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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.

New York State and City Enact New Protections Against Sexual Harassment in the Workplace

As the #MeToo and #TimesUp movements continue to shine a spotlight on sexual harassment and gender equality in the workplace, both New York State and New York City have enacted new laws to strengthen protections against and remedies for sexual harassment in the workplace. On April 12, 2018, New York State Governor Andrew Cuomo signed the state legislation into law (S-7848A), and on May 9, 2018, New York City Mayor Bill DeBlasio signed the city legislation into law (The Stop Sexual Harassment in NYC Act). The dates for implementation of each law differ, as set forth below.

New York State

Effective now:

  • Employers may be held liable for their employees’ sexual harassment of non-employees, such as independent contractors, consultants, freelancers, vendors, and others who provide services under a contract in the workplace. This offers new sexual harassment protections to workers in the increasingly prevalent “gig economy,” who are often excluded from laws that protect employees.

Effective July 11, 2018:

  • Employers will be prohibited from including confidentiality provisions in settlement and severance agreements regarding sexual harassment claims, unless the confidentiality is requested by the complaining employee. The employer must give the employee 21 days to consider whether to sign an agreement containing a confidentiality provision and a seven day period to be able to revoke it.
  • Employers will be prohibited from entering into agreements that require workers to arbitrate claims of sexual harassment, unless federal law requires that the claims may be arbitrated.

Effective October 9, 2018:

  • Employers must begin providing annual sexual harassment training for all employees, with the first annual training due before October 9, 2019.
  • Employers must adopt policies to prohibit sexual harassment that are equal to or stronger than those set forth by the New York State Department of Labor.
  • Employers must distribute sexual harassment policy information sheets to employees, including a standard complaint form.

New York City

Effective immediately:

  • The New York City Administrative Code’s provisions on sexual harassment apply to all employers, regardless of how many employees they have.
  • Employees now have three years within which to file their sexual harassment claims with the New York City Commission on Human Rights, rather than the previous one-year statute of limitations.

Effective September 6, 2018:

  • Employers must conspicuously display, in English and Spanish, an anti-sexual harassment poster produced by the New York City Commission on Human Rights informing employees that sexual harassment in breakrooms and common areas is unlawful.

Effective April 1, 2019:

  • Employers with 15 or more employees must begin providing annual sexual harassment training for all employees, with the first annual training due before April 1, 2020.

Posted by Mitchell Schley and Carli Jensen

New York State and City Enact New Protections Against Sexual Harassment in the Workplace

As the #MeToo and #TimesUp movements continue to shine a spotlight on sexual harassment and gender equality in the workplace, both New York State and New York City have enacted new laws to strengthen protections against and remedies for sexual harassment in the workplace. On April 12, 2018, New York State Governor Andrew Cuomo signed the state legislation into law (S-7848A), and on May 9, 2018, New York City Mayor Bill DeBlasio signed the city legislation into law (The Stop Sexual Harassment in NYC Act). The dates for implementation of each law differ, as set forth below.

New York State

Effective now:

  • Employers may be held liable for their employees’ sexual harassment of non-employees, such as independent contractors, consultants, freelancers, vendors, and others who provide services under a contract in the workplace. This offers new sexual harassment protections to workers in the increasingly prevalent “gig economy,” who are often excluded from laws that protect employees.

Effective July 11, 2018:

  • Employers will be prohibited from including confidentiality provisions in settlement and severance agreements regarding sexual harassment claims, unless the confidentiality is requested by the complaining employee. The employer must give the employee 21 days to consider whether to sign an agreement containing a confidentiality provision and a seven day period to be able to revoke it.
  • Employers will be prohibited from entering into agreements that require workers to arbitrate claims of sexual harassment, unless federal law requires that the claims may be arbitrated.

Effective October 9, 2018:

  • Employers must begin providing annual sexual harassment training for all employees, with the first annual training due before October 9, 2019.
  • Employers must adopt policies to prohibit sexual harassment that are equal to or stronger than those set forth by the New York State Department of Labor.
  • Employers must distribute sexual harassment policy information sheets to employees, including a standard complaint form.

New York City

Effective immediately:

  • The New York City Administrative Code’s provisions on sexual harassment apply to all employers, regardless of how many employees they have.
  • Employees now have three years within which to file their sexual harassment claims with the New York City Commission on Human Rights, rather than the previous one-year statute of limitations.

Effective September 6, 2018:

  • Employers must conspicuously display, in English and Spanish, an anti-sexual harassment poster produced by the New York City Commission on Human Rights informing employees that sexual harassment in breakrooms and common areas is unlawful.

Effective April 1, 2019:

  • Employers with 15 or more employees must begin providing annual sexual harassment training for all employees, with the first annual training due before April 1, 2020.

New Jersey Court Stops Enforcement of Non-Compete Agreement Against Masseuse

On February 27, 2018, Bergen County Superior Court Judge Charles Powers held in Abuayasha v. Shapiro Spa LLC t/a The Woodhouse Day Spa, et al., that a non-compete clause that purported to prevent a fired masseuse from working as a masseuse at a nearby spa was unenforceable.

Olga Abuayasha was hired by Woodhouse Day Spa in Red Bank as a masseuse in 2012. At the time she was hired, she signed an agreement that contained a non-compete clause stating that she agreed “not to directly or indirectly compete with the business of [Woodhouse Day Spa] . . . for a period of two years following termination of employment and notwithstanding the cause or reason for termination,” within a five-mile radius of the spa.

On September 27, 2017, Abuayasha was fired by Woodhouse Day Spa for allegedly failing to produce a doctor’s note for a three-day absence from work. Abuayasha alleges she had the note but was not given a chance to produce it. Soon after, Abuayasha was hired by Dr. Sue Massie, whose spa is located within walking distance of Woodhouse Day Spa, and Massie was allegedly heard soliciting Abuayasha’s former clients from Woodhouse. Woodhouse Day Spa sought to enforce the non-compete clause, and Abuayasha filed a complaint to prevent it from being enforced.

Judge Powers ruled that the agreement could only be enforced if it “protects the
“legitimate” interests of the employer, imposes no undue hardship on the employee, and is not injurious to the public,” and that “[a] restraint on the employee is illegal when its purpose is the prevention of competition, except when the methods of competition to be prevented are methods commonly regarded as improper and unfair.”

Powers held that the non-compete clause could not be enforced, because “the only legitimate interest is Defendants’ interest in its client relationships,” which could be protected by a much narrower clause that only sought to prevent Abuayasha from soliticing Woodhouse Day Spa clients, rather than broadly seeking to prevent her from competing within a five mile radius for two years.

Powers also held that Abuayasha’s termination “may constitute an undue hardship,” and thus the non-compete clause should not be enforced. He reasoned that when an employee loses their job due to breach of an employment agreement by the employer, enforcing a non-compete may be an undue burden on the employee. Here, Abuayasha alleged that she was wrongfully terminated in violation of the New Jersey Conscientious Employee Protection Act and the New Jersey Law Against Discrimination, therefore enforcement of the non-compete may be an undue hardship.

Traditionally, non-competes were found in fields like technology or sales, where trade secrets are closely held and specialized skills are often required. But now, non-competes are so common that you might be required to sign one to work as a factory manager, camp counselor, yoga instructor, or even a summer intern.

Just because an employer requires an employee to sign a con-compete agreement, it does not necessarily mean that it is valid and can be used against the employee. In New Jersey, non-compete agreements are viewed unfavorably as restraints of trade.

Did you sign a non-compete when you started with your employer? Have you been asked to sign one after you’ve been working for your employer for some time? Contact this office and we can help you determine whether it affects your ability to get a new job in your field.

Posted by Mitchell Schley and Carli Jensen

New Jersey Court Stops Enforcement of Non-Compete Agreement Against Masseuse

On February 27, 2018, Bergen County Superior Court Judge Charles Powers held in Abuayasha v. Shapiro Spa LLC t/a The Woodhouse Day Spa, et al., that a non-compete clause that purported to prevent a fired masseuse from working as a masseuse at a nearby spa was unenforceable.

Olga Abuayasha was hired by Woodhouse Day Spa in Red Bank as a masseuse in 2012. At the time she was hired, she signed an agreement that contained a non-compete clause stating that she agreed “not to directly or indirectly compete with the business of [Woodhouse Day Spa] . . . for a period of two years following termination of employment and notwithstanding the cause or reason for termination,” within a five-mile radius of the spa.

On September 27, 2017, Abuayasha was fired by Woodhouse Day Spa for allegedly failing to produce a doctor’s note for a three-day absence from work. Abuayasha alleges she had the note but was not given a chance to produce it. Soon after, Abuayasha was hired by Dr. Sue Massie, whose spa is located within walking distance of Woodhouse Day Spa, and Massie was allegedly heard soliciting Abuayasha’s former clients from Woodhouse. Woodhouse Day Spa sought to enforce the non-compete clause, and Abuayasha filed a complaint to prevent it from being enforced.

Judge Powers ruled that the agreement could only be enforced if it “protects the
“legitimate” interests of the employer, imposes no undue hardship on the employee, and is not injurious to the public,” and that “[a] restraint on the employee is illegal when its purpose is the prevention of competition, except when the methods of competition to be prevented are methods commonly regarded as improper and unfair.”

Powers held that the non-compete clause could not be enforced, because “the only legitimate interest is Defendants’ interest in its client relationships,” which could be protected by a much narrower clause that only sought to prevent Abuayasha from soliticing Woodhouse Day Spa clients, rather than broadly seeking to prevent her from competing within a five mile radius for two years.

Powers also held that Abuayasha’s termination “may constitute an undue hardship,” and thus the non-compete clause should not be enforced. He reasoned that when an employee loses their job due to breach of an employment agreement by the employer, enforcing a non-compete may be an undue burden on the employee. Here, Abuayasha alleged that she was wrongfully terminated in violation of the New Jersey Conscientious Employee Protection Act and the New Jersey Law Against Discrimination, therefore enforcement of the non-compete may be an undue hardship.

Traditionally, non-competes were found in fields like technology or sales, where trade secrets are closely held and specialized skills are often required. But now, non-competes are so common that you might be required to sign one to work as a factory manager, camp counselor, yoga instructor, or even a summer intern.

Just because an employer requires an employee to sign a con-compete agreement, it does not necessarily mean that it is valid and can be used against the employee. In New Jersey, non-compete agreements are viewed unfavorably as restraints of trade.

Did you sign a non-compete when you started with your employer? Have you been asked to sign one after you’ve been working for your employer for some time? Contact this office and we can help you determine whether it affects your ability to get a new job in your field.

New Jersey Workers Will Soon be Entitled to Paid Sick Leave

On May 2, 2018, Governor Phil Murphy signed into law a bill enacting new paid sick leave protections for nearly all employees who work in New Jersey. The law, effective on October 29, 2018, requires New Jersey employers to provide employees one hour of paid sick leave for every 30 hours they work, up to a total of 40 paid sick leave hours per year. Employees can use the leave 120 days after it begins to accrue.

The new law covers almost all employees in New Jersey, but some, including construction workers, per-diem hospital workers, and public employees who receive sick leave under another law are not covered. Under the law, employees can use accrued paid leave if they or a family member are sick, for a child’s school conference or other event, or for recovery from domestic violence.

Employers may designate certain dates that cannot be taken off as paid sick leave. Employers may require certain documentation, such as a doctor’s note, for absences of three or more consecutive days.

While many employees in New Jersey already receive paid sick time, it is estimated that 1.2 million employees in the state do not have any paid time off for illness. New Jersey is the 10th state in the country to enact a paid sick leave law.

Governor Murphy said the new law means “something different to everyone.”

“For a child-care worker, it can mean having time to get well so she doesn’t spread her flu to the children in her care,” said Murphy. “For a restaurant worker, it can mean being able to take an hour to meet with his child’s teacher. For others—especially those seeking help from domestic violence—it is time that can quite literally mean the world.”

Posted by Mitchell Schley and Carli Jensen

New Jersey Workers Will Soon be Entitled to Paid Sick Leave

On May 2, 2018, Governor Phil Murphy signed into law a bill enacting new paid sick leave protections for nearly all employees who work in New Jersey. The law, effective on October 29, 2018, requires New Jersey employers to provide employees one hour of paid sick leave for every 30 hours they work, up to a total of 40 paid sick leave hours per year. Employees can use the leave 120 days after it begins to accrue.

The new law covers almost all employees in New Jersey, but some, including construction workers, per-diem hospital workers, and public employees who receive sick leave under another law are not covered. Under the law, employees can use accrued paid leave if they or a family member are sick, for a child’s school conference or other event, or for recovery from domestic violence.

Employers may designate certain dates that cannot be taken off as paid sick leave. Employers may require certain documentation, such as a doctor’s note, for absences of three or more consecutive days.

While many employees in New Jersey already receive paid sick time, it is estimated that 1.2 million employees in the state do not have any paid time off for illness. New Jersey is the 10th state in the country to enact a paid sick leave law.

Governor Murphy said the new law means “something different to everyone.”

“For a child-care worker, it can mean having time to get well so she doesn’t spread her flu to the children in her care,” said Murphy. “For a restaurant worker, it can mean being able to take an hour to meet with his child’s teacher. For others—especially those seeking help from domestic violence—it is time that can quite literally mean the world.”