The U.S. government will pay nearly $44 million to settle an age-discrimination case filed 16 years ago on behalf of hundreds of workers who missed out on federal pensions after their jobs were outsourced.

Lawyers for the 761 workers say the Federal Aviation Administration and the Transportation Department decided to outsource the jobs because many of the employees were older than 40 and were, or soon would, become eligible to retire with full federal retirement benefits.

They worked as flight service specialists — air traffic controllers who give pilots of private planes information about weather, routes and emergency help. In 2005, the FAA gave Lockheed Martin a contract to run the specialists’ flight service stations in every state except Alaska.

By an act of Congress, about 100 specialists who were within two years of retirement were allowed to stay at FAA and keep their pensions, but 1,900 others, most of them over the age of 40, moved to Lockheed. Some of them sued.

In a $43.8 million settlement announced Wednesday, 25 individuals will get enough service credit to qualify for an air traffic controller’s retirement. The others will get enough to cover lost retirement benefits from 2016 through 2020, according to the agreement.

“We hope this will be a cautionary reminder to federal employers and other employers that, as we have an increasingly aged workforce, employers should be extra careful to avoid making personnel decisions like layoffs because of age,” said Joseph Sellers, lead attorney for the workers.

Almost 700 former agency employees whose jobs were outsourced in 2005 will share in the settlement.

The Federal Aviation Administration has agreed to pay $44 million to resolve a long-standing lawsuit brought by former employees who alleged that their jobs were outsourced because of their age, a settlement announced Wednesday that their lawyers say is the largest of its kind.

The case was filed in 2005, when the FAA decided to hand over the work of about 2,000 employees, known as flight services specialists, to a private company. FAA officials, including the head of the agency at the time, were open about the aging specialist workforce being a factor in the outsourcing deal, according to evidence presented in the lawsuit.

But the case languished in the courts for years as one judge retired and the law firm that originally represented the employees was closed. With the former FAA employees reaching retirement age, a new team of lawyers began hashing out a settlement with the government last year.

. . .

Joseph Sellers, a partner at law firm Cohen Milstein, which joined the case in 2016, described the financial harm faced by the former employees as “brutal.”

“Suddenly their pension investment was ripped away from them,” he said.

The oldest Millennials became eligible to sue for age discrimination this year.

Recouping that retirement pay became the focus of the lawsuit. The $44 million settlement fund will be shared by 646 former employees or their estates. An additional 25 plaintiffs will have their pensions adjusted upward.

Sellers acknowledged that the payouts won’t cover everything the former employees lost, but he said the case was unusual because it was not pursued as a class-action. That meant that even had they won, each of the 671 plaintiffs would have had to have a separate trial to determine what they were owed, potentially extending the case several more years. With the former employees aging, Sellers said it made sense to strike a deal.

“You don’t recover 100 percent when you’re settling a case,” Sellers said. “Our clients faced a tough choice.”

Although appellate court judges threw out some claims against the bank, they said that market manipulation allegations were “plausible.”

Credit Suisse is having another rough week.

A U.S. Appeals Court reopened a 2018 case alleging that Credit Suisse had engaged in market manipulation of some exchange-traded notes that short the VIX, a popular proxy for volatility.

The reopened case comes as the European Commission announced on Wednesday that it had fined the bank and three others, alleging that they had formed a “cartel in the secondary trading market,” and as the United States Senate Finance Committee said it had launched a probe into Credit Suisse. The Finance Committee is looking at whether the bank allowed wealthy individuals to shield their assets from the government, in violation of a 2014 plea agreement. (Commenting on the EC, a spokesman said in an emailed statement that, “Credit Suisse continues to believe that the single former employee whom the EC criticized did not engage in anti-competitive conduct.” The bank intends to appeal the decision.)

The Swiss bank is also still reeling from taking significant losses related to the blow up of Archegos, the heavily leveraged family office of former hedge fund manager Bill Hwang.

Credit Suisse Bought Futures Contracts When Volatility Spiked

The plaintiffs — a group of investors led by Set Capital — allege that Credit Suisse issued exchange-traded notes shorting the VIX, shorthand for the Cboe Volatility Index, while also hedging against those notes, resulting in a liquidity squeeze that then eroded the value of the group’s investments.

The notes are unsecured debt securities sold by Credit Suisse and formally called VelocityShares Inverse VIX Short Term Exchange Traded Notes.

In other words, the investors were using unsecured debt to short the volatility index, which spiked in 2011, 2015, and 2016, according to the appeal.

The appellate judges’ decision said that during these three times, Credit Suisse bought VIX futures contracts to hedge against potential losses on the ETNs. But with insufficient liquidity in the futures markets, Credit Suisse caused prices to spike, and the value of the XIV notes to plummet. The U.S. Appeals Court for the Second Circuit said, “If proven at trial, this alleged conduct was manipulative under our precedents.”

. . .

“We believe that Credit Suisse and its former CEO intentionally misled and manipulated investors so that they could profit while investors suffered devastating losses, and we are pleased that this critical case is moving forward,” said Michael B. Eisenkraft, a partner at Cohen Milstein who represents some of the plaintiffs, in a statement Wednesday.

A U.S. appeals court on Tuesday revived a lawsuit accusing Credit Suisse Group AG of causing huge losses by defrauding investors in a complex product for betting on stock market swings that lost 96% of its value in a single day.

The 2nd U.S. Circuit Court of Appeals in Manhattan said investors could try to prove Credit Suisse intended to collapse the market for its VelocityShares Daily Inverse VIX Short-Term Exchange-Traded Notes (“XIV Notes”) through just 15 minutes of its own trading of futures contracts.

Set Capital LLC and other investors in the proposed class action claimed they lost $1.8 billion, while the Swiss bank reaped at least $475 million in profit at their expense.

. . .

XIV notes imploded on Feb. 5, 2018, when the Standard & Poor’s 500 dropped 4.1% and unexpected market turbulence punished investors betting on low volatility.

Circuit Judge John Walker said investors could pursue claims that Credit Suisse manipulated the market for the notes while downplaying the risks in offering documents.

“The complaint plausibly alleges both motive and opportunity to commit a manipulative act, as well as strong circumstantial evidence of conscious misbehavior or recklessness,” he wrote.

Michael Eisenkraft, the investors’ lawyer, said: “We look forward to prosecuting these claims vigorously.”

The Second Circuit ruled Tuesday that Credit Suisse will have to face claims that it triggered a liquidity crunch to bottom out the price of notes inversely tied to stock market volatility and pick up nearly half a billion dollars of profits.

An appellate panel vacated a New York federal judge’s ruling from 2019 that dismissed manipulation claims against the bank over the price crash for Inverse VIX Short exchange-traded notes, or XIV notes, after the close of regular trading hours on Feb. 5, 2018.

Unlike the lower court, the Second Circuit was swayed Tuesday by the investors’ allegations that Credit Suisse knew hedging against the notes during volatility spikes would sink their prices and capitalized on that strategy in February 2018 to cause an “acceleration event” that allowed the bank to redeem those notes at a cratered price and pull $475 million in gains.

“If proven at trial, this alleged conduct was manipulative under our precedents,” the appellate panel said.

The first of the several since-consolidated suits over the crash was filed in March 2018, roughly a month after a 4.1% drop in the S&P 500 led to a sudden spike in volatility that drove up prices for VIX Futures Index contracts. The price of Credit Suisse’s Inverse VIX Short ETNs started plummeting in tandem and at 4 p.m. that day, the bank hedged its XIV position by buying more than 100,000 VIX futures contracts — representing roughly a quarter of the entire market for the contracts.

This led the VIX Futures Index to again skyrocket and the value of XIV notes to again plummet — but according to investors, the listed value of XIV notes mysteriously stopped updating between 4:09 p.m. and 5:09 p.m. that day, leading them to buy more than $700 million worth of XIV notes at a price they soon learned was far above their actual, updated value.

The following morning, Credit Suisse announced that the extreme drop in XIV value had caused an “acceleration event” whereby the notes were prematurely redeemed at the price of $5.99, well below the $108.37 value they’d started at the previous day.

The investors claim Credit Suisse lied to them in the notes’ offering documents about the reliability of its pricing updates and the effect the bank’s hedging could have on the value of the XIV notes, and further alleged that the bank intentionally manipulated the market for XIV notes by offering more than 16 million of them in January 2018, with the plan to later crash their price and profit from an acceleration event.

. . .

Tuesday’s ruling revives the suit’s manipulation claims as well as its allegations that the XIV notes’ offering documents misrepresented the bank’s “knowledge and its intent to engage in manipulative acts.”

“We believe that Credit Suisse and its former CEO intentionally misled and manipulated investors so that they could profit while investors suffered devastating losses, and we are pleased that this critical case is moving forward,” Michael B. Eisenkraft, an attorney for the investors, said in a statement. “We look forward to prosecuting these claims vigorously on behalf of our clients and the class.”

The investors are represented by Michael B. Eisenkraft, Laura H. Posner, Carol V. Gilden and Steven J. Toll of Cohen Milstein Sellers & Toll PLLC.

Facebook advertisers asked a California federal judge Friday to certify their proposed class claims that the company bolsters its advertising revenue by inflating the potential estimated reach of ads on the platform.

The case is ripe for class treatment because it alleges classwide fraud perpetrated by Facebook with its misleading data for how many people could see any given advertisement, according to the redacted motion filed by plaintiffs DZ Reserve and Cain Maxwell.

The suit focuses on Facebook’s so-called potential reach metric, which supposedly tells advertisers how many people are in an ad set’s target audience, according to the motion. This is shown to advertisers on Facebook’s Ads Manager, the motion states, but that data is inflated and misleading.

Advertisers wouldn’t have paid Facebook for ad space had they known the data was inflated, the plaintiffs said.

The advertisers want to represent a class of all U.S. residents who, from Aug. 15, 2014, to the present, paid for the placement of at least one advertisement on Facebook’s platforms, including Instagram, which was purchased through the company’s Ads Manager or Power Editor.

. . .

In their motion Friday, the advertisers said their allegations raise common questions about whether Facebook inflated the potential reach of ads, whether its use of the inflated data was deceptive or unfair under California law, and whether Facebook knew the data was inflated, among other questions.

The advertisers’ attorney, Geoffrey Graber of Cohen Milstein Sellers & Toll PLLC, was already appointed interim lead class counsel in December 2018 and the firm should be appointed class counsel now, the motion said.

“This is the kind of case for which the class action procedure was created,” the advertisers said. “Any class member’s individual recovery would be dwarfed by the cost of proving the predominating issues in this litigation.”

“Here, the median class member advertiser has incurred no more than $32 in damages. No rational person would challenge the most powerful social media company in the world to recover $32 in damages,” the advertisers added. “If class treatment is denied, the wrongdoing outlined above ‘will go unpunished,’ leaving Facebook free to continue to defraud its customers with impunity.”

The advertisers and proposed class are represented by Andrew N. Friedman, Geoffrey Graber, Julia Horwitz, Karina G. Puttieva and Eric Kafka of Cohen Milstein Sellers & Toll PLLC, and Charles Reichmann.

The complete article can be viewed here.

Legal experts shared tips for choosing an AI solution at a recent American Bar Association conference.

HR professionals hoping to integrate artificial intelligence tools into workplace processes “have their work cut out for them,” a U.S. Equal Employment Opportunity Commission official told attendees at an April 8 American Bar Association conference.

The technology was gaining traction before the coronavirus pandemic, and it now promises to aid in the country’s recovery, according to Commissioner Keith Sonderling. AI can manage elevators and other shared spaces to ensure social distancing, for example; or it can develop hybrid schedules, he said, predicting that “we will be seeing more, rather than less, AI as we begin to return to our workplaces, schools and our pre-COVID routines.”

But such solutions come with risks and the one on EEOC’s radar is discrimination.

Choosing a solution

Employers considering or using AI should evaluate algorithms “early and often for biased outcomes and reengineer as appropriate,” Sonderling suggested.

An algorithm that makes predictions about job applicants, for example, is only as good as the data on which it was taught to rely, he explained, citing information from EEOC’s chief analyst. Therefore, an algorithm that relies solely on the characteristics of a company’s current workforce to model an ideal applicant may merely replicate the status quo. If an existing workforce is made up of primarily one race, gender or age group, he said, the algorithm may screen out applicants who do not share those same characteristics.

Employers also should ask vendors what happens in the case of a discovery request, suggested Christine Webber, a co-presenter and plaintiffs’ attorney from Cohen Milstein Sellers & Toll. If an algorithm is challenged in a lawsuit, past litigation suggests an employer could be caught between the vendor’s interest in keeping an algorithm proprietary and the plaintiff’s discovery needs, “and they could be really hung out to dry.”

Webber suggested employers ask whether the inner workings of the algorithm will be shared or if they’ll be protected as trade secrets — “which means the employer has no defense to establish the validity if it’s a disparate impact claim or to establish that there is no disparate impact disparate treatment going on.”

Carolyn Everson’s emails in long-running lawsuit say social network should ‘prepare for worst’

Carolyn Everson, one of Facebook’s most senior advertising executives, said the company had to “prepare for the worst” over claims that it overstated the reach of its advertisements, according to newly released court filings.

The world’s largest social network has been fighting a class-action lawsuit in California since 2018 over claims that its “potential reach metric”, which told advertisers how many people saw their ads, included duplicate and fake accounts.

Facebook has argued that the numbers were only estimates and that advertisers are charged for actual clicks and impressions, rather than for the potential reach of an ad.

But according to filings in the lawsuit that were unredacted over the weekend, Everson, the vice-president of Facebook’s global business group, wrote an email in 2017 that said the metric “clearly impacted [advertisers’] planning”.

. . .

The lawsuit, which was filed in northern California in 2018 by a small-business owner, alleges that Facebook executives knew the potential reach figure was “misleading” and took no action to correct it in order to “preserve its own bottom line”.

It points to research showing Facebook had suggested potential reach in certain US states and demographics that was greater than the actual populations in those geographies.

A Financial Times investigation in 2019 found similar discrepancies in Facebook’s ads manager, an online tool to help advertisers build campaigns, even though the company made some changes to its potential reach definition earlier that year.

Parts of the filings had initially been sealed largely on the grounds that they were commercially sensitive for Facebook.

Cohen Milstein represents a putative class of advertisers who claim that Facebook’s key advertising metrics are false and misleading due to systemic inflation of Facebook’s user base. Learn more about the case.

Employers have become more flexible, especially in the midst of the coronavirus crisis. But during the pandemic and beyond, employers can run into wage and hour violations if they don’t stay on top of employees’ remote work locations, job responsibilities and more, attorneys say.

Here, Law360 examines the common mistakes employers can avoid.

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Miscategorizing Employees, or Trying to Have Your Cake and Eat It Too

Employers should also be careful when designating a position as overtime exempt under the Fair Labor Standards Act’s administrative carveout, especially since a worker’s actual duties don’t always match what’s described in human resources paperwork.

The administrative exemption of the FLSA relieves employers of minimum and overtime wage requirements if an employee’s responsibilities involve mainly nonmanual, managerial and business-operations work and if that employee exercises discretion on important issues, among other requisites.

. . .

Christine Webber, a partner at Cohen Milstein Sellers & Toll PLLC who represents workers in wage and hour and discrimination suits, said that as with the independent contractor versus employee misclassification debate, employers tend to “want it both ways” when it comes to exempt and nonexempt employees.

Employers, she said, need to pay attention to how a worker’s time is actually spent. Webber said employers shouldn’t chip away at a worker’s duties — however well-intentioned — to the point where there’s “really almost no management authority left in the so-called manager.”

For example, by offering to take care of conducting interviews with job applicants so that an employee can instead unload widgets from a truck, employers can in effect take out the very management responsibilities that are meant to justify, at least in part, treating that employee as an exempt professional, Webber said.

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Starting Off on the Wrong Pay

To prevent steep salary and wage disparities among workers, employers should think about nipping the issue at a common source: starting pay.

. . .

To prevent pay gaps from cementing and growing larger, Webber, of Cohen Milstein, said employers should ask themselves, “Where in our system is this being introduced?”

In some states and cities, certain employers cannot ask about a job applicant’s salary history or use prior salary as a benchmark to establish starting pay. Proponents of these bans say they stop people from getting locked in at low pay in perpetuity.

Speaking more broadly about pay equity and how employers should evaluate their practices, Webber said, “The idea is not to be relatively less bad but to see are you actually where you should be and to set your goals accordingly.”

Playing Whack-A-Mole with Compliance

Worker-side attorneys said employers tend to only focus on remedying a single worker’s complaint instead of zooming out and checking the entire system.

Daniel Hutchinson, a partner at Lieff Cabraser Heimann & Bernstein LLP, said employers should consider thinking about a worker’s complaints “as the canary in the coal mine that could potentially be a reason to make broader changes or to get at cultural issues at the company.”

Webber also said employers should check whether an issue is systemic and not just “put a Band-Aid on fixing the one individual who spoke up.”

AT&T Inc. failed Thursday to convince a federal judge in California to transfer to Texas or dismiss it from a proposed class action brought by employees who challenge the way the company calculates certain pensions.

Six former workers sued in the U.S. District Court for the Northern District of California in October, claiming AT&T shortchanges the pensions of workers who retire before age 65 or choose pension formats that pay benefits to their surviving spouses after their deaths. That lawsuit came one month after a similar case was dismissed for lack of standing.

AT&T sought to transfer the case to the Northern District of Texas in January, arguing that the plan is administered in Texas and is governed by the laws of that state. The telecommunications giant also argued that the plaintiffs wrongly joined AT&T Inc. as a defendant because it is not the plan’s administrator.

But Judge James Donato denied both arguments in a brief oral order after holding a remote hearing Thursday. He said AT&T had failed to show that the plaintiffs’ choice of forum was improper and ruled that AT&T Inc. wouldn’t be dismissed at this stage of litigation.

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The plaintiffs are represented by Cohen Milstein Sellers & Toll PLLC and Feinberg Jackson Worthman & Wasow LLP.