Employment Contracts

November 21, 2022

Pending New Jersey Bill Would Limit Non-Compete Agreements in Employment

Employment agreements often contain clauses and terms intended to protect an employer’s business interests. When a contractual provision limits an employee’s actions, it is known as a restrictive covenant (RC). Sometimes, RCs create difficulties for employees. A common type of RC is the non-compete agreement, which bars an employee from accepting work with the employer’s competitors under various circumstances. Many workers may feel like they are not in a position to try to negotiate different terms with a current or prospective employer. New Jersey employment law sets limits on the extent of RCs in employment or severance agreements. A bill pending before the New Jersey Legislature would expand the limits on some RCs, including non-compete agreements, and provide employees with additional rights.

A non-compete agreement may prohibit an employee from working for a competitor while employed by the employer. It may also prohibit employment with a competitor after the employee no longer works for the employer. In order to be enforceable, a non-compete agreement must be very clear about its terms, such as who counts as a competitor and how long the agreement remains in force for the employee. A 1970 decision by the New Jersey Supreme Court identified three elements that a non-compete agreement must satisfy:
1. The scope of the agreement is limited to the employer’s “legitimate interests.”
2. The agreement does not place an “undue hardship” on the employee.
3. The agreement is not “injurious to the public.”

The bill in the New Jersey Legislature, A3715, is currently pending before the Assembly Oversight, Reform and Federal Relations Committee. It identifies multiple groups of people who may not be subject to non-compete agreements at all, including anyone who is considered exempt under the Fair Labor Standards Act, undergraduate or graduate interns, temporary or seasonal workers, independent contractors, employees who are less than 18 years old, and employees who were employed for less than one year. For anyone who could be subject to a non-compete agreement, the bill sets numerous limitations on the agreement’s terms.
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August 8, 2022

New Jersey Senate Bill Would Expand Protections for Employees in Sexual Harassment Cases

by Resnick Law Group, P.C.

Employers may include provisions in employment contracts or settlement agreements that limit employees’ ability to discuss issues like sexual harassment with others. When a settlement agreement contains this kind of provision, it may mean that the public cannot learn about the employee’s experience in the workplace. Other employees could be at risk of the same kind of experience if the employer took no action against the individual — or individuals — whose conduct led to the complaint and settlement. The New Jersey Legislature passed a law in 2019 that prohibits the use of non-disclosure agreements (NDAs) in connection with claims involving employment discrimination, harassment, or retaliation. A bill now pending in the New Jersey Senate would also prohibit non-disparagement clauses or agreements in those situations. If you have concerns about non-disclosure agreements involving a workplace matter, reach out to a New Jersey employment lawyer to get legal advice.

Businesses often use NDAs as a way to protect trade secrets and other proprietary information. An employment contract might include an NDA that protects information that could be of great interest or value to the employer’s competitors. Employers have also used NDAs to protect other kinds of information besides trade secrets, such as information that could be embarrassing.

News reports have identified numerous cases in which sexual harassment settlements included NDAs. Under this kind of NDA, one of the conditions for receiving a settlement payment is a promise by the complainant never to disclose the circumstances of the sexual harassment claims. The effect of this kind of NDA has been to keep important safety information away from the public. New Jersey passed a law in 2019 barring NDAs in employment contracts and settlement agreements as they might pertain to any “claim of discrimination, retaliation, or harassment.”
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August 1, 2022

Supreme Court Ruling May Affect Mandatory Arbitration for Some New Jersey Workers

by Resnick Law Group, P.C.

Arbitration can allow the parties to a dispute to avoid the time and expense of litigation. More and more businesses are including clauses in consumer and employment contracts that require the parties to go to arbitration before filing a lawsuit. In some situations, arbitration may tend to favor businesses over individuals for numerous reasons. New Jersey lawmakers have attempted to limit the availability of mandatory arbitration contracts for certain claims, but several courts have ruled that the Federal Arbitration Act (FAA) precludes such laws. The FAA grants broad approval to arbitration contracts and arbitration awards. It also excludes certain groups of workers from its provisions. The U.S. Supreme Court recently ruled in favor of an airline employee who objected to arbitration of her overtime compensation claims. The ruling in Southwest Airlines Co. v. Saxon held that the employee is a “transportation worker” who is exempt from the FAA. If you have questions regarding arbitration in the workplace, contact a New Jersey employment lawyer to discuss your situation.

An arbitration proceeding resembles litigation in many ways. Both parties to a dispute must agree in advance to use arbitration. The parties present evidence and arguments to a neutral third party, known as the arbitrator. After considering both sides’ cases, the arbitrator may make an award that is similar to a verdict.

The FAA states that arbitration agreements are generally “valid, irrevocable, and enforceable,” except when they might not be under contract law principles like fraud or duress. If an arbitration agreement specifically states that the arbitrator’s award will be binding, the FAA limits courts’ authority to do anything other than confirm the award and enter it as a judgment, with few exceptions. Courts can only vacate or modify an arbitrator’s award with evidence of corruption, fraud, other forms of misconduct, or significant errors.
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July 8, 2022

Supreme Court Rules on Dispute Over Mandatory Arbitration in Employment Law Claims

by Resnick Law Group, P.C.

The parties to employment law disputes in New Jersey and around the country may agree to use alternative dispute resolution (ADR) instead of the traditional litigation process. Many employers favor one particular form of ADR known as arbitration. Employment contracts often include clauses stating that any dispute must go to arbitration before — or instead of — a lawsuit. Mandatory arbitration is common in many types of employment law claims, supported by the Federal Arbitration Act (FAA). The U.S. Supreme Court recently ruled on a dispute over what an employer must do when they claim that an arbitration clause bars an employee from filing a lawsuit. The ruling in Morgan v. Sundance, Inc. allows the employee to make the case that the employer waited too long before filing a motion to dismiss the suit. If you are involved in a workplace dispute with your employer, reach out to a New Jersey employment lawyer to discuss the matter.

The arbitration process resembles litigation in some ways. An arbitrator conducts a trial and makes a recommendation, much like a judge issues a ruling or verdict. If the parties agreed in advance that arbitration would be binding, courts have very little authority to modify or vacate the arbitrator’s decision.

An employee who is subject to a binding arbitration clause has almost no recourse outside of the arbitration process itself. While arbitration agreements are voluntary, job applicants are rarely in a position to negotiate specific terms. They can either sign the agreement or look for a different job.
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April 29, 2022

Employees of Major Retailer Vote to Unionize, Which Could Influence New Jersey Workers

by Resnick Law Group, P.C.

Labor unions have helped workers achieve significant improvements in pay and working conditions in New Jersey and across the county by enabling them to bargain collectively with their employers. Instead of each individual employee negotiating with their employer, employees can pool their resources and present a united front. Union membership has fallen over the past few decades for a variety of reasons, but this might be changing. As people return to the workforce after the economic slowdown caused by the COVID-19 pandemic, workers are asserting their rights to fair pay, safe work environments, and more. Employees of a major online retailer on Staten Island, for example, voted to unionize in early April 2022. While their employer is contesting the vote, the impact is already spreading to other workplaces, including many workers in New Jersey who have said they plan on holding votes to unionize. If you feel you have been subjected to unlawful practices in the workplace in violation of state or federal law, please contact a New Jersey employment lawyer today.

Section 7 of the National Labor Relations Act (NLRA) protects workers’ rights to engage in activities related to union organizing and collective bargaining. It also protects the rights of workers who do not want to join a union to refrain from these types of activities. Section 8(a) of the statute states that employers may not interfere with union organizing activities. In § 8(b), the statute prohibits unions from “restrain[ing] or coerc[ing]” employees with regard to organizing or membership. Section 9 establishes procedures for employees to vote on forming a union or joining an existing union, and for a union to become the employees’ official representative.

Collective bargaining agreements (CBAs) that require employers to hire union members, known as “closed shop” agreements, are invalid under the NLRA. Some states, known as “right-to-work” states, also prohibit “union shop” agreements, which require employees to join the union once they have been hired. At least twenty-eight states have some form of right-to-work laws as of early 2022. New Jersey is not among them. A CBA between a union and an employer in New Jersey may require union membership. This type of CBA addresses the “free rider” problem, in which employees who are not union members still benefit from the union’s work.
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March 18, 2022

New Federal Law Bans Mandatory Arbitration and Class-Action Waivers in New Jersey Sexual Harassment Cases

by Resnick Law Group, P.C.

Courts in New Jersey and all over the country encourage parties involved in disputes to use alternative dispute resolution (ADR) procedures in order to keep dockets from getting excessively backlogged and free up court resources. Mandatory arbitration clauses are increasingly common in employment contracts. Many employees, as well as their legal advocates, dispute whether these clauses are truly voluntary since employees are often not in a position to negotiate those terms. They also maintain that arbitration tends to favor employers for various reasons. A new law, signed by the president in March 2022, amends the Federal Arbitration Act (FAA) to prohibit the enforcement of mandatory arbitration clauses when employees claim sexual harassment.

Arbitration is a form of ADR in which the parties to a lawsuit present their cases to a neutral third party. That person, known as an arbitrator, presides over a proceeding that resembles a trial in many ways. Data generally support the perception that arbitration favors employers. One possible reason for this is because, while an employee might only encounter an arbitrator once, their employer might have seen that arbitrator many times in other employment disputes. An arbitrator may feel pressure not to alienate a source of consistent business.

If all of the parties to a dispute agreed in advance that the arbitrator’s decision would be binding, the FAA protects the decision from judicial review. A party to the arbitration may petition a court to enforce the award. If the other party tries to challenge the validity of the award, however, the court may not vacate or modify it without evidence of fraud, duress, or misconduct by the arbitrator. This type of mandatory arbitration effectively shuts employees out of the court system.
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October 22, 2021

Appellate Division Revisits Arbitration Agreements in Ruling on New Jersey National Origin Discrimination Lawsuit

by Resnick Law Group, P.C.

Arbitration is a form of alternative dispute resolution (ADR) that resembles a trial in numerous ways, but unlike a trial, there is neither a judge nor a jury. A neutral arbitrator (or panel of arbitrators) with dispute resolution training makes the final decision about the case. Courts all over the country welcome ADR as a way of relieving overburdened dockets. Employers frequently require workers to sign arbitration agreements stating that they will arbitrate any dispute that arises related to the employment instead of going to court. The New Jersey Appellate Division recently ruled that a plaintiff alleging national origin discrimination must submit his case to arbitration because of this kind of agreement.

National origin discrimination violates both Title VII of the Civil Rights Act of 1964 and the New Jersey Law Against Discrimination (NJLAD). According to the Equal Employment Opportunity Commission (EEOC), national origin discrimination includes discrimination because of:
– Actual national origin: A person, or their ancestors, came from a particular location; and
– Perceived national origin: The person has “physical, cultural, or linguistic characteristics” associated with people from that area.

The EEOC notes that the place of origin can be a country or former country, such as Mexico, Nigeria, or the Soviet Union. It could also be a region, such as Central America, Southeast Asia, or the Balkans. People from the United States may be subjected to national origin discrimination, too.
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July 26, 2021

Recent NLRB Decision Could Impact Union Representation for New Jersey Workers

by Resnick Law Group, P.C.

Labor organizing has helped workers in New Jersey and around the country achieve better pay and improved working conditions for over a century. The National Labor Relations Act (NLRA) of 1935 protects workers’ right to engage in activities related to organizing and collective bargaining. The National Labor Relations Board (NLRB) is charged with certifying labor unions and adjudicating disputes under the NLRA. A decision issued in March 2021 by the NLRB could be of note for those involved in New Jersey employment law matters. The board decided to retain the “contract bar rule,” which limits the time for filing any petition that challenges a union’s status while a collective bargaining agreement (CBA) is in force.

Section 7 of the NLRA protects the rights of workers to “self-organization” and other labor organizing activities. Section 9(a) states that, once a majority of employees in a particular “unit,” have selected representatives for collective bargaining, they are the “exclusive representatives” for the employees in that unit. A union can lose its status as representative through a decertification petition filed with the NLRB. If at least thirty percent of the employees in a unit sign on to a petition to decertify the union, § 9(e) directs the NLRB to conduct a secret-ballot election of all employees to see if they favor decertification.

The contract-bar rule states that a petition to decertify a union cannot be filed during the first three years of a CBA, with two exceptions. First, a petition can be filed at any time if the CBA has a “union security clause” that “clearly” violates § 8(a)(3) of the NLRA. A CBA cannot require all of the employees in a unit to pay union dues unless it gives each employee a thirty-day grace period after their employment begins. A CBA that does not include the thirty-day period could be found invalid.
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March 5, 2021

New Jersey Supreme Court Rules on Arbitration Agreements Between Employers and Employees

by Resnick Law Group, P.C.

Arbitration agreements are a common feature in many employment contracts. Under an arbitration agreement, the employee and employer agree to submit any disputes to the arbitration process, either before or in place of filing a lawsuit. Advocates for employees’ legal rights tend to view arbitration as favoring employers for a variety of reasons. While both federal and state law generally favor enforcing arbitration agreements, New Jersey courts sometimes apply extra scrutiny to make sure they are fair to employees. A decision issued by the New Jersey Supreme Court (NJSC) in the summer of 2020 offers a cautionary example of how courts may follow the strict letter of the federal and state arbitration statutes, even when it might seem unfair to the employee. The Appellate Division had ruled in 2019 that an arbitration agreement was unenforceable under the law of contracts. In a 5-1 ruling, the NJSC reversed that decision.

Both federal and state law provide that arbitration agreements are presumed to be enforceable and irrevocable, unless a party can show “a ground that exists at law or in equity for the revocation of a contract.” 9 U.S.C. § 2, N.J. Rev. Stat. § 2A:23B-6. Even if, as is often the case, an employee has no opportunity to negotiate the specific terms of an arbitration agreement, courts will likely find it to be enforceable as long as there was a “meeting of the minds,” meaning that both parties knowingly agreed to all of the contract’s provisions.

In 2003, the NJSC ruled that an employee can only waive statutory rights, such as the right to a trial in a court of law, through “an explicit, affirmative agreement that unmistakably reflects the employee’s assent.” The court further held in 2014 that an arbitration agreement “must be clear and unambiguous” about an employee’s agreement “to arbitrate disputes rather than have them resolved in a court of law.”
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December 13, 2019

Federal Appellate Court Vacates Arbitration Order in New Jersey Misclassification Lawsuit

by Resnick Law Group, P.C.

The court system encourages litigants to attempt alternative dispute resolution (ADR) before taking their cases to court. Many employment contracts in New Jersey and nationwide include clauses requiring arbitration before (or instead of) going to court. The Federal Arbitration Act (FAA) strongly favors these clauses, but it exempts certain groups of workers. The Third Circuit Court of Appeals recently vacated an arbitration order in a New Jersey employment class action. It found that the plaintiff, a driver for a major rideshare company, could be part of an exempt group under the FAA.

The Third Circuit case deals with alleged misclassification of employees as independent contractors, a common issue with rideshare companies and other “gig economy” employers. Employees are protected by multiple local, state, and federal statutes governing wages, hours of work, working conditions, paid and unpaid leave, discrimination and harassment, and more. Independent contractors do not enjoy most of these legal protections. Under New Jersey law, a worker is considered an employee unless they meet the “ABC test,” which looks at the degree of control the employer may exercise over the worker, and the extent to which the worker has their own established trade or business. See N.J. Rev. Stat. §§ 43:21-19(i)(6)(A), (B), (C).

ADR offers some advantages over litigation, but for employees seeking relief under New Jersey’s employment statutes, it can also have disadvantages. The parties must pay all of the costs associated with ADR, including the fees charged by arbitrators, mediators, or other ADR specialists. This can give employers with deep pockets an advantage. The FAA sets a very high bar for challenging, modifying, or vacating an arbitration award. In order for a court to compel arbitration in an employment lawsuit, however, an employer must first demonstrate that the FAA applies to its employees.