Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
Speaker 1: We agonize over every curve, over every detail, every corner,
Speaker 1: every element of the interior, the exterior, including things that
Speaker 1: people probably won't even notice. That was Elon Musk five
Speaker 1: years ago, presenting the first batch of Tesla electric compact
Speaker 1: cars at the company's factory in Fremont, California. These days
Speaker 1: you'll find Musk elsewhere in the state agonizing over every
Speaker 1: detail of his new acquisition Twitter. So it's a bit
Speaker 1: of unfortunate timing from Musk that he had to take
Speaker 1: the stand to defend his unprecedented fifty five billion dollar
Speaker 1: Tesla pay package at a Delaware trial this week, where
Speaker 1: a Tesla shareholder is challenging the package as too excessive
Speaker 1: for a part time CEO. My guest is an expert
Speaker 1: in corporate law, Eric Tallely, a professor at Columbia Law School. Eric,
Speaker 1: there seemed to be a lot of questions being addressed
Speaker 1: at the trial. Was the payout excessive? Did the board
Speaker 1: act appropriately independently of Musk? Is he worth the money?
Speaker 1: What are the questions that the judge has to answer
Speaker 1: to come to her decision? Well, I think there are
Speaker 1: two major questions, and there's a little bit of a
Speaker 1: rabbit hole about how Delaware law works. But the two
Speaker 1: things that are going to be really important to understand
Speaker 1: is what was the context by which the shareholders of
Speaker 1: Tesla approved this compensation package, Because it turns out that
Speaker 1: getting a shareholder vote, as long as it's a fully
Speaker 1: informed vote to approve a pay package, does a lot.
Speaker 1: It buys you a lot of real estate if you're
Speaker 1: trying to defend that pay package, but it's got to
Speaker 1: be kind of a by the book vote. And a
Speaker 1: secondarily important issue is to what extent was the anticipated
Speaker 1: size of this compensation package within the realm of kind
Speaker 1: of a reasonable amount, something that would be fair to
Speaker 1: the other shareholders of Tesla, who, after all, we're basically
Speaker 1: going to be diluting themselves a lot as these benchmarks
Speaker 1: got met and a bunch of these options got cashed
Speaker 1: out if those benchmarks got that. So that part is
Speaker 1: really going to turn on how hard was it to
Speaker 1: meet these benchmarks? Were they really almost like automatics or
Speaker 1: did they pretty much require must to work really hard
Speaker 1: to meet them, in which case, you know, if he
Speaker 1: didn't get paid that much maybe he wouldn't have worked
Speaker 1: that hard. That's the argument that Tesla is going to use.
Speaker 1: And so it turns out that the most likely applicable
Speaker 1: legal test here is gonna pivot on those two questions
Speaker 1: in kind of an inter related way. The more likely
Speaker 1: it is that the shareholders actually they knew what they
Speaker 1: were voting on, they voted with their highs wide open,
Speaker 1: the more deference the judge is going to give to
Speaker 1: the pay package. On the other hand, if the shareholders
Speaker 1: didn't know everything or felt sort of bullied or forced
Speaker 1: into this vote, then that pay package and its farness
Speaker 1: is going to get more scrutiny in court. Defending the
Speaker 1: compensation plan, Tesla directors have testified that it was important
Speaker 1: to keep Musk focused on and engaged in running Tesla.
Speaker 1: But Musk agreed with the shareholders lawyer that at the
Speaker 1: time of this pay deal, he was spending about of
Speaker 1: his time at Tesla, at SpaceX, on open Ai, boring,
Speaker 1: and neuralink. And now he testified that he's spending almost
Speaker 1: all his time reorganizing Twitter. So is he a part
Speaker 1: time CEO. Then this makes this case one of the
Speaker 1: most unprecedented executive compensation cases that we've ever seen. Quite frankly,
Speaker 1: most CEOs don't work part time at their companies. They
Speaker 1: are full time employees, and their employees who are paid
Speaker 1: well to basically put every bit of their effort and
Speaker 1: attention into the welfare of the company. Musk has always
Speaker 1: been a little bit mercurial in his habits, and in fact,
Speaker 1: they kind of knew that at the time. This was
Speaker 1: not one of these things where, you know, some of
Speaker 1: these other sideline ventures came up after the fact other
Speaker 1: than Twitter. So there was a sense in which they
Speaker 1: sort of knew they were getting a guy who had
Speaker 1: divided attentions. And weirdly enough, the rationale that Twitter had
Speaker 1: for trying to make sure this pay package at least
Speaker 1: had the potential to be heavily remunerative was that they
Speaker 1: wanted to make sure that it was attractive enough to
Speaker 1: create a honeypot to steal his attention from some of
Speaker 1: these other factors. And so it's kind of interesting that,
Speaker 1: you know, the road that we've gone down under this
Speaker 1: pay package involves Mr Musk kind of wandering off and
Speaker 1: deciding he was going to take over another company Twitter,
Speaker 1: that's not even in the space. I think that argument
Speaker 1: could cut both ways. On the one hand, the plaintiffs
Speaker 1: who were complaining about it sort of said, you know,
Speaker 1: fat load of good that did you. You know, paying
Speaker 1: him this lucrative amount, he was just gonna wander off anyway,
Speaker 1: And maybe the defendants could say, yeah, if we aired,
Speaker 1: we aired him not paying him enough to keep him
Speaker 1: on mission and on target at Tesla, that may end
Speaker 1: up being a little bit of a standoff of a tie.
Speaker 1: I think you've manufacture that argument to go in either direction.
Speaker 1: It is clear. It is clear that the way that
Speaker 1: this played out pretty much came close to the maximal
Speaker 1: payoff that he was going to get from this compensation package.
Speaker 1: It could have been north of fifty six billion dollars,
Speaker 1: just about fifty six billion dollars. It didn't end up
Speaker 1: quite being that because it didn't make all the benchmarks,
Speaker 1: but he's certainly made most of them, got the lion's
Speaker 1: share of that payoff. So if you look at it
Speaker 1: in hindsight, it just looks like a grotesquely large amount
Speaker 1: that is paid. The real operative question, however, was at
Speaker 1: the time that the grant was made, given that he
Speaker 1: wasn't taking any salary, he was only going to do well,
Speaker 1: if Tesla did well, did that make sense at the time,
Speaker 1: and did the shareholders kind of agree with it? As
Speaker 1: far as the question of whether Tesla's board acted independently,
Speaker 1: Musk testified that he had no role whatsoever in setting
Speaker 1: up this unprecedented pay package. However, in text with the
Speaker 1: board men who headed the compensation committee, Musk said he
Speaker 1: should end up owning of the company in a performance
Speaker 1: plan built around a progression of targets that would each
Speaker 1: grant him one percent of Tesla's outstanding shares. Doesn't that
Speaker 1: contradict what he testified to Yeah, there are definitely some
Speaker 1: inconsistent statements. There were some other statements of him and
Speaker 1: the record that basically sort of said, yeah, I'm kind
Speaker 1: of bargaining against myself on this, and so you know,
Speaker 1: I think it's unlikely that at the end of the day,
Speaker 1: anyone's really going to believe that he was so hands
Speaker 1: off at Tesla that the board of directors felt completely
Speaker 1: comfortable just telling him. Know, there are some important cases
Speaker 1: out there that if that's true, if you've got a
Speaker 1: board that's willing to stand up to you, then your
Speaker 1: route to defending your compensation package is even easier. Than
Speaker 1: what Elon Musk is facing right now. Because if you
Speaker 1: really have a board that has bargaining power and is
Speaker 1: willing to say no, they sign off on it, and
Speaker 1: then the careholders vote in a fully informed way to
Speaker 1: sign off on it. The case is basically done under
Speaker 1: Delaware law. And it's interesting that this case has even
Speaker 1: gotten to this point and the Tesla folks and Mosque
Speaker 1: haven't even seriously tried to argue that a truly independent
Speaker 1: board kicked the tires in a really strenuous way. I
Speaker 1: think the main thing that is important in trying to
Speaker 1: argue about, you know, just how independent the board was, is,
Speaker 1: you know, really about what were the shareholders told before
Speaker 1: they voted to approve this transaction. The plaintiffs in this case,
Speaker 1: it sort of said, yeah, the shareholders voted to approve it,
Speaker 1: so they didn't know the full story. The story that
Speaker 1: they got was that the board was really careful in
Speaker 1: working this out and in fact that the board was
Speaker 1: being led along on a leash by Elon Musk at
Speaker 1: an inaccurate disclosure of how things went down, and therefore
Speaker 1: their vote wouldn't really be a by the book vote,
Speaker 1: it would be an hunt informed vote. Formed vote. So
Speaker 1: I think that's the main reason why this has come up,
Speaker 1: not because you know, an informed and empowered board is
Speaker 1: gonna do much work in his defense, other than the
Speaker 1: fact that, you know, the plaintiffs have made an argument
Speaker 1: in trying to beat back the shareholder vote from having
Speaker 1: any effect, that the shareholders didn't know the whole story.
Speaker 1: And you know, there's kind of an interesting question there too, right,
Speaker 1: maybe TESLA is telling the shareholders and their proxy disclosures,
Speaker 1: Oh gosh, the board really used their own judgment in
Speaker 1: deciding to go forward on this, and they studied up
Speaker 1: on it, but it's kind of an open secret and
Speaker 1: everyone knows that Ellen is, you know, this incredibly powerful
Speaker 1: and influential person, and when it came right down to it,
Speaker 1: the board was going to be as weak need as
Speaker 1: anyone else. So it may be the case that the
Speaker 1: plaintiffs are right that there was this description in the
Speaker 1: proxy materials, but no one actually believed it. Everyone sort
Speaker 1: of figured, yeah, Ellen probably runs the roost on this,
Speaker 1: and we're just going to have to presume that, notwithstanding
Speaker 1: what the board is telling us or what these proxy
Speaker 1: disclosures are telling us, you know, he was probably calling
Speaker 1: the shots of the whole time, and and there may
Speaker 1: be some of that argument that comes out later on
Speaker 1: in the post trial briefing. It certainly wouldn't come out,
Speaker 1: you know, during the live trial, but that could be
Speaker 1: sort of, you know, part of the spin that that
Speaker 1: Tesla puts on it, to the extent that there were
Speaker 1: inconsistencies that come out in testimony versus what was in
Speaker 1: those proxy solicitation materials TESLAA say, yeah, but you know,
Speaker 1: no one really believed it anyway. The shareholders kind of
Speaker 1: knew that they were getting a pretty dominated company, and
Speaker 1: they were the sentry to make sure that, you know,
Speaker 1: whatever the compensation package was was okay by them. So
Speaker 1: then why did the judge allow the shareholders attorney to
Speaker 1: go into a series of questions to show that must
Speaker 1: acts with little oversight from Tesla's board. He asked about
Speaker 1: this report that Musk has some fifty Tesla employees working
Speaker 1: at Twitter, and asked whether a board member had ever
Speaker 1: called him to say it's not a good idea to
Speaker 1: use Tesla's resources for one of his private companies. So
Speaker 1: resources of a public company used for a private company.
Speaker 1: I think this was really meant by the plaintiffs, it
Speaker 1: was meant to undercut, not necessarily whether the board's decision
Speaker 1: requires legal deference or not. That's not the defense that
Speaker 1: Tess was putting up. But what they do need to
Speaker 1: be able to show is that that shareholder vote wasn't
Speaker 1: built on kind of a mountain of prevarications and fanciful
Speaker 1: yarns right that that that shareholder vote the shareholders saw
Speaker 1: the package, they saw the projections, and they received a
Speaker 1: description of what went into the structuring of that package.
Speaker 1: Part of that description did say, hey, listen, this board
Speaker 1: wasn't just like, you know, doing everything that Ellen wanted
Speaker 1: to do. They did their own study on this, and
Speaker 1: they think this is a good idea. And so I
Speaker 1: think that's the nature of the inquiry here to try
Speaker 1: to undercut or impeach the credibility of that statement that
Speaker 1: was in the disclosure to shareholders, and the plaintifts are
Speaker 1: trying to prove you know, what they told you that.
Speaker 1: But the fact of the matter is no one wanted
Speaker 1: to say no to Ellon. And here's a bunch of
Speaker 1: examples about people being too chicken to say no to
Speaker 1: Mr Musk, And so I think that's the reason they're
Speaker 1: gonna they're gonna try to use that here. It is
Speaker 1: an important thing for the plainest to do because you know,
Speaker 1: if if this shareholder vote is found by Chancellor McCormick
Speaker 1: to be, you know, kind of a fully informed and
Speaker 1: non coerced vote of the majority of disinterested shareholders, it
Speaker 1: makes the case much harder for the plaintifts to win.
Speaker 1: It doesn't eliminate the possibility, but it shifts all the
Speaker 1: evidentiary burdens onto the plaintiff, and so that makes it
Speaker 1: a much harder case because burdens, particularly in cases that
Speaker 1: are complex to have a lot of facts, burdens are tiebreakers,
Speaker 1: and if you're the one that carries the burden and
Speaker 1: the evidence is a tie, you lose. Chancellor McCormick is
Speaker 1: familiar with Elon Musk because she presided over the short
Speaker 1: lived Twitter lawsuit. At one point early in the testimony
Speaker 1: to express frustration with Musk digressing, I'm going to interrupt
Speaker 1: Mr Musk, because we can listen all day to this.
Speaker 1: It's very interesting, but I don't think it was responsive
Speaker 1: to the question, which I've now forgotten, is she the
Speaker 1: right judge for this? Because she's not putting up with
Speaker 1: any of Mousque's plays. It's a valid question to ask.
Speaker 1: The fact of the matter is a judges are people too,
Speaker 1: and be you know, a lot of this type of
Speaker 1: adjudication involves kind of a sense of the read of
Speaker 1: the room and whether the people that you're adjudicating on
Speaker 1: have a good read of the room. And by the way,
Speaker 1: I was listening in and I had forgotten the question
Speaker 1: as well, So I think he really was, you know,
Speaker 1: doing some monologue ng um in ways that a lot
Speaker 1: of witnesses do quite frankly, I don't know if you notice,
Speaker 1: But as the testimony wore on, particularly after that, Mr
Speaker 1: Musk's affect flattened. You know, a lot of his responses
Speaker 1: were sort of monosyllabic grunts that I guess I took
Speaker 1: to be yeses or knows. But he ended up, you know,
Speaker 1: being much less loquacious and much more clipped in his
Speaker 1: responses towards the end. One possibility was that he realized
Speaker 1: that he you know, he kind of didn't want to
Speaker 1: try the patients of Chance for McCormick. Now, the other
Speaker 1: thing that it's worth that's worth noting, is that Chance
Speaker 1: for McCormick didn't hear any testimony from Mr musk in
Speaker 1: the Twitter Kike, because she heard a lot from his lawyers,
Speaker 1: and she saw a lot of his tweets, and she's
Speaker 1: a lot of interviews, but he never had to appear
Speaker 1: to testify in court in front of her. And so
Speaker 1: I think, you know, it's important to realize, and lawyers
Speaker 1: and judges realized this as well, that you can become
Speaker 1: exasperated with, say the behavior of a lawyer or a
Speaker 1: legal team in front of you without necessarily that exasperation,
Speaker 1: you know, getting kind of transplanted onto the client themselves.
Speaker 1: This is a case that's been baking all the way
Speaker 1: since you know, two thousand nineteen, actually two thousand eighteen,
Speaker 1: and the factual record is long. It has not been
Speaker 1: on a rush schedule in which tempers get short and
Speaker 1: people get impatient. This has been a you know, a
Speaker 1: trial that's been coming up for years, and so on
Speaker 1: some level, I kind of feel like a cancer. McCormick is,
Speaker 1: in my view, sort of the consummate professional in in
Speaker 1: these sorts of settings and is able to separate these
Speaker 1: things from one another and be the types of cases
Speaker 1: are so different from one another that I don't, you know,
Speaker 1: I don't really think that this kind of has as
Speaker 1: much of a time as of the essence aspect as
Speaker 1: the other one was. So I think it's a little
Speaker 1: easier to achieve some form of acoustic separation between these
Speaker 1: two cases than it might be if both of these
Speaker 1: were kind of fire drill cases that were happening at
Speaker 1: the same time. This is a small thing, but I
Speaker 1: wonder if things like this hurt Musk's credibility with the judge.
Speaker 1: There was a lot of questioning about his opinion of
Speaker 1: the SEC. He had written a tweet in July saying
Speaker 1: SEC three letter acronym, middle word is Elon's. This was
Speaker 1: widely read as being vulgar and an insult to the SEC,
Speaker 1: but he claimed on the stand that it was misunderstood
Speaker 1: and really meant save Elon's company. I mean, a, I
Speaker 1: don't think anyone familiar with that particular acronym, and be
Speaker 1: the answer just doesn't seem incredible. Yeah, one's mind can
Speaker 1: cycle for the various other things that could stand in
Speaker 1: for those other two initials. And I won't give you
Speaker 1: a drum solo myself, but yeah, I think this is
Speaker 1: something that he loves to do. He loves to do
Speaker 1: the slightly juvenile, coy kind of word puzzled type of thing,
Speaker 1: and I think that judges can lose their patients with that.
Speaker 1: You know, it's interesting that probably the Twitter case in
Speaker 1: many respects may have laid bare at least one realization that,
Speaker 1: you know, messing around with the Delaware courts. You know,
Speaker 1: you think of this is just a state court system.
Speaker 1: It's nothing compared to the SEC. But the Delaware courts
Speaker 1: are a special breed. They are sort of the business
Speaker 1: court of the United States on some level. And I
Speaker 1: think on some level of the outcome of the Twitter case,
Speaker 1: in which after putting up a big protestation thinking he
Speaker 1: was going to bend gravity to walk away from that deal,
Speaker 1: he ended up closing on its original terms. And I
Speaker 1: think that might have been a large part because of
Speaker 1: the credibility of the court system. And so, yeah, would
Speaker 1: you like to walk that thing back? Probably would, at
Speaker 1: least to the extent that it was going to be
Speaker 1: presented in front of Chancellor McCormick. But I think at
Speaker 1: the time he really didn't realize that the Delaware state
Speaker 1: court system is pretty professional and they're probably not to
Speaker 1: be trifled with on some level. Now I will also
Speaker 1: say that this particular case, I was never much of
Speaker 1: a fan of Mr Musk's position in that earlier case.
Speaker 1: I just thought it was a it was a case
Speaker 1: of buyer's remorse, and he was drastically and desperately looking
Speaker 1: for escape hatches to get out of, but none of
Speaker 1: them was a very good escape hatch. This is a
Speaker 1: stronger case for him. If I were posting odds on this,
Speaker 1: I think it's quite likely he's going to win this case,
Speaker 1: in large part because you know, there is this shareholder
Speaker 1: vote out there the extent of failed disclosures. They're gonna
Speaker 1: have to, you know, show a pretty strong case to
Speaker 1: undercut the validity of that shareholder vote. And then, in addition,
Speaker 1: you know, a lot of corporate law deals with sticks
Speaker 1: with liability. Stick. If you do this, CEO, we're going
Speaker 1: to punish you by forcing you to pay damages and
Speaker 1: so forth when it comes to compensation. It's effectively the
Speaker 1: other side of the sticks. It's the company is also
Speaker 1: sort of saying, Okay, those sticks are doing some work,
Speaker 1: but we want to do a little bit more work
Speaker 1: with some carrot to fine tune those incentives of our
Speaker 1: CEOs and our board members and courts over the years,
Speaker 1: I think probably appropriately has said, yeah, we're probably not
Speaker 1: getting it right for all companies when it comes to
Speaker 1: the sticks. So we're going to give them a little
Speaker 1: bit of deference when it comes to trying to figure
Speaker 1: out how they're gonna situate their carrots on the other
Speaker 1: side of those sticks. And you know, it may well
Speaker 1: be that Tesla overpaid. It may well be that its
Speaker 1: shareholders voted in a foolish way to permit this thing
Speaker 1: to go forward. But if the shareholders were fully informed,
Speaker 1: they knew that what they're getting into, they knew that
Speaker 1: they could be heavily deluded later on, it's a much
Speaker 1: more defensible case for Mr Musk sort of say, yeah,
Speaker 1: and I accepted on that basis, and you know, on
Speaker 1: some levels, for the same reason that I kind of
Speaker 1: had to go through with the Twitter purchase, Testla should
Speaker 1: have to go through with this contract that they after
Speaker 1: all agreed. Now the shareholders, there at least the plaintiffs,
Speaker 1: they're having buyer's remorse, but you know, they voted to
Speaker 1: agree to pay me this, and so I think there
Speaker 1: is kind of an interesting aspect in this case. The
Speaker 1: law is not identical of course, but the tables are
Speaker 1: a little bit turned that now. Mr Musk is the
Speaker 1: person that's sort of saying, let's enforce this contract has written,
Speaker 1: and it's the test LA shareholders that are saying, let
Speaker 1: us walk away from this contract. Thanks. Eric. That's Columbia
Speaker 1: Law School professor Eric Tally, a Republican e o C commissioner,
Speaker 1: is deploying a rarely used agency procedure to silently initiate
Speaker 1: a discrimination investigations against at least three companies providing their
Speaker 1: employees with abortion travel benefits. That's according to five attorneys
Speaker 1: who have seen the charges, joining me as J. Edward Moreno,
Speaker 1: an employment discrimination reporter at Bloomberg Law who wrote the
Speaker 1: exclusive story. How rare are these charges coming from commissioners directly?
Speaker 1: These commissioners charges e o C commissioners, which there are
Speaker 1: five of them, are able to file them independently. They're
Speaker 1: typically used very rarely. In the past two fiscal years,
Speaker 1: they've only been used three times. We still don't have
Speaker 1: the data for this past fiscal year. But they're typically
Speaker 1: used to push settled law or add claims to existing investigations, where,
Speaker 1: for example, if somebody file the charge with the e
Speaker 1: O C because they believed they were discriminated on the
Speaker 1: basis of race. The and the e o C finds
Speaker 1: that the employer was also discriminating on other grounds, they
Speaker 1: can file a commissioners charge to add a claim to
Speaker 1: that investigation that the victims didn't necessarily make. And so
Speaker 1: tell us about these charges you learned about that. We're
Speaker 1: brought by Republican Commissioner Andrea Lucas. E o C Commissioner
Speaker 1: Andrea Lucas, who is appointed by President Trump in has
Speaker 1: filed these commissioners charge, which is against at least three
Speaker 1: companies um alleging that they're discriminating against pregnant employees and
Speaker 1: disabled employees because they're offering they're allegedly offering um abortion
Speaker 1: travel benefits, but not benefits for other medical procedures. What
Speaker 1: I don't quite understand is what other procedures are they
Speaker 1: claiming need travel benefits. Women are getting travel benefits to
Speaker 1: travel out of state because in state they can't get
Speaker 1: an abortion. So what is Lucas claiming here that there
Speaker 1: are disabled workers and pregnant workers who need to go
Speaker 1: out of state for procedures and they can't. Yeah, So
Speaker 1: it's unclear from the charges. They're very brought. They just
Speaker 1: make those two assertions that the company is discriminating against
Speaker 1: pregnant workers and that it's discriminating against disabled workers. So
Speaker 1: the facts of these cases are not yet established. The
Speaker 1: investigations are still ongoing, but the charges make the assumption that,
Speaker 1: for example, somebody with maybe a complicated pregnancy at that
Speaker 1: company or at any of these companies, was maybe not
Speaker 1: able to travel to see a specialist, or a person
Speaker 1: with a disability was not able to travel to seek
Speaker 1: the care that they needed. Meanwhile, these companies were offering
Speaker 1: travel for abortions. As you mentioned, you know, it is
Speaker 1: a little unusual because abortion is unique in that it
Speaker 1: depending on where you are, you may not have access
Speaker 1: to that anymore. Where with pregnancies or other conditions, those
Speaker 1: services are generally offered locally or you know, if not
Speaker 1: in the general vicinity of where you're working. It's also
Speaker 1: unusual in the from the attorneys that I talked to
Speaker 1: for this, Typically abortion travel is covered under a more
Speaker 1: broad healthcare travel policy in an employer's healthcare plans. So
Speaker 1: you know, they may have advertised it as a pledge
Speaker 1: to cover abortion travel, but as far as you know,
Speaker 1: their healthcare plan is concerned. It's just a general healthcare
Speaker 1: travel policy that happens to include abortion. A commissioner can
Speaker 1: just you know, launch an investigation and then the investigators
Speaker 1: have to investigate it. Is there any other step in between? No,
Speaker 1: So there's a couple of avenues for commissioners charges to
Speaker 1: go through. In this case, um, you know, Andrea Lucas
Speaker 1: has the power and authority to based on information she
Speaker 1: you know, maybe publicly available of information or information she
Speaker 1: required otherwise, uh, to file these charges directly. And then
Speaker 1: the district office where that employer you know is headquartered,
Speaker 1: we'll have to investigate that claim. And then if they
Speaker 1: find that there was discrimination, then they kept to conciliate
Speaker 1: or you know, try to reach a settlement, and if
Speaker 1: that doesn't work out in the EOC can sue. But
Speaker 1: this avenue that Andrew Lucas is choosing is quite unusual.
Speaker 1: What is more common and more routine is for say,
Speaker 1: an alleged victim of discrimination at a company to come
Speaker 1: forward to the e o C and say, for example,
Speaker 1: that they feel that they were discriminated against based on
Speaker 1: their race. And let's say, throughout the investigation, the e
Speaker 1: o C finds that the employer was discriminating against other
Speaker 1: employees and candidates based on gender. Well, the victims didn't
Speaker 1: make that specific claim, so the e o C can
Speaker 1: use the commissioner's charts to add that claim to an
Speaker 1: existing investigation. That's what is more common for for these
Speaker 1: types of charges. Is there any case law to support
Speaker 1: these charges, any precedent or are they completely novel? It's
Speaker 1: pretty novel. You know, it's only been since June that,
Speaker 1: you know, the constitutional right to an abortion has been overturned,
Speaker 1: so this has not been tested in federal courts yet.
Speaker 1: But the laws that place here are Title seven of
Speaker 1: the Civil Rights Act of nineteen sixty four and the
Speaker 1: Americans with Disability Act on the Pregnancy Discrimination Act. And
Speaker 1: you know, I talked to a lot of lawyers for
Speaker 1: the story and trying to find these charges, and generally
Speaker 1: what they argue is that the Pregnancy Discrimination Act in
Speaker 1: fact protects an employer's ability to provide abortion benefits rather
Speaker 1: than preclude them from doing so. And also, what's interest
Speaker 1: think about these charges is that since they come from
Speaker 1: a commissioner, they don't necessarily have a victim. There wasn't,
Speaker 1: you know, somebody who came forward and said that they
Speaker 1: felt that they were discriminated against based on off of
Speaker 1: these benefits. So we still haven't seen that come forward,
Speaker 1: and at least that we are aware of UM in
Speaker 1: the courts or in the public eye. What happens. Suppose
Speaker 1: the agency investigates and it believes that discrimination occurred. What happens?
Speaker 1: Then the EOC would then have to go through a
Speaker 1: conciliation period where it tries to negotiate a settlement with
Speaker 1: the employer. UM. A lot of times that doesn't end
Speaker 1: up happening. UM, they are not able to reach a settlement,
Speaker 1: and then the District Office, which you know also is
Speaker 1: the one trying to reach the settlement, will let the
Speaker 1: General Council's Office know and they will make a decision
Speaker 1: in this case since it's you know, uh, the issues
Speaker 1: here are novel and like I said, I haven't been
Speaker 1: tested in corporate were it would likely result in a
Speaker 1: commission vote. So the five commissioners now four commissioners because
Speaker 1: UM when just just resigned, will have to vote on
Speaker 1: whether or not they would like to pursue litigation. Here,
Speaker 1: you write that these arguments that Lucas makes mirror those
Speaker 1: of the agency's former general Council right, so UM. The
Speaker 1: agency's former General Council, Sharon Gustafson, she was appointed by
Speaker 1: President Trump and served the General Council throughout the Trump administration.
Speaker 1: In October, began sending letters two employers basically warning that
Speaker 1: her interpretation of the law as a former eo C
Speaker 1: General Council was that, you know, the same as what
Speaker 1: Andrea Lucas is alleging in these charges is that the
Speaker 1: abortion travel benefits are potentially discriminatory. UM. That ruffled a
Speaker 1: bit of feathers among the employer community and little er
Speaker 1: than a letter to the e o C requesting some
Speaker 1: sort of ethics investigation or some sort of response from them,
Speaker 1: saying that that you know that that was not the
Speaker 1: agency's position, and that's pretty much what they did. They
Speaker 1: responded to the letter saying that kostoptancies don't reflect There's
Speaker 1: one thing that I find interesting about Christopson's letter is
Speaker 1: it was sent out broadly. She's, um, you know, a
Speaker 1: solo practice attorney, and it was sent out broadly to employers. UM.
Speaker 1: And it's unclear the letters goal one if it was
Speaker 1: if its goal was to attract clients or and to
Speaker 1: the letter also specifically notes that you know, employers could
Speaker 1: be subject to commissioners charges or targeted investigations, which, as
Speaker 1: I mentioned earlier, have historically been pretty rare, especially in
Speaker 1: the way that she's suggesting that they may be used.
Speaker 1: Does Lucas have a connection to Gustafson. They crossed passed
Speaker 1: at the agency. Um. Lucas, uh, like I said, joined
Speaker 1: the agency in the latter half of towards the end
Speaker 1: of the Trump administration, and Kustafson left the agency in
Speaker 1: early one at the start of the wider administration. And
Speaker 1: tell us about Lucas and her focus. Yes, so, Lucas
Speaker 1: has been known to UM have a priority in religious
Speaker 1: liberty in the workplace. She often speaks at events and
Speaker 1: other sorts of panels where she talks about religious discrimination
Speaker 1: in the workplace. She's also has quite a bit of
Speaker 1: focus on disability issues. In fact, she deviates from her
Speaker 1: Republican colleagues often when it comes to those litigations votes,
Speaker 1: particularly when it comes to you know, religious discrimination or
Speaker 1: disability discrimination issues. What's the makeup of the commission as
Speaker 1: far as Republicans and Democrats? Yes, so, currently, um, there's
Speaker 1: a Democratic chair who sets the agenda and puts things
Speaker 1: forward for a vote, and there are three Republican commissioners
Speaker 1: and one other Democrats, so it's a Republican majority but
Speaker 1: with a Democratic chair. Um. As of this week, Janet Dillon,
Speaker 1: who is one of the Republican commissioners who charged the
Speaker 1: commissions during the Trump administration, resigned, so by next week
Speaker 1: the Commission's makeup will be and even to two partisan split,
Speaker 1: so much of the same gridlock that the agency is
Speaker 1: that the Commission has been experiencing for the past year,
Speaker 1: so will likely remain for you know, until Biden is
Speaker 1: able to confirm a Democrat into the open seats, having
Speaker 1: has he nominated a Democrat. Yeah, and um, I believe
Speaker 1: in the spring he nominated a civil rights attorney, Coupon
Speaker 1: a cour and she's had a bit of trouble getting
Speaker 1: through the Senate. Um. You know, there was a committee
Speaker 1: markup for her confirmation where there was a deadlock, which
Speaker 1: means that the Senate needs to have another procedural vote
Speaker 1: before there's a full floor vote on her nomination. Currently,
Speaker 1: and now after the mid terms, it seems that the
Speaker 1: Senate is going to have you know, Democratic control, but
Speaker 1: still a pretty pretty razors and majority. So we'll see
Speaker 1: how that plays out. I know that by the end
Speaker 1: of the year she is not confirmed, she will have
Speaker 1: to be renominated and start the whole process off again.
Speaker 1: Is there a new General Council since Gustafson left? Her
Speaker 1: position has been opened since she left in early There
Speaker 1: is a nominee for her position, who a fact has
Speaker 1: a committee vote coming up this week, considering she wouldn't
Speaker 1: you know she has a little bit less power than
Speaker 1: a commissioner, does you know? She doesn't vote on policy
Speaker 1: issues necessarily. She has proven to be a little less
Speaker 1: controversial than the cut has vote. You know, Still with
Speaker 1: the Senate, it's it's very hard to predict whether her
Speaker 1: nomination will go smoothly. Um, and she has a committee
Speaker 1: markup coming up this week. The agency said that Gustafson's
Speaker 1: views after she sent out that letter didn't reflect the
Speaker 1: views of the E e O C. So then why
Speaker 1: is this commissioner able to start an investigation with those
Speaker 1: same views? You know, commissioners have the authority and power
Speaker 1: to do that completely into sally, And in fact, she
Speaker 1: filed these charges and her colleagues wouldn't even necessarily be
Speaker 1: informed about them like she could do this completely independently,
Speaker 1: without having any sort of vote or discussion with her colleagues.
Speaker 1: Like I said, it's it's very rare that something like
Speaker 1: that happens. I think maybe the chair might be aware
Speaker 1: of it, but again, this is within her authority. I
Speaker 1: don't know if there's much the chair, the or anyone
Speaker 1: else at the agency can do about that. This is
Speaker 1: an exclusive. Can you tell us how you found out
Speaker 1: about this? Right? So, after we covered sharing Gustafa's letter
Speaker 1: and how that ruffled some feathers into the employer community,
Speaker 1: and you know, ever since then, I've just been really
Speaker 1: working the phones and talking to a lot of employment
Speaker 1: attorneys and I eventually heard that some attorneys that I
Speaker 1: spoke to have clients who have received those charges. And
Speaker 1: I was able to confirm that with about five attorneys
Speaker 1: that at least three charges exist, and those five attorneys
Speaker 1: have seen those charges and read the allegations. To me, Well,
Speaker 1: congratulations on your store, Thanks Edward. That's j Edward Moreno
Speaker 1: of Bloomberg Law and that's it for this edition of
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