termination after the discovery of a firearm in his vehicle on company-controlled property was held not to have violated public policy, even though the state’s constitution guarantees citizens the right to bear arms.

Gary Plona was fired from his job with United Parcel Service Inc. (UPS) in Cleveland after a firearm was found in his vehicle parked in a UPS-leased parking lot adjoining his workplace. UPS has a written policy prohibiting employees from possessing firearms while on company property or while conducting company business; the prohibition specifically includes UPS’ parking lots and customer sites. Plona had signed an acknowledgment form indicating that he was aware of that policy.

In April 2006, sheriff’s deputies were in the process of conducting a search of cars in the parking lot after receiving a report of contraband in that area. A search dog identified Plona’s car as suspicious. While giving consent for a search of his car, Plona admitted that there was a firearm in that vehicle. There was, in fact, a .22 caliber Luger pistol under the front seat and an empty ammunition magazine in the glove box. Plona did not have a permit to carry a concealed weapon, nor had he registered the pistol.

Ohio is an "at-will" employment state, meaning that an employer may fire an employee "for any cause, at any time whatsoever," even if termination violates certain employee rights. However, the Ohio Supreme Court has carved out an exception to that at-will employment doctrine when a firing contravenes public policy. In other words, an individual cannot be fired for reasons that would jeopardize a clear policy for the public good.

Plona filed a lawsuit against UPS, alleging that he had been fired in violation of public policy—the right to bear arms embodied in Article I, Section 4, of the Ohio Constitution. The district court granted summary judgment in favor of UPS, holding that Plona had not demonstrated that a clear public policy had been jeopardized by his termination.

On appeal, the 6th Circuit upheld that decision, finding that Ohio does not, in fact, have a clear public policy with respect to the allowance of firearms at workplaces. In support of that holding, the court pointed out that at least one Ohio law specifically provides that employers may prohibit the presence of firearms on a private employer’s premises or property.

While Plona attempted to prove that UPS’ reason for firing him was pretextual, the court pointed out that such a rationale simply goes to the fairness of the termination. Ohio’s at-will doctrine allows termination for any reason, fair or unfair. The real issue in this case is whether Plona’s termination was against a clear public policy, thereby making it illegal.

The court found that UPS plainly was within its rights—as spelled out by Ohio law—to prohibit firearms in the workplace. Plona’s firing was not a violation of public policy, and dismissal of the case was appropriate.

By Maria Greco Danaher, an attorney with the firm of Ogletree Deakins in Pittsburgh.

Plan Sponsor Has No Duty to Disclose Sharing of Fees
Hecker v. Deere & Co., 7th Cir., No. 07-3605 & 08-1224 (Feb. 12, 2009).

The sponsor of a 401(k) plan had no fiduciary duty under the Employee Retirement Income Security Act (ERISA) to notify plan participants of a fee-sharing arrangement between the plan trustee and its affiliated company, according to the 7th U.S. Circuit Court of Appeals.

Deere & Co. sponsors two 401(k)s for its employees. Fidelity Management Trust Co. serves as the trustee and record keeper for the plans, while Fidelity Management & Research Co. serves as the investment advisor for many of the mutual funds offered as investment options.

Professional Pointer: ​Plan sponsors should take steps to minimize legal exposure such as ensuring that their summary plan descriptions and plan documents do not contain ambiguous or misleading language.

The plans offer a variety of investment options. Plan participants decide how to allocate their contributions. Each mutual fund offered charges a fee, calculated as a percentage of assets the investor places with it.

A class of plan participants sued Deere and the Fidelity defendants under ERISA, claiming that Fidelity Research unlawfully shared revenue from its mutual fund fees with Fidelity Trust to pay for administration of the 401(k)s. 

The plaintiffs alleged that Deere breached its fiduciary duty to participants by failing to inform them of the fee-sharing arrangement and by imprudently limiting investment options to Fidelity Research funds. The plaintiffs argued that the Fidelity defendants were "functional fiduciaries" who breached their duty to plan participants.

The district court dismissed the claims, and the 7th Circuit affirmed. The Fidelity defendants were not "functional fiduciaries" and did not owe a duty to participants, according to the appeals court, because they did not exercise any discretionary authority over managing the plans. Although the 7th Circuit issued a favorable ruling on this matter, other circuits have yet to weigh in.

By R. Alex Boals, an attorney with Kiesewetter Wise Kaplan Prather PLC in Memphis, Tenn.

Fired Employee Alleges Libelous E-mail
Noonan v. Staples Inc., 1st Cir., No. 07-2159 (Feb. 13, 2009).

A company was entitled to deny the exercise of stock options and severance payments to an employee fired for cause, according to the 1st U.S. Circuit Court of Appeals. It also held that truthful statements arguably published with "actual malice" can give rise to a libel lawsuit.

Alan Noonan was a Staples sales director who traveled extensively for business and had to compile expense reports for business expenses. Auditors discovered an expense report in which Noonan had requested $1,622 in excess of what he spent. The auditors also found that Noonan had booked the travel through a noncompany travel agent and failed to submit all the required receipts.

Professional PointerPay attention to agreements that deny severance payments or other benefits to employees if they are fired for cause. The for-cause provision should be clearly defined so a fact-finder will have no question about its meaning.

Staples fired Noonan. It sent him a letter stating that he had been terminated "for cause" for violating the travel and expense policy and code of ethics. Staples denied Noonan severance benefits and refused to allow him to exercise stock options, claiming that Noonan was ineligible because he had been fired for cause.

The next day, a Staples executive vice president sent a mass e-mail to roughly 1,500 employees informing them that Noonan had been fired for violating the travel and expense policy.

Noonan sued Staples; his complaint alleged:

  • Breach of stock-option agreements.
  • Breach of his severance agreement.
  • Libel based on the mass e-mail.

A district court granted summary judgment in favor of Staples. On appeal, the appeals court upheld summary judgment on the first two claims. In ruling on the severance-agreement claim, the appeals court concluded that the evidence showed Noonan failed to adhere to the code of ethics. The district court therefore had properly determined that Noonan forfeited his entitlement to severance. But the 1st Circuit reversed summary judgment for Staples on the libel claim and returned it to the district court for trial.

By Amy Onder, general counsel of iXP Corp. in Cranbury, N.J.

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