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

New Jersey has finally enacted a law allowing civil actions for the misappropriation of trade secrets.  The Trade Secrets Act (“The Act”) signed by Governor Christie on January 9, 2012 provides remedies available to the holder of a trade secret that has been acquired by improper means or improperly disclosed. 

 

The Act provides an arsenal of remedies, including compensatory and punitive damages, injunctive relief and attorneys’ fees. The legislation defines a trade secret as information such as a formula, pattern, business data compilation, technique, invention and/or process. New Jersey now joins 46 other states who have enacted a trade secrets statute.

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When discrimination occurs in the workplace, the aggrieved employee should bring the inappropriate behavior to the attention of the employer, who, ideally, would then investigate the allegation and take prompt, appropriate remedial action.  What happens, though, when, after an employer conducts an investigation and then reprimands or terminates the offending employee, the aggrieved employee continues to pursue legal action against his or her employer?  Can the employer still be held liable even though the employer took prompt, remedial action?

 

Most courts – at both the state and federal level in New York, New Jersey, and Pennsylvania – hold that employers may often times avert legal exposure, thus creating a safe harbor, if an objective investigation was conducted and prompt, remedial action occurred.  For example, the Appellate Division of the New Jersey Superior Court, in Barnes v. the State of New Jersey reaffirmed the general rule that when employers have in place policies aimed to address workplace discrimination and take remedial action in response to a complaint of discrimination, the employer may have protections from vicarious liability for the discriminatory actions of its employees. 

 

The Appellate Division in Barnes stressed that the State promptly engaged in an investigation of the charges and ultimately disciplined the offending employee.  Then, citing the New Jersey Supreme Court’s decision in Cavuoti v. New Jersey Transit Corp., the Appellate Division stated that:
 

A company that develops policies reflecting a lack of tolerance for harassment will have less concern about hostile work environment or punitive damages claims if its good-faith attempts include periodic publication to workers of the employer’s anti-harassment policy; an effective and practical grievance process; and training sessions for workers, supervisors, and managers about how to recognize and eradicate unlawful harassment.

 

Again citing the Cavuoti decision, the Appellate Division held that “a form of safe haven [exists] for employers who promulgate and support an active[] anti-harassment policy.”  These conclusions are not at all unique – both the United States Court of Appeals for the Second Circuit and the United States Court of Appeals for the Third Circuit follow this line of reasoning, as exhibited in cases such as Curtis v. Citibank, N.A and Andreoli v. Gates. 

 

From the standpoint of employers who work to implement aggressive anti-harassment policies, and who take prompt objective action in response to complaints of workplace discrimination, the safe harbor protections make sense.  Employers who make a concerted effort to eliminate discrimination and harassment in the workplace should not be punished for their efforts, particularly when prompt, remedial action is taken by the employer and the inappropriate behavior ceases. 

 

In conclusion, should an employer wish to ensure minimal liability from discrimination claims, the employer should follow the procedure described by the New Jersey Supreme Court in Cavuoti, as reinforced by the Appellate Division in Barnes, and in line with case law from most other jurisdictions, including New York and Pennsylvania:

1. an employer should have in place well-publicized anti-discrimination and anti-harassment policies;
2. an employer should implement grievance procedures in order to address claims of discrimination made against its employees;
3. when an employee utilizes the grievance procedures, the employer should conduct a full and thorough investigation; and
4. if an employer determines that an employee has violated the law or the company’s anti-discrimination or anti-harassment policies, the employer should take prompt, appropriate remedial action.  Following the above guidelines, a safe harbor may exist for the employer.

 

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A recent New Jersey Supreme Court decision limits the circumstances where an employer may read an employee’s personal e-mails stored on a company’s computer system.  The Court recently held that a company policy is not enough to allow an employer unfettered access to electronic communications by an employee. 

In Stengart v. Loving Care Agency, the plaintiff, a former employee of Loving Care, was provided a company-owned laptop computer for business use, which she returned to her employer when she resigned from her employment.  Stengart subsequently filed suit against the employer alleging violations of the New Jersey Law Against Discrimination (NJLAD).  In connection with the lawsuit, the employer hired an expert to create forensic images of the contents of the laptop’s hard-drive and discovered a number of e-mail communications between Stengart and her attorneys, exchanged via the plaintiff’s personal Web-based password protected e-mail account.
The Court held that not only were the plaintiff’s e-mails with her attorney protected by the attorney-client privilege, but the employer’s e-mail and Internet policy was ambiguous. 

While the e-mails at issue in Stengart involved attorney-client communications, this Court decision is important for all employers.  To overcome an employee’s expectation of privacy in e-mails, the employer must develop and implement a detailed and specific Internet and e-mail use policy to ensure that it retains the right to monitor and read e-mails sent on its computers.  Employers must also provide employees with express notice that messages sent or received on a personal, Web-based e-mail account will be subject to monitoring if company equipment is used to access the account.

An e-mail and Internet use policy should clearly:  (1) notify employees of what information is stored in the employer’s computer systems and will be subject to retrieval and review; and (2) identify personal e-mail messages saved in such systems as company property.

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In a recent New Jersey Appellate Division Decision, Stengart vs. Loving Care Agency, Inc., the New Jersey Superior Court, Appellate Division, clarified when a company/employer can review and access an employee’s emails when the employee uses company technology to receive emails.  Many employees mistakenly believe that personal emails received on a company computer are private.  The Stengart case provides guidance on how email and internet policies should be drafted in the company/employee handbook.  The law holds that electronic communication policies must be drafted with unambiguous language alerting employees that the employer retains the right to monitor and review emails of the employee for any legitimate business purpose.  Although the Stengart Court did find that the company’s electronic communication policy was subject to claims of ambiguity, it is clear that a well-drafted electronic communication policy will properly advise the employee that there will be no expectation of privacy for that employee’s personal emails received on a company computer and that the company may review employee’s emails for any legitimate business purpose.  The policy should also advise the employee that use or misuse of company technology for non-business purposes violates company policy and may subject the employee to disciplinary action.

The Stengart Court clarified that a carefully crafted electronic communications policy will allow employees to understand that the employer retains the right to access electronic communications when the employee uses company technology.  This well-drafted policy will alert the employee that there is no expectation of email privacy, and will shield the employer from liability for reasonably reviewing an employee’s email on the company technology.

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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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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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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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In a recent decision by the United States Court of Appeals for the 3rd Circuit, the  Court upheld a trial decision finding that an employer did not violate the Americans With Disabilities Act (ADA) by terminating an employee who insisted on an unreasonable accommodation. 

The case involved Edward Whelan, an employee of Teledyne Metalworking Products, who informed his employer that he had a degenerative eye disease.  As an accommodation for the eye disease, Mr. Whelan requested and received a transfer to an outside sales job.  Later, his vision worsened and he was no longer able to work in outside sales.  Therefore, Mr. Whelan notified the company that he was only able to work as a marketing coordinator out of his home.

Several years later, Teledyne consolidated its operations in Alabama.  Teledyne advised Mr. Whelan that he was required to transfer to Alabama and requested information about the accommodation Mr. Whelan would need to perform his essential job functions.  Mr. Whelan proposed only one accommodation–that Teledyne permit him to work out of his house in Pittsburgh.  Teledyne could not agree to have Mr. Whelan work out of his house in Pittsburgh and fired Mr. Whelan for not transferring to Alabama.

Mr. Whelan filed a lawsuit against Teledyne claiming it had violated the ADA by failing to provide him with a reasonable accommodation.  The 3rd Circuit supported and affirmed the jury’s finding that Teledyne had accommodated Mr. Whelan and would continue to accommodate him if he transferred to Alabama.  However, Mr. Whelan’s singular accommodation request to continue working from his home in Pittsburgh was unreasonable.  The 3rd Circuit further admonished Mr. Whelan as he requested a single, unreasonable accommodation and failed to provide appropriate information needed to devise an appropriate accommodation.

When an employee requests an accommodation, the employer must engage in the interactive process to determine what type of reasonable accommodation can be made for that employee.  However, an employer may not be required to provide the employee’s first choice of accommodation if that request is deemed to be unreasonable.  The employer must engage in good faith discussions and attempt to understand and work out whatever type of limitation or accommodation could be made for the employee.  However, the employee cannot hold the employer hostage with unreasonable requests.

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In a 2006 case entitled Burlington Northern & Santa Fe Railway Co. v. White, the United States Supreme Court opened the door to employee lawsuits based on alleged retaliatory actions taken by an employer.  In the past, the courts were reluctant to allow a case to go forward unless the employee was able to show that the alleged retaliatory conduct impacted his or her compensation, terms, conditions or privileges of employment.   Now, however, in Burlington Northern, an employee must only show that a reasonable person would have been dissuaded from exercising his or her rights as a result of the employer’s retaliatory actions.

The Burlington Northern Court is disconcerting to employers as it appears to further expand the law of retaliation available to an employee.  Exactly what kind of employer actions would be unrelated to an employee’s employment, but are nevertheless actionable under discrimination laws, is unclear.  However, it appears that the Court intended to broaden the scope of a potential retaliation case thereby giving the employee additional ammunition in an action against the employer.

Employers need to understand that the new scope of retaliation available to an employee has been broadened.  Managers and human resource professionals must be aware that the expanded Court view of retaliation may hold an employer liable for actions that in the past would not have been actionable.

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The EEO-1 Report, formerly known as the Employer Information Report, is a government form requiring qualifying employers to provide a count of their employees by job category and then by ethnicity, race and gender. The EEO-1 Report is submitted by employers to both the EEOC and the Department of Labor, Office of Federal Contract Compliance Programs.

The EEO-1 Report must be filed by employers with:
    1. federal government contracts in excess of $50,000 and 50 or more employees, and,
    2. by employers who do not have a federal government contract but have 100 or more employees.

The EEO-1 Report is filed annually. The EEOC uses the data contained on the EEo-1 to support civil rights enforcement as a tool to collect from private employer's annual workforce data. The EEOC also uses the data to analyze employment patterns, such as the representation of female and minority workers within companies and industries, and to review the sex, ethnicity and race of the employees.

Recently, the EEOC filed a federal lawsuit against 84 Lumber. The EEOC is attempting to compel 84 Lumber to complete EEO-1 Reports. Apparently, since 2005, 84 Lumber has not turned in its annual EEO-1 Report. Qualifying companies should beware of the EEOC monitoring of the EEO-1 for enforcement purposes and the ramifications if the EEOC believes that the company is hiring or firing employees in a discriminatory manner.

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