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.

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.

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.

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

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.

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.

On February 1, 2005, the Appellate Division in Weisfeld v. Medical Society of New Jersey, et al. upheld the dismissal of an employee's Conscientious Employee Protection Act (CEPA) claims against his employer, the Medical Society of New Jersey (MSNJ). After eleven years of employment, Plaintiff alleged that his firing was retaliatory for his disclosure of an alleged conflict of interest of individual members who sat on the board of two organizations, including his employer.

In the 1970's, MSNJ formed MIIX Group, Inc. (MIIX), a private insurance exchange owned by its member physicians for the purpose of providing affordable medical malpractice insurance to qualified physicians. When MIIX elected to go public in 1999, MSNJ received a substantial stock interest in the company in exchange for the sale of its underwriting entity.

Plaintiff complained to his supervisor about the "pervasive" MIIX influence at MSNJ and his "reasonable belief" that actions taken by those with dual service on the boards conflicted with the interest of MSNJ and its "fiduciary obligation" to its physician members.

On April 1, 2002, Plaintiff drafted a memo seeking to prohibit dual board members to participate in any discussions or recommendations regarding the sale of MIIX stock. On April 10, 2002, the MSNJ Board of Trustees terminated his employment.

The Appellate Division upheld the trial court's dismissal of his CEPA claim since Plaintiff presented no law, rule or code of conduct that precludes dual membership of the boards. Furthermore, the Appellate Division noted that New Jersey statutes especially endorse dual board memberships. The Appellate Division concluded that the alleged violation "must pose a threat of public harm, not merely private harm or harm only to the aggrieved employee."

New Jersey's Office of Administrative Courts has indicated that "whistle blower" suits have more than doubled since 2001. Despite the fact that the employer was successful in dismissing these claims, it still had to litigate this suit through appeal. New Jersey's employers must be vigilant in developing policies that satisfy CEPA statutory requirements.

These protected categories are: race, creed, color, national origin, nationality, ancestry, age, sex (including pregnancy and sexual harassment), marital status, domestic partnership status, affectional or sexual orientation, atypical hereditary cellular or blood trait, genetic information liability for military service, or mental or physical disability, including AIDS and HIV related illnesses. The LAD prohibits intentional discrimination based on any of these characteristics.

The LAD also prohibits harassment based on protected characteristics such as race, sex or nationality. Under the LAD, sexual harassment includes unwelcome sexual advances, requests for sexual relations or other verbal or physical conduct of a sexual nature. There are generally two types of sexual harassment. Quid pro quo harassment occurs when an employer attempts to make submission to sexual demands a condition of employment.

Hostile work environment sexual harassment occurs when an employee is subjected to sexual, abusive, or offensive conduct because of his or her gender. This conduct creates an unlawful work environment when it is severe or pervasive enough to make a reasonable person of the employee's gender believe that the conditions of employment have been altered and the working environment has become hostile or abusive. This analysis may also be applied to hostile work environments created because of an employee's race, nationality, creed, disability, or other characteristics enumerated by the LAD.

Stark & Stark attorneys can help your Company to develop employment policies that meets the statutory requirements pursuant to LAD.

On February 7, 2005, the Appellate Division in Comprehensive Psychology System, P.C. v. Prince upheld the trial court's refusal to enforce a restrictive covenant in an employment contract for professional services by a licensed psychologist. In the lower court, the trial judge refused to restrain Dr. Prince from contacting any patients or contacting referral sources because he deemed the enforceability of these restrictions barred by NJAC 13:42-10.16, a provision of the rules adopted by the Board of Psychological Examiners. The provision reads as follows:

A licensee shall not participate in offering or making a partnership or employment agreement that restricts the right of a licensed health care professional to practice the licensed profession after termination of the relationship, except an agreement concerning the benefits upon retirement.

On appeal, the employer contended that the regulation was amended on April 5, 2004 and this amendment allowed non-competition agreements:

The licensee shall not enter into any business agreement that interferes with or restricts the ability of a client to see or continue to see his or her therapist of choice.

The Appellate Division failed to apply the holding in Karlin v. Weinberg, 77 N.J. 408 (1978), which held that restrictive covenants ancillary to employment contracts between physicians are enforceable to the extent that they protect the legitimate interest of the employer, impose no undue hardship on the employee, and are not injurious to the public. Finding that the regulation was similar into that restrictive covenants between attorneys are per se unreasonable and unenforceable as injurious to the public interest, the Appellate Division ruled that the boards new language for the regulations did not allow the enforceability of a restrictive covenant against a psychologist.

Finally, the Appellate Division noted that a psychologist who changes his office locations, voluntarily or involuntarily, has a duty to inform patients of the change and the new location and phone number. If not, the court noted that this may be akin to patient abandonment.

New Jersey's employers must be careful in drafting restrictive covenants in employment agreements to ensure their enforceability in court.

On February 3, 2005, the Third Circuit in Gary v. The Air Group, Inc. reversed the District Court's dismissal of an employee's "whistle blowing" claims pursuant to New Jersey's Conscientious Employee Protection Act (CEPA). The District Court held that the employee's state law whistle blower claim was preempted by the federal Airline Deregulation Act (ADA) as amended by the Whistleblower Protection Program (WPP).

In this case, the employee was employed from March 15, 2001 through August 30, 2001 as a co-pilot. In July 2001, the employer hired a new pilot- in-command for the group. The plaintiff spent approximately four days assisting the pilot-in-command with preparations for a Federal Aviation Administration (FAA) required "route check." During this period, the plaintiff believed that the pilot-in-command was unqualified to pilot an aircraft because he: (1) did not have the requisite jet time mandated by the FAA; (2) was unfamiliar with FAA mandated basic flight procedures; (3) did not properly proceed with the FAA mandated "pre-flight check list" safety measure; (4) was unfamiliar with the air space into which he was planning to fly; and (5) was unfamiliar with how to obtain departure clearance at certain airports.

Based upon these observations, the plaintiff "reasonably believed" that if the employer permitted the pilot- in-command to fly, he would be endangering himself, the passengers, crew, the public and the aircraft. The plaintiff also believed that the pilot-in-command violated certain FAA regulations.

On August 30, 2001, the plaintiff called his supervisor to stress his concerns. Hours later, the employer terminated plaintiff's employment. The plaintiff alleges that the termination of his employment was in retaliation for the report of the pilot- in-command's lack of qualifications as well as potential FAA violations.

On April 29, 2002, the plaintiff filed a Complaint in the Superior Court of New Jersey alleging that his termination was in violation of CEPA. On May 29, 2002, the employer removed the case to the District of New Jersey and subsequently moved to dismiss plaintiff's Complaint on the grounds that his CEPA claim was preempted by federal law. The District Court granted the employer's motion to dismiss on August 8, 2002.

The Third Circuit analyzed the issue as to whether the ADA, as amended by the WPP, preempted the employer's CEPA claim. The Third Circuit reversed the dismissal of his CEPA claims and held that it was not preempted by the ADA. In support of its conclusion, the Third Circuit reasoned that language of the WPP was silent on the issue of preemption.

CEPA is one of the most powerful whistleblower statutes in the country. It is understandable that the employer would want to attempt to dismiss the CEPA claim in favor of litigating this action pursuant to the ADA, which is probably a less-settled cause of action against an employer. This decision highlights the importance of an employer to enact proper policies to handle whistleblower- type complaints by employees. Stark & Stark attorneys can help you to develop policies and provide training that satisfy CEPA statutory requirements.

More information regarding recent CEPA legislation and court decisions can be found here, here, here, and here.

In an unreported decision on December 16, 2004, the Appellate Division in Hancock, et al. v. Borough of Oaklyn, et al., A-2021-03T3, dismissed an employer's application for counsel fees after successfully dismissing an employees' Conscientious Employee Protection Act ("CEPA") suit even though the lower court determined that the litigation "was without basis and law or in fact." The CEPA statute allows for the successful litigant to make an application for counsel fees. Typically, this provision is relied upon by successful plaintiffs.

The Appellate Division, however, noted that a party's failure to prevail in a lawsuit does not render the suit one in which there is no basis in law or in fact. The Appellate Division cited earlier authority which defined frivolous as "a claim will be deemed frivolous or groundless when no rational argument can be advanced in its support, when it is not supported by any credible evidence, when a reasonable person could not have expected its success, or when it is completely untenable. The Appellate Division stressed that "when the plaintiff's conduct bespeaks an honest attempt to press a perceived, though ill-founded and perhaps misguided, claim, he or she should not be found to have acted in bad faith."

Here, the Appellate Division's reversal of the grant of counsel fees for this successful defendant/employer highlights the difficulty employers have in recouping litigation costs even when defending suits with little merit. It is unclear from the decision with the employer had the proper policies in place to handle whistleblower-type complaints by employees. Stark & Stark attorneys can help your Company to develop policies that satisfy CEPA's statutory requirements.

The Third Circuit ruled that Pennsylvania employment law, not New Jersey's, governs in diversity action brought in New Jersey. The plaintiff was employed in Pennsylvania, even though she performed some work in New Jersey, lived in New Jersey, and claimed wrongful discharge based on whistle-blowing about alleged fraud committed by a subcontractor in New Jersey.