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A recent opinion in the case of Susan L. O’Keefe v. Edmund Optics, Inc., addressed the question of whether an arbitration provision in a written employment agreement could survive the expiration of the agreement’s one-year term. The Superior Court of New Jersey, Camden County, in denying the employer’s request to dismiss the former employee’s gender and age discrimination complaint in favor of arbitration, held that such an arbitration provision could not survive.
O’Keefe was hired by Edmund Optics in April 2011, as the Executive Vice President of Supply Chain. In February 2013, to effectuate a change in her position to Executive Vice President of Operations, O’Keefe and Edmund Optics jointly executed a 1-year Executive Employment Agreement (“Agreement”), the term of which expressly ran from February 14, 2013, through February 13, 2014. The “term” provision stated that the Agreement shall not automatically renew, but stated that O’Keefe “may remain in the employ of [Edmund Optics] subject to the terms and conditions of employment [Edmund Optics] deems appropriate . . . . [and which] will be generally consistent with the terms and conditions of employment of similarly situated employees.”
The Agreement also contained an arbitration provision by which the parties agreed to arbitrate all disputes that might arise out of O’Keefe’s employment and expressly waived the right to a jury trial. O’Keefe remained employed with Edmund Optics in the role of Executive Vice President of Operations beyond the February 13, 2014 expiration of the Agreement, until her eventual termination on August 3, 2018. Thereafter, O’Keefe filed a complaint alleging wrongful termination on the basis of her age and gender in violation of the New Jersey Law Against Discrimination.
Edmund Optics filed a motion to dismiss the complaint, arguing that the arbitration provision survived the expiration of the Agreement and that it would defy logic to allow O’Keefe to continue her employment with the company on less favorable terms after the expiration of her employment agreement. In opposing the motion, O’Keefe noted that other clauses explicitly survived the expiration of the Agreement, such as the restrictive covenants clause, but the arbitration clause did not.
The Court’s Decision
The trial court agreed with O’Keefe and found that the arbitration provision expired along with the term of the Agreement, noting that her circumstances were no different than a hypothetical scenario in which she had left employment with Edmund Optics on February 13, 2014, and returned prior to being terminated. The Court stated that, in such a scenario, there would be “no doubt that the mandatory arbitration clause would be unenforceable.” The Court also found that “[a]s a venue, this court is no more or less favorable to [Edmund Optics] than an arbitration venue.” Therefore, given the absence of a valid, current agreement of the parties to arbitrate, the Court denied Edmund Optics’ motion to dismiss.
Recent opinions by the New Jersey Courts make clear that the enforceability of arbitration agreements depends on the clarity of the plain language used as well as on the rights that the employee and employer have agreed to waive. Employers should not assume that the bare existence of an arbitration provision in an employment agreement will be sufficient to compel arbitration. This opinion reaffirms that employers must ensure a mandatory arbitration clause survives the end of the term of a written employment agreement. The agreement should also be reviewed with the assistance of legal counsel to ensure that the arbitration provision is not limited to disputes between the parties only occurring during the term of the written agreement.
The New Jersey Conscientious Employee Protection Act (“CEPA”) is arguably the broadest employee protection law in the country. CEPA protects an employee from workplace retaliation related to the employee’s “whistle-blowing” activities. Thanks, in part, to documentation of performance issues, in late November 2018, the New Jersey Appellate Division upheld a trial court’s decision dismissing an employee’s CEPA claim against her employer and supervisor. The decision marks an important victory for employers, since CEPA claims are rarely decided in favor of the employer. This case also teaches the valuable lesson that diligent documentation can be an employer’s best defense to whistle-blowing and harassment claims.
In May 2012, Tammy Russell was hired by Rutgers Associate Chancellor to serve as the Director of the Rutgers Camden Educational Opportunity Fund Program (“EOF”). The EOF is funded by the State, and provides scholarships, academic year and summer program access to higher education for economically or educationally disadvantaged students.
Russell was responsible for oversight of the program budget, which is submitted annually to the state. Early in her employment, Russell discovered that EOF funds may have been used to pay salaries for non-EOF Rutgers staff. Russell also complained about issues the state raised regarding the EOF reports, and that the employees who replaced her EOF duties lacked experience and therefore did not complete the reports correctly. Once notified of the issues by Russell, Rutgers performed an internal investigation of its EOF program. The report concluded that there was no need for further investigation.
Russell alleged after she notified Rutgers of the issues in the EOF program, she was treated differently in the workplace. Russell alleged that budgeting responsibilities were taken away from her, she was told that she would no longer have access to the budget, and that she was no longer responsible for completing state mandated EOF reports. However, Russell was still responsible for reviewing and approving items in the budget, and signing off on Camden’s ultimate EOF budget. Although Russell also claimed that she was retaliated against, she admitted that her supervisor never forced her to approve the budget or otherwise threatened her about it in any way.
Russell also had performance issues throughout her employment at Rutgers. Although she received “meets expectations” on her performance reviews, Russell had communication issues with both her supervisors and co-workers. Employees complained she was “abrasive, harsh, and combative.” Additionally, Rutgers documented complaints from employees regarding Russell’s job performance, and shared a memo with Russell regarding her “poor communication and program management” and failure to follow instructions regarding the completion of certain tasks. As a result of her documented poor work performance, Rutgers sent Russell a pre-termination letter and scheduled a conference for the following day. The next day, Russell was terminated. Russell sent a letter to Rutgers advising she was “fully prepared to have legal counsel represent [her] and [was] very prepared to go outside of Rutgers University regarding this case.” Rutgers investigated and found that no violation of their policies had occurred, and that there was no nexus between Russell’s alleged whistle-blowing complaints and her impending termination.
To prevail under her CEPA claim, Russell was required to prove four elements: (1) that she reasonably believed that the employer’s conduct was violating a law, rule, regulation, or a clear mandate of public policy; (2) that she engaged in “whistle-blowing” activity; (3) an adverse employment action was taken against her; and (4) her whistleblowing activity caused the adverse employment action.
If an employee establishes these elements, the employer must set forth a legitimate, non-retaliatory reason for the adverse conduct against the employee. The employee must then provide factual reasons why the employer’s proffered reason is pretextual.
In this case, the trial court found that Russell’s apparent “issues on the job” were the real reason for her termination. The court was persuaded by the various complaints against her, the timing of those complaints – both before and after her alleged whistle-blowing complaint – and the fact that Russell’s job performance did not improve even after she was informed of her performance deficiencies. Thus, Rutgers was entitled to summary judgment.
The Appellate Division affirmed the decision of the trial court and noted that although stripping an employee of her job responsibilities could constitute retaliation, in this case, Russell’s duties shifted, but she bore the same responsibility to ultimately approve the program budget as she did prior to her complaint. Although she testified that she “perceived” that her boss would make her job more difficult if she did not approve the budget, she could not identify anything that her boss did or said to that effect. According to the Appellate Division, this lack of specifics did not support Russell’s claim of retaliatory reduction in job responsibilities.
Not every action which makes an employee unhappy constitutes retaliation under CEPA. However, employers are reminded to document all workplace performance issues. Your documentation of performance issues will be critical in allowing a court to determine whether a termination was due to retaliation, or the employee’s poor performance. A termination that is warranted can still be misconstrued by an employee, and perceived as retaliatory by the courts, if the employer lacks sufficient documentation. Here, Rutgers persuaded the court through written complaints in the employee’s personnel file, despite performance reviews that the employee “met expectations.” In the end, Rutgers’ diligent documentation when the employment issues arose helped them to achieve a pre-trial win, and to avoid the cost of a protracted litigation.
On November 19, the New York City Department of Consumer Affairs (“DCA”) announced a settlement with an operator of 30 Kentucky Fried Chicken restaurants across the City for violations of the NYC Fair Workweek Scheduling Law. A DCA investigation concluded that the KFC employees were required to sign waivers of premium pay for any last-minute changes in their work schedules. The settlement agreement invalidates the waivers and requires payments to more than 600 employees of $80,000 in restitution for working consecutive shifts that were shorter than 11 hours apart. The settlement further requires that the KFC operator undergo comprehensive monitoring by an independent investigator for 18 months.
The NYC Fair Workweek Scheduling Law took effect in November 2017 and gives fast food workers the right to a more predictable work schedule. Employers are required to give employees advance notice of their work schedules and any changes to work schedules, post and electronically transmit work schedules, update and re-post any changed schedules, and provide historical schedules to employees upon request. Each violation of this section of the law carries a $200 penalty and an order of compliance. The law imposes mandatory penalties on fast food employers that give employees insufficient notice of a schedule change, ranging from $10 to $75, depending on the amount of notice given.
The Law prohibits covered employers from scheduling fast food employees to work two shifts over two consecutive calendar days if the end of the first shift is less than 11 hours before the beginning of the next shift, unless the employee has given written consent to work the second shift and is paid an extra $100 in a lump sum for the second shift. A violation of this section of the law carries a $500 penalty, an order of compliance, in addition to the $100 lump sum payment. The law also imposes job preference and posting requirements that prefer current employees.
The NYC Fair Workweek Scheduling Law also applies to retail workers and regulates on call shifts, cancellation of shifts, notice of work assignments and mandatory employee reporting availability to work. Retailer employers must provide employees with a written work schedule no later than 72 hours before the start of the schedule’s first shift, post work schedules in a conspicuous location at least 72 hours before the first scheduled shift, electronically transmit the schedules to the employees, and directly notify any affected employee of changes in the work schedule. Violations of these sections carry various penalties.
In just its first year of enforcement, the NYC Fair Workweek Scheduling Law has led to settlements benefiting almost 1,200 workers and requiring over $217,000 in restitution payments. Given the active compliance environment, fast food operators in the City must ensure their scheduling practices are updated to meet legal requirements and understand that the City will not enforce employee waivers of this Law. The law can be found here.
For more information regarding on the Fair Workweek Scheduling Law and management’s legal requirements under this Law, please contact one of the Partners in the firm’s Labor Law Practice Group:
Just in time for Halloween, on October 31, 2018, a New Jersey federal court held that an unsigned, non-binding separation agreement could provide relevant background evidence of age discrimination, and that employers anywhere could be subject to the reach of the New Jersey judiciary, even if they have no contacts with the state.
Kathleen Fowler worked for AT&T, Inc. (“ATTI”) and AT&T Services, Inc. (“ATTS”) (collectively, “AT&T”), for more than 30 years until her employment was terminated. Kathleen Fowler v. AT&T, Inc. & AT&T Services, Inc. At the time of her termination, she was 60 years old and undergoing chemotherapy for breast cancer. She sued AT&T in the United States District Court for the District of New Jersey, claiming that the company engaged in age and disability discrimination when it erroneously told her that it was eliminating her position and that she was being placed on “surplus status,” meaning she had 60 days to find another job within AT&T or be terminated. While on surplus status, she applied internally for other positions like her former job, which AT&T rejected. Instead, AT&T placed her in a different position and then failed to reasonably accommodate her disability so that she could perform that job or be transferred to another vacant position. Meanwhile, of the 69 people in Fowler’s former unit, only two were selected for surplus, Fowler and another person who was aged 52. Nobody under the age of 40 was selected for surplus.
AT&T terminated Ms. Fowler’s employment and offered to pay her severance in exchange for her signing a separation agreement that included a general release and waiver of liability, including age discrimination claims. Ms. Fowler did not sign the agreement.
In her complaint, Ms. Fowler alleged that the (unsigned) release ran afoul of the Older Workers Benefit Protection Act (“OWBPA”). The OWBPA is a federal statute aimed to protect older employees by requiring employers to provide specific information in exchange for a waiver of age discrimination claims. Ms. Fowler alleged that the release was invalid under the OWBPA because it contained factual misstatements, failed to comply with OWBPA’s strict disclosure requirements, and was intended to harm workers aged 40 and older.
ATTS’s Motion to Strike
ATTS moved to strike the allegations in the complaint related to non-compliance with OWBPA. ATTS argued that because Ms. Fowler did not sign the separation agreement containing the release that she claimed violated OWBPA, those allegations were immaterial to her age discrimination cause of action and would only serve to invite unnecessary discovery and cast ATTS in a prejudicial light. In opposition, Ms. Fowler argued that the allegations related to ATTS’s release were relevant because they reflected the company’s age bias. In reply, ATTS argued that the alleged OWBPA violation could not support a showing of age bias because the Third Circuit in Lawrence v. National Westminster Bank N.J. previously held that an employee who does not sign a waiver or release cannot establish a violation of OWBPA.
The District Court denied ATTS’s motion to strike, finding that ATTS’s non-compliant release suggested a pattern or practice of age-based bias. The court was unpersuaded by ATTS’s reliance on Lawrence because, unlike in Lawrence, Ms. Fowler did not bring a separate cause of action under OWBPA; rather, she alleged that ATTS’s conduct was inconsistent with OWBPA, the statute designed to protect older employees, which revealed a pattern of age-based bias.
ATTI’s Motion to Dismiss
ATTI moved to dismiss Ms. Fowler’s case against it for lack of personal jurisdiction. Personal jurisdiction refers to a court’s power to make decisions regarding an entity’s legal rights or obligations. There are generally two types of personal jurisdiction. First, a court can have general jurisdiction over an individual whose residence is in the forum state and an entity whose place of incorporation and/or principal place of business is within the forum state. Second, a court can exercise specific jurisdiction over an entity in a lawsuit filed against it when i) the entity purposely directed its activities at the forum state; ii) those activities are what led to the lawsuit; and iii) the assertion of jurisdiction comports with fairness.
In Fowler, the court had personal jurisdiction over Ms. Fowler because she was a New Jersey resident. ATTI moved to dismiss claiming the New Jersey District Court lacked personal jurisdiction over it because it is a Delaware corporation with its principal place of business in Texas. ATTI does not employ, own real property, insure persons or property, pay taxes, contract, operate, or produce goods or services in New Jersey, nor is it even registered to do business in New Jersey. Nevertheless, the court held that, because Ms. Fowler’s claims against ATTI arose out of a release directed at her in New Jersey, ATTI should have expected that it could be hauled into court in New Jersey to litigate disputes over that conduct. Thus, the court held that it could exercise specific personal jurisdiction over ATTI.
Employers must ensure that separation agreements containing a release and waiver of age discrimination claims comply with the precepts of OWBPA, even if the agreement is just an offer and is never signed. More generally, this case serves as a harsh reminder that an employer’s course of conduct, although not alone sufficient to sustain a separate cause of action, may be probative of the employer’s discriminatory animus. Courts routinely allow employees to allege and introduce evidence of their employers’ other acts to prove a discriminatory attitude in making the employment decision at issue. For instance, an employer’s history of treating its older employees poorly may provide an evidentiary source for employees to tap to prove the allegations of discrimination against them individually.
With respect to personal jurisdiction, Fowler reaffirms the principle that a court in New Jersey can make decisions about an employer that has no contacts in this state if the employer purposely directed the alleged conduct at residents in New Jersey. Employers may not be able to escape the authority of the New Jersey judiciary and the potential liability imposed on it by New Jersey law by simply incorporating and operating outside of the state.
Three recent decisions in New Jersey shed new light on the ongoing tension between the Federal Arbitration Act (“FAA”) and the standard of review utilized by the New Jersey courts concerning the enforceability of arbitration agreements. Congress passed the FAA almost a century ago to address the hostility courts had towards private arbitration and put arbitration agreements “on equal footing” with other contracts. In New Jersey, however, courts have been reaching decisions that appear to be at odds with the FAA and are increasing their focus on “mutual assent” – whether or not parties have reached a “meeting of the minds.”
Can Mutual Assent Be Found in an Email?
Two recent decisions by the United States District Court for the District of New Jersey, Schmell v. Morgan Stanley & Co., Inc. and AT&T Mobility Services LLC v. Jean-Baptiste, address mutual assent where the company’s arbitration agreement was presented to employees by email.
Facts in Schmell
Mr. Schmell was employed as a Senior Vice President with Morgan Stanley from January 2006, until his termination in October 2017. Schmell filed a complaint in the Superior Court of New Jersey, Monmouth County alleging wrongful termination. Morgan Stanley subsequently removed the case to federal court and moved to compel arbitration pursuant to its Convenient Access to Resolutions for Employees (“CARE”) Arbitration Agreement.
Morgan Stanley’s CARE Agreement was sent out to employees through their work email address. In relevant part, the email informed employees “that the program was mandatory unless they opted out and that their continued employment without opting out constituted acceptance” of the arbitration agreement (emphasis added). The CARE Agreement was also available on Morgan Stanley’s internal human resources portal. Schmell continued his employment without opting out and, in opposing the motion to compel arbitration, claimed that he never read the email and did not recall reviewing it, stating that he could receive possibly hundreds of emails in a given day.
The District Court’s Decision in Schmell
In the first of three separate decisions (Schmell I), the District Court Judge found that there was an unresolved question as to whether Schmell had notice of the CARE Agreement and denied Morgan Stanley’s initial motion to compel arbitration. In particular, the Court noted that the notice question raised a genuine issue as to whether “there was a meeting of the minds [so that Schmell] could mutually assent to the terms of the CARE program.” In a second decision (Schmell II), the Court ordered limited discovery to address this notice question, the goal being to “properly evaluate whether there was a meeting of the minds on the agreement to arbitrate.” In the third-and-final decision (Schmell III), the Court ruled that the limited discovery had established that Schmell did indeed have notice of the email and, consequently, the CARE Agreement. Therefore, although Schmell failed to opt out or otherwise respond to the email, such notice, particularly that the CARE program was mandatory, combined with his continuing employment without opting out, constituted his assent to be bound by the arbitration agreement.
Facts in Jean-Baptiste
Ms. Jean-Baptiste was employed as an Assistant Store Manager for AT&T at the time she filed her complaint in the Superior Court of New Jersey, Union County alleging gender and race discrimination in violation of the New Jersey Law Against Discrimination. AT&T removed the case to federal court and filed a motion to compel arbitration, pursuant to an agreement that had been presented to Jean-Baptiste by email in March 2016. The email informed Jean-Baptiste that participation in the arbitration program was optional and also established a deadline for employees to opt out of the agreement, stating “[i]f you do not opt out by the deadline, you are agreeing to the arbitration process as set forth in the Agreement.” (emphasis added). Prior to the opt-out deadline, Jean-Baptiste accessed the arbitration agreement and clicked on a button that read “Review Completed.” In opposing AT&T’s motion to compel arbitration, Jean-Baptiste argued that she never affirmatively agreed to be bound by the arbitration agreement and that her mere silence could not be construed as her assent to the terms.
The District Court’s Decision in Jean-Baptiste
The District Court, in considering whether Jean-Baptiste’s silence constituted her assent to the arbitration agreement, applied New Jersey contract principles, particularly that the enforceability of such an agreement could only result from an “explicit, affirmative agreement that unmistakably reflects the employee’s assent.” The Court also cited the opinion in Schmell I, that such affirmation “need not be an actual signature, but must demonstrate a willingness and intent to be bound by the arbitration provision.”
The District Court’s decision addressed the differences between Ms. Jean-Baptiste’s case and the facts in Schmell. Whereas Mr. Schmell was notified that participation in the CARE Agreement was mandatory and that his continued employment without opting out signified assent to the agreement, the email sent by AT&T to Ms. Jean-Baptiste contained no such notification. The District Court highlighted the fact that AT&T specifically told Jean-Baptiste that the decision to participate was “entirely up to her” and that there would be “no adverse consequences” if she chose not to participate in the program. As such, the District Court found that Jean-Baptiste’s decision to continue her employment had nothing to do with her assent (or lack thereof) to the optional arbitration program and emphasized that “the burden of obtaining affirmative acceptance . . . rests with employers.”
Shed the Pounds and the Arbitration Provision
In Flanzman v. Jenny Craig Inc., the New Jersey Appellate Division found that an arbitration provision between weight loss company Jenny Craig and a former employee was unenforceable because the agreement failed to identify where or how the parties would arbitrate their dispute.
Facts in Flanzman
Ms. Flanzman was employed with Jenny Craig for 26 years as a weight loss counselor before she was terminated at the age of 86. She filed a complaint in Superior Court of New Jersey, Bergen County alleging age discrimination and discriminatory discharge in violation of the New Jersey Law Against Discrimination. Jenny Craig moved to compel arbitration pursuant to an agreement that Ms. Flanzman had signed in 2011 – 20 years after she had been hired – as a condition of her continued employment. The problem with Jenny Craig’s arbitration agreement, however, was that it failed to specify the forum in which the parties could bring their claims.
Trial and Appellate Decisions
The trial court found that the absence of a specified arbitration forum did not render the agreement unenforceable, instead it allowed Ms. Flanzman to choose the body that would conduct the arbitration. The Appellate Division, however, reversed this decision, holding that the parties could not have reached a “meeting of the minds” without knowing what rights would replace their right to judicial resolution of their dispute and, therefore, the agreement lacked mutual assent. The basis for the Appellate Division’s decision was adapted from the New Jersey Supreme Court’s decision in Atalese v. United States Legal Services Group, L.P., which instructed the lower courts to “take particular care in assuring the knowing assent of both parties to arbitrate, and a clear mutual understanding of the ramifications of that assent.”
Thus, since Jenny Craig’s arbitration agreement did not identify where and how the parties would arbitrate the dispute (such as, through the American Arbitration Association, or by creating a process for the selection of an arbitrator), this failure doomed the agreement. Jenny Craig may still seek review by the New Jersey Supreme Court, which has as recently as September 2018 taken up cases to clarify the interplay between New Jersey contract law and the FAA.
Courts applying New Jersey’s contract-principle approach to arbitration agreements have made it clear that courts will not assume that employees have intended to waive their right to a jury trial unless the agreements reflect their assent in unambiguous terms. Likewise, employers should not assume that the bare existence of an arbitration agreement will be sufficient to compel arbitration. As the Court noted in Schmell and Jean-Baptiste, employers bear the burden of obtaining their employee’s affirmative assent. While, in some circumstances, an employee’s silence may be construed to signify assent, the better approach is to use the most unambiguous means possible – such as a signature. As you can see, ambiguity on this issue leads to consequences that cut against the benefits of arbitration – such as speed in resolving disputes, relative informality, and cost-effectiveness. Furthermore, Flanzman instructs that, in addition to requiring mutual assent to arbitrate, the parties must also have a mutual understanding as to the rights that will be afforded in arbitration, to replace those that have been waived.
On October 29, 2018 a N.J. Appellate Division panel reversed a dismissal of class action overtime pay claims brought against a freight-forwarding company that convinced the lower court that the company’s drivers and deliverers lacked standing to sue because they signed independent contractor agreements to provide services through their separate corporations. In an unpublished opinion, the Appellate Division found that the court below prematurely ended its inquiry into whether the plaintiff was an employee or an independent contractor, and directed the lower court to look beyond the terms of the contract to consider the totality of the circumstances surrounding the relationship between the drivers and the company. Veras v. Interglobo North America, Inc., et al., Docket No. A-3313-16T1 (Oct. 29, 2018).
In 2014, Raymond Veras, through his corporation J&K Trucking Solution, signed a “Contractor Lease Agreement” (CLA) with Interglobo and then provided driver services to Interglobo. He claimed that he routinely worked in excess of 40 hours each week but received no overtime pay, and that Interglobo took illegal deductions from his pay. In 2015 he filed a class action under the N.J. Wage and Hour Law (WHL) and the Wage Payment Law (WPL) against two Interglobo entities. The CLA clearly stated that J&K was an independent delivery operator. However, Veras’s complaint alleged that, despite the CLA which his corporation signed, he was an employee protected by the WHL and WPL since he took direction from Interglobo and its employees, wore its uniforms, dealt with its customers’ invoices, and was subject to discipline and termination by Interglobo.
The lower court dismissed Veras’s complaint on the grounds that he lacked standing to bring the action. The Appellate Division reversed and held that the A-B-C test articulated by the N.J. Supreme Court’s 2015 decision in Hargrove v. Sleepy’s applied to determine whether Veras’ relationship with Interglobo was that of an employee as opposed to an independent contractor. The Appellate Division held that “a court is not limited to the terms of the contract between the parties” and the court should review “the substance, not the form of the relationship … to determine if [the relationship] is exempt from the WPL and WHL.”
The A-B-C test presumes that a service provider is an employee, unless the service recipient can prove A, B and C: (A) the service provider is free from direction or control by the service recipient, (B) the services rendered to the recipient are outside the recipient’s usual course of business, or are performed outside all places of the recipient’s business, and (C) the service provider is customarily engaged in an independently established trade, occupation, profession, or business.
Interglobo argued that the A-B-C test did not apply because Veras’s employer was his own corporation, J&K Trucking Solution, and under the economic realities test, Interglobo was not the employer. The court rejected this argument, too, and held that the economic realities test does not apply to WHL and WPL claims.
The Appellate Division held that the A-B-C test applied to Veras regardless of whether the CLA was signed by Veras as an individual or by his corporation, and stated that the A-B-C test presumes that Veras was an employee, not an independent contractor. The Appellate Division reasoned that even if the economic realities test did apply, dismissal of the complaint at the motion to dismiss stage was not warranted solely because of the CLA, because this test is fact-intensive, and courts rarely decide a worker’s status on a summary judgment motion, let alone on a motion to dismiss before discovery is taken.
Ultimately, this Appellate Division panel decided that the mere fact that the service provider’s corporation, and not the driver himself, signed an independent contractor agreement with the service recipient was not dispositive of the issue of employee versus independent contractor status at the motion to dismiss stage, and the underlying facts must be examined to determine whether, despite the contract, the service provider is an employee and has standing to sue the service recipient under the WHL or the WPL. As businesses attempt to create more separateness between themselves and their service providers, this court cautions that employee status will not depend on the existence of a contract alone, but will be analyzed under the rigorous A-B-C test.
Fall brings requests for time off for school conferences. Winter brings absences for colds and flu. The New Jersey Paid Sick Leave Law (the “Sick Leave Law”) provides paid sick leave to virtually every New Jersey employee to attend to these needs. The Sick Leave Law became effective on October 29, 2018, and requires all New Jersey employers, regardless of size, to provide paid sick leave for full-time, part-time, casual, and seasonal employees. Sick leave may be used for the employee’s own medical condition, or the medical condition of the employee’s family member. Employees may also use paid sick leave for absences due to public health emergencies and absences related to domestic violence suffered by the employee or the employee’s family member. Finally, paid sick leave may be used by the employee to attend school conferences and events. Employers may choose to either allow employees to accrue sick leave at a rate of 1 hour for every 30 hours worked, up to a maximum of 40 hours per year, or “frontload” the 40 hours of sick leave at the beginning of the benefit year.
In this article, we explore the 10 most frequently asked questions we have been receiving in assisting employers to comply with the requirements of the new law:
When do employees accrue sick leave and how soon may they start using it?
The law and the proposed regulations conflict on this issue as it pertains to current employees. The statute states that for employees who were hired before October 29, 2018, earned sick leave begins to accrue on October 29, 2018. The current employee can use his or her earned sick leave 120 calendar days after his or her start date. This means that current employees can use paid sick leave as soon as it is accrued, and if an employer frontloads the full entitlement of paid sick leave, then the employee can use that leave immediately.
The proposed regulations, however, provide that current employees cannot use paid sick leave until the 120th calendar date after the employee commences employment, or February 26, 2019, whichever is later. We have the statute, on one hand, that allows current employees to use their accrued paid sick leave immediately, and the proposed regulations, which state that they must wait until February 26, 2019. How do employers comply with the Sick Leave Law considering this conflict? There is no clear-cut answer, but instead employers must look at their current PTO policies and benefit year. Employers must also determine if any segment of the workforce is receiving less than the full complement of leave provided for under the law (and not the proposed/draft regulations).
The statute and regulations are consistent with respect to new hires. Employees hired after October 29, 2018, accrue paid sick leave immediately on the employee’s first day. New employees cannot use accrued paid sick leave until the 120th calendar day after the employee commences employment.
Do I need to take any action if I already offer paid time off (“PTO”)?
It depends. An employer’s PTO policy will only be compliant with the Sick Leave Law if the employer provides at least the minimum amount of sick time as required by the Sick Leave Law (1 hour of paid sick leave for every 30 hours worked). An employer may offer a more generous PTO policy; however, the policy must meet or exceed all the requirements of the Sick Leave Law and allow employees to use the time for all the reasons permitted by the law.
What is the interplay between the Sick Leave Law, the federal Family and Medical Leave Act (FMLA) and the New Jersey Family Leave Act (NJFLA)?
The FMLA provides 12 weeks of unpaid job-protected leave for employees suffering from a serious health condition or for the care of a family member with a serious health condition. Similarly, the NJFLA provides 12 weeks of unpaid job-protected leave for employees to care for a newly born or adopted child, or for the care of a family member with a serious health condition. When an employee is eligible to care for a family member under both FMLA and NJFLA, the leave may run concurrently pursuant to the employer’s policy.
The Sick Leave Law may also be used for illness by the employee or the employee’s family member. The Sick Leave Law, however, limits leave up to 40 hours, and, unlike the FMLA and NJFLA, the time off is paid. It is feasible that situations may exist where the Sick Leave Law runs concurrent with either FMLA or NJFLA, or both. Notably, the Sick Leave Law carries with it an extremely broad definition of “family member,” which includes anyone “whose close association with the employee is the equivalent of a family relationship.” This means that New Jersey employees may use paid sick leave to care for a person, regardless of biological or legal relationship. This allows employees to take leave to care for individuals not covered as family members under the FMLA and NJFLA.
Another important distinction is that unlike the FMLA or NJFLA, the Sick Leave Law may not be used to bond with a newborn or newly adopted or fostered child. In addition, FMLA and NJFLA take precedence when they require employers to do more than the Sick Leave Law.
Finally, the FMLA and NJFLA only apply to employers that meet certain criteria and only eligible employees (based on length of service and hours worked) are entitled to take FMLA and NJFLA leave. The Sick Leave Law applies to almost all New Jersey employees and employers, so employees ineligible for FMLA or NJFLA will likely be entitled to paid sick leave, particularly those employed by small businesses.
If my municipality already has a paid sick time law, does the new law affect my
Yes. The new law fully preempts and displaces the municipal ordinances that previously provided paid sick leave in 13 municipalities in New Jersey.
Can employers require that employees provide notice when taking sick leave?
Yes and No. Employers can require that employees provide up to 7 days’ notice of “foreseeable” absences. Foreseeable absences include time off for scheduled medical appointments. Where the need for leave is unforeseeable, an employer may only require notice “as soon as practicable,” and only if the employer has notified the employee, in advance, of this notice requirement.
Employers may only require documentation to substantiate the need to sick leave under two circumstances: 1) when the employee is absent for 3 or more consecutive days or 2) when the employee is absent during established “black-out dates.” Blackout dates must be limited to verifiable high-volume periods or special events (like the winter holidays). Importantly, employers must provide notice to employees of these backout dates.
If we offer a more generous PTO policy than the law requires, are we exempt from the law’s carry-over provision?
No. Employers whose employees accrue PTO in excess of the law’s requirement are still required to carry-over a maximum of 40 hours paid leave to each new benefit year. An employer is not required to carry over more than 40 hours paid leave per year.
Are employers required to change the “benefit year”?
Employers are required to establish a single benefit year (the 12-month period in which employees accrue or are frontloaded paid sick leave) for all employees. Employers who calculate PTO based on the employee’s anniversary date can no longer do so if that PTO is being used for paid sick leave. This requirement also means that employers must work closely with payroll to address accrual dates.
The law also requires that if employers seek to change the benefit year they must provide at least 30 calendar days’ notice to the Commissioner of the NJDOL. Employers are not required to provide notice to the Commissioner of the initial establishment of a benefit year.
What happens to unused sick time at termination?
Employers are not required to payout for unused sick time at termination unless a company policy or a collective bargaining agreement provides for payout. Employers should update their policies to unambiguously provide that accrued and unused paid sick leave will not be paid out at termination.
The law only exempts construction employees subject to a collective bargaining agreement, public employees who are provided with sick leave, and per diem health care employees. What constitutes a per diem health care employee?
This is another great example of where the law and proposed regulations contradict. The statute defines “per diem health care employee” as any New Jersey licensed health care professional (or license applicant) employed by a facility licensed by the New Jersey Department of Health or any first aid, rescue, or ambulance squad member employed by a hospital system, who fulfills the following three qualifications: (1) works on an as-needed basis to supplement a health care employee or to replace or substitute for a temporarily absent health care employee; (2) works only when the employee indicates that the employee is available to work, and has no obligation to work when the employee does not indicate availability; and (3) either (a) has the opportunity for full time or part-time employment under that healthcare provider or (b) has waived earned sick leave benefits for alternative benefits or consideration. So, under the law, a per diem health care employee must meet an exceedingly high standard to be exempt. However, the proposed regulations eliminate the three qualifications.
Whether this departure from the law was intentional or a mere scrivener’s error is unclear and we await the publication of the final regulations. For now, the statute controls.
Does the new law impose additional recordkeeping and compliance requirements?
Yes. Employers must post the NJDOL’s required notice in a conspicuous place, accessible to all employees in each New Jersey workplace. In addition, employers must distribute the notice (1) to all existing employees by November 29, 2018; (2) at the time of hiring; and (3) if the employee requests a copy of the notice. The required notice may be distributed by email. Employers are not required to obtain signed acknowledgments confirming that employees received the notice. Significantly, employers must distribute the notice in English and if the employee’s primary language is other than English, the employer must also provide the notice in the employee’s primary language.
Employers must also maintain records documenting the hours worked and earned sick leave used by employees. Records must be maintained for 5 years and made available for inspection by the NJDOL. If an employee claims an employer violated the Act, and that employer has failed to maintain adequate records, then the law creates a presumption that the employer failed to provide paid sick leave.
The answers to the questions above are based on a review of the FAQs and proposed regulations released by New Jersey Department of Labor and Workforce Development (NJDOL). Employers reviewing the draft regulations for guidance may also find that some of the sections contradict the Sick Leave Law. The proposed regulations are not binding and are open for public comment until December 14, 2018. We will continue to monitor developments and will provide an update once the final regulations are released by the NJDOL.
In the meantime, employers should work closely with counsel to address the specific needs of their workplace. In addition, employers must adhere to the notice and recordkeeping requirements, and review and revise existing policies, practices and procedures related to calculating employee’s sick leave to ensure compliance with the new law.
The New Jersey Supreme Court overturned the termination of a state employee who uttered a highly offensive gender slur that was overheard by other employees. William R. Hendrickson, Jr., a fire safety inspector with the New Jersey Department of Consumer Affairs (“DCA”) was terminated from his employment as a result of the slur, but his termination was reduced to a six-month suspension following a hearing before an Administrative Law Judge (“ALJ”) with the New Jersey Office of Administrative Law. The Supreme Court ruled that suspension, not termination, was the proper punishment in light of the offense.
On December 1, 2013, while on an assignment at MetLife Stadium, which was hosting a New York Jets football game, inspectors from DCA’s Division of Fire Safety were tasked with ensuring the stadium complied with applicable safety codes. Hendrickson and two other inspectors met in the parking lot before beginning their assignments. Their supervisor was Senior Inspector Margaret Knight, who was not present with the three men in the parking lot.
While in the parking lot, Hendrickson learned that Senior Inspector Knight assigned him to inspect the pyrotechnics display (fireworks) which were on the roof of MetLife Stadium. After being informed of his assignment, the two other inspectors overheard Hendrickson made an obscene remark about Senior Inspector Knight, calling her the “c-word.” Both inspectors were offended by Hendrickson’s remark and reported the incident. At the hearing, Hendrickson provided a different account of his reaction to the assignment, stating that he walked away and “muttered” to himself that he hoped Senior Inspector Knight “gets a disease.” Hendrickson testified that he said a few things he was not proud of but claimed to have no recollection of using the offensive language.
After learning of Hendrickson’s outburst, Senior Inspector Knight announced to a number of inspectors, including Hendrickson, that if anyone had any issues with her, to respect her position and come to her directly to discuss and resolve the issue. Hendrickson walked away without talking to Senior Inspector Knight and completed his assigned task without incident.
ALJ and Appellate Decisions
After the hearing, the ALJ issued a written decision holding that Hendrickson uttered a gender slur in the workplace and violated the State’s policy prohibiting gender discrimination and engaged in conduct unbecoming a public employee. While the ALJ rejected Hendrickson’s account as not credible, the ALJ found that termination was too harsh a remedy given Hendrickson’s lack of disciplinary history in the 15-months prior and 9-months after the incident. The ALJ ordered Hendrickson be suspended for 6-months.
The Department of Consumer Affairs appealed the ALJ’s decision to the Appellate Division. The Appellate Division, substituting their judgment for that of the ALJ, reinstated the penalty of removal and Hendrickson thereafter appealed to the New Jersey Supreme Court.
Supreme Court Decision
The Supreme Court overturned the Appellate Division’s decision and reinstated Hendrickson’s 6-month suspension imposed by the ALJ. The Supreme Court determined the proper standard of review was to assess whether the sanction imposed by the ALJ was “so disproportionate to the offense, in light of all circumstances, as to be shocking to one’s sense of fairness.”
While acknowledging that Hendrickson’s use of a highly offensive gender slur in a public place which was overheard by co-workers must be firmly condemned, the Supreme Court concluded that the ALJ’s decision to impose a 6-month suspension was not shocking to one’s sense of fairness. In making this determination, the Supreme Court found the ALJ considered: (1) Hendrickson’s outburst to be an isolated incident; (2) the incident was mitigated by Hendrickson’s unblemished disciplinary record prior to and after the incident; and (3) Hendrickson was ultimately redeemable. As the Supreme Court stated: “A belittling gender insult uttered in the workplace by a state employee is a violation of New Jersey’s policy against discrimination and Hendrickson’s conduct was unbecoming a public employee.” Thus, the Supreme Court deferred to the ALJ’s conclusions and reinstated Hendrickson’s 6-month suspension.
Employers have a responsibility to investigate complaints employees raise about harassment and discrimination in the workplace. If the investigation concludes that an employee has engaged in the conduct complained of, often the employer is faced with a choice of how to properly discipline the employee. In this case, while the Supreme Court did not does not excuse Hendrickson’s conduct, it found that the ultimate decision by the employer to terminate the employee was too harsh in light of the circumstances. While termination can always be considered, an employer must take into account, and properly document, any mitigating factors that apply in imposing discipline lesser than termination.
The New Jersey Department of Labor and Workforce Development (NJDOL) has issued its long awaited mandatory notice for compliance with the New Jersey Paid Sick Leave Act (“the Act”) which goes into effect on October 29, 2018. The “Notice of Employee Rights” can be found here.
All New Jersey employers regardless of size must:
Post the notice in a conspicuous place accessible to all employees in each New Jersey workplace; and
Distribute the notice (1) to all existing employees by November 29, 2018; (2) at the time of hiring; and (3) if the employee requests a copy of the notice.
The required notice may be distributed by email. Employers are not required to obtain signed acknowledgments confirming that employees received the notice.
The notice must be also be posted and distributed in any language that the employer believes is the first language of a majority of the employer’s workforce. In addition to English, the NJDOL will release the notice in 12 additional languages, including Spanish, Chinese, and Arabic. The NJDOL has advised that translations will be available on its website soon.
Under the new law, employees accrue 1 hour of paid sick leave for every 30 hours worked. Employees (hourly, salaried, full-time, part-time) may accrue up to 40 hours of paid sick leave per benefit year. Employers are also permitted to designate the “benefit year” as any 12-month period but may not modify it without notifying the NJDOL.
Employees become eligible to use earned sick leave beginning on the 120th day after they are hired, and may use their earned sick leave as it is accrued. Employers are also permitted “frontload” 40 hours of paid sick time. There is no requirement to pay out accrued and unused sick leave upon termination absent a company policy to the contrary.
Permissible use of sick leave, which will accrue at the rate of one hour for every 30 hours worked up to 40 hours per benefit year, includes the following:
(i) Diagnosis, care, treatment, recovery and/or preventive care for the employee’s own mental or physical illness or injury or the employee’s family member’s mental or physical illness or injury;
(ii) Absence due to a public health emergency declared by a public official that causes the closure of the employee’s workplace or the school or childcare facility of the employee’s child or requires the employee or an employee’s family member to seek care;
(iii) A necessary absence for medical, legal or other victim services because of domestic or sexual violence perpetrated on the employee or the employee’s family member; or
(iv) To attend a school-conferences, meetings, or any event requested or required by a child’s school administrator, teacher, or other professional staff member responsible for the child’s education, or to attend a meeting regarding a child’s health or disability.
The Act also broadly defines “family members” to include an employee’s child, spouse, domestic partner, civil union partner, parent (including adoptive, foster or step-parent, or legal guardian), sibling (including foster or adoptive siblings), grandparent or grandchild, and the parent, grandparent or sibling of the employee’s spouse, domestic partner or civil union partner. Notably, an employee has the opportunity to use their sick leave for the care of a non-related individual whose close association with the employee is the “equivalent” of a family relationship.
Exemptions & Employees Covered by a CBA
Per diem healthcare employees, construction workers subject to a collective bargaining agreement (CBA), and public employees who are provided with sick leave with full payment pursuant to any other law, rule or regulation are exempt from the new law. Non-construction employees covered by a CBA at the time the law goes into effect are also exempt, but the Act’s provisions will apply once the CBA expires. Further, employees and their representatives may waive the rights available under the law and address paid leave in collective bargaining.
Employers are entitled to 7 days advance notice of “foreseeable” absences and can restrict employee’s use of “foreseeable” paid sick leave on certain dates. Where the need is unforeseeable, an employer may only require notice “as soon as practicable,” if the employer has notified the employee of this requirement. In addition, employers are only permitted to ask the employee for documentation to substantiate the sick leave if the employee is absent for 3 or more consecutive days.
Employers will be required to maintain records documenting the hours worked and earned sick leave used by employees. Records must be maintained for 5 years and made available for inspection by the NJDOL. If an employee claims an employer violated the Act, and that employer has failed to maintain adequate records, then there is a presumption that the employer failed to provide paid sick leave.
Employers are prohibited from retaliating or discriminating against employees under the Act. The Act broadly defines retaliation to include not only retaliatory personnel action like suspension, demotion, or refusal to promote, but also includes threatening to report the immigrant status of an employee or family member of the employee. Employers are also prohibited from retaliating or discriminating against an employee who files a complaint with the commissioner or a court alleging the employer’s violation of the Act, or informs any other person of their rights under the Act.
There is a rebuttable presumption of unlawful retaliatory action whenever an employer takes adverse action against an employee within 90 days of when that employee opposes any violation of the Act, informs any person about the employer’s alleged violation of the Act, files a complaint alleging a violation of the Act, or cooperates in an investigation into an alleged violation of the Act.
Any failure of an employer to make available or pay earned sick leave as required by the new law, or any other violation of the law, shall be regarded as a failure to meet the wage payment requirements of the New Jersey Wage and Hour Law. Employers will also be subject to the penalties and remedies contained in the New Jersey Wage and Hour Law, including fines and possible imprisonment, reinstatement of a discharged employee to correct any discriminatory action and payment of all lost wages in full.
The New Jersey Paid Sick Leave Act takes effect on October 29, 2018. Employers in New Jersey, in consultation with legal counsel, must post the notice and review and revise existing policies, practices and procedures related to calculating employee’s sick leave to ensure compliance with the Act. Human Resources and Benefits personnel should also be trained on the new paid sick leave law requirements and Managers should also receive updated training to ensure that internal recordkeeping processes are sufficient to keep track of time taken under the new law.
On October 1, 2018, New York State released final versions of a sexual harassment policy, a complaint form and training materials, along with guidance materials for employers, to assist employers in complying with the new set of laws combating workplace sexual harassment. By way of background, in April of this year, Governor Cuomo signed legislation imposing requirements on New York State employers to adopt a sexual harassment prevention policy, complaint procedure and training program. The State released, in draft form, a model policy, model complaint form and model training program in August of this year, followed by a period of public comment that ended on September 12, 2018. Perhaps the most notable change to result from the public comment period was that the statutory deadline to train employees, which was initially October 9, 2018, was extended one year to October 9, 2019. Note, however, that this does not change the October 9, 2018 deadline for adopting a sexual harassment policy and mounting posters.
Model Sexual Harassment Prevention Policy – By October 9, 2018, all New York State employers must adopt a policy that meets or exceeds this model policy’s standards and distribute it in writing to all employees.
Minimum Standards for Sexual Harassment Prevention Policies – For employers who wish to update their existing sexual harassment prevention policy instead of adopt the model policy, the State has issued minimum standards for that policy to uphold.
Sexual Harassment Prevention Poster – By October 9, 2018, all New York State employers must mount this poster in conspicuous places around the workplace for all employees to see.
Sexual Harassment Complaint Form
Model Complaint Form for Reporting Sexual Harassment – The sexual harassment policy must include a complaint form that, collects at least all of the information sought on the State’s model complaint form, for employees to report sexual harassment.
Sexual Harassment Training Program Materials – All New York State employers must implement an annual, interactive sexual harassment training program that meets or exceeds the State’s model program, and all existing employees must be trained under that program by October 9, 2019. The materials released by the State include:
Model Sexual Harassment Prevention Training Script – Although the training must be interactive, it need not be live. The State established the script document for employers to use in creating the narrative of the interactive training.
Model Sexual Harassment Prevention Training Slides – The State has released model presentation slides to incorporate into sexual harassment training.
Model Sexual Harassment Prevention Training Case Studies – The new laws require that the training include examples of conduct that would constitute unlawful sexual harassment, which is provided by the content on the case studies document.
Minimum Standards for Sexual Harassment Prevention Training – For employers who have an existing sexual harassment training program, the State has issued minimum standards for employers to use to make sure their programs comply with the law.