A class action lawsuit against New York University, which alleged that the fiduciaries of its two retirement plans breached their ERISA duties by failing to diligently monitor the plans’ investment funds and allowing the plans to pay excessive fees, was recently dismissed.1 After an eight-day bench trial, U.S. District Judge Katherine B. Forrest ruled that, despite some “troubling” deficiencies in the manner in which the fiduciaries discharged their duties, the plaintiffs failed to prove any fiduciary breach.
The National Labor Relations Board (Board), in Columbia University, has issued a 3-1 decision holding that graduate, and undergraduate, student assistants are common law employees within the meaning of the National Labor Relations Act and therefore are eligible to organize and bargain collectively under federal labor law. In so doing, the Board overruled its 2004 determination in Brown University. Board Member Miscimarra wrote a lengthy dissent, arguing that the educational nature of the relationship between student and educational institution should dictate that student assistants are not employees and therefore they should not be eligible to organize and bargain collectively. After much speculation, and following an invitation for briefing in December 2015, the NLRB rejected the Brown holding that graduate assistants cannot be statutory employees because they are “primarily students and have a primarily educational, not economic, relationship with their university.” The Board first noted that it has the statutory authority to treat student assistants as statutory employees. The Board applied a common law test and indicated that when student assistants perform “work,” at the direction of a college or university, for which they are compensated, a common law employment relationship will be deemed to exist and the students will be eligible to organize and bargain collectively. The Board indicated that the new test will apply to all student assistants, including graduate assistants engaged in research funded by external grants (and subject to the conditions of those grants). The Board also determined that the petitioned for bargaining unit at Columbia -- which included graduate students, terminal Master’s degree students, and undergraduate students -- constituted an appropriate unit and that none of the petitioned for classifications consisted of temporary employees who should be excluded from the unit. Finally, the Board remanded the case to the Regional Director for consideration of whether student assistants not currently performing their assistant duties should be eligible to vote based upon a continuing expectation of future common law employment. The Board’s decision was long the subject of speculation and has been anticipated by many commentators. In the wake of the decision, colleges and universities should anticipate increased organizing activity on their campuses and will have the obligation to bargain with units comprised of student assistants if they are recognized after an NLRB election. Given the breadth of the Board’s decision, and the potential units that could be petitioned for by unions, this decision has the potential to represent a significant challenge if broad units of student assistants are voted in and certified under NLRB procedures.
Three lawsuits filed in early August suggest that plaintiffs’ law firms, representing employees of colleges and universities, are looking at higher education retirement plans as potential targets for lawsuits seeking millions of dollars in damages. The New York Times reported that class action lawsuits were commenced on August 9, 2016 against three prominent universities – New York University, Yale, and the Massachusetts Institute of Technology – alleging that the schools had allowed their employees to be charged excessive fees on their retirement savings. The law firm bringing the lawsuits – Schlichter Bogard & Denton – has already brought and settled many similar lawsuits against companies such as Lockheed Martin, Boeing, and Novant Health, for amounts in the tens of millions of dollars. The Lockheed Martin settlement, for example, was for $62 million. The new lawsuits suggest that Schlichter, and potentially other plaintiffs’ law firms, are now looking at college and university plans as potential targets for similar kinds of claims. The new lawsuits are putative class actions, which means that the law firm represents certain named employees who are participants in the universities’ retirement plans, and purports to represent all other similarly situated employee participants – plaintiff classes that may have thousands of members each. Once a handful of the college or university’s employees agree to be part of the lawsuit, it can be brought on behalf of all the employees in the retirement plan. The claims against NYU, MIT and Yale are similar to claims made in many of the previous retirement plan lawsuits brought by the Schlichter firm and others: that retirement plan fiduciaries breached their fiduciary duties under the Employee Retirement Income Security Act (ERISA) to prudently select investment vehicles for the plans so as to maximize returns, often by minimizing fees. Under ERISA, the “fiduciaries” of a covered retirement plan – plan fiduciaries can include administrative and investment committees and, frequently, officers and other members of management of the college or university – are subject to strict fiduciary responsibilities and can be held personally liable for any losses caused by a breach of these duties. In short, it means the college or university is obligated to administer the retirement plan funds of employees in a manner that results in the highest possible prudent growth. Beginning about ten years ago, a wave of lawsuits have been brought on behalf of retirement plan participants alleging that fiduciaries had breached their duties by selecting improper investment options, and in particular by allowing excessive fees to be paid from plan assets. If the investment fees paid by a retirement plan are deemed to be excessive, even by a seemingly small margin, the aggregate losses over an employee’s working career can be very large. A frequently cited calculation stated in a U.S. Department of Labor publication more than 10 years ago – and repeated in the Times article – recites that if investment fees are one percentage point higher than a reasonable amount, the participant’s retirement account will be 28 percent lower after a 35 year career. If that is true, then for large plans (like those sponsored by the three universities), the potential losses are enormous – the complaint against MIT alleges that the plan could have saved more than $8 million in fees in a single year by selecting investments prudently. (The complaint’s damage claim is of course not limited to a single year’s losses.) Significantly, these lawsuits also involve claims against major college and university retirement plan managers, including TIAA-CREF and Fidelity. Accordingly, any college currently using these companies for its employee retirement plans could face some of the same claims. To reduce the risk of liability going forward, retirement plan fiduciaries should, among other things:
exercise “procedural prudence” in analyzing, vetting, and selecting investment options and advisors for the retirement plan, with a view to the risk, return and cost characteristics of each investment and the plan portfolio as a whole,
continually monitor the chosen investments and make changes if and when appropriate,
discuss fees and fee options with retirement plan companies to secure the most favorable arrangements for employees,
require that retirement plan managers disclose fees and charges so they may be communicated to employees;
avoid any conflicts of interest in the selection and monitoring processes, and
consult with third party advisors whenever “in-house” fiduciaries lack necessary expertise.
Colleges and universities may also want to confer with existing retirement plan managers regarding responses to questions which may arise at this time from employees about current retirement plans. Attorneys in Bond Schoeneck & King’s Employee Benefits Practice Group frequently counsel clients with respect to best practices for fulfilling fiduciary duties and avoiding ERISA liability. Often this takes the form of “fiduciary training” we provide to retirement plan committees and other plan fiduciaries. In addition, the firm’s Litigation Group has substantial experience in defending ERISA lawsuits.  Tara Siegel Bernard, “M.I.T., N.Y.U. and Yale Are Sued Over Retirement Plan Fees”, NY Times (Aug. 9. 2016, accessed at http://www.nytimes.com/10/your-money/mit-nyu-yale-sued-4013b-retirement-plan-fees-tiaa-fidelity.html.  We discussed some of the numerous issues pertinent to these types of claims in previous Memoranda – , for example: ERISA Fiduciary Guidance - Fairness for Defined Contribution Fees, and ERISA Fiduciary Guidance - Making a "Watch List" Work.
In the private sector, most full-time (tenured/tenure track) faculty are currently considered “managerial” under the National Labor Relations Act (“NLRA”), making them ineligible for the protections of the NLRA, including the right to organize and bargain collectively. (Managers and supervisors are not considered “employees” under the NLRA.) Managerial status does not preclude an institution from voluntarily recognizing a faculty union, but it does prevent faculty from compelling a unionization vote under the NLRA. At the risk of oversimplifying, what makes most private sector full-time faculty managerial is their shared governance role. Adjuncts, or contingency faculty, on the other hand are often not included in the shared governance model. The Chronicle recently reported on a study presented at this year’s Association for the Study of Higher Education (“ASHE”) annual conference on adjuncts and shared governance. According to The Chronicle’s report, the Study examined more than 100 research universities in an attempt to quantify adjuncts’ involvement in governance. The Study found that at about two-thirds of the institutions studied, faculty senates were off-limits to adjunct instructors who had less than half the workload of a full-time faculty member. The remaining one-third of institutions were about evenly split between those whose faculty senates were more open to adjuncts and those whose senates were more restrictive in terms of access for adjuncts. Interestingly, these results are inconsistent with AAUP’s view, reflected in a report issued in late 2012 which recommended that eligibility for voting or holding office in shared-governance bodies should be the same for all faculty, regardless of their full-time or part time status. Because adjuncts, who along with others who constitute the “contingent” faculty that now comprise perhaps as much as 75% of higher education teaching ranks, do not participate in shared governance, they generally are not considered managerial under the NLRA. As a result, they are entitled to compel unionization through the National Labor Relations Board’s election procedures. And over the past several years, adjuncts at a number of institutions have actively pursued this path, often with a fair degree of success. For example, when adjuncts at Georgetown University voted to unionize this past May with SEIU Local 500, it purportedly raised the number of adjuncts in the District of Columbia organized by Local 500 to more than 75% (including adjuncts at previously organized American University, George Washington University, and public Montgomery College) . The potential long term impact of achieving this level of “density” success across all of D.C. is apparent. More recently, a similar "regional" approach was started by SEIU in Boston. Operating under the name Adjuncts Action, adjuncts at Tufts University voted to unionize this past September, and unionization efforts are underway at Northeastern University and Lesley University. This effort suffered a setback in late October when adjunct faculty at Bentley University in Boston voted 100-98 against unionization. (Objections to the election outcome have been filed and are pending.) Despite this setback, the trend appears clear and institutions should expect efforts to organize adjunct faculty will continue, and likely expand, across the country. While there are a number of factors that undoubtedly contribute to adjuncts’ interest in organizing, and economic factors are often prominently noted, in reality experience suggests that it may often be non-economic factors that ultimately drive the outcome. As with any other employee group, non-economic factors are often as important as economic factors when it comes to unionization. In this context, the more critical question may be how are adjuncts treated on their campuses? Are they welcomed and received by the rest of the campus community as important contributors to the overall mission, or not? Ironically, it can often be their relationship with their full-time colleagues that creates a tension and feeling of disrespect (or at least insufficient respect) which is a contributing factor in unionization decisions. In other words, an interest in securing an institutional voice like their full-time colleagues may drive the outcome as much as anything else. As noted, at most institutions examined in the ASHE Study, adjunct involvement in shared governance is limited and that voice does not exist. Yet, at least one faculty study has concluded that involvement in meaningful shared governance may be a more important indicator of faculty satisfaction than economic factors. There is little reason to think this conclusion is not as relevant for contingent faculty as it is for full-time faculty. The moral? Institutions should consider promoting the involvement of their adjuncts in governance matters. Not only may it result in more satisfied adjuncts, but it might also impact their status as possibly "managerial" members of the institution.
Many colleges and universities are federal contractors and, as such, need to comply with Department of Labor, Office of Federal Contract Compliance Programs’ (“OFCCP”) regulations relating to affirmative action. Revised Regulations have been issued by OFCCP addressing affirmative action obligations applicable to disabled individuals under the Rehabilitation Act of 1973, as amended ("Section 503"), and to protected veterans pursuant to the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, as amended ("VEVRAA"), and become effective March 24, 2014. Due to the numerous requirements in these new Regulations, higher education institutions that are federal contractors should start reviewing and implementing procedures to ensure compliance. Ten steps that covered institutions should implement by March 24, 2014 include:
1. Review current electronic systems and databases to determine if there is capacity to capture protected veteran and disability status for both applicants and employees. If not, institutions will need to invest in new systems or methods to capture this required data.
2. Review current referral sources to determine if sources are providing qualified protected candidates; sources that are not should be eliminated and/or new ones should be added. This is a key component for meeting the 8% hiring benchmark under VEVRAA and the 7% utilization goal under Section 503.
3. Ensure all required notices are posted. Where notices are posted electronically, make sure they are accessible to all employees, including those with disabilities. For covered institutions that use electronic or internet-based application processes, an electronic notice must be posted and stored with the electronic application to inform job applicants of their EEO rights.
4. Review collective bargaining agreements to determine if the agreements include notice of the institution’s affirmative action and non-discrimination policies and request for cooperation. If they do not, institutions should send annual letters to each union, notifying the union(s) of the policies and requesting cooperation.
5. Review and update the list of all existing subcontracts, including vendors and suppliers, who should be receiving the mandatory written notice to subcontractors of the institution’s affirmative action efforts and request for cooperation.
6. Revise contracts and purchase orders to include the revised mandatory EEO language under both Section 503 and VEVRAA.
7. Make sure solicitations and advertisements include all the protected categories – minorities, females, disabled individuals, and veterans. OFCCP has indicated in recent FAQs that just using "D" and "V" is not adequate since abbreviations must be commonly understood by jobseekers.
8. Update recordkeeping procedures to incorporate the three-year retention requirement for specific records under Section 503 (documentation and assessment of external outreach and data collection analysis) and VEVRAA (documentation and assessment of external outreach, data collection analysis, and benchmarking records).
9. Revise self-identification forms inviting applicants to self-identify at both the pre-offer and post-offer stage of the selection process. All Section 503 invitations must use the new OFCCP form which will be posted on OFCCP’s website once approved. Under the Section 503 Regulations, employees must be invited to self-identify again every five years and reminded on an annual basis that they can voluntarily update their status at any time.
10. Adopt written reasonable accommodation procedures to ensure uniformity in processing requests. The OFCCP’s guidance for creating procedures (listed in Section 503 Regulations as Appendix B) can be used in developing such procedures.
At the end of last week, the U. S. Department of Education announced that its Office for Civil Rights (“OCR”) had entered into a Resolution Agreement with the State University of New York (“SUNY”) dealing with Title IX compliance issues. Significantly, the Agreement arose out of an OCR initiated investigation and was not based on the filing of any complaint against SUNY. OCR’s Resolution Agreement and accompanying letter of findings are significant because, as with OCR’s Resolution Agreement earlier this year involving the University of Montana, they provide a roadmap as to what OCR considers to be the requirements of Title IX in the sexual harassment context. OCR’s latest pronouncements start with its basic operating premises:
if a recipient of federal financial assistance knows or has reason to know about sexual harassment which creates a hostile environment, it must take immediate action to eliminate it, prevent its recurrence and address its effects;
when responding to any complaint of sexual harassment, a recipient must take immediate and appropriate action to investigate or otherwise determine what occurred;
if that investigation reveals that discriminatory harassment occurred, the recipient must take prompt and effective steps reasonably calculated to end the harassment, eliminate any hostile environment and its effects, and prevent recurrence;
these duties exist regardless of whether a student has complained, asked the recipient to take action, or identified the harassment as a form of discrimination.
From there, these documents offer important insight into OCR’s perspective of the full scope of a recipient’s obligations under Title IX. First, of course, the institution must have a policy expressly providing that it does not discriminate on the basis of sex in its educational programs or activities, that this prohibition extends to employment, and that inquiries concerning the application of Title IX may be referred to the institution’s Title IX Coordinator or to OCR. The Title IX Coordinator should be clearly identified by name or title, with contact information (phone number, address, email). Notice of this policy must appear, at a minimum, in announcements, bulletins, catalogs and application forms used in connection with the recruitment of students and employees and should be published broadly including on the institution’s website. Notice of the institution’s non-discrimination policy must also be provided to any unions representing the institution’s employees. Second, the institution must maintain procedures for resolving sexual harassment complaints. These procedures can be either the same as those used for resolving other types of complaints or can be dedicated to the resolution of sexual harassment complaints, but in either event they must provide for the prompt and equitable resolution of complaints, whether brought by students, employees or third parties. As in the University of Montana agreement, this Resolution Agreement and letter of findings set forth OCR’s view of what should be included in these policies:
an appropriate definition of sexual harassment and examples of harassing conduct;
clear notice of where complaints may be filed, including the name or title, phone, address and email information of those individuals;
notice that students, employees and third parties may access these procedures (based on information we have received in other instances from OCR, we do not believe that OCR requires that the same procedure must apply to all three categories);
designated and reasonable prompt timeframes for major steps of the grievance/complaint process;
notice of the availability of interim measures to assist the complainant and the nature of those measures (such as the availability of counseling and academic assistance, steps that can be taken if the alleged perpetrator lives on campus and/or attends classes with the victim, etc.). Pending the outcome of the investigation, a recipient must take steps to protect the complainant from further harassment, and must ensure that such interim measures will not disproportionately impact the complainant;
notice of a complainant’s Title IX rights and any available resources, such as counseling services and their right to file a complaint with local law enforcement;
in the event the policy provides for informal resolution procedures (such as mediation) the policy it cannot require a complainant to work the matter out directly with an alleged perpetrator, the complainant must know that he or she can end informal resolution at any time, and if the allegations include sexual assault/violence, mediation is not appropriate even on a voluntary basis (as was the case in OCR’s 2011 “Dear Colleague Letter,” OCR’s letter of findings refers to mediation as one example of informal procedures that may be available, but then provides only that mediation is not appropriate in cases of sexual assault/violence; presumably other informal procedures may be);
any hearing processes must be equally available to both parties, including the opportunity to present relevant witnesses and other evidence and if an appeal process is provided (based on the Resolution Agreement, it appears that OCR does not require an appeal procedure), it must be available to both the complainant and the respondent;
written notice to the parties of the outcome of the proceedings, including any appeals (if appeals are provided for);
assurances that the institution will take steps to prevent further harassment and to correct its discriminatory effects on complainant if appropriate;
protections against retaliation, including ensuring that complainants know how to report any subsequent problems (and the institution should follow up with complainants to determine whether any retaliation or new incidents of harassment have occurred);
assurances of confidentiality to the extent possible, but even if the complainant requests confidentiality or asks that a complaint not be pursued, an institution must nonetheless take all reasonable steps to investigate and respond consistent with that request for confidentiality or request not to pursue an investigation (although OCR has given little guidance explaining how an institution is to strike that balance appropriately);
if the incident involves potential criminal conduct, the recipient must determine consistent with state and local law whether law enforcement should be notified (but it should not wait - more than temporarily - for law enforcement to carry out its responsibilities).
In addition to these provisions, OCR apparently expects an institution to maintain documentation of all proceedings (although OCR does not indicate how long). Institutions also must provide training regarding the grievance process to any employees likely to witness or receive reports of sexual harassment and violence (e.g. faculty, campus security, university administrators, counselors, health personnel and resident advisors). Training can be in person or on line for all staff responsible for recognizing and reporting incidents. Responsible persons are to report not only complaints brought directly to them, but also conduct they observe first-hand or learn about in some other way. The Resolution Agreement also requires SUNY to conduct an annual review of all complaints to identify patterns or systemic problems and to conduct annual climate checks. Simply because OCR required the above in its Resolution Agreement with SUNY does not mean it necessarily will require all of these items from every other institution, nor does an institution incorporating all of these items into its policies ensure that OCR will not require something more or different in a review of its policies. Nevertheless, the above should provide a useful checklist for institutions to consider.