Wall Street Collapse = ERISA Stock Drop Litigation

Graphup Not a surprising development at all. From BNA Daily Labor Report (subscription required):

As several heavy hitters in the financial world have come under pressure or have gone bankrupt in the past couple of months because of the subprime mortgage and lending crisis that has battered investment firms and banks, the employer “stock drop” cases that proliferated in the post-Enron Corp. and post-WorldCom Inc. age are on the rise.

Although the Employee Retirement Income Security Act claims raised in these stock drop cases have not been identical, there are two central claims that arise in these cases. The first claim typically raised is that the plan fiduciaries breached their duties by offering company stock as a plan investment option when the stock was an imprudent or unwise investment. The second claim focuses on the disclosure obligations of the plan fiduciaries and often alleges that the fiduciaries breached their duties by not telling plan participants of financial matters of the plan sponsor that made the sponsor’s stock an imprudent investment.

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Protecting Workers in a Federal System

Paul Secunda has a new pair of working papers on SSRN, entitled “The Ironic Necessity for State Protection of Workers” and “More of Less: The Limits of Minimalism and Self-Regulation.”  These are his opening and closing statements in a debate with Jeffrey Hirsch for PENNumbra.  Paul takes the position that the federal government is doing a poor job of protecting American workers, noting a lack of capacity or will to engage in robust enforcement of statutes likes the National Labor Relations Act and the Occupational Safety and Health Act.  As a result, he would like to see states play a more active role in workplace regulation. 

These short papers touch on an important, longstanding debate in federalism theory: whether each field of social regulation ought to be handled exclusively at a particular level of government (federal, state, or local), or whether shared responsibilities ought to be the norm.  The exclusivity model was dominant through much of this nation’s history, but was almost entirely supplanted in the middle decades of the last century by a cooperative federalism model.  As someone who worries a lot about transparency and accountability in government, I confess to some unease about the opaque, complex federal-state-local arrangements that now predominate in nearly every major field of public policy (environmental protection, crime, health care, education, housing, transportation, etc.).  On the other hand, if the mechanisms of democratic accountability do not operate well, the exclusivity model can lend itself to agency capture, bureaucratic inertia, and regulatory stagnation–which is (I take it) how Paul would characterize the present state of federal labor and employment law.

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The Scope of IRCA Preemption

Scales Thanks to Ross Runkel for bringing to my attention this case from the 9th Circuit concerning whether the Legal Arizona Workers Act (LAWA)  is preempted by Immigration Reform and Control Act (IRCA).  In CPLC v. Napolitano (9th Cir 09/17/2008), the court examined LAWA, which allows state courts to suspend or revoke the business licenses of employers who knowingly or intentionally hire “unauthorized aliens.”  As Ross explains:

That act also requires employers to use the federal E-Verify system (an internet-based system that allows an employer to verify an employee’s work authorization status).

But:

The 9th Circuit rejected various facial challenges to the Act, concluding (among other things) that it is not expressly preempted by the federal Immigration Reform and Control Act (IRCA).  In reaching that conclusion, the court determined that the Act fell within the scope of the “savings clause” of IRCA’s express preemption provision as a “licensing law.”

So it seems that IRCA, like ERISA, recognizes federalism concerns by exempting certain types of state laws that have historically been in the domain of state regulation.

Cross posted at Workplace Prof Blog.

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