Allyn & Fortuna LLP
Paula Lopez, July 29, 2016.
In Smith v. Millville Rescue Squad, the New Jersey Supreme Court reversed the trial court’s dismissal of an employee’s discrimination claim based on marital status, finding that New Jersey Law Against Discrimination (LAD)’s prohibition against workplace discrimination based on marital status extends beyond whether an individual is married or unmarried, and protects employees in all marital phases (e.g., engaged, separated, divorcing, divorced, or widowed).
In Millville Rescue Squad, Robert Smith and his wife Mary Smith both worked for Millville Rescue Squad (MRS). In 2005, Mary learned about her husband’s affair with an MRS volunteer and informed their employer. Shortly thereafter, Mr. Smith also told his supervisor, John Redden, of the affair. During the initial conversation, Mr. Redden told Mr. Smith that he could not promise the affair would not impact his job. The affair continued, and in January 2006 Smith and his wife separated. Mr. Redden asked to be kept apprised of their marital status. When Mr. Redden learned that the couple decided to divorce, he told Mr. Smith that he would need to inform the board of the situation. The following day, Mr. Smith was given the option of resigning or being terminated. Mr. Smith chose not to resign and was then terminated. The minutes of the board meeting held to discuss Smith’s termination reflect discussions about an operational restructuring that would impact Smith’s position and his recent poor work performance.
Robert Smith filed a lawsuit against MRS and Redden asserting claims of discrimination based on his sex and marital status among other claims. During trial, Smith testified about statements made by Redden in response to learning about his separation and divorce and refuted MRS’ claim that he was terminated for poor performance by showing that he received two promotions, annual raises and was never the subject of formal discipline. At the conclusion of Plaintiff’s case in chief, the trial court granted MRS and Redden’s motion to dismiss Smith’s case.
The trial court found that Smith could not prevail on his discrimination claim based on marital status because he did not present any evidence to show that he was terminated because he was either married or unmarried, or because he was having an affair, or that employees of the company had been treated differently because of their marital status. Instead, the court found that the evidence showed that MRS terminated him because of a concern of an “acrimonious divorce,” and such action does not amount to marital status discrimination.
The trial court’s dismissal of Smith’s discrimination claim on the basis of marital status was reversed on appeal by the both the Appellate Division and New Jersey’s Supreme Court, with both courts finding that Smith had presented sufficient evidence to show that he was terminated based on negative stereotypes held by his employer about divorcing employees. While the LAD does not define “marital status,” the court held that the protections afforded by the LAD against discrimination on that basis are not limited to whether individuals are treated differently because they are either married or unmarried, but also extends to those who are in transition from one state to the other.
The New Jersey Supreme Court’s holding in this case establishes the standard to be applied to future claims of discrimination based on one’s marital status. The court supports its broad definition of “marital status” as being consistent with the remedial nature of the LAD and as discouraging employers from taking employment actions based on status and stereotypes, such as one that an unmarried employee is not as committed to his career as a married employee. However, the court did note that despite the broad definition of marital status, employers maintain the right to discipline or discharge employees whose personal lives have a detrimental effect to an employee’s job performance or create an actual disruption in the workplace.
As a result of the court’s decision in Millville, New Jersey employers may see an increase in the filing of claims based on marital status. Therefore, it is important for employers to have a clear understanding of the protections afforded by the LAD in making their employment decisions.
Date: June 22, 2016, Megan J. Muoio
In June 2016, the U.S. Equal Employment Opportunity Commission (EEOC) released the report of its Select Task Force on the Study of Harassment in the Workplace. It has been 30 years since the Supreme Court held in Meritor Savings Bank v. Vinson that harassment is a form of workplace discrimination under Title VII of the Civil Rights Act of 1964. Workplace harassment takes many forms, such as harassment on the basis of sex (which includes sexual orientation, gender identity, and pregnancy), race, disability, age, ethnicity/national origin, color, and religion. Allegations of harassment constituted almost one-third of the approximately 90,000 charges received by the EEOC in 2015, with 45% of those alleging harassment on the basis of sex and 24% alleging harassment on the basis of race.
In the report, the EEOC recommends that: (1) employers become aware of factors in their workplaces that create a risk for harassment; (2) employers look at their written policies with a fresh eye; (3) employers address the challenges posed by social media head-on; (4) employers have proper reporting and investigatory systems in place to address reports of harassment; and, (5) employers conduct thorough anti-harassment training sessions to educate employees at all levels.
First, the EEOC encourages employers maintain “situational awareness” of factors that may make their workplaces more susceptible to harassment so that employers can take proactive steps to ensure harassment does not occur. Both homogenous workforces – in which one group predominates and possibly isolates another group – and diverse workplaces – in which blocks of workers can form or where workers may be ignorant to cultural norms – can result in increased harassment. Workplaces with many young workers, where work is monotonous or low-intensity, or where the culture tolerates or encourages alcohol consumption leads to higher incidents of harassment. In addition, workplaces with significant power disparities, those in which authority is decentralized, and those with “high value” employees have an increased risk of harassment.
Second, the EEOC encourages employers not only to have a written policy against harassment, but to keep apprised of changes in law and circumstances in the workplace. The policy should be written and communicated to employees clearly, and contain all of the information about how to file a complaint or how to report an incident of harassment. The EEOC discourages the use of “zero-tolerance” policies against harassment because they can contribute to under-reporting and uneven discipline. Anti-harassment policies should contain information about the prohibition against retaliation and detail the steps that the employer will take to maintain employees’ confidentiality throughout the investigatory process.
Third, the EEOC encourages employers to directly address the evolving issue of social media use among employees and understand how it can contribute to workplace harassment, especially since interactions are less formal and more frequent. The EEOC stressed that employers should anticipate a time in the not-too-distant future when the entirety of their workforce will be using social media. Therefore, employers should stay current on social media trends at use in their workplaces and update anti-harassment policies to keep up.
Fourth, the EEOC recommends that employers implement and maintain reporting systems for harassment for employees who have either experienced or observed harassment in the workplace. An effective reporting system will contribute to all employees’ faith in the employer’s ability to handle incidents of harassment. The EEOC encourages employers to implement a multifaceted reporting structure with a choice of reporting methods, which can include the option to file a complaint with a manager or human resources, via multi-lingual complaint hotlines, or via the internet. Employers should examine the specific needs of their workplaces and offer an accessible reporting system for all employees that is followed up by an accountable, thorough investigation.
Finally, the EEOC recommends changing the focus of anti-harassment training. Research reviewed by the EEOC shows that standard training, without proper reporting procedures and accountability, has not decreased the frequency of incidents of harassment. One-size-fits-all compliance training that is focused on avoiding legal liability has not been effective. Instead, the EEOC recommends training that is tailored to educate employees as well as managers, supervisors, and other “first-line” employees to handle harassment in the workplace. The training should be live and interactive and should be conducted on a regular basis. Anti-harassment training should also be supplemented by “workplace civility training” that focuses on creating a positive workplace environment and “bystander intervention training” to empower and educate employees to reduce harassment in the workplace.
The EEOC’s focus on harassment in the workplace stems from not just a concern for its illegality, but also on its detrimental effect on business. The direct financial cost of workplace harassment is striking: since 2010, employers have paid out $698.7 million to employees through the EEOC’s administrative enforcement process alone. There are other direct costs to employers in terms of time, energy, and monetary resources, for legal representation, litigation, court awards, and damages. In addition, workplace harassment indirectly costs employers in terms of decreased productivity, increased employee turnover, and reputational damage.
Nicholas Fortuna, June 17, 2016
On May 11, 2016 President Obama signed into law the Defend Trade Secrets Act (DTSA), which is an expansion of the Economic Espionage Act. The law provides for the first time a federal cause of action for misappropriation of trade secrets. Previously, state law governed all claims regarding trade secrets.
Trade secrets typically include formulas, patterns, compilations, programs, devices, plans, methods, techniques or processes. To be protected, certain common elements must exist: the information is not publically known, reasonable measures have been taken to protect the information, and there is economic value in keeping such information secret. Examples of trade secrets include marketing and business plans, designs, proprietary computer programs, and manufacturing information.
DTSA provides robust trade secret protection, such as seizure of property “to prevent the propagation or dissemination of the trade secret. In addition to seizures, courts may grant an injunction, award monetary damages, punitive damages, and attorneys’ fees. It also gives immunity protection for whistle-blowers. The immunity provisions allow employees to avoid criminal and civil liability for the disclosure of a trade secret to a governmental official or to an attorney “solely for the purpose of reporting or investigating a suspected violation of law” or for use in an anti-retaliation suit.
There is a notice requirement in the DTSA. If an employer fails to give notice of the immunity provisions to an individual in the manner prescribed, the employer cannot recover punitive damages or attorneys’ fees in a DTSA action.
The notice applies to all “contracts and agreements that are entered into or updated after the date of enactment of this subsection.” An employer will not be penalized because existing agreements do not contain a notice of immunity provision. Only new and updated agreements that govern the use of trade secrets or confidential information must comply with DTSA’s notice requirements. To comply, an employer must either incorporate the immunity terms in the contract itself, or include in such contract a cross-reference to the employer’s whistle-blower policy containing the requisite provisions. The notice must be given to contractors, consultants, and employees, and pertains to any agreement governing the use of a trade secret or other confidential information. If an employer fails to give notice of the availability of immunity to an individual in the manner prescribed by the DTSA, the employer cannot recover punitive damages or attorneys’ fees in a DTSA action.
An example of immunity language that should be included in agreements governed by the DTSA would be the following:
An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made in confidence to a Federal, State, or local governmental official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law. An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in a court proceeding, if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order.
Employers should review and update their agreements and incorporate the provisions of the DTSA to ensure maximum protection against misappropriation of trade secrets and confidential information.
Paula Lopez, June 3, 2016.
On May 23, 2016, the Supreme Court decided Green v. Brennan, resolving a circuit court split on when the statute of limitations begins to run on an employee’s constructive discharge claim under Title VII of the 1964 Civil Rights Act. The Court, in a 7-1 vote, ruled that the statute of limitations begins to run on the date the employee gives the employer notice of his or her resignation, not on the date of the employer’s alleged last discriminatory act that drove the employee to resign.
The Court’s decision reversed the Tenth Circuit’s ruling which had upheld the trial court’s dismissal of Mr. Green’s constructive discharge claim on the basis that it was time-barred because he asserted his claim more than 45 days after he entered into a settlement agreement with his employer that gave him the option of either resigning or transferring to another position at a significantly lower salary and nearly 300 miles from where he lived. The trial court and Tenth Circuit held that the limitations period for a constructive discharge claim begins running on the date the employer takes the “last discriminatory act” that precipitates the employee’s resignation, which in this case was the date the settlement agreement (containing the perceived equally negative ultimatum) was entered into.
By way of background, Marvin Green had worked for the United States Postal Service (U.S.P.S.) for 35 years. The last position held by him prior to his resignation was of postmaster for Englewood, Colorado. In 2008, he applied for, but did not receive, a promotion to the vacant position of postmaster of Boulder, Colorado. Green complained to U.S.P.S. officials that he was denied the promotion because of his race. After filing his complaint, the relationship with his supervisors deteriorated and in 2009, his two supervisors accused him of intentionally delaying the mail, which is a criminal offense. Green’s supervisors told him that the Postal Service’s Office of Inspector General was investigating the charge. During the investigation, Green was reassigned to off-duty status. On December 16, 2009, Green and the U.S.P.S. entered into an agreement by which the U.S.P.S. agreed not to pursue criminal charges if Green agreed to leave his post in Englewood, Colorado and, effective March 31, 2010, either retire or accept a lower-paying job in another area. On February 9, 2010, Green elected to resign from the U.S.P.S. and submitted his retirement papers to his employer, effective March 31, 2010. On March 22, 2010, Green contacted the U.S.P.S. EEO counselor to report that he had been constructively discharged.
To bring a constructive discharge claim against the U.S.P.S. for discrimination under Title VII, Mr. Green was required to exhaust administrative remedies prior to filing a suit against his employer. The Equal Employment Opportunity Commission (EEOC) has promulgated regulations setting out the requirements that must be met by an employee in exhausting administrative remedies. For federal employees, as is the case with Mr. Green, he was required to “initiate contact with an [EEO] counselor within 45 days of the date of the matter alleged to be discriminatory.” In the private sector, an employee must file a charge of discrimination with the EEOC within 180 days (or 300 if a state or local agency enforces a law prohibiting employment discrimination under the same basis).
The issue being decided by the Supreme Court was when the 45 day period for Green to initiate contact with an EEO counselor began to run. The Tenth Circuit held that the limitations period began to run on December 16, 2009, the date the settlement agreement was entered into. Other circuits have held similarly. Mr. Green, on the other hand, argued that the limitations period began running at the time he submitted his retirement papers to his employer, which occurred on February 9, 2010. Other circuits, including the Second Circuit (presiding over appeals from the federal district courts in New York, Connecticut, and Vermont) agree with Green’s position as to when the limitations period begins. By the time the case reached the Supreme Court, both Green and U.S.P.S. agreed that the limitations period should begin when the employee gives notice of the intent to resign; however, they disagreed on the date this occurred. As a result, the Supreme Court appointed an attorney to act as amicus curiae and defend the Tenth Circuit’s position.
The Supreme Court, in an opinion written by Justice Sotomayor, held that the 45-day period for an employee to initiate contact with an EEO counselor begins to run on the date the employee resigns. In reaching this conclusion, the Court applied the “standard rule” for limitations period, which is that “a limitations period ordinarily begins to run ‘when the plaintiff has a complete and present cause of action.’” As noted by the Court, a constructive discharge claim is comprised of two elements: (i) discriminatory conduct at such a level that an employee feels compelled to resign AND (ii) the employee actually resigns. It is not until after an employee resigns that he or she can file suit against an employer.
The Court further supported its decision by noting that neither Title VII nor the regulations promulgated for its implementation require courts to deviate from the standard rule for limitations period when constructive discharge claims are involved. The Court also pointed to the practical benefits of having the limitations period begin to run at the time an employee resigns, recognizing that it would be illogical to have a limitations period for filing a claim begin to run before an actionable claim even exists, as this would require a plaintiff to undertake a two-step process to preserve a constructive discharge claim. First, filing a complaint after the employer’s alleged discriminatory conduct, only to then have to amend the complaint or file a second complaint after he or she resigns.
The Court’s decision makes it clear that an employee resigns—triggering the limitations period—at the time notice of the resignation is given to the employer even if the resignation is not effective until a later date. To illustrate its ruling, the Court used the example of a typical two weeks’ notice given by employees when the resign from a job. Applying the Court’s ruling, the limitations period begins to run the day the two weeks’ notice is given by the employee, not the last day worked by the employee. In addition, it is clear from the decision that even though Green v. Brennan involves a public sector regulation, the Court’s interpretation of the limitations period is applicable to a constructive discharge claim brought by a private sector employee.
While the Court’s decision does not make substantive changes to the law applicable to constructive discharge claims, it does provide clarification for both employers and employees on when the limitations period for an employee to exhaust administrative remedies begins to run. The Court’s ruling will likely have the unintended effect of leading to more constructive discharge claims because of the longer limitations period. While the Court’s decision does not require employers to make drastic changes to their existing policies, employers should update their recordkeeping policies to ensure that they keep an accurate record of when an employee gives notice of his or her resignation in order to determine whether it has a viable statute of limitations defense if it is ever the subject of a constructive discharge claim.
By: Megan J. Muoio, May 26, 2016
On May 18, 2016, President Barack Obama announced that the Department of Labor will be finalizing a new rule expanding the payment of overtime wages to a larger class of workers who are not currently eligible for overtime pay under federal law. The aim of the rule change, according to the Obama Administration, is the expansion of overtime protections and the boosting of wages for middle class workers. However, the rule change may have different results.
Currently, hourly workers are entitled to be paid the overtime rate of time and a half for each hour they work over 40 hours per week. Salaried workers who make more than $23,660 per year and who are managers, supervisors, or fall into certain classes of workers (as determined by the “duties test” under the Fair Labor Standards Act) are not entitled to time-and-a-half wages for any hours they work over 40 hours per week. The class of full-time salaried workers entitled to overtime pay has shrunk from 62% in 1975 to just 7% today.
The Obama Administration seeks to reverse this trend and raise the salary threshold equivalent to as if the $23,660 threshold set in 1975 were indexed to inflation. The Administration hopes to extend overtime protections to an additional 4.2 million workers (of whom approximately 1 million work overtime each week) and boost wages by $12 billion over the next 10 years. By increasing the salary threshold from $23,660 to $47,476 per year, white collar workers who had previously worked more than 40 hours per week with no increase in pay will now see a benefit. The salary threshold will be updated every three years. The Department of Labor tempered these changes by maintaining the current “duties test” applicable to determine whether employees are exempt or nonexempt under the Fair Labor Standards Act.
Employers are skeptical regarding the cost and actual effect of the new rule. The National Retail Federation has estimated that the rules will cost the restaurant and retail industries $745 million and create an overall negative effect on employment rates, especially for small businesses. The investment bank Goldman Sachs has predicted that employers will respond in four ways to the rule change. First, employers may simply make overtime payments for more workers. Second, employers may reduce employees’ base pay so that the total compensation after overtime payments is unchanged, although the effectiveness of this strategy will depend on the employer’s ability to predict how much overtime employees will work from week to week. Third, employers may increase employees’ base pay to bring employees above the new $47,476 threshold, which is likely for employees who already earn a salary close to that threshold. Finally, employers may hire more employees and limit all employees from working more than 40 hours per week. It is estimated that employers who choose this option could create 100,000 additional jobs.
The new overtime rule will take effect on December 1, 2016.