New Jersey Lawyer & Attorney : Stark & Stark Law Firm : New Jersey Law Blog

As the economy worsens, employers are facing an increasing number of lawsuits over employee references.  Whether the employer gives a good reference or a bad reference, there is an increase in lawsuits being filed against the employer.

In Georgia, a lawsuit is pending against a school district for giving a positive reference to a teacher who had been convicted of a sex crime and went on to teach in a district where he was later charged with raping a student.  In New Jersey a man is suing Best Buy Company, Inc. alleging that a human resources manager wrote a defamatory email about him to a prospective employer, thus costing him the job. 

Many employers believe that the potential liability in the employment arena ends when an employee terminates his or her employment with the company.  This clearly is not the case.  In fact, if an employee does not get a job, that employee will often times draw the conclusion that a negative reference was given by the former employer. 

As a result, many companies have adopted policies that specifically state to new hires that they will not give them any kind of reference when they leave.  Some employers will only give dates of employment, nothing else.  However, limiting reference information can also lead to trouble. Several lawsuits are currently pending against employers who said nothing when asked for an employee reference.  This creates a problem in that many employees do have issues that should be disclosed to the prospective employer.  For instance, does this employee have dangerous propensities?  Has this employee been charged with employment-related discrimination issues?  How this employee been dishonest?  If an employer hides behind a neutral-reference policy, that policy may reward the bad employee, and open the former employer up to liability.

Although many states have qualified immunity laws that allow employers to speak about employees’ job performance, the condition is that the statements must be made without malice.  Many plaintiffs will argue that there was malice, which will allow the employee to potentially move forward through the Court system.  Although there is no perfect answer for the employer, the typical rule of thumb is only to give “name, rank and serial number.”  By limiting the information given to dates of hire, salary and position, an objective reference is given, which should protect the employer as much as reasonably possible.  Although this may not completely protect the former employer from a potential lawsuit, it probably is the best and most protective policy to utilize.

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Thomas B. Lewis, Shareholder and Chair of Stark & Stark's Employment Litigation group, and Michael J. Brittan, member of Stark & Stark's Employment Litigation group, have authored the article, Court Limits Damages in Restrictive Covenant Cases, for the March 17, 2008 edition of the New Jersey Law Journal.

The article discusses a decision in the New Jersey Supreme Court Case of Totaro, Duffy, Cannova and Company, L.L.C. v. Lane, Middletown & Company, which established new factors in assessing breaches of nonsolitication agreements.

You can read the full article here.

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In a recent Appellate Division case, Michael vs. Robert Wood Johnson University Hospital, et al., the New Jersey Superior Court - Appellate Division was presented with a question of whether reasonable counsel fees could be awarded to a Defendant who prevails in an action under the New Jersey Law Against Discrimination.  Typically, counsel fees are only awarded to a prevailing Plaintiff under the Law Against Discrimination.  In the Michael case, Plaintiff was a part-time employee of Defendant Robert Wood Johnson University Hospital for more than twenty years and filed a lawsuit alleging age discrimination, a hostile work environment and other tort based claims.  Plaintiff’s claims centered on the hospital’s vacation policy, tuition reimbursement policy and Plaintiff’s performance evaluations.  The trial court granted summary judgment dismissing Plaintiff’s claims without a trial.

After the trial court entered summary judgment, the Defendant moved for counsel fees and costs, relying on the Frivolous Lawsuit Statute and on the Law Against Discrimination.  The Law Against Discrimination provides that reasonable attorney fees may be awarded to the prevailing party where there is a determination that the complainant brought the charge in “bad faith”.

The Appellate Division held in Michael that the determination of the term “bad faith” must be viewed within the context of the particular matter being considered.  The Appellate Division equated “bad faith” with a reckless disregard or purposeful obliviousness of the known facts.
   

The Michael Appellate Court remanded the matter back to the trial court to determine if the complaint was filed in “bad faith” and if it was, what constituted a reasonable award of counsel fees taking into account the Plaintiff’s ability to pay and the extent to which the Plaintiff relied on the advice of counsel.
   

Conclusion
 

This case is instructive as reasonable counsel fees and costs may be awarded  to a successful Defendant who prevails in an action under the New Jersey Law Against Discrimination if it is found that Plaintiff’s complaint was brought in “bad faith” and that Plaintiff had the economic circumstances to pay an attorney fee award.  This decision permits a trial judge to consider the award of counsel fees to a prevailing Defendant if it is determined that the discrimination lawsuit was brought in “bad faith”.  Although the “bad faith” standard will be difficult for a Defendant to prove, it will give pause to the Plaintiff who files a frivolous lawsuit.

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Kevin M. Hart, Shareholder and member of Stark & Stark's Litigation group, recently authored the article Halting Employee Theft for Biz 4 NJ. The article discusses various options an employer can take to prevent employee theft within an organization, during a time when more than $600 million annually is being stolen from companies.

You can read the full article here.

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The New Jersey Supreme Court in the case of Totaro, Duffy, Cannova & Company, LLC vs. Lane, Middleton & Company, LLC gave some insight for a Court to award damages for violations of a non-solicit agreement.

The facts of the case are as follows:  In 1997, Merritt Lane and David Middleton formed an accounting firm known as Lane, Middleton & Company, LLC.  In connection with his employment, Lane signed a restrictive covenant barring him from soliciting clients of the Company for a period of four years should he depart from the Company.  In 2001, Lane started his own accounting practice.  Lane sent solicitation packages to clients for whom he had previously performed services, including clients of Lane, Middleton & Company.  Numerous clients left to join Lane in his new accounting practice. 

During trial, several clients testified that they had a relationship with Lane and they were dissatisfied with the Company, and they would not have remained clients of the Company following Mr. Lane’s departure regardless of any solicitation.

The Trial Court found that Lane breached the non-solicitation agreement and calculated losses to the Plaintiff for loss of business following the first year after the departure of Lane.  The Trial Court then multiplied the first year’s losses by three to account for the remaining three years on the four-year restrictive covenant.  The majority of the Appellate Division affirmed the Trial Court’s Decision.

The New Jersey Supreme Court considered the appeal and reversed the judgment on the amount awarded.  The Supreme Court agreed that the Plaintiff’s loss of compliance work for the first year following Lane’s breach was a reasonable consequence of his action.  According to the Court, his breach of the agreement precipitated the clients’ departure. 

However, the Supreme Court disagreed with the Trial Court’s quantification attributable to the breach and reasoned that the damages must also reflect that Lane’s clients would have eventually left the Plaintiff.  The New Jersey Supreme Court found that the evidence did not support the Trial Court’s Decision to triple the damages to account for the three remaining years left on the restrictive covenant.

Conclusion.

If there is a breach of a non-solicitation covenant for a term in excess of one year, the Court will scrutinize the potential damages and may limit damages to a reasonable time period immediately following the employee’s departure. 

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A Bill has now passed in the Senate, 38 – 0 (S-2488/A-3451) on December 19, 2007 that will make it unlawful for an employer to discriminate against employees because of “religious practices.” 

The importance of this bill is that it goes beyond protecting an employee from being discriminated against because of their religion, and specifically protects them from discrimination based on “religious practice.”  Given the lack of opposition to this Bill, it is likely that the Governor will sign it into law shortly. 

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In somewhat of a surprise move, on December 14, 2007, Congress amended the Family Medical Leave Act (FMLA) to add two additional reasons for applying for FMLA leave.  One provision adds that FMLA can be taken for a “qualifying exigency” arising from active duty in the armed services. 

Additionally, time off can be taken under the FMLA to care for a wounded service member for up to 26 weeks paid leave (which must be taken within a single 12-month period).  It is anticipated that President Bush will sign the Bill into law within the next few weeks.  Once the Bill is signed, employers will need to notify their employees of this change in their FMLA rights.

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On appeal, the Third Circuit reversed this holding with the Court stating that the Plaintiff’s “verbal” notice was sufficient to entitle him to a claim under benefits through the Family Medical Leave Act (FMLA), even if he had not followed the Company’s policies.  This is a somewhat disturbing development for employers, because it raises many issues about the type of “verbal” notice an employee can give, and “muddies the waters” as to a company’s ability to require its employees to follow its written policies regarding disability benefits. 

For example, if an employee leaves a voice mail message on the Human Resource's voice mail requesting FMLA leave, is that sufficient to put the company on notice?  This question will need to be answered in subsequent cases.

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In a recent unpublished decision by the New Jersey Appellate Division, known as Ashwall and Winograd v. Prestige Management Services, Inc., et als. (Decided October 16, 2007), the Court dealt with a claim by employees of a New Jersey automobile dealership franchise who claimed religious discrimination and “promissory estoppel” against their former employer.  The Plaintiffs, a manager and top-salesman, claimed discrimination based on their religious faith (Judaism) under the New Jersey Law Against Discrimination.  One of them had also claimed that, since he had been given the task of turning a non-profitable dealership “around,” that he was entitled to employment for at least a reasonable period of time. 

His argument was that he had been a very successful manager of another dealership, and by asking him to take on the management of a non-profitable dealership, the franchisee in effect “owed” him employment for a certain period of time.  This claim had been dismissed by the trial judge prior to the trial of the case, and was never heard by a jury.  While there appears to have been some factual merit to the Plaintiffs’ argument, the Appellate Division relied on traditional notions of “at-will” employment and determined that the Court had been correct in dismissing the claim for Promissory Estoppel as they did not find that there was enough evidence that the parties had intended to enter a long-term commitment.  Specifically, the Court was looking for “assurances of employment” that were “clear, specific and definite.”  The franchisee in this case avoided any liability on the “promissory estoppel” claim (though there was a jury verdict against it for discrimination). 

This case highlights the potential for confusion between the franchisee who owns several locations and employees who are “specially assigned” to trouble-shoot certain kinds of jobs.  To avoid this confusion, a franchisee should notify an employee clearly and in writing that their “at-will” employment relationship continues despite the new assignment and that there is no guarantee of continued employment.  Such a written assurance would have most likely avoided litigation in this case and would have saved the franchisee from having to defend such a claim.

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Thomas B. Lewis, Chair and Shareholder of Stark & Stark's Employment Litigation Group, and Michael J. Brittan, member of Stark & Stark's Employment Litigation Group authored the chapter At-Will Employment: New Changes and Challengers for Employers for the Winter Edition of Human Resources 2008.

The chapter discusses issues and challenges employers will face when initiating changes in the relationship to protect the company, even though legal protections may be in place.

You can read the full chapter here.

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