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Legal News GavelIn New Jersey, sexual harassment in the workplace is considered a form of unlawful sex discrimination. The elements that a plaintiff must prove can vary depending on the circumstances of the case, and several defenses are available to defendants. The Third Circuit Court of Appeals, whose jurisdiction includes New Jersey, recently ruled on a defendant’s use of the Faragher-Ellerth affirmative defense. A defendant can overcome liability under federal law if they can prove, in part, that a plaintiff unreasonably failed to report alleged sexual harassment. The plaintiff did not report alleged sexual harassment by her supervisor for four years. The court rejected the defendant’s claim that this was per se unreasonable under Faragher-Ellerth, citing the recent revelations of the #MeToo movement. Minarsky v. Susquehanna Cty., No. 17-2646, slip op. (3d Cir., Jul. 3, 2018).

Title VII of the Civil Rights Act of 1964 prohibits employment discrimination on the basis of sex and other factors. Numerous court decisions have applied this to sexual harassment. When an alleged harasser is a coworker of the complainant, or is otherwise not part of the company’s management, the employer is only liable if it was aware of the alleged harassment and failed to make reasonable efforts to remedy the situation.

The Faragher-Ellerth affirmative defense is partially based on this obligation to notify the employer and seek internal remedies. Since it is an affirmative defense, the burden of proof shifts to the defendant to prove two elements:
1. “[T]he employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior,” Burlington Industries, Inc. v. Ellerth, 524 U.S. 742, 765 (1998); and
2. The complainant “failed to [use] reasonable care to take advantage of the employer’s safeguards and…to prevent harm that could have been avoided.” Faragher v. Boca Raton, 524 U.S. 775, 805 (1998).
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Cheeseburgers on grillAntitrust laws protect both consumers and employees from anti-competitive practices. These laws are an essential part of any free market system. Monopolies and other accumulations of wealth or influence almost invariably lead to restraints on trade that harm both businesses and individuals. A single company that holds a monopoly over a particular product or geographic area has little to no incentive to set prices based on the conditions of the market. Companies that agree to fix prices do similar harm to competitors and consumers. Employees rely on a competitive job market, which enables them to seek out better opportunities with other employers. Some employers may attempt to restrain the mobility of their employees by entering into agreements with other companies to refrain from recruiting or hiring one another’s employees. These are commonly known as “no-poach” agreements, and they can have a major impact on employees. New Jersey’s Attorney General recently announced that, along with several other states, it is investigating alleged no-poach agreements among fast-food franchisees.

When employers enter into no-poach agreements, employees may find themselves unable to advance in their chosen careers. Workers cannot seek to move to a higher position, often with higher pay, at another company if that company has agreed ahead of time not to hire them. They are therefore at the mercy of their current employers. A press release from the New Jersey Attorney General quotes the state’s Labor Commissioner, who stated that no-poach agreements can keep workers from looking for jobs with better pay, better opportunities, or a better location. These agreements therefore “exploit low-wage workers who are most in need of job protections.”

The Antitrust Division of the U.S. Department of Justice (DOJ) has conducted its own series of investigations into alleged no-poach agreements over the past few years. In an April 2018 update, it noted that competitive markets for employees and jobs are subject to “the same rules” as consumer-oriented markets for goods and services. This applies both to no-poach agreements and wage-fixing agreements, in which employers agree to set a range or upper limit for employee compensation. The DOJ announced a plan in late 2016 to pursue criminal antitrust charges against companies that use “naked” no-poach and wage-fixing agreements, i.e. agreements that “are not reasonably necessary to any separate, legitimate business collaboration.”
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Legal News GavelBusiness laws in New Jersey and around the country protect corporate directors and officers from personal liability for most actions undertaken by the business. Courts will only “pierce the corporate veil” and allow suits against individual directors or officers in limited situations, such as illegal conduct by those individuals. In the context of employment, some statutes allow claims against individuals, while others do not. A putative class action alleging violations of a New Jersey wage law sought to hold individual directors liable along with the employers. A federal court, while allowing the lawsuit to proceed against the business entity defendants, ruled that New Jersey’s Prevailing Wage Act (PWA) “does not impute personal liability.” Palmisano, et al v. Crowdergulf, LLC, et al, No. 3:17-cv-09371, mem. order at 1 (D.N.J., May 29, 2018).

The PWA “establish[es] a prevailing wage level for workmen engaged in public works.” N.J. Rev. Stat. § 34:11-56.25. “Public works,” as defined by the statute, includes most construction and maintenance work performed under government contract, or performed on government-owned property. Id. at § 34:11-56.26(5). The “prevailing wage” is the rate paid in accordance with collective bargaining agreements in force in the geographic area of the public work. Id. at § 34:11-56.26(9). Workers must be paid, at minimum, the current prevailing wage, which may vary based on location, type of work, and other factors. If an employer pays a worker less than the prevailing wage rate, the worker may file a private cause of action to recover amounts owed to them. Id. at § 34:11-56.40.

The defendants in the Palmisano case include corporations and limited liability companies that entered into contracts with the State of New Jersey for cleanup work after Hurricane Sandy. The hurricane caused extensive damage to the mid-Atlantic region in late October 2012. It made landfall in New Jersey on October 29, killing thirty-seven people, damaging or destroying nearly 350,000 homes, and causing an estimated $30 billion in damage. The state entered into contracts with companies from all over the country to repair the damage.

Legal News GavelClass actions and collective actions allow numerous individuals with similar claims to bring a single lawsuit against a common defendant, rather than hundreds or thousands of individual lawsuits. A New Jersey employee, for example, could file a collective action on behalf of themselves “or other employees similarly situated” for violations of state minimum wage law. See N.J. Rev. Stat. § 34:11-56a25. This offers many benefits for plaintiffs, particularly in situations where the cost of filing suit individually, when compared to the potential recovery, would make it too expensive to assert one’s legal rights. One could also argue that class actions help defendants by consolidating all claims against them into a single lawsuit, rather than hundreds or thousands of lawsuits. That is not how employers and other defendants usually see class actions, however, and they frequently argue against allowing employees to pool their claims in a single lawsuit. The U.S. Supreme Court recently sided with employers regarding collective arbitration, similar to collective or class actions. Epic Systems Corp. v. Lewis, 584 U.S. ___ (2018).

The ruling in Epic Systems arose from a conflict between two federal statutes: the Federal Arbitration Act (FAA) of 1925, 9 U.S.C. § 1 et seq.; and the National Labor Relations Act (NLRA) of 1935, 29 U.S.C. § 151 et seq. The FAA generally states that arbitration clauses in written contracts “involving commerce” are “valid, irrevocable, and enforceable.” 9 U.S.C. § 2. Courts have authority to order parties to such a contract to participate in arbitration, and to enforce the recommendations of the arbitrators. A court may only vacate or modify an arbitration award on grounds specified by the statute. See id. at §§ 10, 11. The Supreme Court held that the FAA applies to contracts executed under both state and federal law in Southland Corp. v. Keating, 465 U.S. 1 (1984).

The NLRA protects the rights of workers to organize for the purpose of collective bargaining—i.e. to form or join labor unions—and “to engage in other concerted activities for” those purposes. 29 U.S.C. § 157. It is an “unfair labor practice” for employers to “interfere with” or “restrain” employers engaged in these protected activities. Id. at § 158(a)(1). Courts have given rather broad interpretation to the meaning of “concerted activities.” The question in Epic Systems concerned whether collective arbitration was a “concerted activity” protected by the NLRA, or whether the FAA required enforcement of arbitration clauses in individual employment contracts.
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Legal News GavelThe court system in the U.S. is often described as “overburdened.” Courts therefore encourage litigants to pursue a variety of alternative dispute resolution (ADR) methods. Many employers in New Jersey and around the country often include clauses in employment contracts requiring a form of ADR known as arbitration in disputes with their employees. Both federal and New Jersey employment laws establish a preference in favor of enforcing arbitration clauses but require that an employee receive adequate notice. A federal district court in New Jersey ruled on two separate motions to compel arbitration by an employer in a wrongful termination case. First, the court ruled that a genuine issue of fact existed as to whether the plaintiff received adequate notice of an arbitration agreement. Schmell v. Morgan Stanley & Co., Inc. (“Schmell I”), No. 3:17-cv-13080, op. (D.N.J., Mar. 1, 2018). It later denied a motion “to compel arbitration…to resolve disputed issues of fact related to arbitration.” Schmell v. Morgan Stanley & Co., Inc. (“Schmell II”), No. 3:17-cv-13080, op. at 2 (D.N.J., May 30, 2018).

The arbitration process involves presenting a dispute to one or more trained ADR professionals, often former judges, who conduct a proceeding similar to a trial and render a decision. If the parties have agreed in advance, this decision is binding. Arbitration offers some advantages over litigation, but it is often perceived as favoring employers, who typically have more resources to pay arbitration fees. New Jersey law holds that an employee is not bound by an arbitration clause if the employee “does not sign or otherwise explicitly indicate his or her agreement to it.” Schmell I, op. at 4, quoting Leodori v. CIGNA Corp., 814 A.2d 1098, 1106 (N.J. 2003).

The plaintiff in Schmell began working for the defendant in 2006. During his employment, he wrote “a self-help book that referenced his history with drug and alcohol abuse and ultimate recovery.” Schmell I at 1. In June 2017, according to the plaintiff, he presented the defendant with a draft of the book. The defendant allegedly threatened termination if he did not make certain edits. The plaintiff claims that he made the requested edits, but the defendant still terminated him on October 31, 2017. The book was published on November 14. The plaintiff filed suit one month later, alleging discrimination on the basis of disability because of his history of addiction.

Legal News GavelThe U.S. Constitution limits the government’s ability to infringe on a range of rights, including the First Amendment right to free speech. In the context of New Jersey employment matters, this usually places far more limits on public employers than private employers. As a general rule, a private employer does not infringe on an employee’s freedom of speech if they discipline or fire that employee because of statements they have made. Since public employers are part of the government, they have less leeway with regard to employee speech. A lawsuit filed earlier this year, however, alleges that a private employer violated the plaintiff’s constitutional rights by firing her because of her speech. Briskman v. Akima, LLC, No. 2018-5335, complaint (Va. Cir. Ct., Fairfax Cty., Apr. 4, 2018). The plaintiff claims that the defendant fired her “out of fear of unlawful retaliation by the government for constitutionally protected speech,” id. at 8, and that this makes her termination a violation of her First Amendment rights.

Caselaw has largely established broad protections for the free speech rights of public employees with regard to their employment. According to the U.S. Supreme Court, a public employee who speaks out about “issues of public importance” cannot be subject to termination by their employer, unless their statements were “knowingly or recklessly” false. Pickering v. Board of Education, 391 U.S. 563, 574 (1968). This does not apply, however, when the employee is speaking in their official capacity as a government employee. Garcetti v. Ceballos, 547 U.S. 410 (2006).

Private employers have fewer restrictions with regard to disciplining employees, including terminating them, for statements they have made. This often applies even when the statement or statements at issue involved matters of public concern that were unrelated to the employee’s position with the employer. Some exceptions apply, such as when the speech involves activities protected by the National Labor Relations Act, 29 U.S.C. § 157, or when a state or local anti-discrimination law includes protections for “political activities,” N.Y. Lab. L. § 201-D. The Third Circuit Court of Appeals has ruled that termination for an employee’s political activities, or their refusal to participate in political activities, could violate public policy. Novosel v. Nationwide Ins. Co., 721 F. 2d 894 (3rd Cir. 1983).

Legal News GavelBusinesses have an obligation to protect their assets and interests, but not in ways that damage their employees. New Jersey employers can protect their interests with covenants not to compete, also known as noncompete clauses, which limit employees’ ability to work for, or become, a competitor after their employment ends. A bill pending in the New Jersey Legislature would significantly restrict the enforceability of noncompete clauses. An Assembly committee reported favorably on A1769 in May 2018, while the Senate counterpart, S635, is still awaiting a committee hearing.

In order for a noncompete clause to be enforceable under current New Jersey employment law, it must be reasonably limited in both time and geographic scope. A noncompete clause that purported to prohibit a former employee from ever working for a competing company anywhere in New Jersey would be unenforceable on its face because it is not even close to being reasonably limited to the protection of the employer’s interests at the moment the employee ceases to be employed. If the noncompete clause only restricted employment with a competitor within, for example, five miles of the employer’s location for six months, it would probably be enforceable. Even then, however, noncompete clauses often require workers to relocate or change fields solely to avoid liability to their former employer.

A1769 and S635 state that noncompete clauses “driv[e] skilled workers to other jurisdictions” and “requir[e] businesses to solicit skilled workers from out-of-State.” The Assembly Labor Committee made some changes to the bill, but most provisions remain the same as in S635. The bill establishes a 10-part test that a noncompete clause would have to meet in order to be enforceable:
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Businesses entrust a considerable amount of information, along with the value represented by that information, to their employees. Employers have an interest in protecting their intellectual property, trade secrets, and other proprietary information. Employment laws in New Jersey and New York allow restrictive covenants in employment contracts that reasonably limit certain activities by former employees. From an employee’s point of view, the overzealous enforcement of restrictive covenants imposes an undue burden on their ability to make a living in their chosen field. Courts often give close scrutiny to employers’ efforts to enforce restrictive covenants. Last summer, a Manhattan federal court refused to enforce several non-compete clauses against a group of former employees in a New York employment dispute. In re Document Technologies Litigation (“DTL”), No. 17-cv-2405, op. (S.D.N.Y., Jul. 6, 2017).

Legal News GavelOne common type of restrictive covenant used in employment agreements is the “covenant not to compete,” also known as a non-compete clause. An employer may worry that, when an employee leaves their job, they will take the knowledge and contacts they have gained and either go to work for a competitor or start their own competing business. In order to be enforceable, a non-compete clause must have a reasonable duration and a limited geographic scope. A non-compete clause stating that a former employee cannot work for any competing business anywhere in the state of New Jersey for a period of 10 years is unlikely to be enforceable, but one that restricts competition within 10 miles of the employer’s location for six months might be considered reasonable. Other common restrictive covenants include agreements not to solicit the employer’s clients or customers (non-solicitation), and agreements not to disclose certain information learned during an individual’s period of employment (non-disclosure).

The plaintiff in DTL “is a global provider of electronic discovery (‘e-discovery’) services for law firms and corporate legal departments,” with about 7,000 employees. DTL, op. at 2. The defendants include four former employees and the competing company that hired them after they quit their jobs with the plaintiff. The individual defendants signed employment agreements with the plaintiff that included one-year non-compete and non-solicitation clauses and a non-disclosure clause. According to the court’s opinion, the individual defendants had become “dissatisfied with their employment” with the plaintiff as early as 2014. Id. at 3. They resigned from the plaintiff and signed employment agreements with the competing company in January 2017, with the understanding that they would not begin work until the following year, after the non-compete had expired.

Legal News GavelA group of baggage handlers employed by a major airline at Newark Liberty International Airport enjoyed a victory in their wage lawsuit recently, when a federal judge granted their request for class certification. Ferreras, et al. v. American Airlines, Inc., No. 2:16-cv-02427, opinion (D.N.J., Mar. 5, 2018). The plaintiffs allege that the defendant violated the New Jersey Wage and Hour Law (NJWHL) by requiring them to work during times when they were “off the clock.” The lawsuit originally asserted causes of action under both the NJWHL and the federal Fair Labor Standards Act (FLSA). Airline employees are specifically exempted from the FLSA’s minimum wage provisions, but they are covered by the NJWHL.

Both federal and state laws require employers to pay overtime compensation to non-exempt employees for work performed in excess of 40 hours in a week, at one-and-a-half times the regular hourly rate. See 29 U.S.C. § 207(a)(1), N.J. Rev. Stat. § 34:11-56a4. Ideally, employees submit time sheets showing the total amount of time worked, and for any time worked over 40 hours per week, the employer pays them time-and-a-half. In reality, however, some employers require “off the clock” work, meaning employees must perform job-related services during time that is not included on their time sheets. If the total compensation received does not reflect the total amount of time actually worked, the employer could be liable under the FLSA or the NJWHL.

A wide range of jobs are exempt from the FLSA’s minimum wage and overtime provisions. Perhaps the best-known of these exemptions is for those who work “in a bona fide executive, administrative, or professional capacity.” 29 U.S.C. § 213(a)(1). Some jobs are only exempt from the overtime requirement. This includes “any employee of a carrier by air subject to” federal legislation. Id. at § 213(b)(3). The NJWHL only exempts “employee[s] of a common carrier of passengers by motor bus.” N.J. Rev. Stat. § 34:11-56a4. While the statute does not define “motor bus,” it has been construed not to include airplanes.

Legal News GavelNew Jersey is among the majority of the states in the U.S. in allowing, under the supervision of a doctor, the possession and use of marijuana for medical purposes. The New Jersey Compassionate Use Medical Marijuana Act (CUMA), N.J. Rev. Stat. § 24:6I-1 et seq., enacted in 2009, defines permissible uses for the drug, establishes prescription guidelines for doctors, and creates a registry for patients. Federal law, however, still classifies marijuana as a Schedule I controlled substance, meaning that as far as the federal government is concerned, marijuana has “no currently accepted medical use in treatment.” 21 U.S.C. §§ 812 (b)(1)(B), (c)(I)(c)(10). Possession of marijuana with a valid prescription could therefore still be illegal under federal law. In an employment context, medical marijuana use that is entirely legal in New Jersey could lead to problems. Neither federal nor New Jersey employment discrimination laws prohibit adverse employment actions based on lawful medical marijuana use, but a bill currently pending in the New Jersey Assembly intends to change that.

The New Jersey Legislature, in enacting CUMA, found that “[m]odern medical research has discovered a beneficial use for marijuana in treating…certain debilitating medical conditions,” regardless of what federal law says. N.J. Rev. Stat. § 24:6I-2(a). It also found that state law enforcement officials are not responsible for enforcing federal laws and that “[c]ompassion dictates that “medical marijuana patients should be “protect[ed] from arrest, prosecution, property forfeiture, and criminal and other penalties.” Id. at § 24:6I-2(e). The provisions of CUMA mainly deal with registration of patients and certification of doctors.

The statute currently places no obligations or restrictions on employers. Section 16 of CUMA specifically states that employers are not required “to accommodate the medical use of marijuana in any workplace.” Id. at § 24:6I-14. The New Jersey Law Against Discrimination (NJLAD) does not include medical marijuana use as a protected category. See N.J. Rev. Stat. § 10:5-12(a). While it does include disability as a category, this is not likely to offer much protection for medical marijuana users. Not all conditions for which medical marijuana may be prescribed would qualify as disabilities under the NJLAD. Even if the underlying condition did qualify as a disability, it is conceivable that an employer could justify taking an adverse action because the employee’s conduct violates federal law, instead of because of the disability. This is where the proposed bill comes in.

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