Forced Arbitration is Unfair to Workers

Many companies require their workers to sign arbitration agreements—contracts that require workers to bring any claims related to their employment through arbitration, a private dispute resolution process outside the court system. Companies often require this of both employees and independent contractors, and arbitration agreements can cover all sorts of claims, including sexual harassment, discrimination, wage theft, and more.

Arbitration greatly favors employers over workers. Workers are less likely to win in arbitration, and if they do win, they are usually awarded less money. It is nearly impossible to appeal a decision in arbitration. Arbitration is private, so the worker loses the leverage that comes with the threat of negative media coverage from a public lawsuit against the employer. Further, because arbitration is private, other workers who may also be in a similar situation lose the ability to learn about their rights or join a class-action when they hear about the case. And many forced arbitration agreements ban class-actions outright, denying workers the ability to join together to bring claims for widespread wrongs like wage theft or discrimination.

A major problem with forced arbitration for workers is that it reduces the already small amount of power any worker has to stand up for their rights in the workplace. Employers often present these forced arbitration agreements as a take-it-or-leave-it proposition, requiring the worker to sign the agreement in order to earn a paycheck from the company—often even in low-wage hourly positions. This puts workers in a bind, because they must choose between agreeing to arbitration and paying this month’s rent or grocery bills.

Some employers are beginning to end their forced arbitration programs. For example, Microsoft ended forced arbitration for sexual harassment claims in December 2017. On November 8, 2018, one week after more than 20,000 employees walked out in protest, Google announced that it was ending its requirement that sexual harassment and assault claims be arbitrated. The next day, Facebook announced it was ending forced arbitration for sexual harassment claims.

Although it seems that the tide may be turning on arbitration for workplace sexual harassment and assault claims, forced arbitration is still pervasive for claims of wage theft, discrimination, and many other workplace wrongs. And because the Supreme Court recently held that companies may include class-action waivers in their arbitration agreements, workers face an even harder uphill battle to pursue their rights. However, not all arbitration agreements are enforceable, and courts in some states, such as New Jersey, have held that arbitration agreements must use very specific language to be valid.   

If you believe you have a claim against your employer, but may be subject to an arbitration agreement, it is a good idea to contact a lawyer to determine whether you may be able to bring your claim in court.

Second Circuit Vacates Lower Court Decision Ruling Time Warner Territory Sales Representatives were Exempt from Overtime Pay

On October 4, 2018, the Second Circuit Court of Appeals vacated a decision by the U.S. District Court for the Northern District of New York which held that Territory Sales Representatives(TSRs) for a cable company were exempt from overtime pay because their primary duty was exempt outside sales.

Two TSRs, Jeffrey Sydney and Stephen Capousis, sued their former employer, Time Warner Entertainment-Advance/Newhouse Partnership (Time Warner), a subsidiary of Time Warner Cable, Inc., for unpaid overtime under the Fair Labor Standards Act(FLSA) and the New York Labor Law (NYLL). Time Warner moved for summary judgment, arguing that the TSRs were exempt from overtime pay under the FLSA and NYLL because they were “outside salesmen.” The District Court agreed with Time Warner and granted summary judgment. The plaintiffs appealed, arguing that the District Court was wrong to conclude that they were “outside salesmen.”

 Subject to certain exemptions,the FLSA and NYLL require that employers pay employees overtime pay for hoursmore than 40 worked in one workweek. One exemption from the FLSA and the NYLL is for “any employee employed . . . in the capacity of outside saleman.” To bean outside salesman, a worker’s primary duty must be either (1) making sales within the definition of the law, or (2) obtaining orders or contracts for services or for the use of facilities. In addition, the worker must be customarily and regularly engaged away from the employer’s place of business while performing their primary duty.

The Second Circuit held that the District Court was wrong to conclude that the TSRs’ primary duty was exempt sales of Time Warner’s products, as opposed to non-exempt installation of cable,telephone, and internet equipment.

According to the plaintiffs, TSRs spent most of their 50-70 hour workweeks installing cable, telephone, and internet equipment in apartment units, and spent a smaller portion of their time performing sales duties such as maintaining relationships with apartment managers and trying to persuade customers to purchase additional services and“bundles” of internet, telephone, and cable services.

The Second Circuit found that a reasonable factfinder could conclude that the TSRs spent most of their time performing non-exempt installation duties, and that, in this instance, their outside sales duties were not more important than their installation duties.Further, while TRSs were paid mainly on commissions, the majority of their “commissions” were in fact payment for installations rather than commissions for sales.

Because the Second Circuit did not find as a matter of law that the TSRs’ installation work was merely incidental to their outside sales work, it vacated the District Court’s decision and remanded the case for further proceedings.

New York City Supports #MeToo Movement with Sexual Harassment Legislation

On April 11, 2018 the New York City Council passed a package of bills called the “Stop Sexual Harassment in NYC Act” (the “Act”) (Int. No. 632-A), which were signed into law by Mayor Bill DeBlasio on May 9, 2018. The Act is intended to prevent and combat sexual harassment in the workplace.

The Act makes the following changes to New York City’s sexual harassment laws:

  • All employers regardless of size are now covered by the New York City Human Rights Law’s (“NYCHRL”) protections against gender-based harassment. Prior to the Act, these provisions of the NYCHRL only applied to employers with four or more employees.
  • The statute of limitations for filing claims of gender-based harassment under the NYCHRL is increased from one year to three years.
  • All employers must now display a poster with anti-sexual harassment information, and distribute to all new employees an information sheet about sexual harassment.
  • Certain New York City contractors are required to include their policies, practices, and procedures related to preventing and addressing sexual harassment in their employment report for certain city contracts.
  • The New York City Commission on Human Rights is required to post new resources regarding sexual harassment on its website.
  • The NYCHRL’s policy statement has been updated to include the following, “gender-based harassment threatens the terms, conditions, and privileges of employment.
  • Effective April 1, 2019, employers with 15 or more employees (including interns) will be required to give annual interactive anti-sexual harassment training to all their employees, including managers and supervisors. Employers must make and keep records of the trainings, including signed employee acknowledgements for at least three years. The trainings are required to include the following:
    • A description of what sexual harassment is, along with examples.
    • A description of what unlawful retaliation is, along with examples.
    • An explanation that sexual harassment is a form of unlawful discrimination under New York City Law, as well as federal and state law.
    • A description of the employer’s internal complaint procedures, as well as the complaint procedures available through the New York City Commission on Human Rights, the New York State Division of Human Rights, and the United States Equal Opportunity Commission, along with contact information.
    • Information about how bystanders can intervene.
    • A description of the responsibilities of managers and supervisors to prevent sexual harassment and retaliation, and what actions managers and supervisors can take to address complaints of sexual harassment and retaliation.

JPMorgan Settles Race Discrimination Suit with Financial Advisors for $24 Million

According to August 31, 2018, court filings, JPMorgan Chase & Co. reached a settlement with six current and former financial advisors who sued the company for racial discrimination. The settlement includes $19.5 million paid to the financial advisors, and a $4.5 million fund to implement an anti-bias program.

The six current and former employees—Kellie Farrish in California, Erika Williams in Illinois, Amanda Jason in Kentucky, Irvin Nash in New York, Jerome Senegal in Texas, and Brent Griffin in Wisconsin—filed a class action lawsuit alleging that JPMorgan treated them poorly because they are black. They alleged that black financial advisors throughout the company were assigned to less lucrative branches than their white counterparts, were understaffed, had few licensed bankers to support them, got paid less, and were not included in a program for wealthier clients. The lawsuit claims that the racial discrimination is “uniform and national in scope.”

The settlement comes as Wall Street banks, including JPMorgan, have been losing black workers over the past several years. JPMorgan’s own internal figures show that its percentage of black workers has decreased for six years in a row, from 16% in 2011 to 13.4% in 2017. At another Wall Street bank, Citigroup, Inc., black employees now account for only 10% of employees, down from about 16% in 2009. Both Wells Fargo and Merrill Lynch have settled race discrimination suits in recent years, for $35.5 million and $160 million, respectively.

“Our clients are proud of this outcome and acknowledge that JPMorgan had a choice to fight [rather than settle the case],” the plaintiffs’ lawyer Linda Friedman said in an email to Bloomberg. “Each case builds on the last. This is how progress is made.”

JPMorgan denies any wrongdoing, and released a statement saying that the settlement “eliminates the need for litigation, allowing us to continue our focus on the diverse and inclusive environment that is critical to our success.”

WeWork Settles with New York State Attorney General on Overly Broad Non-Competes

On September 18, 2018, WeWork, a shared-office company, agreed to end its practice of using overly broad non-compete agreements as part of a settlement with the attorneys general of New York and Illinois. The settlement eliminates or reduces the scope of non-compete agreements for nearly all of WeWork’s approximately 3,300 U.S. employees, with the exception of about 100 executive level employees.

Non-compete agreements prevent an employee of one company from working for a competitor, typically for a certain amount of time after the employee leaves the company and within a certain geographic area. 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 job-seekers might be required to sign one to work as a factory manager, camp counselor, yoga instructor, or even a summer intern.

The WeWork settlement fully releases more than 1,400 rank-and-file employees from their non-compete agreements, 800 of whom work in New York. These employees include executive assistants, baristas, mail associates, cleaners, and more, some making as little as $15 per hour.

The settlement also reduces the scope of non-competes for 1,800 employees who are managers or have specialized skills or knowledge, 1,400 of whom work in New York. For these employees, the non-compete period will be reduced to six months rather than one year, and the geographic scope will be reduced from any geographic area where WeWork operates to a 15-mile radius from the WeWork locations engaged in the business lines in which the employee worked. The scope of competition will be reduced from working for a competitor in any capacity to working for a competitor on the business lines in which the employee worked.

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. If the non-compete does not protect a legitimate business interest, like trade secrets or customer lists, for example, it is likely not enforceable. But, many employees don’t know whether their non-competes are enforceable, and the threat of a lawsuit often deters workers from accepting a new job with better pay—keeping wages and worker mobility low. In response to the problem of employers misusing non-compete agreements, New York State has published Non-Compete Agreements in New York State – Frequently Asked Questions, a guide to help answer New York workers’ questions about non-competes.

“Workers should be able to take a new job without living in fear of a lawsuit from their former employer,” said New York State Attorney General Barbara D. Underwood. “Yet too often, non-compete agreements are misused, especially when it comes to low-wage workers – limiting employees’ mobility and opportunity and preventing businesses from hiring the best person for the job. Today’s settlement is a key step forward for WeWork’s thousands of employees in New York and across the country, and should serve as an example for all businesses as we continue our efforts to end the use of these overly broad non-competes.”

Federal Government Sues Walmart for Pregnancy Discrimination

On September 20, 2018, the U.S. Equal Employment Opportunity Commission (EEOC) filed a lawsuit against Walmart in the U.S. District Court for the Western District of Wisconsin for pregnancy discrimination.

The lawsuit alleges that Walmart unlawfully refused to provide Alyssa Gilliam and other pregnant employees at a distribution center in Wisconsin with the same light duty work that it provides to its non-pregnant workers with disabilities, such as lifting lighter loads, a chair, and additional breaks during the workday. The complaint alleges that Walmart’s failure to provide these accommodations resulted in Gilliam losing her benefits, having to reduce her hours from full-time to part-time, and being forced to take unpaid leave two months prior to the birth of her baby when she wanted to work up until the birth.

Employment discrimination based on pregnancy, childbirth, or related medical conditions is prohibited by the Pregnancy Discrimination Act (PDA), which amends Title VII of the Civil Rights Act of 1964. The law applies to employers with 15 or more employees, and requires them to provide the same reasonable accommodations to pregnant workers as they provide to disabled workers.

“Walmart deprived pregnant workers of the opportunity to participate in its light duty program. This amounted to pregnancy discrimination,” said EEOC District Director Julianne Bowman. The lawsuit seeks back pay, compensatory and punitive damages, and injunctive relief. Walmart denies the allegations. Two additional class action lawsuits alleging pregnancy discrimination in Walmart’s retail stores have been filed in New York and Illinois.

In addition to the protections provided under federal law by the PDA, both New Jersey and New York have state laws that protect pregnant employees from discrimination by their employers. The New Jersey Law Against Discrimination (NJLAD) and the New York Human Rights Law (NYHRL) both prohibit discrimination in employment based on pregnancy, childbirth, or related medical conditions. The NJLAD applies to all employers regardless of size, and the NYHRL applies to employers with four or more employees.

We will continue to monitor developments in this case.

Third Circuit Court of Appeals Rules Truckers’ Wage Deduction Class Action is Not Preempted by Federal Law

On September 27, 2018, a three-judge panel of the Third Circuit Court of Appeals affirmed the District Court for the District of New Jersey’s holding denying the defendant employer’s motion to dismiss the plaintiff truck drivers’ claims based on federal preemption, in Lupian v. Joseph Cory Holdings LLC.

Five truck drivers filed the lawsuit against their employer, Joseph Cory Holdings LLC, as a class action pursuant to the Class Action Fairness Act of 2005 (“CAFA”) alleging that the company deducted wages from drivers’ paychecks for items such as uniforms, insurance, and goods damaged in transit, without their contemporaneous consent, in violation of the Illinois Wage Payment and Collection Act (“IWPCA”).

While the drivers’ contracts with the company purported to create an independent contractor relationship, the drivers claimed the realities of their relationship with the company created an employer-employee relationship under the IWPCA. The IWPCA defines an employee as “a person who is permitted to work by an employer.” It should be noted that this is similar to the New Jersey Wage and Hour Law, which defines the term “employ” as “to suffer or permit to work.”

The company moved to dismiss the lawsuit, arguing that the truckers’ claims under the IWPCA were preempted by the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”). The FAAAA contains a preemption provision that applies to the trucking industry, which states, “a State, political division of a State, or a political authority of 2 or more States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier . . . or any motor private carrier, broker, or freight forwarder with respect to the transportation of property.”

The district court denied the motion, holding that the connection between the subject matter of IWPCA and that of the FAAAA was not strong enough to trigger preemption. The company appealed to the Third Circuit Court of Appeals.

The Third Circuit Court of Appeals affirmed, holding that, “the IWPCA does not have a significant impact on carrier rates, routes, or services of a motor carrier and does not frustrate the FAAAA’s deregulatory objectives, as the impact of the IWPCA is too tenuous, remote, and peripheral to fall within the scope of the FAAAA preemption clause.”

The court reasoned that wage laws like the IWPCA are a traditional area of state regulation, like zoning laws, that affect all types of businesses equally, and do not single out trucking companies. Because wage laws like the IWPCA regulate the relationship between companies and their employees, not between companies and customers, it demonstrates that the purpose and effect of the IWPCA are not sufficiently similar to the type of regulations the FAAAA sought to prohibit.

We will monitor future developments in this litigation.

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, 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.