November 2024
FINRA bars former employees from working with former clients and customers
In May 2024, two TD Bank entities (“TD Bank”) sued two former employees and their new employer Raymond James Financial Services, Inc. and one of its subsidiaries (together, “Raymond James”) in Connecticut federal court, alleging the former employees, with Raymond James’ assistance, violated their post-employment non-solicitation covenants. The court initially entered a temporary restraining order (“TRO”) enjoining the defendants from “actively soliciting any more” of TD Bank’s clients for 14 days. TD Bank separately filed for arbitration with the Financial Industry Regulatory Authority (“FINRA”) asking FINRA to convert its TRO to permanent injunctive relief. The court stayed the proceedings, and the parties stipulated the TRO would remain in place pending FINRA’s decision.
FINRA did not issue a decision until November 18, 2024, when it enjoined TD Bank’s former employees from “initiating any form of business contact with” any clients, customers or accounts of the bank that the former employees had serviced or had contact with during their affiliation with TD Bank. FINRA also enjoined Raymond James from contacting such customers and accounts “but only to the extent that any such business contact results from information provided by” the former employees. The permanent injunction exempts any TD Bank clients, customers or accounts where the business communication is “initiated by the client without solicitation or prompting,” or which had commenced an active relationship with the employees or Raymond James prior to the issuance of the permanent injunction.
S&K Take: We flag this case as a reminder that FINRA-regulated entities and personnel may sue for injunctive relief simultaneously in both court and before FINRA. It also serves as a cautionary tale about the FINRA forum where, as with restrictive covenants, time is of the essence. While the FINRA hearing was initially scheduled for only 16 days after the TRO was issued, it was postponed several times, leaving the defendants in “legal limbo” for 6 months. As a result, the defendants were subject to the TRO for far longer than they anticipated before a tribunal finally determined TD Bank’s request for permanent injunctive relief.
Third Circuit to decide whether Ending Forced Arbitration Act prevents arbitration of “garden variety” gender or sexual orientation discrimination claims
The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“EFAA”) amended the Federal Arbitration Act to prohibit mandatory arbitration of “sexual harassment disputes.” The Third Circuit Court of Appeals, in Cornelius v. CVS Pharmacy, Inc. and Doe v. Saber Healthcare Group, is poised to determine whether a “sexual harassment dispute” includes hostile work environment claims based on gender and/or sexual orientation/gender identity if the alleged conduct was neither sexual in nature nor motivated by sexual desire. The U.S. Equal Employment Opportunity Commission (“EEOC”), the agency tasked with enforcing federal discrimination and harassment statutes, has argued in amicus briefs that these so-called “garden variety” claims are covered by the EFAA.
S&K Take: We’ve covered several court cases defining the scope of the EFAA already—here, here, and here—and expect to see more in the future. In another recent decision by the Southern District of New York in Diaz-Roa v. Hermes Law, P.C. et al., the court denied an employer’s motion to compel arbitration on the grounds that the plaintiff’s entire employment case “relates” to the sexual harassment dispute and that her sexual harassment claims were not brought solely to avoid arbitration because the relevant allegations were “not immaterial” to her other claims in the lawsuit as they were “a part of the employment relationship from which all her claims stem[med].” If the Third Circuit agrees with the plaintiffs’ and EEOC’s position here, it will make it easier for employees to add sexual harassment claims in lawsuits to avoid mandatory arbitration provisions in their employment agreements.
Michigan federal jury awards almost $13 million to terminated employee who refused COVID-19 vaccine on religious grounds
A federal jury in the Eastern District Court of Michigan in Lisa Domski v. Blue Cross Blue Shield of Michigan awarded nearly $3 million in compensatory damages and $10 million in punitive damages to an employee who claimed that her former employer discriminated against her by failing to accommodate her religious objection to its mandatory COVID-19 vaccination policy. The jury did not credit the employer’s defense that the employee failed to cooperate in the interactive process when she refused to participate in a follow-up interview to evaluate her religious beliefs.
S&K Take: Employers should approach religious accommodation requests with care and flexibility. Unlike in the disability context, where employers may require supporting documentation from a medical professional, the EEOC’s guidance generally discourages employers from questioning whether a religious belief or practice is “sincerely held” because “a religious practice may be sincerely held by an individual even if newly adopted, not consistently observed, or different from the commonly followed tenets of the individual’s religion.”
