New Jersey Employment Lawyer Blog

New York’s Highest Court Refuses to Expand Exception to Employment At-Will

December 28, 2012 | by Jonathan I. Nirenberg

Earlier this year, New York’s Court of Appeals dismissed a wrongful termination lawsuit brought by a Compliance Officer who objected about an unethical stock transaction by the company’s President and Chief Executive Officer. In doing so, New York’s highest court refused to extend an exception to the employment at-will doctrine. Employment at-will is the general rule that a company can fire an employee for any reason, or even for no reason at all. Although there are many exceptions to employment at-will, such as anti-discrimination laws, New York does not have a whistleblower law that would have protected this employee.

Specifically, in Sullivan v. William F. Harnisch, Joseph Sullivan was a partner in two related hedge fund companies, Peconic Partners LLC and Peconic Asset Managers LLC. He also held several other job titles, including Executive Vice President, Chief Operating Officer and Chief Compliance Officer. Mr. Sullivan objected about apparent improper and unethical stock sales by the company’s Chief Executive Officer and President, William Harnisch. Peconic fired Mr. Sullivan within days after he made this complaint. He then sued, claiming Peconic’s decision to fire him was retaliation in violation of the company’s Code of Ethics.

In an earlier case, Murphy v. American Home Prods. Corp., the New York Court of Appeals found an exception to employment at-will for a lawyer who objected about accounting improprieties at his law firm. The Court allowed the attorney to proceed with his wrongful discharge case. It found there is an implied agreement between attorneys and their law firms that they will each follow professional ethical standards, and that American home Products violated that agreement when it fired Mr. Murphy.

However, in Sullivan the Court of Appeals refused to expand that rule to protect Mr. Sullivan. It indicated that although Murphy is not necessarily limited to the relationship between lawyers and law firms, there needs to be a uniquely close connection between the employment relationship and an ethical obligation that makes the two “incapable of separation.” It found no such relationship between a Compliance Officer and the hedge fund for which he works. It also found there is nothing express or implied in Peconic’s Code of Conduct that prohibits the company from firing an employee for reporting an unethical stock transaction. Accordingly, it found Mr. Sullivan did not have a legal claim, and dismissed his case

Decision to Seek Outside Job Candidate Isn’t Legitimate Reason Not to Promote Employee

December 22, 2012 | by Jonathan I. Nirenberg

Last week I discussed Colicchio v. Merck & Co., Inc., a case involving an employee who claims her employer Justified Eliminating Her Job by Reducing Her Job Duties After Her Maternity Leave. The employee in that case, Kerri Colicchio, also claims her employer failed to promote her because of her gender and pregnancy, and retaliated against her for objecting to violations of the New Jersey Law Against Discrimination (LAD).

The judge allowed Ms. Colicchio to proceed with her claim that the company failed to promote her to the position of Vice President of Global OE. Ms. Colicchio testified that her supervisor told her she was not being considered for that position on an interim basis expressly because she was about to go out on a maternity leave. The judge found this was not “smoking gun” evidence since the comment involved the interim position, and Ms. Colicchio was suing Merck for failing to offer her the job on a permanent basis. However, he found the comment showed the company used Ms. Colicchio’s pregnancy as an important negative factor in making employment decisions about her. In other words, it was evidence of pregnancy discrimination.

The judge also found Merck’s justification for its decision not to promote Ms. Colicchio was not a legitimate, non-discriminatory reason. Specifically, Merck claims it decided to consider only external job candidates for the position. The judge called this explanation “barely more than no reason at all,” since the company did not indicate why it decided not to consider internal candidates. This is noteworthy, since it potentially means Merck does not have a valid defense to Ms. Colicchio’s claim that it failed to promote her because of her gender and pregnancy.

However, the court dismissed Ms. Colicchio’s retaliation claim. It explained that to be protected by the LAD, an objection has to either expressly or implicitly indicate that the company treated an employee differently based on a legally protected category. For example, an employee who objects to race, age, or gender discrimination would be legally protected from retaliation under the LAD. However, when Ms. Colicchio made her internal complaints, she only indicated she was being treated unfairly, without stating or implying she believe the unfair treatment was due to her gender or pregnancy. As a result, the Judge ruled that Ms. Colicchio does not have a valid retaliation claim.

Employee Claims Company Justified Eliminating Her Job by Reducing Her Job Duties After Her Maternity Leave

December 15, 2012 | by Jonathan I. Nirenberg

A New Jersey judge recently issued a noteworthy decision in a gender and pregnancy discrimination case, Colicchio v. Merck & Co., Inc. The fact scenario is fairly common. Kerri Colicchio worked for Merck & Co., Inc. for approximately a decade. She alleges the company passed her over for a promotion shortly before she was scheduled to go on a maternity leave. She also claims the company took away many of her job duties when she returned from that leave, and eventually used her reduced role as a justification to fire her as part of a “business reorganization.”

Merck asked the judge to dismiss her gender discrimination and pregnancy discrimination claims. It argued that since there was nearly a year between Ms. Colicchio’s maternity leave and the elimination of her position, she could not prove the company discriminated against her. The judge was not persuaded. He found Ms. Colicchio offered evidence that her supervisors made discriminatory statements right before her pregnancy leave, decided to fire her while she on that leave, and then carried out its decision by gradually taking away her job duties when she returned to work so it ultimately could justify eliminating her position.

Ms. Colicchio’s evidence of discrimination includes the fact that her boss told her she would have been promoted to the position of Interim Vice President of Global OE if she had not been scheduled to take a maternity leave. The judge recognized this was evidence the company was using her maternity leave as a negative factor in employment decisions. Ms. Colicchio also testified that her boss tried to discourage her from returning to work by telling her “babies need their mamas.” The court found this was further evidence of Merck’s discriminatory motive. The judge concluded that the evidence supports the conclusion that Merck removed Ms. Colicchio’s job duties as part of a plan to set her up to be fired.

The judge also allowed Ms. Colicchio to proceed to a trial on her claim that Merck interfered with her right to take a leave under the Family & Medical Leave Act (FMLA) and the New Jersey Family Leave Act (FLA). Specifically, he recognized that a jury could find the company denied her the right to return to her position, or an equivalent one, based on the evidence that Merck reduced her job duties after she returned from her maternity leave.

New Jersey Court Permits Age Discrimination Lawsuit Because Company Retained Younger Employees

December 9, 2012 | by Jonathan I. Nirenberg

Last month, a federal judge in New Jersey allowed a group of employees to proceed with their class action age discrimination lawsuit even though they do not claim the company hired younger employees to replace them.

In Bratek v. TD Bank, NA, four customer service representatives, Edna Bratek, Diane Deluca, Lois Skoff, and David Steinberg, claim TD Bank fired them because of their age. They were each over 60 years old when TD Bank included them in a reduction in force. They sued, claiming the company targeted older employees, in violation of the New Jersey Law Against Discrimination.

TD Bank moved to dismiss the case, claiming the employees did not set forth facts which, if true, would prove age discrimination. In particular, they argued that the lawsuit does not even allege the Bank hired younger customer service representatives to replace the older employees it fired. The Court agreed that the employees did not claim the Bank had replaced them with younger employees, but it found they could proceed with their case on another theory. It recognized that an employee can set forth a claim of discrimination in a case involving a reduction-in-force by alleging the company retained one or more younger employees to perform his job. Thus, for example, an employee can claim the company gave his job duties to younger employees who it chose not to lay off.

TD Bank also argued that even though the lawsuit named 18 customer service employees under 40 years old who the company retained after the reduction-in-force that was a small fraction of the customer service employees it retained, is statistically meaningless, and is not enough to support an inference of age discrimination. The company claimed this was particularly true since the lawsuit is a class action filed on behalf of hundreds (and potentially as many as a thousand) older customer service representatives who lost their jobs in the reduction-in-force.

The district judge rejected this argument. He recognized it would be extremely difficult for an employee filing a class action discrimination lawsuit to list the names and ages of a large percentage of the employees who the company retained. It also recognized that a lawsuit only needs to set forth facts that are compatible with discrimination to support an inference of discrimination. Accordingly, he concluded that providing the names and ages of several younger customer service representatives who the Bank retained was enough for the employees to proceed with their case.

United States Supreme Court Rules Arbitrator Must Decide Whether Non-Compete Agreement is Enforceable

December 4, 2012 | by Jonathan I. Nirenberg

Last week, the United States Supreme Court overturned a state court’s ruling that a non-compete agreement is invalid because it violates state law. The Supreme Court ruled that since the non-competition agreement included a valid arbitration clause, an arbitrator has to decide whether the non-compete agreement is legally enforceable.

The case originated in Oklahoma, a state which has a statute that limits when non-competition agreements are enforceable. Eddie Lee Howard and Shane D. Schneider filed a lawsuit against their former employer, Nitro-Lift Technologies, in which they sought a ruling that the confidentiality and non-compete agreements they entered into with Nitro-Lift were unenforceable because they violated Oklahoma law. The case went up to the Oklahoma Supreme Court, which ruled that the non-compete agreements were null and void under Oklahoma law. However, Nitro-Lift argued that the state Supreme Court should not have decided whether the non-compete agreement was enforceable since there were provisions in the non-compete agreements which required all disputes to be decided through private arbitration.

The United States Supreme Court agreed with Nitro-Lift. In Nitro-Lift Technologies, LLC v. Howard, it ruled that once a court determines there is a valid and enforceable arbitration agreement, decisions about the enforceability of anything else in the contract must be decided by an arbitrator. As a result, the Oklahoma Supreme Court should not have decided whether the non-compete agreement itself is enforceable.

Nitro-Lift is part of a series of cases in which the United States Supreme Court has recognized how difficult it is to get around arbitration agreements. This is extremely important, since when you sign an arbitration agreement you are giving up your right to a jury trial, and arbitration is typically considered much more favorable to employers than employees.

Reducing Employee Hours in Response to Overtime Lawsuit Can Be Retaliatory

November 21, 2012 | by Jonathan I. Nirenberg

New Jersey’s Appellate Division recently recognized it can be unlawful for a company to reduce employees’ overtime hours in response to an overtime lawsuit. Specifically, the case finds that such a policy could violate New Jersey’s whistleblower law, the Conscientious Employee Protection Act (CEPA).

Howard Flecker III worked as a Deckhand for Statue Cruises, a company which provides ferry service from New York and New Jersey to Liberty Island and Ellis Island.Under the company’s Collective Bargaining Agreement (CBA), employees were entitled to be paid time-and-a-half only after they worked more than 48 hours per week. The FLSA is a federal law which requires companies to pay “non-exempt” employees overtime pay at the rate of time-and-a-half when they work more than 40 hours per week
In 2009, Mr. Flecker filed a class action lawsuit claiming the CBA violates the Fair Labor Standards Act (FLSA). In direct response to Mr. Flecker’s lawsuit, the company issued a memorandum indicating that none of its employees would work 40 hours per week. For example, the company reduced Mr. Flecker from 50 to 40 hours per week.

As a result, Mr. Flecker’s coworkers lost 8 or more hours of pay per week. Many of his coworkers confronted him about this on a daily basis, and pressured him to withdraw his lawsuit. Mr. Flecker’s lawyer told the company that its policy was a form of unlawful retaliation in violation of CEPA. The company responded that it was attempting to minimize the potential damages in Mr. Flecker’s overtime lawsuit. Eventually, due to the stress caused by his co-workers’ constant pressure to withdraw his lawsuit, he resigned. He also added a retaliation claim to his lawsuit under CEPA.

The trial court dismissed Mr. Flecker’s CEPA claim, finding he had not alleged any retaliatory action. However, in Flecker v. Statue Cruises, LLC , the Appellate Division disagreed, and found two potential retaliatory actions. First, it ruled a jury could conclude the company’s actions were intended to turn Mr. Flecker’s co-workers on him, which in turn forced him to resign. In other words, a jury could conclude the company constructively discharged him. Second, it found reducing Mr. Flecker’s hours because he filed an overtime lawsuit could violate CEPA if the company’s motive was to retaliate against him for filing his lawsuit. The court explained this theory was supported by the fact that, although the company claimed it was going to reduce the hours of all of its employees, it did not reduce the hours of at least two of the employees who had been harassing Mr. Flecker.

Targeting Alcoholic Employees for Drug Testing Can Violate New Jersey Law Against Discrimination

November 13, 2012 | by Jonathan I. Nirenberg

Late last month, the New Jersey Appellate Division ruled that ExxonMobil Research and Engineering Company may have violated New Jersey Law Against Discrimination (LAD) when it fired an employee suffering from alcoholism after she failed a breathalyzer test. The LAD prohibits employers from discriminating against employees because they are disabled. Since alcoholism is a disability, it is illegal to fire an employee because he is an alcoholic. However, the LAD permits employers to fire employees if their disabilities, such as alcoholism, prevent them from performing their jobs or create a serious health risk.

The case, A.D.P. v. ExxonMobil Research and Engineering Company, involves an employee who voluntarily informed her employer, ExxonMobil Research and Engineering Company, that she was an alcoholic and was checking herself into an inpatient rehabilitation program. Based on company policy, ExxonMobil required her to stop from using any alcohol and to undergo random breathalyzer tests for two years. The company did this even though the employee had an exceptional performance history, and there was no evidence she was ever intoxicated at work or that her drinking interfered with her job in any way. When the employee eventually failed a breathalyzer test, ExxonMobil fired her. She then sued, claiming the company committed disability discrimination, in violation of the LAD.

The Appellate Division found there was direct evidence of disability discrimination. Specifically, a manager admitted ExxonMobil required the random drug testing pursuant to company policy because the employee revealed she is an alcoholic, rather than because of anything relating to her job performance. The Court found this policy to be discriminatory since it shows hostility toward alcoholics. Given this direct evidence of discrimination, the court ruled that ExxonMobil has the burden to prove it would have fired the employee irrespective of her disability. Usually the employee has the burden to prove discrimination.

The Court explained that companies have the right to fire employees whose disabilities prevent them from adequately performing their jobs. However, to establish this defense, a company needs to prove the particular employee could not perform her job. In this case, the court found no evidence that the employee was unable to perform her job despite her alcoholism.

The Court also explained that companies can fire employees whose disabilities create a serious health risk. But to establish this defense the company needs to prove, with a reasonable degree of certainty, there is a probability the employee’s disability will cause a substantial injury to the employee or someone else in the workplace. To meet this test the employer has to show more than the fact that the employee has a specific disability. It has to prove the disability was likely to pose a safety risk with respect to the particular employee.

For more information, please see our previous article, When Can A Private Company Require Random Drug Testing in New Jersey?

What Compensation Is an Employee Entitled to if His Employer Was Affected By Hurricane Sandy?

November 6, 2012 | by Jonathan I. Nirenberg

As a result of Hurricane Sandy, many businesses in New York and New Jersey had to stop their operations for a considerable period of time. Now that many employees are returning back to work, they are asking whether they should be paid for the days when their offices were closed due to the storm.

The United States Department of Labor provides a clear answer to this question as it relates to employees who are “exempt” under the Fair Labor Standards Act (FLSA). An employee is generally considered exempt if he meets certain requirements regarding his job duties and is paid a salary of at least $455 per week ($23,660 per year based on a full time schedule). The most common exemptions are for employees employed in a bone fide executive, administrative, and professional capacities.

An employer may not withhold pay to an exempt employee because the office was closed as a result of the storm or another natural disaster without jeopardizing the employee’s exempt status. In other words, if a company fails to pay an exempt employee his salary for the period he was unable to work during a natural disaster, then that employee might be entitled to overtime pay if he works more than 40 hours in a week. However, if the employee has accrued vacation or personal time, the employer can require the employee to use that time during his absence from work due to the storm.

As far as non-exempt employees, under the FLSA employers are required to pay them only for the hours they actually worked. Thus, unless they used paid time off, employees who are paid on an hourly basis and other non-exempt employees are not entitled to pay for the days they were unable to work because of the natural disaster. Of course, companies still have to pay employees if they are required to do so under an individual employment contract, a collective bargaining agreement, or a company policy.

Employees who became unemployed as a result of Hurricane Sandy may be eligible for Disaster Unemployment Assistance. The information about the requirements and the application process is available through the New Jersey Department of Labor and the New York Department of Labor.

When Is a Non-Compete Agreement Enforceable in New Jersey?

October 23, 2012 | by Jonathan I. Nirenberg

In a sluggish economy employers tend to use non-compete agreements more frequently to protect their interests. At the same time employees struggling to find a job in difficult job market are more likely to question and challenge the limitations set by their non-compete agreements. As a result, we frequently receive inquiries from employees about whether their non-compete agreements are enforceable under New Jersey law. For example, an employee recently asked if her employer could sue her for violating a non-compete agreement even though the employer fired her only a few weeks after she started the job.

Technically, an employer is not required to give an employee anything more than his or her job, even for a short time, in exchange for signing a non-compete agreement. However, non-compete agreements are disfavored by New Jersey courts and have to meet a few different requirements to be enforceable. Thus, it is impossible to give a short or definitive answer to this client, especially without carefully reviewing her agreement. I can explain, however, the factors New Jersey courts consider when deciding whether to uphold a non-compete clause in an employment agreement.

A non-compete agreement will be enforced in New Jersey only if it protects the legitimate interests of the employer, does not impose an undue hardship on the employee, and is not unduly harmful to the general public.

Legitimate interests of the employer can include protecting trade secrets, proprietary or confidential information, and customer relations. Courts generally will not uphold a non-compete agreement or another form of restrictive covenant if the employer is merely trying to prevent fair competition.

In determining if a non-compete agreement places an “undue burden” on the employee, courts analyze whether the employee is likely to get reemployed in his field somewhere else despite the restrictions of the agreement. The reason why the employee was separated from the job can also be an important factor. For example, courts are much more likely to find an undue hardship on the employee if the employee was laid off or fired without cause, like the client I mentioned above. However, unlike how New York treats non-compete agreements, New Jersey does not have a rule that they are automatically invalid if an employee lost his job involuntarily.

New Jersey courts also have struck down non-compete agreements that limit the public’s right to have access to receive professional advice and services. For example, New Jersey does not permit non-compete agreements to be enforced against attorneys. Although there is no similar prohibition for physicians, accountants, or other licensed professionals, courts will consider whether a non-compete agreement harms the public by restricting its access to professionals in a particular geographic area.

A non-compete agreement only is enforceable if it is reasonable in terms of its duration and geographic scope. What is reasonable depends on all facts in the case, and there are hardly any bright line rules. Non-compete restrictions lasting up to two year are typically enforceable, but longer restrictions can be enforceable depending on the circumstances. The geographic scope can legitimately be limited to any area where the company actually does business, or is seeking or planning to do business. If a court finds the restrictions are overly board, it can rewrite the agreement to make the restrictions reasonable. However, if a court finds the company intentionally made the restrictions unreasonably broad, it can throw out the entire agreement.

Third Circuit Recognizes EEOC’S Broad Power to Investigate Employment Discrimination Claims

October 13, 2012 | by Jonathan I. Nirenberg

The Third Circuit Court of Appeals recently ruled that the United States Equal Employment Opportunity Commission (EEOC) is entitled to subpoena a broad range of information during its investigations into possible violations of the Americans with Disabilities Act (ADA). The Third Circuit is a federal appellate court that handles cases that started in the District of New Jersey.

The appeal stems from an investigation the EEOC is conducting regarding Kroger grocery store’s alleged violation of the Americans with Disabilities Act (ADA). The ADA prohibits companies from using tests when hiring employees if they “screen out or tend to screen out” disabled job candidates, unless the tests are “‘job-related for the position in question” and “consistent with business necessity.” Kroger uses a Customer Service Assessment test that was written for it by another company, Kronos Incorporated, to screen its job applicants. Kroger decided not to hire a job applicant, Vicky Sandy, after she scored poorly on that test. Ms. Sandy is hearing and speech impaired.

During its investigation into Ms. Sandy’s disability discrimination claim, the EEOC sent a subpoena to Kronos seeking information about how the test impacts disabled job applicants. Kronos refused to respond to the subpoena. The EEOC then filed a motion to enforce the subpoena in federal district court. The district court eventually limited the information the EEOC was entitled to receive to information relating to the state in which Ms. Sandy applied and the job titles for which she applied during an 18 month period. In 2010, the Third Circuit reversed that decision, and removed those limitations. It then sent the case back to the district court to modify its order.

But the EEOC again disagreed with the order the district court issued, and appealed to the Third Circuit. This time, it objected to a limitation that it was only entitled to information from any research or studies about the test’s impact on disabled individuals that Kronos “relied upon in creating or implementing the test for Kroger.”

In Equal Employment Opportunity Commission v. Kronos, Inc., the Third Circuit again agreed with the EEOC. It explained that the EEOC is entitled to subpoena information during its investigations if it can show that (1) the investigation has a legitimate purpose; (2) the information requested is relevant to that purpose; (3) the EEOC does not already have the information it is requesting; (4) the EEOC has complied with its own administrative requirements; and (5) the information it requested is not unreasonably broad or burdensome. Applying that test, the court concluded that the EEOC was entitled to the information it was seeking whether or not Kronos specifically considered it with respect to the test it developed for Kroger. It therefore instructed the district court to remove that limitation from its order.