“Collective Action” Permitted in Citibank Overtime Pay Case

ATTORNEY: MURIELLE STEVEN WALSH
POMERANTZ MONITOR, MARCH/APRIL 2012

A federal judge has conditionally certified a nationwide “collective action” in Pomerantz’s overtime pay case against Citibank, and has authorized us to send a notice to personal bankers who may have been affected by the misconduct we allege in our complaint.
 
We brought this case on behalf of Citi personal bankers (PBs) nationwide who we allege worked “off-the-clock” overtime but were not paid for it. This alleged conduct would violate the Fair Labor Standards Act (FLSA), as well as several state laws, including New York’s.
 
Under the relevant law, we had to make a “modest showing” that there are others who are “similarly situated” to our clients. Here, Citibank has at least 4,000 PBs, of whom we have been able to identify, so far, about two dozen employees who were not paid for overtime work. Citi argued that this was not enough.
 
To bolster our contention that there are a lot more PBs who were “similarly situated” we relied on evidence of dual-edged nationwide policies that created an environment that was ripe for FLSA/overtime violations. We argued that the court could infer from the existence of these policies that there are probably many more PBs who suffered the same fate as our clients. Citi had a nationwide job policy and high sales quotas that effectively forced PBs to work overtime to keep their jobs; but Citi also had a nationwide “no overtime” policy that strongly discouraged the incurring of overtime expenses. The natural result of these conflicting policies was that people worked overtime but were not paid for it, either because they were intimidated into underreporting their time, or in some instances, their managers altered their time records to show no overtime worked. Our plaintiffs testified that this in fact occurred.
 
Because the policies were carried out nationwide, it was reasonable to infer that there are many other PBs who are “similarly situated” to our clients. Citi argued that its policies were “facially lawful,” and that the court could not infer a pattern of FLSA violations simply because it had otherwise lawful policies that had conflicting goals. The Court disagreed.

Say on Pay is Having Its Day

ATTORNEY: H. ADAM PRUSSIN
POMERANTZ MONITOR, MARCH/APRIL 2012

Although only 45 companies – less than 2% of all publicly held companies – lost “say on pay” votes last year, the Wall Street Journal reports that many of those companies are going out of their way to do better this year. Jacobs Engineering and Beezer Homes, for example, have already obtained approval, after revamping executive pay, to bring it into better alignment with overall corporate performance. Beezer, in particular, got a new CEO, hired a new compensation consulting firm and adopted a new performance-based stock plan that stopped giving executives automatic restricted stock grants, and went to great lengths to consult with investors about compensation. As a result, at its annual meeting in February it received 95% shareholder approval of its pay plans. Jacobs did much the same thing (though it kept its CEO) and increased its shareholder “yea” vote from 45% last year to 96% at its annual meeting in January of this year.
 
Executive turnover at loser companies has been roughly twice the average rate. About 1 in 4 installed a new CEO after the vote, and about 1 in 5 put in a new CFO, both more than double the average turnover rate.
 
Corporate governance mavens will be looking ahead to votes later this spring at other loser companies from last year, including Hewlett Packard and Cincinnati Bell. H-P has a new CEO, Meg Whitman, who is pulling in $1 in compensation, and has reportedly held compensation discussions with 200 or so of its nearest and dearest institutional investor shareholders, in an effort to tie compensation more closely to corporate performance. Cincinnati Bell, which was sued by shareholders after losing last year’s vote, agreed to revamp disclosures and to dump its compensation consultants if it loses another say on pay vote.
 
The effect of say on pay votes is largely attributable to the attention that Institutional Investor Services (“ISS”), the proxy advisory firm, has been paying to this issue. The WSJ reports that a study published in the journal Financial Management concluded that a negative ISS recommendation on a management proposal influences between 13.6% and 20.6% of investor votes; and in 2011, ISS advised investors to vote “no” on pay proposals about 11% of the time. Some are predicting that the ISS will say “no” far more often this year than last. In one highly publicized incident, ISS got into a brawl with Disney over its pay packages. Disney won this won, by aggressively fighting back.
 
Also amplifying the impact of “say on pay” votes is the SEC ruling that executive compensation matters fall into the “Broker May Not Vote” category under its Rule 452. That means that brokers, who tend to vote reflexively with management, cannot vote shares held by their investor customers, if those customers have not sent them instructions on how to vote. This means that companies will have to work that much harder to secure investor “yea” votes on compensation.