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National Labor Relations Board Issues Proposed Rule to Limit Joint Employer Liability

On September 14, 2018, the federal agency that oversees labor practices nationwide, the National Labor Relations Board (“NLRB”), proposed a new rule that would redefine the standard for determining whether a company is considered a joint employer of its franchisees’ or another company’s employees.

The proposed rule reverses a 2015 NLRB ruling in a case known as Browning-Ferris Industries, that changed the standard for determining who was a joint employer. Before the 2015 Browning-Ferris Industries decision, to be considered a joint employer, a company was generally required to exercise direct and immediate control over the other company’s employees. In Browning-Ferris Industries, the NLRB ruled that a company could be considered a joint employer even if it controlled the other company’s employees indirectly, or if it had a right to control the employees’ working conditions but didn’t use that right.

This decision made it easier to impose liability on franchisors or other outside companies for labor and employment violations which occurred at a franchisee’s or partner company’s location. This helped workers challenge the labor practices of large chain companies, such as McDonald’s, rather than simply the owner of one McDonald’s franchise where the employee worked. It also made it easier for workers at franchises to unionize, because the franchisor company could be held liable for firing workers who attempted to unionize.

The proposed NLRB rule not only returns to the pre-2015 status quo, but goes further. The NLRB states that under the proposed rule, “an employer may be found to be a joint-employer of another employer’s employees only if it possesses and exercises substantial, direct and immediate control over the essential terms and conditions of employment and has done so in a manner that is not limited and routine.” The addition of the word “substantial” creates a stronger test for joint employership than simply “direct and immediate control,” as was required pre-Browning-Ferris Industries.

The public has 60 days from the proposed rule’s publication on September 14, 2018 to submit comments on the rule to www.regulations.gov, or to Roxanne Rothschild, Deputy Executive Secretary, National Labor Relations Board, 1015 Half Street S.E., Washington, D.C. 20570-0001.

New Jersey Law Does Not Protect Employees Who Use Medical Marijuana from Employer Drug Testing Requirements

On August 10, 2018, the United States District Court for the District of New Jersey dismissed an employee’s claims in Cotto v. Ardagh Glass Packing, Inc., holding that neither the New Jersey Compassionate Use Medical Marijuana Act (“NJCUMMA”) nor the New Jersey Law Against Discrimination (“NJLAD”) required the employer to waive its drug testing requirements for an employee who was prescribed medical marijuana.

Plaintiff Daniel Cotto Jr. was employed as a forklift operator for Defendant Ardagh Glass Packing, Inc. Cotto was injured on the job when he hit his head on a forklift, and Ardagh Glass required him to pass a drug test before he could return to work. Cotto told Ardagh Glass that he could not pass the drug test, due to the fact that he was taking prescription medications including medical marijuana. Ardagh Glass told Cotto that he must test negative for marijuana to continue working there. Cotto was put on indefinite suspension because he could not pass the drug test.

Cotto sued Ardagh Glass for disability discrimination under the NJCUMMA and NJLAD, claiming that because the NJCUMMA decriminalized medical marijuana, the NJLAD required his employer to give him the reasonable accommodation of waiving its requirement that he pass a drug test for marijuana. The court dismissed Cotto’s claim, holding that New Jersey law does not require private employers to waive drug tests for medical marijuana.

The court reasoned that medical marijuana is still illegal under federal law, and while the NJCUMMA was enacted to protect patients using medical marijuana from prosecution, it does not include any protections for employees in the workplace. The NJCUMMA states explicitly that “nothing in this act shall be construed to require . . . an employer to accommodate the medical use of marijuana in any workplace.”

In its analysis regarding protections under the NJLAD, the court reasoned that courts in other states have found that the decriminalization of medical marijuana does not in itself create protections for employees against adverse employment actions based on marijuana use. The court also reasoned that, as was decided regarding a similar California law, the New Jersey judiciary would conclude that the NJLAD does not require employers to accommodate the use of drugs still illegal under federal law, such as medical marijuana, with a drug test waiver. Thus, the LAD does not require employers to accommodate employees by waiving drug testing requirements for medical marijuana.

New Jersey Appeals Court Holds Sexual Harassment Claim Must Be Arbitrated, but Arbitration Clause Cannot Bar Punitive Damages

On August 23, 2018, a panel of judges on the Superior Court of New Jersey, Appellate Division, held in Roman v. Bergen Logistics that, while the plaintiff was bound to arbitrate her claims against the company, the clause in the arbitration agreement barring her from seeking punitive damages under the New Jersey Law Against Discrimination (NJLAD) was invalid.

The plaintiff, Milagros Roman, was hired as a human resources generalist at Bergen Logistics in September 2015. When she was hired, she signed an arbitration agreement that contained a clause stating that she waived her right to punitive damages. Roman was terminated by her immediate supervisor, Gregg Oliver, on December 30, 2015.

Roman alleged in her 2017 complaint that Oliver sexually harassed her, created a hostile work environment, and fired her in retaliation after she objected to his sexual harassment. Roman’s complaint alleged violations of the NJLAD and intentional infliction of emotional distress against the company and Oliver.

The Bergen County Superior Court dismissed Roman’s lawsuit, holding that the arbitration agreement was a valid waiver of her right to bring her claim in court and to pursue punitive damages under the NJLAD.

The Appellate Division affirmed in part and reversed in part. The panel held that Roman must arbitrate her claims because she knowingly agreed to arbitrate claims against the company, but that the clause barring her from seeking punitive damages under the NJLAD was unenforceable because it violates the public policy of the NJLAD.

The panel reasoned that a contractual provision preventing an employee from seeking punitive damages under the NJLAD violates public policy in two ways. First, it eliminates a remedy that the legislature expressly provided to victims of discrimination when it passed the statute. Second, it removes an essential element of deterrence and punishment for high level employees who are in positions to control the employer’s policies and actions regarding discrimination in the workplace.

The panel then dismissed the case to proceed to arbitration, subject to its holding that the provision barring the plaintiff from seeking punitive damages was null and void.

New Jersey Court Rules that Employee Who Voluntarily Resigned is Not Disqualified from Receiving Unemployment Benefits

On March 29, 2018, the Superior Court of New Jersey, Appellate Division held in Cottman v. Bd. of Review that an employee who voluntarily resigned from her job when she was facing imminent termination was eligible for unemployment benefits.

Plaintiff Tamyra Cottman worked as a residential counselor at a group home, which had a policy requiring its employees to find another employee to cover any missed shift. Just before one of her shifts, Cottman’s babysitter unexpectedly quit, leaving her with no childcare for her three special-needs children. Cottman called everyone on her work contact list, but no one was available to cover her shift.

Cottman said she told her supervisor about the situation, who threatened that Cottman might be fired if she did not come in. To avoid being terminated, Cottman quit, and later applied for unemployment benefits. Cottman’s application was denied on the basis that she voluntarily resigned. The denial was affirmed by the New Jersey Department of Labor Appeal Tribunal and the Board of Review.

On appeal, the Superior Court of New Jersey, Appellate Division, reversed. The court reasoned that, “when an employee knows that he or she is about to be fired, the employee may quit without becoming ineligible.” In Cottman’s case, her supervisor reminded her that she was just finishing a probationary period, and not to “play with her time” by not coming in. The court reasoned that Cottman interpreted this as a “near-certainty” that she would be fired if she failed to show up for her shift. So, rather than be terminated, which could hurt her future employment prospects, she resigned.

“[A]n employee need not wait to be fired when discharge is imminent. At that point, the employee may resign and still be eligible for benefits,” held the court.

New Jersey’s New Paid Sick Leave Law

On May 2, 2018, Governor Phil Murphy signed into law the New Jersey Paid Sick Leave Act (“NJPSLA”), which guarantees paid sick leave to every employee in the State of New Jersey. The new law takes effect on October 29, 2018, and makes New Jersey the tenth state to require employers to give employees paid sick leave.

“This is not just about doing what’s right for workers and their families,” he said of paid sick leave. “This is about doing the right thing for our economy and protecting more New Jerseyans’ place in that economy,” said Murphy.

Unlike many paid sick leave laws in the United States, New Jersey’s new law applies to any person or entity that employs employees in the state. The federal Family and Medical Leave Act and the New Jersey Family Leave Act, for example, only apply to employers with 50 or more employees. The NJPSLA requires all New Jersey employers, regardless of size, to give their employees paid sick leave under the law.

Under the NJPSLA, employees make take leave for the diagnosis, care, treatment, or recovery related to the employee’s illness, or for that of a family member. Family members are defined broadly to include domestic or civil union partners, spouses, children, grandchildren, siblings, parents, grandparents, or someone “whose close association with the employee is the equivalent of a family relationship.”

Employees are also entitled to leave for medical or psychological attention or victim services related to domestic or sexual violence, public health emergencies, and school conferences or other meetings related to care for the employee’s child.

Under the NJPSLA, employers must pay employees at their normal rate of pay for every hour of leave taken. Employees can accrue and use up to 40 hours of leave per benefit year. Employers may use one of two options to provide leave. First, they may allow employees to accrue one hour of earned sick leave for every 30 hours worked. Second, they may allot the full amount of leave to employees up front. Employees can accrue and use up to 40 hours of leave per benefit year. New employees may use leave after the 120th day of employment.

Houlihan’s Restaurant Operator in New Jersey and New York Settles Tip-Pooling and Wage Case for $5 Million

On April 2, 2018, A.C.E. Restaurant Group (“A.C.E.”), an operator of Houlihan’s restaurants in New Jersey and New York, agreed to pay $5 million in a consent judgment to settle a case brought against it by the U.S. Department of Labor (“USDOL”) for allegedly keeping a portion of bartenders’ and servers’ tips, using tips to pay non-tipped workers, and failing to pay some employees overtime wages for hours more than 40 in a workweek. The consent judgment was approved by U.S. District Judge Joseph Rodriguez on April 10, and states that A.C.E. does not admit or deny the allegations.

The USDOL suit, filed in 2015, accused A.C.E. of violating the Fair Labor Standards Act (“FLSA”) by taking a tip credit without complying with FLSA regulations, impermissibly pooling tips and using them to pay the wages of non-tipped workers such as custodians and kitchen workers, and failing to pay overtime wages to employees who worked more than 40 hours in a workweek where they worked part of the week at one Houlihan’s location and part of the week at another Houlihan’s location.

The consent judgment covers a settlement period between February 2013 and May 2015, and requires A.C.E. to pay employees $2.5 million in unpaid minimum wages and overtime wages, and $2.5 million in liquidated damages, for a total of $5 million. The $5 million will be distributed among more than 1,400 employees according to the amount of back wages owed to each employee.

The consent judgment also requires A.C.E. to comply with FLSA mandates on minimum wage, overtime, anti-retaliation, and recordkeeping, and to provide notices to employees of their rights under the FLSA.

The Houlihan’s restaurants involved in the consent judgment are located in Brick, Bayonne, Bridgewater, Eatontown, Fairfield, Hasbrouck Heights, Holmdel, Cherry Hill, Lawrenceville, Woodbridge, New Brunswick, Paramus, Ramsey, Secaucus and Weehawken, New Jersey; and in Farmingdale and Westbury, New York.

No-Poach Agreements for Fast Food Employees are Under Scrutiny

Many fast food franchise operators have “no-poach” clauses in their franchise agreements, which prevent low-wage fast food workers from moving to higher-paid jobs at other franchises. While a non-compete agreement appears in an employee’s contract and prevents them from working for a competitor after they leave, a no-poach agreement is never agreed to by the employee, but still prevents them from working for a competing franchise.

Many types of businesses impose no-poach clauses, but they are the most prevalent in the restaurant industry. The clauses do not prevent employees from moving between fast food chains, but do prevent them from moving between franchises in the same fast food chain. For example, a no-poach clause would not prevent a Burger King employee from being hired by a Wendy’s, but would prevent the Burger King employee from being hired by a different Burger King Franchise.

Supporters of the clauses argue that they protect the franchise’s investment in training employees, in a high-turnover industry. But no-poach clauses are coming under increased scrutiny.

In June 2017, employees brought a class action lawsuit against McDonald’s for state and federal antitrust violations arising from its no-poach agreement, which had been included in its franchise contracts since 1987. The complaint states, “The collusion of employers to refrain from hiring each other’s employees restricts employee mobility. This raises employers’ power in the market at the expense of employees and diminishes employee bargaining power.” On June 25, 2018, Judge Jorge L. Alonso denied McDonalds’ motion to dismiss the federal antitrust count, but granted its request to dismiss the two state antitrust counts. The litigation is ongoing, and we will monitor the case as it proceeds. McDonalds removed the no-poach clause from its franchise agreements in 2017.

A letter released publicly on July 9, 2018, by 10 attorneys general, including those of New York and New Jersey, asks eight fast food restaurant chains—Burger King, Dunkin’ Donuts, Five Guys Burgers and Fries, Little Caesars, Wendy’s, Arby’s, Popeyes Louisiana Chicken, and Panera Bread—to provide information about their no-poach agreements, including how many employees are subject to no-poach agreements and whether the employees are aware of the agreements.

In the letter, the attorneys general expressed concern about the clauses, stating, “By limiting potential job opportunities, these agreements may restrict employees’ ability to improve their earning potential and the economic security of their families.” The attorneys general also cited concern that the agreements “deprive other franchisees of the opportunity to benefit from the skills of workers covered by a No Poach agreement whom they would otherwise wish to hire.”

On July 12, 2018, the Washington State Attorney General announced that seven large fast food restaurant chains entered into an agreement with Washington State to end their practice of including no-poach clauses in their franchise agreements, and to stop enforcing existing no-poach clauses nationwide. The chains that are dropping the no-poach clauses are Arby’s, Carl’s Junior, McDonald’s, Jimmy John’s, Auntie Anne’s, Buffalo Wild Wings, and Cinnabon. “My goal is to eliminate these provisions in all fast-food contracts in my state,” said Washington State Attorney General Bob Ferguson.

Workers in other industries are also affected by no-poach agreements. In a notable example, in 2011, employees brought a class action lawsuit against Silicon Valley giants Apple, Google, Intel Corp, and Adobe Systems for entering into agreements not to poach each other’s engineers, thereby limiting job mobility and keeping salaries down. During the case, emails among the top executives were produced, in which Apple CEO Steve Jobs asked Google CEO Eric Schmidt to stop poaching employees from Apple, and an email from Intel CEO Paul Otellini referring to an agreement between himself and Schmidt not to poach each other’s employees. The case settled in 2015 for $415 million.

New Jersey Court Holds that Job Transfer is Retaliation under Whistleblower Law

On May 14, 2018, the Superior Court of New Jersey, Appellate Division held that laterally transferring an employee to a different job can constitute retaliation under the New Jersey whistleblower law, the Conscientious Employee Protection Act (CEPA).

The plaintiff, Jeffrey Scozzafava, was a retired police officer employed by the Somerset County Prosecutor’s Office in its forensic unit. Scozzafava alleged that he was transferred from the forensics unit to the fugitive unit, reduced his ability to earn overtime pay, and changed his work vehicle, in retaliation for making whistleblowing complaints regarding improper and deficient evidence collection and casework by the forensic unit and his supervisor.

The trial court held that Scozzafava’s transfer to the fugitive unit and change of vehicle were not sufficient to support a CEPA claim, because the court found that Scozzafava maintained his position and rank, with full pay and benefits, arguably improved his working hours, and his physical arrangements were unchanged. The court further ruled that he did not substantiate a claim of damage to his professional reputation, and finally, rejected his claim that the transfer deprived him of overtime wages because the overtime pay was “unreliable and speculative.”

The Appellate Division reversed, holding that Scozzafava’s transfer was sufficient to show a “retaliatory action” under CEPA. The court reasoned that under CEPA, a “retaliatory action” includes not only a whistle-blowing employee’s “discharge, suspension or demotion,” but also “other adverse employment action taken against an employee in the terms and conditions of employment,” and that retaliation can be composed of “many separate but relatively minor instances of behavior directed against an employee that may not be actionable individually but that combine to make up a pattern of retaliatory conduct.”

The Appellate Division found two main adverse employment actions against Scozzafava. First, Scozzafava had great deal of training and a proven reputation in the forensics field, and the transfer out of the forensics unit was “demeaning,” and prevented him from utilizing and further developing his forensics expertise. Second, the loss of overtime compensation amounted to thousands of dollars, and this was a reduction in his compensation. These actions, taken together with the rest of Scozzafava’s allegations, were sufficient to state a claim for retaliation under CEPA. The Appellate Division reversed and remanded for further proceedings.

We will continue to monitor developments in this case.

New York State Says #TimesUp on Sexual Harassment in its 2019 Budget Bill

Showing a strong response to the nationwide #MeToo and #TimesUp movements, the New York State legislature recently passed the “New York State Budget Bill for Fiscal Year 2019” (S-7848A), signed into law by Governor Andrew Cuomo on April 12, 2018, which enacts several new protections against sexual harassment in the workplace.

Some of the key changes enacted in the budget law are:

  1. The New York State Human Rights law is expanded, to make it an unlawful discriminatory practice “for an employer to permit sexual harassment of non-employees in its workplace.” (New York State Budget FY19, Part KK, Subpart F.) This means the protections against sexual harassment in the workplace under the New York State Human Rights Law that only applied to traditional employees are now extended to non-employees, including vendors, consultants, contractors, and subcontractors. This provision is effective immediately.
  2.  New York State bans the use of mandatory arbitration clauses for claims of sexual harassment in the workplace, except where it is inconsistent with federal law or a collective bargaining agreement. (New York State Budget FY19, Part KK, Subpart B.) This provision is effective July 11, 2018.
  3. New York State bans nondisclosure provisions in agreements resolving claims in which the “factual foundation . . . involves sexual harassment,” unless the complainant wants to the nondisclosure provision. (New York State Budget FY19, Part KK, Subpart D.) This provision is effective July 11, 2018.
  4. New York State requires mandatory annual sexual harassment training. (New York State Budget FY19, Part KK, Subpart E.) This provision is effective October 9, 2018.
  5. New York State requires companies bidding for certain state and public contracts to include a statement in their bid confirming that they have implemented a written sexual harassment prevention policy and annual sexual harassment prevention training. (New York State Budget FY19, Part KK, Subpart A.)

No-Fault Attendance Policies Unfairly Penalize Pregnant and Sick Workers

Many workplaces have what’s called a “no-fault attendance policy.” This means that the employer records every absence or lateness as a mark against the employee, regardless of the reason. When the employee reaches a certain number, it results in discipline or even termination. These policies are also known as “maximum leave” or “absence control” policies.

The problem with these policies is that they punish workers who have disabilities, illnesses, and pregnancies, which may violate the workers’ rights under federal laws, including the Americans with Disabilities Act (ADA), the Family and Medical Leave Act (FMLA), and the Pregnancy Discrimination Act (PDA), as well as some state laws. For example, under a no-fault attendance policy, a worker who missed three days of work because they would simply rather be relaxing on the beach is treated the same way as a pregnant worker who is admitted to the hospital for three days due to hypertension caused by the pregnancy—both are punished.

The ADA requires employers to make “reasonable accommodations” for employees with covered disabilities, and one of those “reasonable accommodations” may be allowing flexibility in the employee’s schedule, including coming in late or being absent from time to time, so long as it is not an undue hardship on the company.

The FMLA requires covered employers to allow employees to take up to 12 weeks of leave, including intermittent leave taken in smaller blocks, to care for their own serious medical condition or that of a family member. The FMLA also covers absences for pregnancy-related illness and care of a newborn or newly-adopted child.

The PDA is an amendment to Title VII of the Civil Rights Act of 1964, and it prohibits discrimination by covered employers on the basis of pregnancy, childbirth, or related medical conditions. The PDA requires that covered employers provide unpaid leave to pregnant workers who are temporarily disabled due to the pregnancy to the same extent they must provide it to workers who are temporarily disabled by other medical conditions.

Under these three federal laws, as well as under some state laws, covered workers are legally entitled to take leave that their employer might wrongfully penalize them for under a no-fault attendance policy. The pregnant worker described above who had to take three days off work because she was hospitalized for hypertension would be protected by the PDA and the FMLA, and possibly the ADA as well. Thus, her employer’s no-fault attendance policy unlawfully penalizes her for absences that are protected by law.

The U.S. Department of Labor and the federal Equal Employment Opportunity Commission (EEOC) have recognized the unlawful results of applying no-fault attendance policies to workers protected by these laws. For example, the EEOC filed a lawsuit against Verizon challenging the company’s no-fault attendance plan as violating the ADA, and in 2011, Verizon paid $20 million to settle the case.

Does your employer use a no-fault attendance policy? Have you been penalized for taking time off work that may be protected under law? If so, contact this office for a free consultation.