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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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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BE AWARE OF ILLEGAL DISCRIMINATION UNDER THE UNIFIED SERVICES EMPLOYMENT AND RE-EMPLOYMENT RIGHTS ACT (USERRA)

An employer who has discriminated against an employee because of his or her miliary service may be in violation of the Uniform Services Employment and Re-employment Rights Act of 1994 (USERRA).  Under the USERRA, an employee who is absent from work because of his or her activation for military service is entitled to reinstatement to his or her position upon return from military service if the employee is qualified.  

A qualified employee has:

1.    Provided oral or written notice of military activation to his or her employer;
2.    Has five years or less of cumulative military service with that particular employer;
3.    Has returned to work or applied for re-employment in a timely manner after conclusion of service;
4.    Has not left the military service with a disqualifying discharge.  

In a recent case decided in 2007 from the United States First Circuit Court of Appeals, entitled Velazques-Garcia v. Horizon Lines, the First Circuit held that an employee only needs to show that his or her military service was a substantial or motivating factor in an employer’s decision to impose an adverse employment action.  The burden will then shift to the employer to prove that it would have taken the adverse employment action regardless of the employee’s military service.

Employers need to ensure that employees who perform military service are treated in the same manner as other employees.  If a termination of employment does occur with an employee who served in the military, the employer must be certain that it can demonstrate a non-discriminatory reason for any adverse employment action taken against that employee.

Further, employers should make efforts to avoid subjecting returning military employees to criticism or harassment that has the potential to create a hostile workplace environment even if the criticism or harassment comes from non-supervisory personnel.

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Burlington Northern Santa Fe Railway v. White

In a recent case argued before the United States Supreme Court, Burlington Northern Santa Fe Railway v. White, the issue of what constitutes a material adverse employment change was debated.

Justice Antonin Scalia was concerned that a jury may be able to award an employee damages for "every little thing" instead of the requirement of a material adverse change. Justice Scalia continued that an angry supervisor who stops saying "good morning" or taking to lunch an employee who alleged discrimination may give rise to an adverse employment change, thus subjecting the employer to liability.

In the Burlington Northern case, the railroad is seeking the United States Supreme Court to overturn a decision by the 6th Circuit Court of Appeals which found that suspending an employee for 37 days without pay and transferring her to a more physically demanding job was a material adverse change in her employment.

Businesses warn that the Court should not create a super protected class of employees who cannot be disciplined or transferred once they file a discrimination complaint. The employee alleges that any change in her employment duties, compensation, title or tasks would give rise to a material adverse employment change, thus holding the Company liable under retaliation-based claims.

The Burlington Northern decision is expected to be published in late 2006. With the recent conservatism of the Court, it is likely that the decision will permit an employer to escape liability and discipline an employee as long as the employer is exercising good faith and has a legitimate business purpose in the discipline.

Technorati Tags: New Jersey : Employment : Retaliation

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Julius Beasley v. Passiac County

On May 26, 2005 the Superior Court of New Jersey, Appellate Division in Julius Beasley v. Passiac County reviewed New Jersey's Conscientious Employee Protection Act (CEPA) and in particular what types of employee grievances fall under the protections of CEPA. The Court's decision illustrates that although CEPA protects employees who object to illegal behavior, it is not an absolute bar to termination or other negative employment actions against the employee.

The Court noted that there are no "magic words" which must be communicated by an employee for him or her to fall under the protections of CEPA. Rather, the employee's objection must only demonstrate the employee had a reasonable belief of illegal activity and that he or she was objecting to such activity. This "reasonable" standard is consistent with the remedial nature of the Act; the object of which is "not to make lawyers out of conscientious employees but rather to prevent retaliation against those who object to employer conduct that they reasonably believe to be unlawful." As such, an employee need not point to a specific law, rule, regulation or other mandate of public policy when voicing his complaint.

Although the Court's opinion focused on protections afforded to objecting employees by CEPA, the decision also emphasized that a CEPA complaint does not grant an employee a shield from all termination or other negative employment action. CEPA's protections are designed to protect an objecting employee from "discrimination" or "retaliation" for voicing his or her objection, but does not protect against employer actions that merely "result in a bruised ego or injured pride on the part of the employee."

In light of Beasley, employers should be mindful that employees making CEPA complaints are afforded a degree of protection from discharge, suspension, demotion or other "adverse employment action" effecting the terms and conditions of their employment. However, the Act does not insulate the employee from all such employment actions - only those which are the result of the employee's complaint. Employers who wish to learn more about CEPA, and its impact on their employees and their workplace are invited to contact Thomas B. Lewis.

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Harkness v. Unemployment Compensation Board of Review

Pennsylvania employers must be represented by an attorney at Unemployment Compensation hearings. On February 3, 2005, the Pennsylvania Commonwealth Court in Harkness v. Unemployment Compensation Board of Review, held that employers cannot have non-lawyers representing them at Unemployment Compensation proceedings. See 2005Pa. Commw. LEXIS 48 (Feb. 3, 2005). At the hearing, the employer was represented by a third-party company that provides "representation" to employers at Unemployment Compensation hearings.

This representative was a tax consultant rather than an attorney. At the hearing, the representative cross-examined the former employee, offered exhibits into evidence and gave a closing statement. The Commonwealth Court, however, found that this tax consultant improperly engaged in the practice of law. The Court rejected the argument that since an individual claimant may be represented by a non-attorney pursuant to the Pennsylvania Code, the employer should be afforded those same privileges.

The Pennsylvania Department of Labor and Industry announced that it was appealing the Harkness decision to the Pennsylvania Supreme Court.

In the meantime, employers cannot use non-lawyers to represent them in unemployment compensation hearings. As a result, employers must change its practices relating to such hearings and determine whether it makes financial sense to dispute unemployment claims.

Stark & Stark attorneys can advise and represent your Company regarding Pennsylvania unemployment issues. If you would like to obtain more information on this recent ruling, please contact Thomas Lewis, Chair of the Firm's Employment Group.

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