NJ Business Law Blog

The New Jersey District Court Clarifies the Application of the Lilly Ledbetter Fair Pay Act of 2009

Employment Law: The United States District Court for the District of New Jersey, recently issued one of the first opinions to examine the application of the newly enacted Lilly Ledbetter Fair Pay Act of 2009 (“FPA”). In Gilmore v. Macy’s Retail Holdings, 2009 WL 305045 (D.N.J.) the Court indicated that the FPA applied to the plaintiff’s Title VII discrimination claim, but did not apply to the plaintiff’s claims under the New Jersey Law Against Discrimination.

The FPA amended Title VII’s provisions concerning when the statute of limitations accrues. As amended, Title VII now provides that “an unlawful employment practice occurs, with respect to discrimination in compensation, when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject to a discriminatory compensation decision or other practice, or when an individual is affected by application of a discriminatory compensation decision or other practice, including time wages, benefits, or other compensation is paid, resulting in whole or in part from a decision or other practice.” 42 U.S.C. 2000e-5(e)(3)(A).

In other words, as the New Jersey District Court noted, the FPA clarified when the period to file a claim commences by expressly permitting “a victim of discrimination in compensation who files a timely EEOC charge as to at least one instance of pay discrimination to recover back pay for a pay discrimination that occurred during the two years preceding the filing of the charge if such preceding discrimination is ‘similar or related to’ the practice that is the subject of the timely-filed charge.”

In Gilmore, Ms. Gilmore, the plaintiff, filed suit against her employer alleging discrimination on the basis of racial discrimination. She filed a complaint with the Equal Employment Opportunities Commission on July 7, 2005. The basis of her complaint was that she was not fairly promoted within her retail employer to departments that would have provided her with better commission opportunities, and therefore better pay. She claimed that such failures on the part of Macy’s were a result of racial discrimination.

The Court noted that since Ms. Gilmore’s discrimination claim involved an unlawful employment practice relating to compensation, the FPA, signed into law by President Obama January 29, 2009, was triggered. The law, which expressly applies retroactively to May 28, 2007, was designed to redress the Supreme Court decision of May 29th of that year, in which the Court had limited the time period as to when the triggering event occurs.

The Gilmore Court examined the legislative intent behind the FPA and specifically noted that Congress, in propounding the FPA stated that the Supreme Court decision “undermine[d] … [statutory protections against discrimination] by unduly restricting the time period in which victims of discrimination can challenge and recover for discriminatory compensation decisions . . .” Congress specifically noted that the Supreme Court decision demonstrated an impracticable approach, “ignoring the reality of wage discrimination.”

Interestingly, the Gilmore Court did note its opinion that the FPA does not apply to a claim made under the New Jersey Law Against Discrimination (NJLAD), but rather, is limited to the plaintiff’s Title VII claim. Its rationale was that NJLAD applies a different statute of limitations to its claims that are distinct from the timing that an EEOC charge is made.

Comments/Questions: ljm@gdnlaw.com

© 2009 Nissenbaum Law Group, LLC

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New Jersey Appellate Court Holds that Statute of Limitations for Hostile Work Environment Claim Commences Upon the Employee’s Leave

Employment Law: The New Jersey Appellate Division recently handed down an important decision interpreting the statute of limitations in work discrimination claims. In Toto v. Princeton Township, 2009 WL 88499 (N.J. Super.A.D. 2009), the Court held that the statute of limitations for the plaintiff’s hostile work environment claim ran from the time that he commenced his medical leave, rather than from his date of termination. Toto, the plaintiff, alleged that he suffered from disabilities such as a speech impediment and Attention Deficit Hyperactivity Disorder. He brought suit against his former employer, Princeton Township, based on allegations that he was “verbally taunted and teased” by co-workers; subjected to sexual harassment; that the Township failed to remedy such conduct; and that the Township failed to make reasonable accommodations for him, pursuant to New Jersey’s Law Against Discrimination.

Mr. Toto allegedly was involved in a confrontation with two co-workers January 9, 2002 and left his work for medical leave on January 11, 2002, and never returned. In July, 2002, the Township issued correspondence to Mr. Toto inquiring as to whether he was going to return to work and indicating to him that if he did not, he would be terminated upon the expiration of his medical leave. As a result, Mr. Toto was terminated on July 19, 2002.

The plaintiff’s claims consisted of (1) a failure to accommodate and (2) hostile work environment. The plaintiff’s "failure to accommodate" claim allegedly arose in the time during his medical leave. However, the Court determined that the hostile work environment only could arise out of acts that Mr. Toto was subjected to while he was at work. A hostile work environment claim is subject to a two year statute of limitations in New Jersey. In other words, to assert a claim, a plaintiff must commence legal action within two years from the date that the claim arose.

The Toto Court specifically held that for hostile work environment claims, the “statute of limitations began to run when plaintiff left the workplace because this is the date the last act of harassment could have occurred. . . . Because plaintiff was last physically at the work site more than two years before this action was commenced, the claim is barred by the statute of limitations.”

As a result, Mr. Toto’s claim for hostile work environment was dismissed in whole. The Toto case emphasizes the non-waning application of the Courts of the statute of limitations. Regardless of how sympathetic a claim might be, if the time has run, the claim will be barred. Accordingly, it is critical that potential plaintiffs consult counsel immediately to ensure that they have evaluated all potential claims that might be sought and have accounted for the statute of limitations that apply to each.

Comments/Questions: ljm@gdnlaw.com

© 2009 Nissenbaum Law Group, LLC

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New Jersey Legislature Permits Treble Damages for Failing to Pay Sales Commissions within 30 Days of Termination

Employment Law: As part of the 2008 Legislative Session, the New Jersey legislature passed, and Governor Corzine signed, a law which provides treble damages (triple the amount of actual damages) for sales representatives who are not paid earned sales commissions within thirty (30) days of termination of their services.

Under the law, a “sales representative” is defined as “an independent sales company or other person, other than an employee, who contracts with a principal to solicit orders and who is compensated, in whole or in part, by commission.” Thus, the penalties imposed by the bill do not apply to individual sales representatives providing services pursuant to an employment contract, but rather apply to those representatives providing services on an independent contractor basis. Moreover, a person who places orders or purchases goods exclusively for his own account for resale will not be deemed to be a “sales representative” for purposes of the bill.

In light of the obligations imposed by this law, individuals and business entities should be aware that they may be subject to increased damages if they retain sales representatives on an independent contractor basis and fail to timely pay those individuals’ commissions. In addition to timely payments during the course of the agreement, the principal would be required to pay all commissions earned by the representative within thirty (30) days of the termination of the agreement for any reason.

Comments/Questions: ljm@gdnlaw.com

© 2009 Nissenbaum Law Group, LLC

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New Jersey Passes Law Providing Paid Family Leave

Employment Law: The New Jersey legislature recently enacted historic legislation which will allow all New Jersey employees to take up to six weeks of partially paid leave to care for sick family members, newborns or newly adopted children.

Under the New Jersey Paid Family Leave Act, a “family member” is defined as a child, spouse, domestic partner or civil union partner, or the parent of a spouse, domestic partner or civil union partner. Employees seeking benefits under the law may take either continuous or intermittent leave, up to a total of 42 days in any 12-month period. With respect to newborns and newly adopted children, parents may take leave at any time within the first year after the birth or adoption of the child, provided that the leave is completed within the first 12-month period.

Leave under the Paid Family Leave Act will run concurrently to any leave taken by an employee under the Federal Family and Medical Leave Act (FMLA) and the New Jersey Family Leave Act (NJFLA). However, while both the FMLA and the NJFLA require covered employers to reinstate employees taking leave under those acts, the Paid Family Leave Act does not impose the same requirement. Accordingly, employees taking leave under the Act may not be able to return to the same or a comparable position once their leave ends. In other words, if an employee is only eligible for leave under the Paid Family Leave Act, his job is not protected. However, if the employee is eligible for the paid leave as well as leave under either the FMLA or NJFLA, although the terms run concurrently, the employee would still be entitled to reinstatement of his job under the latter statutes.

Employees taking leave under the new law will be eligible to receive 2/3 of their salary, up to a maximum of $524 per week. The program will be funded entirely by employee contributions in the form of payroll deductions, which the legislature estimates will amount to approximately $33 a year for New Jersey workers. These payroll deductions will begin on January 1, 2009, however, the benefits afforded under the Act will not be available to employees until July 1, 2009.

It is notable, that this law is differs from the Federal and State Family Leave Acts in that the Paid Family Leave Act applies to all employers, regardless of size. Accordingly, even employees of small companies can avail themselves of the benefits of this Act; in fact, it is arguably aimed as such small business employees. Accordingly, it is important that all New Jersey employers understand the new law and its requirements. Without limitation, as of January 1, 2009, all employers need to remember commence withholding the application deductions from employee payroll.

Comments/Questions: ljm@gdnlaw.com

© 2009 Nissenbaum Law Group, LLC

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Employees’ Information on Work Computers Not Protected

Employment Law: Under New Jersey law, an employee does not have a reasonable expectation of privacy in the content stored on his work computer. This is true notwithstanding the fact that the employee may have created confidential passwords to preclude third parties from accessing the computer. This was the ruling of the New Jersey Appellate Division in the August 2008 decision in State v. M.A., 402 N.J. Super 353 (App. Div. 2008).

In State v. M.A., during the course of working as a bookkeeper, the defendant employee stole money from his employer company. Upon the employer discovering the employee’s theft, the employee was terminated. Subsequently, the employer reported the theft to the police and consented to the search of the employee’s work computers to obtain evidence of the employee’s theft. The employee was subsequently prosecuted. At trial, the employee sought to suppress the information obtained from the computers on the basis that the search of the computers without his permission was impermissible. Specifically, the employee asserted that he had a reasonable expectation of privacy in this information because he had, among other things, created confidential passwords precluding access from third parties.

The Appellate Division, however, found that the search of the employee’s work computers was valid because the employer, in its capacity as owner of the computers, consented to the search. The Court noted that the employee never requested that the computers be provided to him. Therefore, even if he had tried to claim an ownership interest in them, the Court determined that the employee had abandoned them. Accordingly, he no longer retained any reasonable expectation of privacy in them. Again, this was despite the fact that the employee had tried to block third party access. In other words, setting up passwords and other obstacles may be insufficient to establish a privacy invasion.

So employees beware of what you store on your workplace computers. Regardless of what passwords and other security initiatives you take to preclude access of any information stored on the computers, the consent of the employer may be all that is necessary for a search to be conducted with respect to these computers.

Moreover, employers should also take this as a reminder to clearly articulate employee’s privacy expectations. It is strongly recommended the company’s adopt an employee manual or other policy document that clearly states that employees should not expect to have any privacy rights in their workplace computers, other company equipment or otherwise. While these Court here did not require such a policy statement required to allow the “invasion,” it would certainly be a useful weapon in an employer’s arsenal. In other words, such a policy would help to make it clear that any purported employee expectation of privacy was unreasonable because of the employer’s clear statements to the contrary.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

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Rescission of an Employment Contract Based on an Employee’s Misrepresentations

In accordance with general principles of law, rescission of a contract is generally allowed only in narrow situations, such as where a party is fraudulently induced into entering into the contract. Rescission may also be permitted where there is a willful, material and substantial breach of the contract which essentially defeats the purpose of the contract.

In the employment context, a court may be inclined to rescind an employment contract where an employee misrepresents certain aspects of his employment history in order to secure a position. However, before a court will rescind a contract on this basis, the employer is usually required show that he relied on the employee’s oral or written misrepresentations, and that such reliance was reasonable.

In one such case, National Medical Health Card Systems, Inc. v. Fallarino, the Supreme Court of New York found that the employee’s misstatements as to his prior employment could not serve as a basis for his termination. In that case, the employer only realized that the employee had made misrepresentations in his resume after the employee had already been terminated. Nonetheless, the Court held that the employer’s reliance on the employee’s misrepresentations was not reasonable. Specifically, the Court found that the employer failed to exercise due diligence in investigating the employee’s background despite that it had an ample opportunity to do so and that information about the employee’s prior employment was readily available. In fact, the Court noted that during the interview, the hiring coordinator focused on only one of the employee’s prior positions, which happened to be legitimate, and did not inquire into his other prior experience. In addition, and although the employee had provided more than one reference, the employer’s agent contacted only one of the references provided. Accordingly, the Court found that the employment contract could not be rescinded because the employee did not defraud the employer.

Employers beware—the mere fact that an employee made false statements about his employment history does not necessarily mean that a court would hold him liable for fraud, justifying the rescission of the employment contract. Rather, the courts place a burden on the employer to exercise due diligence in evaluating an employee’s credentials.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

Please visit our website at www.gdnlaw.com and our other blogs at www.nissenbaumlawblog.com; www.foreclosuredefenselawblog.com; www.saleofbusinesslawblog.com; www.internetdefamationlawblog.com; www.constructionlawinfoblog.com; www.filmproductionlawblog.com; www.internetlawinfoblog.com; and www.njbusinesslawblog.com

New Jersey Law Requires Advance Notice of Mass Employee Terminations

Employment Law:  The New Jersey Legislature recently passed the Millville Dallas Airmotive Plant Job Loss Notification Act, which will require qualified employers to provide advance notice of certain mass employee terminations.  The law is effective immediately, as of December 20, 2007.  It is essentially the New Jerseyanalog to the Federal WARN Act, 29 USC § 2101 et seq., (the Worker Adjustment and Retraining Notification Act).  The New Jersey law was essentially designed to address the Federal statute’s shortcomings. 

The Act specifically provides for required notices to employees in the event of certain termination events, including mass layoffs or a termination of operations.  In general, the statutory notice is required:

• In the event of a mass layoff consisting of the termination of employment at an establishment during any 30-day period for 500 or more full-time employees OR 50 or more of the full-time employees that represent one-third or more of the full-time employees at that establishment;
• With certain exceptions for events such as a fire, flood, court order, if a business establishment (which has been operated for more than three years) shuts down an establishment for 30 or more days, resulting in the termination of 50 or more employees; or
• If a business establishment (or operating units within an establishment) is permanently or temporarily transferred to another location, whether inside or outside of New Jersey, if such transfer results in the termination of 50 or more employees.

Upon the occurrence of any of the above-described events, the New Jersey Act imports several obligations on the employer.  Employers employing 100 or more full-time employees must provide statutory notice at least 60 days’ before the first termination of employment, termination of transfer of operations or mass layoff.  For this purpose, full-time employees are defined as employees working with the company for more than six months, and who work 20 or more hours a week.   Moreover, the notice must comport with the statute’s requirements and be submitted to:  (a) the Commissioner of Labor and Workforce Development; (b) the chief elected official of the municipality in which the business establishment is located; (c) each employee whose employment is going to be terminated; and (d) any collective bargaining units of employees working at the establishment.

The Act provides six-prongs which must be included in the written notification.  Further, the Act requires that the Commissioner of Labor and Workforce Development issue a form for notification which must be made available by March 19, 2008.  At that time, the notice must be made on that form.   

Notably, the 60-day notice period was revised per a previous gubernatorial veto, in order to match the notice period set forth in the Federal WARN Act.  However, the New Jersey legislature originally sought 90 days’ notice and the Act provides that the notice period will automatically change to match that of the Federal Act. 

In accordance with the Act, an employer who fails to provide timely and proper notice must pay each full-time employee who was terminated with severance.  The statute further provides that such severance payment shall be equal to one week of pay for each full year of employment.  The applicable pay rate is calculated as the higher of (a) the employee’s average regular rate of compensation over the past three years; or (b) the final regular rate of compensation paid to the employee.  This severance requirement is in addition to any severance that may be required under an applicable collective bargaining agreement. 

Furthermore, the Act provides for a civil remedy for the aggrieved employee. An employer who fails to timely provide the appropriate notice may be liable for damages including lost wages, benefits and attorneys’ fees. 

We therefore recommend the following:

• New Jersey employers should consult with counsel at the outset with regard to any major corporate strategy change, including closing an office or engaging in any significant termination or layoff plan; 

• Employers should ensure that their employment agreements are properly drafted to provide as much flexibility with regard to termination as the law will allow; and
• Any severance paid, whether with regard to the Act’s requirements or separate, should be paid pursuant to a severance agreement, including a release that is signed by the employee.  That severance agreement should be carefully drafted and reviewed by counsel.

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New York Legislature Amends Law Regarding Unlawful Discriminatory Employer Practices

Employment Law:  The New York legislature has amended the rules governing unlawful discriminatory employer practices to specifically address youthful offenders and sealed convictions for non-criminal violations. 

The law proscribes certain inquiries and/or employment decisions based on related information as unlawful discrimination.  The law specifically addresses inquiries being made of a potential employee in the interview process.  Prior to the current amendment, the law prohibited any employer, in connection with the employment of an individual, from inquiring about or acting adversely upon that individual on account of an arrest or criminal accusation, if such arrest or accusation was followed by the termination of the related criminal action or proceeding in favor of the individual. 

The amendment, effective as of November 1, 2007, extends this prohibition to inquiring about or acting adversely upon that individual on account of either:

• A youthful offender adjudication; or
• A conviction for any non-criminal violation which by statute shall remain sealed.

Notwithstanding the foregoing, an exception does apply to an arrest or accusation that is then-pending.  Also exempt from the statute are applicants for employment in any law enforcement agency.

We therefore recommend the following:

• New York employers should be extremely cautious in inquiring about or taking adverse actions against individuals based on prior arrests or accusations both in written applications as well as in interviews; 

• Any employee or interviewee questionnaires, including employment applications, should be reviewed by legal counsel;

• Employee agreements, manuals and other policies outlining corporate policies with regard to arrests or criminal accusations should be reviewed by legal counsel; and

• Employers should have training sessions and establish hiring protocols for company owners, human resource departments and other managers making employment decisions in an effort to avoid an accidental violation of the law.

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ljm@gdnlaw.com

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Whether a Worker is an Employee or Independent Contractor: the Vicaino v. Microsoft Legal Precedent

Employment Law: The issue of whether a person has been engaged to render a service as an employee or an independent contractor is a legal minefield. While it is true that many people would rather be paid as an independent contractor so that payroll taxes and other items are not deducted from their pay check, if they become sick or disabled, they may switch gears and argue that such deductions should have been made. Therefore, the person’s initial preference as to whether they would like payroll deductions to be taken from their pay check should not be the deciding factor.

This was highlighted by the Viciano v. Microsoft case in which the independent contractors working for Microsoft were actually paid more per hour than normal employees performing comparable jobs. They nevertheless, successfully argued to the Ninth Circuit Court of Appeals that they were actually employees who should have been eligible for the Microsoft Savings Plus Plan (“SPP”). They relied upon an Internal Revenue Service ruling against Microsoft in regard to other workers in a similar situation. The Court sided with them and ordered Microsoft to treat them as employees entitled to participate in the SPP.

The key here is the interplay between a ruling by the IRS in one instance and the application of that ruling by the employees for their own benefit in a different instance. This is akin to a situation in which a State taxing authority finds that independent contractors should be reclassified as employees, and this triggers a reclassification by the Federal taxing authorities. There are many ways that a reclassification can occur, and once it does, it can cascade to other levels within an institution.

Therefore, it is critical that employers determine whether a person is an employee or independent contractor at the outset of the engagement, and without regard to the person’s initial preference.

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