Employment Contracts

October 13, 2016

Proposed Law Would Protect Rights of Workers in the “Gig Economy”

The traditional model of “employment” in the U.S., in which individuals work for an employer long enough to establish a career and secure retirement benefits, is a reality for fewer and fewer people. In many workplaces today, employees must fight simply to secure their status as employees—who are entitled to protection under various federal, state, and local employment laws—while their employers try to classify them as independent contractors. The “gig economy” is a relatively new concept of the last decade or so, in which people work as freelancers—i.e., independent contractors—for multiple clients. Unlike misclassified employees, freelancers accept that they are independent contractors, but they often lack the means to assert their contractual rights against much larger clients. These disputes can closely resemble wage and hour disputes between employees and employers. A bill pending in the New York City Council, informally known as the Freelance Isn’t Free Act, would protect the rights of freelancers to timely payment in full.

Currently, no law in New Jersey or New York specifically addresses the circumstances faced by freelancers. Laws regarding employee misclassification offer a good starting point for understanding these issues. Employers may see an incentive in classifying workers as independent contractors. Employees are generally protected by a wide variety of laws dealing with minimum wage, overtime compensation, workplace discrimination and harassment, family and medical leave, unemployment benefits, and other matters. Independent contractors’ rights are mostly limited to whatever is addressed in their contract—assuming they have a written contract.

New Jersey has adopted a standard for employee classification that is favorable to the employee. The New Jersey Supreme Court applied a test known as the “ABC test,” based on a provision of the New Jersey Unemployment Compensation Law. An individual is an independent contractor, rather than an employee, if they are “free from control or direction” by the employer with regard to their job duties, their work is “outside the usual course of the business” or “performed outside of all the [employer’s] places of business,” and they regularly work “in an independently established trade, occupation, profession or business.” N.J. Rev. Stat. §§ 43:21-19(i)(6)(A) – (C); Hargrove v. Sleepy’s, LLC, 106 A.3d 449, 453 (N.J. 2015).

June 28, 2016

State “Right to Work” Law Ruled Unconstitutional

by Resnick Law Group, P.C.

Laws in New Jersey and many other states protect workers’ right and ability to organize for the purpose of collective bargaining with employers. Some states, however, have passed laws aimed at significantly reducing workers’ ability to unionize, ironically named “right to work” laws. These laws prohibit requiring workers who choose not to join a union to pay any sort of fee to the union, even if they benefit from working conditions only made possible by union efforts. In a bit of good news, a Wisconsin court has ruled that its state’s “right to work” law constitutes a taking of union property by the government without just compensation, in violation of the state constitution. Int’l Assoc. Of Machinists Dist. 10, et al. v. State of Wisconsin, et al., No. 2015CV000628, order (Wis. Cir. Ct., Dane Co., Apr. 8, 2016).

Unions represent employees in collective bargaining negotiations with their employers. These types of negotiations, backed by strikes and other actions, helped make possible many of the features of employment taken for granted today. Workers who do not join a union generally still benefit from the union’s activities, so unions have, in the past, sought contractual terms with employers to address this imbalance. A “closed shop” refers to an employer that, under the terms of a union contract, may only hire union members. A “union shop” is an employer that must require all employees to join the union.

Federal law has banned closed-shop clauses in union-employer contracts. States can prohibit union-shop clauses, but federal law allows unions to require the payment of an “agency fee” by non-union workers. See Communications Workers of America v. Beck, 487 U.S. 735 (1988). “Right to work” laws prohibit union-shop clauses, particularly agency fees. The Wisconsin Legislature passed a “right to work” law in 2015. See WI Stat. §§ 111.04(3)(a)(4), 111.06(1)(c).

May 27, 2016

How New Federal Trade Secrets Legislation Could Affect New Jersey Employment Law

by Resnick Law Group, P.C.

In order to remain competitive in the marketplace, most businesses rely on keeping certain types of information confidential. These might include client lists, sales leads, or computer algorithms, to name but a few. Employees often have access to information that an employer considers proprietary or otherwise secret. State laws protecting trade secrets may affect employees during and after their employment relationship. New federal legislation, the Defend Trade Secrets Act (DTSA) of 2016, Pub. L. 114-153 (May 11, 2016), expands federal courts’ jurisdiction over trade secret matters, and it could have an impact on employees in New Jersey and around the country.

Until the DTSA came along, no uniform standard for trade secret protection applied across the country. New Jersey law defines a “trade secret” as information that has value specifically because it is secret and that has been “the subject of efforts…to maintain its secrecy.” N.J. Rev. Stat. § 56:15-2. This definition is consistent with most state statutes and existing federal law. See 18 U.S.C. § 1839(3).

New Jersey’s trade secrets law prohibits the “misappropriation” of a trade secret, defined to include the acquisition of secret information by a party who knows of its confidential nature, and the disclosure of such information without permission and with knowledge of its secrecy. N.J. Rev. Stat. § 56:15-2. It allows state courts to grant injunctions to prevent “actual or threatened misappropriation.” Id. at § 56:15-3. It also allows the recovery of damages for actual losses and unjust enrichment resulting from misappropriation. Id. at § 56:15-4.

April 5, 2016

U.S. Department of Labor Issues Guidelines on “Joint Employment” Under Federal Law

by Resnick Law Group, P.C.

In order for a worker to assert their rights under many employment statutes, they must establish that an employment relationship exists. This is often not as simple as it might seem. Multiple separate business entities are often present on a worksite, with a complicated web of legal and contractual relationships. Under a “joint employment” (JE) theory, a worker might have multiple employers for the purposes of certain legal claims. The U.S. Department of Labor’s Wage and Hour Division (WHD) recently issued guidance regarding joint employment under two federal statutes: the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq.; and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), 29 U.S.C. § 1801 et seq. Administrator’s Interpretation No. 2016-1 (“AI”) (WHD, Jan. 20, 2016).

What Is Joint Employment?

The WHD defines JE very broadly. A worker might be the employee of a business entity that has contracted to provide services to another business. The AI uses the example of a hotel that subcontracts functions like housekeeping or catering to another business. Housekeeping and catering workers, in this scenario, might wear hotel uniforms. To the public, they would appear to be hotel employees. The hotel has authority over them at its worksite, including hours worked. Applying a standard model of employment, a worker could only bring a claim under a wage and hour statute like the FLSA against the staffing agency. If the hotel is a joint employer, however, it and the staffing agency might be jointly and severally liable for the worker’s damages.

The AI begins by describing a wide range of “evolving employment scenarios” that have made JE much more common around the country. AI at 1. It states that JE plays a role in hundreds of WHD investigations every year. The purpose of the AI is to offer “additional guidance” because of the increase in JE. Id. It identifies two types of JE: horizontal joint employment (HJE) and vertical joint employment (VJE).
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April 1, 2016

New Jersey Appellate Court Invalidates Arbitration Clause in Employee Handbook

by Resnick Law Group, P.C.

New Jersey courts encourage parties to a dispute to make every reasonable effort to resolve their disagreements without resorting to litigation. Various forms of alternative dispute resolution (ADR) are available to assist litigants and would-be litigants. One type of ADR, known as arbitration, is somewhat similar to a trial, in that the parties present their cases to one or more arbitrators. Many employment contracts include clauses stating that any disputes must be submitted to arbitration, and that the arbitrator’s decision is binding on the parties. The New Jersey Appellate Division recently ruled that an arbitration clause in an employee handbook was not a mandatory arbitration clause, because the handbook also stated that it was not to be construed as a contract. Morgan v. Raymours Furniture Co., Inc., No. A-2830-14T2, slip op. (N.J. App., Jan. 7, 2016).

The New Jersey Arbitration Act, N.J. Rev. Stat. § 2A:23B-1 et seq., applies to arbitration agreements between employers and individual employees. An agreement to arbitrate must be part of an enforceable employment contract, or else it must be a separate contract between an employer and an employee.

A party to a dispute can ask a court to compel arbitration if another party is refusing to cooperate with a valid arbitration agreement. N.J. Rev. § 2A:23B-7. A court is required to enter an order confirming a binding arbitration award, N.J. Rev. § 2A:23B-22; unless it vacates the order due to fraud, partiality by an arbitrator, or certain other grounds, N.J. Rev. § 2A:23B-23; or it modifies the award due to an error by the arbitrator, N.J. Rev. § 2A:23B-20, 24.
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January 21, 2016

Proposed New York City Legislation Would Protect Independent Contractors from Wage Theft

by Resnick Law Group, P.C.

The term “wage theft” refers to a broad range of unlawful employment practices that deprive employees of wages they have earned. This might include under-reporting of hours worked, underpayment for reported hours, illegitimate paycheck withholdings, requiring employees to work extra hours without pay, or even outright theft of tips. Employment statutes at the federal and state levels, such as the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., and the New Jersey Wage and Hour Law (NJWHL), N.J. Rev. Stat. § 34:11-56a et seq., require employers to pay a minimum wage, pay extra for overtime, and keep detailed payroll records. None of these protections, however, applies to independent contractors, who are defined as independent of any one employer but are also just as susceptible to wage theft. A bill pending in the New York City Council would remedy this situation for independent contractors, including thousands of people who identify as freelancers, within the city.

The FLSA requires employers to maintain payroll records for all exempt and non-exempt employees. These records must include personal information like name and address, and non-exempt employee records must identify hourly rates, days worked, and hours worked each day, amounts owed for regular and overtime hours, itemized amounts deducted from paychecks, and dates and amounts of all paychecks. 29 C.F.R. §§ 516.2, 516.3. The U.S. Department of Labor’s Wage and Hour Division (WHD) enforces these regulations.

Payroll records assist regulators investigating alleged wage theft, as well as employees asserting claims for themselves. Employees can bring claims for underpayment or non-payment of wages under the minimum wage and overtime provisions of the FLSA and the NJWHL, and the WHD and New Jersey officials may also enforce these laws on workers’ behalf. In addition to civil liability for back wages and other damages, penalties under the FLSA include a fine of up to $10,000 and, for repeat offenders, imprisonment for up to six months. 29 U.S.C. §§ 215(a)(2), 216(a).

November 25, 2015

Pop Singer Sues Producer for Sexual Harassment, Other Claims; Producer Counter-Sues for Extortion

by Resnick Law Group, P.C.

The field of employment law extends beyond claims under statutes like the Fair Labor Standards Act or the New Jersey Wage and Hour Law. Employment law includes almost any legal issue involving an employer-employee relationship or almost any similar relationship. A pair of lawsuits between a pop singer and her producer demonstrate how “employment law” can encompass a wide range of issues. No express employer-employee relationship exists in the cases, but the singer’s lawsuit alleges that the producer has made it essentially impossible for her to work. The producer responded by filing his own lawsuit, alleging breach of contract and other claims.

The singer, who uses the stage name “Kesha” and previously used the name “Ke$ha,” has built a rather extensive body of work as a singer, songwriter, and performer. She released her first full-length album in 2010, but her career has been less active in recent years. She attributes that apparent slowdown in her career to a conflict with her producer, who does business under the name “Dr. Luke.”

In her complaint, Kesha states that she first signed a contract with Dr. Luke in 2005, when she was 18 years old. She alleges that he “has sexually, physically, verbally, and emotionally abused” her for the past decade, “to the point where [she] nearly lost her life.” Sebert v. Gottwald, et al., 1st am. complaint at 2 (Cal. Super. Ct., L.A. Co., Jun. 8, 2015). The allegations include “sexual advances” and “forc[ing her] to take drugs and alcohol in order to take advantage of her sexually while she was intoxicated.” Id. at 7. The “abuse and control” allegedly continued after she got her “big break” in 2010. Id. at 8. She also alleges numerous acts by the producer that have hindered her career in recent years, such as by preventing her from releasing albums or touring.

November 20, 2015

Non-Competition Agreements Under New Jersey Law

by Resnick Law Group, P.C.

The relationship between an employer and an employee is not nearly as simple as an exchange of labor for wages. It involves a complicated set of interests that frequently come into conflict with one another. Employees often gain valuable skills and information during the course of their employment with a particular business, and any business has an interest in preventing competition. Some employers require their employees to sign an agreement restricting their ability to work for a competitor during or after their term of employment. This could be a separate agreement or a clause in an employment contract. While this sort of agreement clearly benefits an employer, employees need to be able to earn a living in their field. New Jersey courts strictly limit the enforceability of non-competition agreements, sometimes called “non-competes.”

Known as a “restrictive covenant” in formal legal terms, a typical non-compete states that an employee may not accept employment from any competitor of the employer, typically within a defined geographic area and for a defined period of time. Employers may be able to obtain injunctive relief and monetary damages against a former employee who violates a non-compete. While non-competes have long appeared in employment contracts for jobs that involve high levels of education, training, or experience, they are reportedly becoming more common in a much wider range of jobs—including sandwich makers and summer camp counselors. As non-competes have become more common, so has litigation challenging their enforceability.

As of the summer of 2015, only four states have enacted statutes banning or severely limiting non-competes. See Cal. Bus. & Prof. Code § 16600; Haw. Rev. Stat. § 480-4(d) (as amended by H.B. 1090, eff. Jul. 1, 2015); N.D. Cent. Code § 9-08-06; 15 Okla. Stat § 15-219A. New Jersey has no statute dealing with the issue, but New Jersey courts have established a set of criteria for determining whether a non-compete is enforceable. Courts will only enforce a non-compete if, first and foremost, it limits the ban on competition to a reasonable geographic area for a reasonable time period. Community Hosp. Group, Inc. v. More, 869 A.2d 884 (N.J. 2005); Solari Industry v. Malady, 264 A.2d 53, 56 (N.J. 1970); Whitmyer Bros., Inc. v. Doyle, 274 A.2d 577 (1971).

October 27, 2015

New Jersey Appellate Court Rules on Enforceability of Employee Arbitration Agreements

by Resnick Law Group, P.C.

Arbitration clauses, by which the parties to a contract agree to submit disputes to an arbitrator or arbitration panel before filing suit, or in lieu of litigation entirely, are becoming increasingly common in both consumer and employment contracts. Arbitration is a form of alternative dispute resolution (ADR) that has some similarities to the litigation process, but it is conducted almost entirely outside the court system. The New Jersey Appellate Division recently issued a ruling that clarifies the requirements for the validity of an arbitration clause in an employment contract, holding that the clause must state a “clear and unmistakable” waiver of an employee’s right to a jury trial. Milloul v. Knight Capital Group, et al., No. A-1953-13T2, slip op. at 15 (N.J. App., Sep. 1, 2015).

New Jersey courts, as a matter of policy, encourage litigants and prospective litigants to use arbitration and other ADR methods. The New Jersey Arbitration Act, N.J. Rev. Stat. § 2A:23B-1 et seq., sets basic guidelines for arbitration. A neutral third party, known as an arbitrator, reviews both sides’ claims and defenses, and he or she may conduct a proceeding that is similar to a trial before rendering a decision. Arbitrators are often former judges with experience in conducting trials, as well as training and certification through various private arbitration organizations. State and federal laws do not require licensing for arbitrators the way they do for attorneys and other professionals, although courts may set their own criteria.

Some arbitration clauses state that the result of an arbitration is binding on the parties. In that case, a court’s authority over the matter is limited to ratifying the arbitration decision, unless it finds evidence of fraud, bias, or misconduct during the arbitration process. See N.J. Rev. Stat. §§ 2A:23B-22, 23, 24. When an arbitration clause appears in an employment contract, much as when one appears in a consumer contract, the employee is often not in a position to negotiate the details of the clause, due to both a lack of bargaining power and a lack of understanding of what the clause means. Arbitration clauses are the subject of much criticism, partly because of this disadvantage.

July 3, 2015

Airlines Operating in New York and New Jersey Face Criticism for Alleged Sex Discrimination and Other Labor Practices

by Resnick Law Group, P.C.

Three airlines are facing allegations of unfair labor practices and sex discrimination in several proceedings. A coalition of U.S.-based airlines and labor unions issued a report earlier this year claiming that the three airlines, which are based in the Persian Gulf region and fly out of airports in New York and New Jersey, engage in unfair competition and unlawful employment practices. The federal government is investigating similar claims. An agency of the United Nations (UN) recently ruled that one of the airlines engaged in ongoing sex discrimination against female employees. While these proceedings generally involve international law and treaties, they could still have an impact on workers who deal with these airlines in New Jersey and New York.

The U.S. began entering into agreements with other countries known as “Open Skies Partnerships” (OSPs) in 1992. It currently has agreements with more than 100 countries. These agreements, according to the U.S. Department of State, allow airlines to expand international service by “eliminating government interference” in various air transportation matters. Since different countries provide different levels of protection for business and labor interests, however, OSPs can result in unfair advantages for some airlines.

A coalition of three U.S. airlines and labor unions, known as the Partnership for Open & Fair Skies (POFS), issued a report in early 2015 criticizing three airlines: Qatar Airways, based in Doha, Qatar; Etihad Airways, based in Abu Dhabi, United Arab Emirates; and Emirates Airlines, based in Dubai, UAE. All three airlines fly out of JFK International Airport in New York City, and Etihad Airways reportedly sometimes flies out of New Jersey’s Newark Liberty International Airport.
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