NJ Business Law Blog

When Are Non-Solicitation Covenants in an Employment Agreement Enforceable?

A recent case offers guidance to New York employers concerning their ability to restrict former employees from attempting to take away the employer’s customers. 

In that case, a former employee of USI Insurance Services, LLC (“USI”) signed an employment agreement that included a provision restricting the employee’s ability to solicit the business of former clients for 24 months following the termination of the agreement.  USI Insurance Services LLC v. Miner, No. 10 Civ. 8162, 2011 WL 2848139 (S.D.N.Y. July 7, 2011). Yet just days after the the employee, Jeffrey Miner, left the company and triggered the termination of the employment agreement, he mass e-mailed USI’s current customers in an attempt to solicit business.  In this case, the U.S. Federal District Court for the Southern District of New York Court concluded that Miner’s actions constituted solicitation as a matter of law and granted partial summary judgment to USI on this issue. Id. at 13. Miner’s mass e-mail to USI’s current customers was a clear attempt to solicit business in violation of the employer’s contractual rights. Therefore, it was prohibited conduct.

In New York, non-solicitation covenants – also known as restrictive covenants – are provisions in an agreement that restrict others from actively engaging in certain business development activities (i.e. soliciting an employer’s customers). A non-solicitation covenant may restrict a former employee from contacting his employer’s customers by way of mailings, e-mails, personal calls or through other means that would constitute solicitation.  Id. at 11. According to the Court, non-solicitation covenants are enforceable if they are:

a)      necessary to prevent disclosure of trade secrets or confidential information, or

b)      where an employee’s services are unique or extraordinary.

Id.

Additionally, the covenants cannot impose undue hardship on the employee or be injurious to the public. Id. at 14 [quoting IBM Corp. v. Visentin, No. 11 Civ. 399, 2011 WL 672025, 8 (S.D.N.Y. Feb. 16, 2011)]. 

However, a non-solicitation covenant alone may not be enough to restrict a former employee from taking customers. In an unrelated case, the New York Court of Appeals noted that “‘absent an express or restrictive covenant not to compete,’ advertising to the general public . . . [would] not be considered solicitation, so long as such advertisements are not specifically aimed at the seller’s former clients.” Id. at 12 [quoting Bessemer Trust Co. v. Branin, 2011 WL 1583932, 5 (N.Y. Ct. of Appeals Apr. 28, 2011]. Accordingly, a former employee can continue to compete in the same industry.  Id.  Also, a customer can contact his former employee for the purposes of obtaining factual information and such interaction would also be permissible “so long as the response .  .  . [does] not go beyond the specific information sought.”  Id.

This is a significant decision for companies that are including non-solicitation covenants in their employment agreements. The Court’s decision gives an indication of what type of covenant would be reasonable to be enforced. 

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Does Your Company Need to Circulate the Conscientious Employee Protection Act Notice to its Employees?

Employers should take notice of the poster that small New Jersey employers are required to display as mandated in the New Jersey Conscientious Employee Protection Act (CEPA).

Under the CEPA, employers with ten or more employees must distribute notice of the CEPA law once a year to their employees. Employers should post the most recent whistleblower poster in an area that is visible and accessible for employees.

New Jersey’s Department of Labor and Workforce Development requires employers to display several posters for employees to be able to read and review. The posters range from information on wage and hour law, child labor law and family leave insurance. CEPA, also known as the “Whistleblower Act,” was designed to provide broad protections against employer retaliation for employees acting within the public interest and blow the whistle on illegal or unethical activity committed by their employers or co-employees.

CEPA states that New Jersey law prohibits an employer from taking any retaliatory action against an employee because the employee:

a)      Discloses or threatens to disclose to a supervisor or public body conduct that the employee believes violates a law, rule or regulation promulgated pursuant to law;

b)      Provides information to or testifies before public bodies regarding such conduct;

c)      Objects or refuses to participate in an activity, policy or practice the employee reasonably believes violates a law, rule, regulation or public policy, or is fraudulent or criminal.  

As a result of the requirement, all employers with ten or more employees should immediately acquire and post the newest whistleblower poster in an area that is visible and accessible to employees. Additionally, employers should provide employees with an annual notice, either via e-mail or in some handwritten form. It is also advisable to have employees complete acknowledgement forms to provide proof the employee has read and understood the notice it has received.

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Is the anti-retaliation provision of the Fair Labor Standards Act limited to complaints that are in writing?

In Kasten v. Saint-Gobain Performance Plastics Corp. the United States Supreme Court was asked to decide whether an employee’s oral complaints triggered the anti-retaliation protections of the Fair Labor Standards Act (the “Act”), which sets forth employment rules concerning minimum wages, maximum hours, and overtime pay.  563 U.S. ______ (2011).

The anti-retaliation provision of the Act makes it unlawful

to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to [the Act], or has testified or is about to testify in such proceeding, or has served or is about to serve on an industry committee.

29 U.S.C. §215(a)(3).

The Court had to decide whether the statutory term “filed any complaint” included oral as well as written complaints.  Kevin Kasten sued his former employer, Saint-Gobain Performance Plastics Corporation (“Saint-Gobain”), following his termination for allegedly failing to record his comings and goings on the timeclock.  Kasten argued that he was really terminated in retaliation for making repeated oral complaints about the location of the timeclock.  Saint-Gobain’s timeclock was located between the area where Kasten and other workers put on and took off their work-related protective gear and the area where they performed their assigned tasks.  As a result, Kasten and the other workers did not receive credit for the time it took them to put on and take off their work clothes, which is contrary to the Act’s requirements.  In fact, in a separate lawsuit a District Court in Wisconsin held that Saint-Gobain’s failure to compensate its employees for the time it took to put on and take off work clothes violated the Act.  Kasten v. Saint-Gobain Performance Plastics Corp., 556 F.Supp.2d 941, 954 (W.D.Wis. 2008).

Kasten repeatedly told Saint-Gobain about the timeclock’s unlawful location via Saint-Gobain’s internal grievance-resolution procedure and raised the issue with his shift supervisor.  Kasten told Saint-Gobain’s human resources manager that the timeclock’s location was illegal, that he was thinking about starting a lawsuit about the timeclock’s placement and that company would lose in court.  Kasten claimed in his lawsuit that it was this activity, and not his failure to use the timeclock, that caused Saint-Gobain to discipline and ultimately terminate him in December, 2006.

The District Court granted Saint-Gobain’s motion for summary judgment and dismissed Kasten’s lawsuit on the ground that the Act did not protect oral complaints.  On appeal, the United States Court of Appeals for the Seventh Circuit agreed that the Act did not apply to oral complaints and affirmed the District Court’s dismissal of Kasten’s lawsuit.  The United States Supreme Court agreed to hear Kasten’s appeal to determine whether “an oral complaint of a violation of the Fair Labor Standards Act is protected conduct under the [Act’s] anti-retaliation provision.”  Kasten, 563 U.S. at p.4.

In analyzing the statutory text, the Court considered some dictionary definitions of “file”, which used of the word “file” in connection with oral material, and common usage of the word by legislators, administrators, and judges, which sometimes use the word when referring to oral statements.  The Court noted that regulations promulgated by federal agencies sometimes permit complaints to be filed orally and that oral filings were a known phenomenon when the Act was passed.  The Court, however, determined that review of the statutory text alone was insufficient to provide a conclusive answer.

The Court next analyzed the Act’s objectives, which are to prohibit labor conditions that are detrimental to the minimum standard of living necessary for health, efficiency, and the general well-being of workers.  The Act relies upon information and complaints by employees that seek to enforce their rights under the Act.  The Act’s anti-retaliation provision serves to prevent employees from being fearful of economic retaliation and quietly accepting substandard working conditions. 

The Court found no evidence in the Act’s legislative history supporting the position that Congress intended to limit the effectiveness of the Act by preventing those employees who cannot read or write from making complaints under the Act.  Limiting complaints under the Act to those made in writing would also prevent governmental agencies from using hotlines, interviews and other oral methods to take employee complaints.  Thus, the Court held, “to fall within the scope of the antiretaliation provision, a complaint must be sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute and a call for their protection.  This standard can be met, however, by oral complaints, as well as by written ones.”  Id. at p.12.

Moreover, the Court noted that the Department of Labor has consistently held that the phrase “filed any complaint” covers oral, as well as written, complaints.  See e.g. Goldberg v. Zenger, 43 CCH LC ¶31,155, pp. 40,985, 40,986 (D.Utah 1961).  More recently, the Department of Labor set up a hotline for the purposes of receiving oral complaints.  The Equal Employment Opportunity Commission has set forth a similar view with regard to oral complaints in its Compliance Manual, Vol. 2, §8-II(B)(1), p. 8-3, and n. 12 (1998).

The Court concluded that the Court of Appeals erred in holding that oral complaints cannot fall within the phrase “filed any complaint” in the Act’s anti-retaliation provision.  As a result, the Court vacated the judgment in favor of Saint-Gobain, reinstated Kasten’s complaint and remanded the case to the District Court for trial.

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Does the anti-retaliation provision of New York City’s Human Rights Law protect employees who suffer retaliation for opposing discrimination against other employees?

On March 31, 2011, the New York Court of Appeals upheld a jury’s verdict in favor of two New York City police officers that claimed they were subject to retaliation for opposing discrimination against a third officer on the basis of that third officer’s perceived sexual orientation.  Albunio v. City of New York, 2011 WL 1157706 (2011).

In 2002, Captain Lori Albunio was the commanding officer of the Youth Services section of the New York City Police Department.  Lieutenant Thomas Connors was operations coordinator of the section and reported to Albunio.  Sergeant Robert Sorrenti applied for a transfer into the Youth Services section, was interviewed by Albunio and seemed poised to become the Youth Services section DARE officer, responsible for educating New York City school children about the dangers of drugs.  Albunio recommended Sorrenti for the DARE position to her supervisor, Inspector James Hall.  Hall decided to interview Sorrenti himself and did so with Albunio present.

According to Albunio, during that interview Hall aggressively questioned Sorrenti about his marital status; whether he had children; and about his relationship with another male officer to whom he had allegedly loaned money, suggesting that the relationship was more than a friendship.  After the interview, Hall told Albunio that Sorrenti didn’t seem quite right.  Hall later chose another officer for the DARE position and told Albunio that he would not trust Sorrenti working around children.

Several months later, Hall told Lieutenant Connors that there had to be something more to Sorrenti’s relationship with the officer to whom he loaned money and that Hall would not have been able to sleep at night if he knew Sorrenti was working with children.  Connors responded that he believed Sorrenti was more than qualified to work with children and showed Hall a favorable performance evaluation that Sorrenti recently received.  Following that conversation, Connors formed the opinion that Hall “believed that Sergeant Sorrenti was a child molester and homosexual.”  Id. at *2.

Later in 2002, Albunio learned that she was to be removed as the commanding officer of the Youth Services section for utilizing poor judgment when requesting personnel.  Hall cited her recommendation of Sorrenti as the prime example.  Albunio told Hall that Sorrenti was the better candidate for the DARE position and that she would recommend Sorrenti again if she had the chance to do it over.  Albunio was told it would be in her best interest to find another assignment.  She did, but it was a much less desirable assignment.

After Albunio told Connors that she was directed to find another assignment, Connors filed a complaint with the police department’s Office of Equal Employment Opportunity alleging that Hall discriminated against Sorrenti based upon Sorrenti’s sexual orientation.  After Hall learned of the complaint, Connors decided it was time to leave the Youth Services section.  However, while Connors remained with that section he was subject to several adverse employment actions.  For example, his geographical assignments and working hours were changed in unfavorable ways; and he was shunned and excluded from meetings with Hall and Hall’s subordinates.  When he was finally transferred, he received a less desirable assignment than he expected.

Albunio and Connors filed a lawsuit against the City of New York claiming they were victims of retaliation in violation of the New York City Human Rights Law, Administrative Code §8-107(7).  That section states,

Retaliation. It shall be an unlawful discriminatory practice for any person engaged in any activity to which this chapter applies to retaliate or discriminate in any manner against any person because such person has (i) opposed any practice forbidden under this chapter, (ii) filed a complaint, testified or assisted in any proceeding under this chapter, (iii) commenced a civil action alleging the commission of an act which would be an unlawful discriminatory practice under this chapter, (iv) assisted the commission or the corporation counsel in an investigation commenced pursuant to this title, or (v) provided any information to the commission pursuant to the terms of a conciliation agreement made pursuant to section 8-115 of this chapter. The retaliation or discrimination complained of under this subdivision need not result in an ultimate action with respect to employment, housing or a public accommodation or in a materially adverse change in the terms and conditions of employment, housing, or a public accommodation, provided, however, that the retaliatory or discriminatory act or acts complained of must be reasonably likely to deter a person from engaging in protected activity.

New York City Administrative Code §8-107(7).

A trial was held and the jury found that the City retaliated against both Albunio and Connors and awarded each monetary damages.  The City appealed the jury’s verdict to the Appellate Division, which upheld the verdict in favor of Albunio and Connors.  The City appealed that decision to the New York Court of Appeals, the state’s highest appellate court.

The Court of Appeals noted that the issue was whether the record supported the jury’s finding that Albunio and Connors “opposed” the discrimination against Sorrenti based upon his sexual orientation.  The court was guided by New York’s Local Civil Rights Restoration Act of 2005 (“LCRRA”), which requires that “the provisions of this title [i.e., the New York City Human Rights Law] shall be construed liberally for the accomplishment of the uniquely broad and remedial purposes thereof, regardless of whether federal or New York State civil and human rights laws, including those laws with provisions comparably-worded to provisions of this title, have been so construed.”  Id. at *4.  In other words, the court was required to construe Administrative Code §8-107(7) “broadly in favor of discrimination plaintiffs, to the extent that such a construction is reasonably possible.  We interpret the word ‘opposed’ according to this principle, and conclude that the evidence supports a finding that both Albunio and Connors opposed discrimination against Sorrenti.”  Id. at *4.

According to the court, Connors clearly opposed the discrimination since he filed a discrimination complaint on Sorrenti’s behalf; there was evidence Hall knew of the complaint; and after filing the complaint Connors was subjected to a series of adverse employment actions.  The court similarly found that Albunio “opposed” the discrimination although she did not file a formal complaint.  Albunio “opposed” the discrimination against Sorrenti when she stated that Sorrenti was the better candidate and that she would choose him again if given another chance.  In essence, the court held that the jury could have found that Albunio made her disapproval of Hall’s action clear and voiced her opinion that it was wrong when she made those statements to Hall. 

The Court of Appeals affirmed the decision of the Appellate Division and reinstated the jury’s verdict in favor of Albunio and Connors.

Download Albunio v. City of New York, 2011 WL 1157706 (2011)

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What are the new protections for hourly employees in the hospitality industry under New York law?

Effective January 1, 2011, New York State enacted the Hospitality Wage Order (“Order”) which applies to New York’s hospitality industry and makes several important changes to the existing law. 12 N.Y.C.R.R. §146-1.1 et seq.

First, the Order increases the minimum hourly wage for tipped employees such as food service workers, service employees in all establishments, service employees in resort hotels and chambermaids in resort hotels.  That hourly wage is now $5.00 for food service workers and $5.65 for all other service employees.

Second, hourly rates are now required for all non-exempt employees (employees that are paid by the hour under the Fair Labor Standards Act), except commissioned salespersons.  Employers may no longer pay such employees salaries, weekly rates or daily rates.  This is intended to deter excessively long hours and ensure compliance with the rules regarding overtime pay.

Third, overtime pay for all non-exempt employees is now due after 40 hours worked in a week, rather than after 44 hours.

Fourth, for the first time, gratuities are now subject to regulation in New York State.  Employers must give employees written notice of the employer’s tip policies.  Employers must also remit to their service employees all house-imposed guest charges that are said to be gratuities.  If any charges for banquet or special function services are not intended to be gratuities, that information must be clearly communicated to patrons so they are aware that gratuities will not be paid out of those charges.  In a dispute, the employer has the burden of proving by clear and convincing evidence that patrons were notified that the charges were not gratuities.  Adequate notification includes a statement in the contract with the patron that clarifies that the charges are not gratuities.

Fifth, employers must permit employees to bring their own meals or give them a meal at no more than the current meal credit amount, which is $2.50.

Finally, uniform maintenance pay is due all non-exempt employees unless the uniforms are of the “wash and wear” variety.  The employer may establish that the uniforms are “wash and wear” by demonstrating that the number of uniforms provided is the same as the number of days worked per week by the employee and that the uniform is suitable for laundering with personal clothing.

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May a non-competition agreement be enforced under New York law?

The United States District Court for the Southern District of New York was recently asked to enforce a non-competition agreement between International Business Machines, Corp. (“IBM”) and its former employee, Giovani Visentin (“Visentin”).  Int’l Business Machines Corp. v. Visentin, No. 11-399, 2011 WL 672025 (S.D.N.Y. 2011).

On January 19, 2011 Visentin resigned from IBM and accepted a position with competitor Hewlett-Packard Company (“HP”).  On January 20^th, IBM sued Visentin for breach of contract and misappropriation of trade secrets.  IBM also sought a temporary restraining order preventing Visentin from starting employment with HP.  The court issued a temporary restraining order that prevented Visentin from working for HP until a full hearing was held on February 1, 2011.

Visentin worked for IBM as a business manager for 26 years.  He had no technical training and was not involved in the design or implementation of technology-based solutions for IBM.  In other words, Visentin had business expertise, but no technical expertise and the positions he held with IBM were consistent with that business expertise.

Visentin was required to sign two non-competition agreements for IBM: the first in July 2008 and the second in July 2009.  The 2009 agreement stated, “during [Mr. Visentin’s] employment with IBM and for twelve (12) months following the termination of [his] employment . . . [Mr. Visentin] will not directly or indirectly within the ‘Restricted Area’ (i) ‘Engage in or Associate with’ (a) any ‘Business Enterprise’ or (b) any competitor of the Company.”  Id. at *3.  The 2009 agreement also prohibited Visentin from soliciting IBM customers for twelve (12) months after the termination of his employment.

At the hearing, HP representatives testified that Visentin was hired for his business knowledge and not for any technical knowledge he may have acquired while working for IBM.  HP’s representatives also testified that Visentin’s position with HP would be structured so that it would be different from his prior position with IBM in terms of subject area, geographic scope and level of responsibility.  HP purposely implemented these restrictions so Visentin could avoid violating the non-competition agreement.

Under the law of New York, IBM had to show irreparable harm to obtain a temporary restraining order preventing Visentin from working at HP.  The irreparable harm claimed by IBM was Visentin’s inevitable disclosure to HP of IBM’s confidential information.  New York law also recognizes trade secrets and confidential information as legitimate interests to be protected by employers; however, only trade secrets and confidential information the employee misappropriates or will inevitably disclose may be protected.

In rejecting IBM’s arguments, the court held that Visentin was a “general manager” at IBM charged with the task of running efficient teams.  While he may have come into contact with some trade secrets while doing this, those secrets were not the focus of his job.  HP’s witnesses testified that Visentin was hired to “manage people” at HP and that HP was not interested in someone with technical proficiency for Visentin’s position.

The court rejected IBM’s claims.  The court accepted Visentin’s testimony that he did not come into contact with trade secrets in any of those areas.  As a result, the court held that IBM could not establish that the information it sought to protect constituted “trade secrets.”

The court also considered whether Visentin misappropriated confidential information or whether his position with HP would cause inevitable disclosure of  IBM’s confidential information.  Visentin’s testimony revealed that he did not retain any IBM documents after resigning and that his laptop was retrieved by IBM within hours of his resignation.  In fact, the court concluded that IBM presented no evidence at all that Visentin misappropriated confidential information or trade secrets.  While all parties agreed that IBM and HP are competitors and that the nature of the industry involves confidential information and trade secrets, there was no evidence that Visentin’s position with HP was “nearly identical” to his position with IBM.  There was also no evidence that the nature of Visentin’s position with HP meant he would inevitably disclose IBM’s confidential information.  The court based its conclusions on Visentin’s acknowledgment that he was bound by law not to disclose IBM’s confidential information and on the fact that there was no evidence of prior wrongdoing or disclosure of confidential information by Visentin.

In reaching its decision, the court applied New York’s common law “reasonableness standard” which states that a non-competition agreement is enforceable only when it:

1) is no greater than is required for the protection of the legitimate interest of the employer; 2) does not impose undue hardship on the employee, and 3) is not injurious to the public. 

Applying this reasonableness standard, the court determined that the first factor weighed in favor of Visentin.  IBM’s non-competition agreement was overbroad because it prohibited competition in areas where IBM had no legitimate business interest.  The court held that the second factor also weighed in favor of Visentin.  The agreement imposed an undue hardship on future employment prospects for Visentin as there was no guarantee the job at HP would still be available after the period of the non-competition agreement (12 months).  Finally, the Court determined that the third factor – injury to the public – did not weigh in favor of either party.  As a result, the court held that IBM was unable to establish that the non-competition agreement was enforceable under New York law.

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May an employer be sued for denying an employee leave under the Family Medical Leave Act?

The United States Court of Appeals for the Third Circuit recently affirmed in part and reversed in part the decision of the United States District Court for the Middle District of Pennsylvania.  Erdman v. Nationwide Ins. Co., No. 07-3796, 582 F.3d 500 (3d Cir. 2009). The issue the Court of Appeals addressed was whether an employer may be sued for denying an employee leave under the Family Medical Leave Act.

Brenda Erdman worked full-time for Nationwide Insurance from 1980 until 1998 when she requested part-time employment so she could care for her daughter Amber, whom was born with Down’s Syndrome.  Nationwide granted Erdman’s request and also permitted her to switch to a four-day work week a few years later.  Prior to 2002, Nationwide permitted Erdman to work extra hours and count that time towards “comp time”, rather than be paid for it.  In early 2003, Erdman was informed by her new supervisor that she was no longer permitted to accrue “comp time” and that her part-time position would be eliminated.  Erdman was given the option to return to work full-time and she did so.  Prior to returning to a full-time position, Erdman asked whether Nationwide was going to honor her previously approved vacation request for the entire month of August, which Erdman normally used to prepare Amber to return to school in the fall.  Erdman was told that it was unlikely her vacation would be approved, so she decided to request the time as leave under the Family Medical Leave Act (“FMLA”).

Shortly after Erdman returned to full-time employment in April 2003, she submitted paperwork requesting FMLA leave from July 7^th to August 29^th.  Initially, Human Resources told Erdman there were no problems with her FMLA leave.  Unfortunately, Nationwide terminated Erdman thereafter, on May 9, 2003, citing behavioral problems that allegedly culminated in a telephone call in which Erdman used profanity.  Specifically, Erdman said, “this is a personal call and should not be reviewed for quality purposes, a--holes.”  Erdman sued Nationwide in the United States District Court for the Middle District of Pennsylvania claiming she was unlawfully terminated under the Americans with Disabilities Act (“ADA”) for requesting leave pursuant to the FMLA. 

The District Court dismissed Erdman’s case at Nationwide’s request on the grounds that Erdman had not accumulated sufficient hours to qualify as an eligible employee under the FMLA and on the grounds that Nationwide did not terminate her based upon “unfounded stereotypes and assumptions against employees who associate with disabled people.”  Id. at 6.  Instead, the District Court held that Nationwide’s termination of Erdman was motivated by Erdman’s prior modifications to her work schedule.  Erdman appealed the District Court’s decision to the United States Court of Appeals for the Third Circuit.

The Court of Appeals initially determined that Erdman accumulated sufficient worked hours in the prior year to be eligible for FMLA leave.  Nationwide countered that Erdman could not recover under a retaliation theory since she never actually took FMLA leave.  The Court reasoned it would be absurd to permit an employer to escape liability for punishing an employee for taking FMLA leave simply because the employer fired the employee before the leave began.  Per the Court, the question was whether Nationwide’s actions amounted to interference with Erdman’s FMLA rights or retaliation for asserting them.

To succeed on an interference claim, Erdman had to show that she was 1) entitled to and 2) denied some benefit under the FMLA. 

To establish a retaliation claim, Erdman had to show: 1) she was protected by the FMLA; 2) she suffered an adverse employment action; and 3) the adverse action was causally related to her exercise of FMLA rights. 

The Court held that Erdman established all three factors of a retaliation claim.  It also held that Erdman did not have to actually begin FMLA leave to be protected by the law.  As a result, the Court held generally that terminating an employee for a valid FMLA request may constitute interference with the employee’s FMLA rights as well as retaliation against the employee.

In applying that reasoning to the facts, the Court determined that Erdman relied upon the ADA’s “association provision,” which prohibits “denying equal jobs or benefits to a qualified individual because of the known disability of an individual with whom the qualified individual is known to have a relationship or association.”  42 U.S.C. §12112(b)(4).  The Court reviewed the evidence to determine if it was sufficient to establish that Nationwide terminated Erdman because of Amber’s disability.  To establish that, Erdman was required to show that she would not have been terminated had she requested time off for a different reason.  In other words, Erdman had to show that Nationwide terminated her due to Amber’s disability and not due to Erdman’s stated intention to take leave.  The Court held that there was no evidence that Nationwide terminated Erdman because of Amber’s disability.  Therefore, the Court affirmed the District Court’s dismissal of Erdman’s ADA claim.

Download Erdman v. Nationwide Ins. Co., No. 07-3796, 582 F.3d 500 (3d Cir. 2009)

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May a fired pregnant employee sue for discrimination if there is no evidence that she was replaced with a non-pregnant employee?

The United States District Court for the District of New Jersey recently decided that a pregnant employee who was fired was not permitted to sue for gender discrimination under New Jersey’s Law Against Discrimination (“LAD”) N.J.S.A. §10:5-12(a); disability discrimination under the Americans With Disabilities Act (“ADA”) 42 U.S.C. §12112(a); or discrimination under the Jury Service Improvement Act (“JSIA”) 28 U.S.C. §1875(a).  Schwinge v. Deptford Twp. Bd. of Ed., No. 09-5964, 2011 WL 689615 (D.N.J. 2011).

The employee, Lisa Schwinge, claimed she was terminated for several reasons; becoming pregnant, missing work to serve on jury duty and suffering from a serious back injury.  Schwinge served state jury duty in late 2007/early 2008.  At that time she was also suffering from herniated and bulging discs in her spine.  In February 2008, she  revealed to her employer, the Deptford Township Board of Education (the “Board”), that she was pregnant.

Shortly after that revelation, she received her first negative performance evaluation in the two years she was employed by the Board.  When Ms. Schwinge asked about her Family Medical Leave rights, she was told that she would be terminated when her contract expired in the near future.

Schwinge initially filed suit against the Board in the Law Division of the Superior Court of New Jersey. She claimed gender and disability discrimination under the LAD; disability discrimination under the ADA; and discrimination under the JSIA.  The Board exercised its right to transfer the case to the United States District Court for the District of New Jersey and filed a motion to dismiss Schwinge’s complaint for failure to state a claim upon which relief could be granted. 

The District Court granted the Board’s motion and dismissed Schwinge’s claims of discrimination under the LAD, ADA and JSIA.  The  Court reasoned that Schwinge satisfied the first three elements of her LAD claim; 1) she belonged to a protected class (pregnant person); 2) her positive performance evaluations before 2008 showed she was performing her job to her employer’s legitimate expectations; and 3) she suffered an “adverse employment action” in that she was terminated.  However, Schwinge was unable to establish the fourth element; that the Board hired someone not a member of the protected class – someone that was not pregnant - to perform the same job following Schwinge’s termination.  There was no evidence that the Board replaced Schwinge with a non-pregnant employee.  The Court similarly dismissed Schwinge’s disability discrimination claim under the ADA for the same reason; an inability to establish the fourth element of her claim.

The Court held that the JSIA only applied to federal jury service, not state jury service.  Since Schwinge served on a state jury, she was not protected by JSIA.  As a result, the Court dismissed her claim of discrimination under the JSIA.

The Court also reasoned that Schwinge’s claim of disability discrimination under the ADA had to be dismissed due to Schwinge’s failure to exhaust administrative remedies.  An individual claiming disability discrimination under the ADA is required to file a Charge of Discrimination with the Equal Employment Opportunity Commission (“EEOC”) or analogous state agency and receive a “right-to-sue letter” before a complaint may be filed in court.  The evidence revealed that Schwinge withdrew her EEOC claim before the process was complete and before receiving a “right-to-sue letter.”  As a result, the Court held that her ADA disability discrimination claim was barred due to her failure to exhaust administrative remedies.

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New Jersey passes new regulations for employees who punch time clocks at work.

In late 2010, the New Jersey Legislature enacted a new regulation for use of time clocks and “rounding” of hours worked by employees.  N.J.A.C. 12:56-5.8.  “Rounding” is the practice of recording employees’ starting and stopping times to the nearest five minutes or to the nearest one-tenth or quarter of an hour when using a time clock.  Before the new regulation came into effect, New Jersey’s regulations simply required that employees be paid for “all hours worked” without guidance on the use of time clocks or the practice of rounding. 

The new regulation permits the practice of rounding, provided employees are properly compensated for all time worked.  New Jersey’s regulation is now identical to the Federal regulation regarding the use of time clocks and the practice of rounding. New Jersey’s use of the same language used in the Federal regulation is intended to assure that employers currently complying with the Federal regulation will also be in compliance with New Jersey’s new regulation.  The new regulation should prevent employers from incurring administrative penalties as a result of violating New Jersey’s wage and hour regulations.

New Jersey’s new regulation also states that employees voluntarily arriving before their shift and/or voluntarily remaining after their shift are not to be paid for that time.  Their early or late clock-punching is to be disregarded unless they actually perform work before or after their shift.

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Does firing an employee whose fiancée accused the company of sex discrimination violate the employee’s civil rights?

In a recent decision, the U.S. Supreme Court permitted an employee to sue the company that fired him on the grounds that the firing was in retaliation for his fiancée’s claim of sex discrimination against the company.

Eric Thompson and his fiancée Miriam Regalado each worked for North American Stainless (NAS).  In February 2003, Regalado filed charges of sex discrimination against NAS with the Equal Employment Opportunity Commission (EEOC).  Three weeks later, NAS fired Eric Thompson.  As a result, Thompson sued NAS under Title VII of the Civil Rights Act for unlawfully firing him in retaliation for the charges brought by Regalado.  Per the Supreme Court, the case raised two important questions: 1) Did NAS’s firing of Thompson constitute unlawful retaliation? 2) If so, could Thompson sue NAS under Title VII?

The Supreme Court held that NAS’s firing of Thompson was unlawful retaliation.  Title VII prohibits employers from taking action that might discourage a reasonable worker from making or supporting claims of discrimination.  The Court believed it “obvious that a reasonable worker might be dissuaded from engaging in protected activity if she knew her fiancée would be fired.”  Thus, NAS’s firing of Thompson was in retaliation for Regalado’s charges of sex discrimination against it.  The Supreme Court also held that Thompson was permitted to sue NAS under Title VII.  The Court found that NAS sought to harm Regalado by firing Thompson, which placed Thompson within the “zone of interests” sought to be protected by Title VII.  Specifically, Thompson had an interest in being protected from NAS’s unlawful actions which were intended to harm Thompson and punish Regalado.  As a result, Thompson qualified as an “aggrieved person” under the statute and was permitted to sue NAS.  Download ERIC L. THOMPSON, PETITIONER v. NORTH AMERICAN STAINLESS, LP

This decision demonstrates the extent to which Title VII protects employees that are directly or indirectly affected by the unlawful actions of their employers.

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