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

“GINA” (the “Genetic Information Non-Discrimination Act”) was signed into law on May 21, 2008 by President George Bush.  It became effective a few days ago on November 21, 2009, at least with regard to its employment provisions (its health insurance provisions have been in place since May 21, 2009). 

Employers need to know that GINA prohibits them from requiring genetic test information from job applicants.  More importantly, and less obviously, the Act prohibits potential employers from seeking out and gathering information – even information in the public domain such as on the Internet - regarding job applicants.  While inadvertent acquisition of genetic information regarding a job applicant is not a violation of the Act, employers do not want to get into a situation where they need to explain why they have gathered genetic/medical information about their employees. 

The information about the employee’s close relatives can also be violative of GINA if that information is acquired for the purpose of learning about genetic health-related problems or conditions.  A quick Google search of a potential employee’s name can sometimes produce such information, whether be in the form of a Facebook entry, an obituary, or other seemingly benign sources.  The EEOC, the Department of Health and Human Services, the Department of Labor, the Department of Treasury, and similar state agencies will all have a hand in enforcing GINA.  Like HIPPA, GINA is easy to violate if an employer is unaware of its requirements.  Employers should seek guidance in updating their internal employment procedures and policies to avoid an expensive GINA violation.

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In a recent Appellate Court Decision, the New Jersey Court of Appeals has determined that a “constructive termination” of a franchise constitutes a violation of New Jersey’s Franchise Practices Act.  In Maintainco Inc. v. Mitsubishi Caterpillar Forklift American, Inc., A-1485-07T2, the Appellate Division considered a situation where a franchisee learned from a customer that the franchisor had placed another franchisee (using a different platform concept) in the Plaintiff’s “area of proper responsibility.”  After learning of this development, the Plaintiff concluded that its franchise had been “constructively terminated” and sued for damages.  The Appellate Division agreed that constructive termination may constitute a violation of the New Jersey Franchise Practices Act.  Also in the decision, was a holding that expert fees in this context are not allowable as damages under the Act.

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During recessionary times, most people are acutely aware of the general business relationship they have with their employer.  Few, however, fully appreciate the legal duties they may owe their employer as a result of documents they signed when they joined the company.  This lack of understanding can lead to problems when employees, frustrated by cut-backs in compensation, decreased wages and general job instability take actions that run “afoul” of the contractual and common law agreements they have with their employers.  Three (3) major pitfalls are outlined below:


Example One:  Confidentiality Agreements
All but a few employers require that new employees sign some form of confidentiality agreement.  This agreement usually comes in the stack of medical forms and other documents that are presented to the employee at or around their first day of work.  Most of these confidentiality agreements require that the employee maintain the confidentiality of information they learn while employed at the company.  This would include company policy information, customer information, financial information, sales information, technological information, etc. which it does not want shared with its competitors.  Employees should use caution against downloading confidential information and removing it from the company’s premises.


Example Two:  Non-Solicitation Agreements
Many companies that hire sales staff require that their sales employees sign a non-solicitation agreement.  The purpose of this agreement is to stop employees from soliciting from customers (whose identities they learned of while employed by the company).  Employers consider sales information to be owned by the company.  Most non-solicitation agreements contain a provision called an “injunctive relief provision” which allows the company to go to Court for an Order that will stop an employee from soliciting any customers whose identities the employee learned of while employed at the company.  These agreements usually contain an attorneys’ fees provision that allows the company to seek an order giving it all the attorneys’ fees the employer accrued to enforce the non-solicitation agreement.  As a result, an employee who violates a non-solicitation agreement can find him or herself unable to contact customers and also responsible for expensive attorneys’ fees.  There is a popular misconception that such agreements are not enforceable.  This is a myth.  Such agreements are generally enforceable in New Jersey to the extent that they are reasonable in scope and are designed to protect a company’s legitimate business interest.


Example Three:  Non-Competition Agreements
This type of agreement is not as ubiquitous as non-solicitation agreements, but it is often used with employees such as scientist and other researchers who have access to sophisticated scientific or technological information.  The affect of such an agreement is to stop an employee from working for a competitor of the former employer for a specific period of time.  While these types of agreements are not generally as easily enforceable as non-solicitation agreements, many courts will enforce these types of agreements if it is shown that as a result of working for the competitor, the employee will “inevitably disclose” sensitive information.  Obviously, this kind of agreement, if enforced, can have a significant impact on the employee.  The employee may be barred from working in the industry that he or she is trained for some period of time.  This can have a devastating economic effect on the employee.

While many of the employees may have forgotten that they signed a confidentiality agreement, most will remember signing a non-solicitation or non-competition agreement.  If the employee is not certain about this, they should take reasonable steps to determine whether or not they signed such agreements.  Many prospective employers will require that employee candidates sign a document stating whether or not they have entered into a non-solicitation or non-confidentiality agreement.  If an employee has concerns about an agreement they signed, or about confidential information that they may have learned, and are unsure how these things effect a potential employment with a new employer or a new business, the time to ask questions is before the employee resigns, not after.  Their best bet is to consult with an employment attorney prior to making mistakes that could prove to be very costly.
 

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To add to their other current woes, it is anticipated that New Jersey employers will soon be faced with higher employee costs due to proposed federal legislation known as “Card Check.” This legislation will make union organization far simpler in the Garden State (and everywhere else).  In general, “card check” removes the “secret ballot” from the union organization process.  Union organization will be largely accomplished by getting potential union members to simply sign a card indicating their desire to unionize. 

Opponents of the bill think this will lead to intimidation and threats to employees who do not wish to unionize – and will inevitably increase labor costs.  Backers of the legislation state that this step is necessary to revitalize union organization in the United States and will lead to higher wages for employees.  Most federal Democratic Party legislators favor the legislation, while most Republican Party members of Congress oppose it.  Given the new balance of power in Washington, passage of “card check” legislation is almost a certainty.  Look for passage of this legislation within the first 100 days of the new administration.     
 

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Many of you may remember the Federal Warn Act - an Act which requires 60 days notice of a company’s intent to shut down a location with 100 or more employees (with various exceptions, of course). What is not largely known is that New Jersey passed a “baby” Warn Act earlier this year. 

 

This Act reduces the number of required full time employees from 100 to 50.  The New Jersey WARN Act also eliminates the useful exception in the federal Act, which allows for termination of employees within a certain time period and other exceptions, which weakened the original federal Act. 

 

In short, the New Jersey Warn Act is a force to be reckoned with as we head deeper into the current recession.  Employers shutting down any office location should seek legal counsel prior to taking action.

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Bill A2491, which was originally filed in March 2008, was “introduced” on Thursday October 23, 2008 and then referred to the Assembly Commerce and Economic Development Committee on Friday October 24, 2008.  It will likely have a “second reading” before proceeding in the substantive legislative process. 

 

Members of the International Franchise Association gave a thorough argument against the bill, despite some tough questioning by the Committee members. I also gave some brief testimony on the technical aspects of the proposed bill. The fight against this bill is just beginning – and since passage of this bill could have a chilling effect on all types of franchising in New Jersey – this is a fight the franchising community needs to win.

 

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The “Mobile Franchise” Act has been scheduled for a legislative session on October 23, 2008 at 2:00 p.m. The session will take place in front of the Commerce and Economic Development Committee, Room 9 on the Third Floor of the State House Annex located in Trenton, New Jersey.

 

As I mentioned in a previous blog post:

House Bill 2491 and Senate Bill 1539 of the New Jersey Legislature seek to expand the type of franchises, which are subject to the New Jersey Franchise Practices Act. In general, the New Jersey Franchise Practices Act currently applies to franchises where: 1) the franchisor has granted the franchisee a license, mark, trade name, etc.; 2) there is a “community of interest” in the marketing of goods and services; 3) where the franchisee has established or maintains a “place of business” in New Jersey; 4) where the gross sales between franchisor and franchisee are more than $35,000 in the prior year; and 5) more than 20% of the franchisee’s sales are derived from the franchise. The proposed change in the statute would apply the provisions of the Franchise Practices Act to “mobile” franchises, in other words, franchises that do not have a brick and mortar location. Under the proposed Bill, a “place of business” would include a location where the franchisee “displays for sale or at which or from which the franchisee sells the franchisor goods.” This would include an office or warehouse from which franchisee personnel visit or call upon customers or, perhaps more importantly from which the franchisor’s goods are delivered to customers.

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In an interesting new development, the Appellate Division of New Jersey, in the matter of Cerdeira v. Martindale Hubbell, Appellate Division A-5855-06T1 (September 18, 2008) has expanded liability for discrimination in situations where: (a) an employee is subjected to discrimination/harassment by a co-worker (as opposed to a supervisor); and (b) the employer does not have an effective policy for employees to use in reporting harassment. Relying on a form of negligent liability which has previously only been recognized in federal court, the Appellate Division has now established that in New Jersey state courts, under the circumstances set forth above, there can be liability for a company. This new form of liability only underscores the need for employers in New Jersey to have a clear written policy on how employees are to report incidents of discrimination and harassment to their company.

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Last Summer, the New Jersey Legislature added  “affectional orientation” to the list of protected classes of people under the New Jersey Law Against Discrimination (NJLAD). Now New Jersey employers are faced with another tricky issue on a very practical level which may have not been considered by the Legislature.  How does an employer respond to a trans gender employee who wishes to use the bathroom of the opposite “biological” sex? For example, a biologically male employee who dresses as a woman wants to use the “ladies room.”  Should the employer allow this?  What about the other employees?  The courts in New Jersey have done almost nothing to answer these questions to date.  In a recent unpublished decision Opilla v. Parker, the Appellate Division sidestepped these issues in a case which would have otherwise provided employers with real guidance on this issue.  In Opilla, a trans gendered biologically male employee entered the women’s locker room of the corporate gym and allegedly stared at a semi-dressed female co-worker. The coworker was uncomfortable enough to complain about the incident to her employer and eventually filed a lawsuit. 


The court determined that one single incident of alleged discrimination would not rise to the severe and pervasive level required under NJLAD, thereby neatly avoiding the rather obvious issues presented in the case.  Other jurisdictions have taken on this issue and provide some guidance. For example, a Federal Court in Minnesota dealt with the trans gender bathroom question and made the following, seemingly reasonable determination:  If an employee presents “as a male,” the employee should use the mens bathroom – likewise if the employee presents “as a female,” the employee should use the womens bathroom.  While this is obviously not a perfect solution, and does not really address the issues other employees may have with sharing lavatories or locker room with transgendered coworkers, it is probable that this “middle of the road” solution will eventually become the law in New Jersey.  Only time will tell if New Jersey employers will take on the additional economic impact of creating a third “gender neutral” bathroom in their place of business.  

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In a previous blog post I discussed House Bill 790 in Vermont which would have had a substantial negative impact upon franchising in Vermont.  It would essentially void non-compete provisions in franchise agreements. 

The Bill apparently languished in committee through the end of the May session, which effectively kills it for the time being.  The danger of such bills is that they tend to leach into “sister” states.  The demise of the Vermont Bill is a positive development for franchisors and helps strengthen the franchise community in general because it protects the general integrity of franchise systems.

 

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