Masuda Funai's Attorneys Speak on Employment and Benefits Matters

Advertised in Crain's Chicago Business, Alan M. Kaplan and Frank J. Del Barto presented a program on Onboarding & Terminating Employees on May 3, 2017, to Illinois workNet in Arlington Heights, Illinois.

On May 1, 2017, Frank presented an "Overview of USERRA" and its application to employee benefit plans at The John Marshall Law School's 14th Annual Employee Benefits Symposium. On May 16, 2017, Frank presented a program on 401(k) plan fee and expense litigation to over 150 retirement plan auditors at the Illinois CPA Society's Employee Benefits Conference.

Does Your Company Need an Employment Agreement? Advantages and Disadvantages

By Masanari Katsumi

Your company is planning to hire a new accounting manager. You have already decided whom to hire, and you are now working on new employee orientation packet. One of the pending questions you need to resolve is whether to require the manager to sign an employment agreement.

Is an employment agreement necessary in this situation? What type of agreement is necessary and should the agreement be limited to certain provisions? The answers depend upon your company's needs. In short, not all employment relationships require employment agreements and sometimes employers are better off not executing an agreement with their employees. What are the pros and cons of employment agreements?


Solves specific needs – To attract the candidate, the employment agreement may include a provision promising to pay him a sign-on bonus. To protect your company, the employment agreement may include a provision in which the new employee promises not to disclose confidential information he learned while working at his previous employer.

Clarifies rights and obligations – The best time to clarify the rights and responsibilities of the parties is at the beginning of the employment relationship. For example, the employee may want a guarantee that his place of employment is limited to the geographical area of your company's headquarters. Your company may want to include a provision that the employee is required to travel to its different facilities and overseas as part of his job.

Includes a finite Duration – If there is no employment agreement, the employment relationship is "at will." In an at will relationship, either your company or the employee may terminate the relationship at any time, with or without notice and for any lawful reason. An employment agreement may state that the relationship is at will or set a definite duration of employment, require notice of termination and/or automatically renew for additional periods of time. With a predetermined duration of employment, both your company and the manager may prepare and plan for anticipated future events.

Therefore Provides security – By signing an employment agreement, the manager may have a sense of security, and this may increase his morale, productivity and loyalty to your company. In addition, your company may have a sense of security that it is able to invest in the employee's training and will help ensure the lack of turnover.

Protects an employer's interests – Your company may include provisions that protect its interests. For example, a restrictive covenant enables your company to require the manager not to disclose confidential information and trade secrets. If the employee will be inventing a product, a trade secrets provision will ensure that his inventions are "works for hire" and his rights are automatically assigned to your company. Other restrictive covenants could prohibit the manager from working for one of your company's competitors for a certain period of time after his employment ends and could prohibit the manager from soliciting other employees in your company to leave and work for another company. In addition, many employers include a clause requiring the parties to resolve disputes through alternative dispute resolution methods, such as arbitrations, instead of going to court.


Gives additional remedies for the employee – If there is no employment agreement and your company terminates the employment relationship, the employee may file a lawsuit under different statutes or judge-made (i.e., "common") law. However, when there is an employment agreement, the employee has contractual rights and may sue for breach of the agreement.

Makes terminations more difficult – If there is no employment agreement, the employment relationship is "at will" and either party may terminate it at any time, with or without notice and with or without cause. However, depending upon the wording of an employment agreement, a court may require your company to terminate the relationship only for "good cause." Good cause is a legal concept with many meanings, some of which could be included within the agreement. Also, depending upon the state, the courts may require "good faith and fair dealing" between your company and the manager. Thus, your company's ability to terminate the employment relationship becomes more difficult, because the manager acquires contractual rights to contest his termination.

Creates administrative burdens – Drafting employment agreements consume resources of your company to draft agreements for each employment relationship. In addition, some employment agreements contain notice requirements and different renewal dates. Keeping track of these requirements for each existing employee could be cumbersome.

Requires a court's interpretation – If a dispute arises out of the agreement's implementation, an arbitrator or court will need to interpret the contractual provisions. Unless the provisions are clearly written, disputes will occur and the third party may interpret the provisions differently than your company originally intended.

Whether to execute an employment agreement with employees is a major decision for your company, particularly because the parties may be governed by the agreement's provisions for years to come. Therefore, your company may decide to include provisions guaranteeing employment for a period of time or limit the employment agreement to specific terms, such as restrictive covenants protecting your company's confidential information and competitive advantages. The employment agreement is part of your company's Employment Tool Box. Thus, an employment agreement may be a very useful tool that enables the parties to protect their interests while creating and maintaining a mutually beneficial relationship.

Chevron 401(k) Suit Dismissed With Prejudice

By Frank Del Barto

On May 31, 2017, the U.S. District Court for the Northern District of California granted Chevron Corporation's motion to dismiss a first amended complaint which alleged various breaches of fiduciary duty related to Chevron's 401(k) Plan (the "Plan"). As of December 31, 2014, the Plan had more than $19 billion in assets and over 40,000 participants. Noting that the plaintiffs failed to correct the deficiencies noted by the Court in its prior order, this dismissal was with prejudice. Charles White, et al., v. Chevron Corporation, et al., Case No. 16-cv-0793-PJH.

Plaintiffs, who are participants in the Plan, filed a class action against defendants Chevron Corporation, the Plan's investment committee, and 20 DOEs (who were alleged to be "current and former members of the investment committee"). In granting the defendant's motion to dismiss, the Court reviewed plaintiff's allegations that defendants (1) breached their duties of loyalty and prudence by selecting a money market fund versus a stable value fund in violation of the plan's investment policy statement, (2) caused the plan to pay unreasonable investment management fees, (3) retained a particular fund in the plan that drove investment revenue to Vanguard, (4) caused the plan to pay excessive recordkeeper fees, and (5) failed to monitor fiduciaries.

In short, like most 401(k) suits, the plaintiffs alleged that because defendants selected funds with lower returns and higher administrative and management fees, the value of the their individual accounts decreased. If true, how does a plan fiduciary know if its fees and expenses are reasonable? First, plan sponsors must understand the various fee and expense components of their particular plan. For this initial step, we recommend that the plan sponsor's consider utilizing the 401(k) Plan Fee Disclosure Tool provided by the U.S. Department of Labor.

The DOL has provided the tool in order to help plan fiduciaries understand and determine the "total cost of the plan" by identifying the various investment product, administrative, start-up and termination fees. Once a plan administrator has determined the source of all plan fees and expenses, we recommend benchmarking those fees and expenses via the retention of an investment advisor and / or engaging in a competitive bidding process. By benchmarking plan fees and expenses, plan sponsors will have a better understanding of the reasonableness of their plan's fees and expenses and help ensure that they continue to meet their fiduciary duty to defray the reasonable costs of the plan.

Naturally, the benchmarking process may lead to a change in 401(k) providers, or it may prompt the existing provider to provide alternative funds, share classes, and /or simply improve its pricing to retain the business. Because a 401(k) account balance is likely the plan participant's greatest asset, it is critically important to periodically review and benchmark plan fees and expenses.

Masuda Funai Presents Company-Specific Webinars and Training Programs

With managers and employees located in different facilities around the country and overseas, Masuda Funai's employment lawyers now present webinars as part of the training programs its presents. Presented from one of the Firm's offices, one of the Firm's attorneys presented a webinar on the Family & Medical Leave Act to over 80 site managers and administrators who implement the FMLA on a daily basis and need to comply with the certification and recertification of leave as well as intermittent and fraudulent use of FMLA leave. Two other attorneys traveled to a client's facilities in Michigan, Ohio and Tennessee to present a series of seminars on anti-competitive business behaviors and price fixing under U.S. anti-trust laws, working with foreign officials and governments, and harassment prevention. Future in-house seminars are scheduled on the importance of a code of conduct and confidentially and non-compete agreements. If there is an employment topic that you are interested in learning more about and it would fit into a webinar format, please be sure to contact your Masuda Funai relationship attorney.

The U.S. District Court for the Northern District of Illinois Awards Excellence in Pro Bono Service to Frank J. Del Barto and David J. Stein

Frank J. Del Barto and David J. Stein received awards for excellence in pro bono service at the Eighteenth Annual U.S. District Court for the Northern District of Illinois and the Chicago Chapter Federal Bar Association Awards Ceremony held on May 24, 2017.

Judge Elaine E. Bucklo nominated Frank and David for the award to recognize their work on behalf of Loretta Morse in Morse v. Illinois Department of Corrections, Case No. 12 C 10263. In presenting the award to Frank and David, Judge Bucklo remarked that they provided outstanding representation to their client who filed an age discrimination case against her former employer, the Illinois Department of Corrections. After years of discovery, successfully opposing summary judgment, and conducting a three day trial, the case settled on very favorable terms.

In his remarks, Frank said that "having invested over three and one-half years helping Ms. Morse pursue her claims, the favorable settlement terms which will enable Ms. Morse to move on with her life reinforces my belief that all lawyers should consider representing those individuals who may not have a voice in our legal system."

David added, "it was a pleasure to represent Ms. Morse and advocate on her behalf to see that she obtained just compensation for the discriminatory treatment she suffered at the hands of her former employer."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.