The New Jersey Employment Law Firm Blog

June 26, 2018

New Jersey Bill Would Limit Enforceability of Noncompete Clauses and Other Restrictive Covenants in Employment Contracts

Businesses have an obligation to protect their assets and interests, but not in ways that damage their employees. New Jersey employers can protect their interests with covenants not to compete, also known as noncompete clauses, which limit employees’ ability to work for, or become, a competitor after their employment ends. A bill pending in the New Jersey Legislature would significantly restrict the enforceability of noncompete clauses. An Assembly committee reported favorably on A1769 in May 2018, while the Senate counterpart, S635, is still awaiting a committee hearing.

In order for a noncompete clause to be enforceable under current New Jersey employment law, it must be reasonably limited in both time and geographic scope. A noncompete clause that purported to prohibit a former employee from ever working for a competing company anywhere in New Jersey would be unenforceable on its face because it is not even close to being reasonably limited to the protection of the employer’s interests at the moment the employee ceases to be employed. If the noncompete clause only restricted employment with a competitor within, for example, five miles of the employer’s location for six months, it would probably be enforceable. Even then, however, noncompete clauses often require workers to relocate or change fields solely to avoid liability to their former employer.

A1769 and S635 state that noncompete clauses “driv[e] skilled workers to other jurisdictions” and “requir[e] businesses to solicit skilled workers from out-of-State.” The Assembly Labor Committee made some changes to the bill, but most provisions remain the same as in S635. The bill establishes a 10-part test that a noncompete clause would have to meet in order to be enforceable:
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June 15, 2018

New York Court Declines to Enforce Non-Compete Clause Against Former Employees

by Resnick Law Group, P.C.

Businesses entrust a considerable amount of information, along with the value represented by that information, to their employees. Employers have an interest in protecting their intellectual property, trade secrets, and other proprietary information. Employment laws in New Jersey and New York allow restrictive covenants in employment contracts that reasonably limit certain activities by former employees. From an employee’s point of view, the overzealous enforcement of restrictive covenants imposes an undue burden on their ability to make a living in their chosen field. Courts often give close scrutiny to employers’ efforts to enforce restrictive covenants. Last summer, a Manhattan federal court refused to enforce several non-compete clauses against a group of former employees in a New York employment dispute. In re Document Technologies Litigation (“DTL”), No. 17-cv-2405, op. (S.D.N.Y., Jul. 6, 2017).One common type of restrictive covenant used in employment agreements is the “covenant not to compete,” also known as a non-compete clause. An employer may worry that, when an employee leaves their job, they will take the knowledge and contacts they have gained and either go to work for a competitor or start their own competing business. In order to be enforceable, a non-compete clause must have a reasonable duration and a limited geographic scope. A non-compete clause stating that a former employee cannot work for any competing business anywhere in the state of New Jersey for a period of 10 years is unlikely to be enforceable, but one that restricts competition within 10 miles of the employer’s location for six months might be considered reasonable. Other common restrictive covenants include agreements not to solicit the employer’s clients or customers (non-solicitation), and agreements not to disclose certain information learned during an individual’s period of employment (non-disclosure).

The plaintiff in DTL “is a global provider of electronic discovery (‘e-discovery’) services for law firms and corporate legal departments,” with about 7,000 employees. DTL, op. at 2. The defendants include four former employees and the competing company that hired them after they quit their jobs with the plaintiff. The individual defendants signed employment agreements with the plaintiff that included one-year non-compete and non-solicitation clauses and a non-disclosure clause. According to the court’s opinion, the individual defendants had become “dissatisfied with their employment” with the plaintiff as early as 2014. Id. at 3. They resigned from the plaintiff and signed employment agreements with the competing company in January 2017, with the understanding that they would not begin work until the following year, after the non-compete had expired.

In February 2017, the individual defendants began work on a spreadsheet containing names and contact information of their clients at the plaintiff. They planned to meet to discuss sales strategies at the new employer, but a cease and desist letter from the plaintiff prevented this meeting from taking place. The plaintiff filed suit in April 2017 and sought a preliminary injunction enforcing the restrictive covenants.

June 11, 2018

Lawsuit Alleging Violations Under New Jersey Wage and Hour Law Gains Class Certification

by Resnick Law Group, P.C.

A group of baggage handlers employed by a major airline at Newark Liberty International Airport enjoyed a victory in their wage lawsuit recently, when a federal judge granted their request for class certification. Ferreras, et al. v. American Airlines, Inc., No. 2:16-cv-02427, opinion (D.N.J., Mar. 5, 2018). The plaintiffs allege that the defendant violated the New Jersey Wage and Hour Law (NJWHL) by requiring them to work during times when they were “off the clock.” The lawsuit originally asserted causes of action under both the NJWHL and the federal Fair Labor Standards Act (FLSA). Airline employees are specifically exempted from the FLSA’s minimum wage provisions, but they are covered by the NJWHL.

Both federal and state laws require employers to pay overtime compensation to non-exempt employees for work performed in excess of 40 hours in a week, at one-and-a-half times the regular hourly rate. See 29 U.S.C. § 207(a)(1), N.J. Rev. Stat. § 34:11-56a4. Ideally, employees submit time sheets showing the total amount of time worked, and for any time worked over 40 hours per week, the employer pays them time-and-a-half. In reality, however, some employers require “off the clock” work, meaning employees must perform job-related services during time that is not included on their time sheets. If the total compensation received does not reflect the total amount of time actually worked, the employer could be liable under the FLSA or the NJWHL.

A wide range of jobs are exempt from the FLSA’s minimum wage and overtime provisions. Perhaps the best-known of these exemptions is for those who work “in a bona fide executive, administrative, or professional capacity.” 29 U.S.C. § 213(a)(1). Some jobs are only exempt from the overtime requirement. This includes “any employee of a carrier by air subject to” federal legislation. Id. at § 213(b)(3). The NJWHL only exempts “employee[s] of a common carrier of passengers by motor bus.” N.J. Rev. Stat. § 34:11-56a4. While the statute does not define “motor bus,” it has been construed not to include airplanes.

June 6, 2018

Bill Pending in New Jersey Legislature Would Protect Employment of Medical Marijuana Patients

by Resnick Law Group, P.C.

New Jersey is among the majority of the states in the U.S. in allowing, under the supervision of a doctor, the possession and use of marijuana for medical purposes. The New Jersey Compassionate Use Medical Marijuana Act (CUMA), N.J. Rev. Stat. § 24:6I-1 et seq., enacted in 2009, defines permissible uses for the drug, establishes prescription guidelines for doctors, and creates a registry for patients. Federal law, however, still classifies marijuana as a Schedule I controlled substance, meaning that as far as the federal government is concerned, marijuana has “no currently accepted medical use in treatment.” 21 U.S.C. §§ 812 (b)(1)(B), (c)(I)(c)(10). Possession of marijuana with a valid prescription could therefore still be illegal under federal law. In an employment context, medical marijuana use that is entirely legal in New Jersey could lead to problems. Neither federal nor New Jersey employment discrimination laws prohibit adverse employment actions based on lawful medical marijuana use, but a bill currently pending in the New Jersey Assembly intends to change that.

The New Jersey Legislature, in enacting CUMA, found that “[m]odern medical research has discovered a beneficial use for marijuana in treating…certain debilitating medical conditions,” regardless of what federal law says. N.J. Rev. Stat. § 24:6I-2(a). It also found that state law enforcement officials are not responsible for enforcing federal laws and that “[c]ompassion dictates that “medical marijuana patients should be “protect[ed] from arrest, prosecution, property forfeiture, and criminal and other penalties.” Id. at § 24:6I-2(e). The provisions of CUMA mainly deal with registration of patients and certification of doctors.

The statute currently places no obligations or restrictions on employers. Section 16 of CUMA specifically states that employers are not required “to accommodate the medical use of marijuana in any workplace.” Id. at § 24:6I-14. The New Jersey Law Against Discrimination (NJLAD) does not include medical marijuana use as a protected category. See N.J. Rev. Stat. § 10:5-12(a). While it does include disability as a category, this is not likely to offer much protection for medical marijuana users. Not all conditions for which medical marijuana may be prescribed would qualify as disabilities under the NJLAD. Even if the underlying condition did qualify as a disability, it is conceivable that an employer could justify taking an adverse action because the employee’s conduct violates federal law, instead of because of the disability. This is where the proposed bill comes in.

May 25, 2018

After a New Jersey Lawsuit Addressed Wage Claims by NFL Cheerleaders, a New Complaint Alleges Gender Discrimination

by Resnick Law Group, P.C.

Professional football presents multiple legal issues related to employment. New Jersey officially has no team in the National Football League. That said, both of the New York-based NFL teams, the Giants and the Jets, have used stadiums in Northern New Jersey as their home fields since the early 1980s. Issues affecting players in the NFL, particularly the lasting effects of concussions and other injuries, have received media attention in recent years. NFL cheerleaders have also made a variety of complaints regarding wages, working conditions, and sexual harassment. In 2016, the New York Jets settled a New Jersey wage and hour lawsuit filed on behalf of a class of NFL cheerleaders. In 2018, a former cheerleader, who had recently been fired by another team, filed a sex discrimination complaint with the Equal Employment Opportunity Commission (EEOC).

While NFL players usually receive generous salaries under contracts with their teams, cheerleaders are often paid far less and do not have the protection of a defined term of employment. NFL cheerleaders have recently made several successful wage claims. A lawsuit filed in New Jersey in 2014, Krystal C. v. New York Jets LLC, alleged that the compensation received by members of the Jets’ cheerleading squad, when compared to the number of hours they were required to work, was often substantially less than minimum wage. Cheerleaders were paid $150 per game and $100 for appearances at team-sponsored events, but not for other required activities like practices and rehearsals. The parties entered into a settlement agreement in 2016, in which the team agreed to pay $325,000 to the class of plaintiffs.

Claims of sex discrimination involving NFL cheerleaders have not received as much attention in the court system as wage claims. Title VII of the Civil Rights Act of 1964 and the New Jersey Law Against Discrimination prohibit discrimination on the basis of sex. Cheerleading, as an occupation, presents some challenges in this area. Technical skill, including proficiency in dance, is not the only requirement for the job of cheerleader. To put it bluntly, cheerleaders are expected to meet a particular standard of physical attractiveness.

May 18, 2018

Sex Stereotyping Could Lead to Discrimination Against High-Achieving Female Job Applicants in New Jersey

by Resnick Law Group, P.C.

New Jersey gender discrimination statutes protect workers from discrimination on the basis of sex or gender. An important feature of many types of sex discrimination is “sex stereotyping,” meaning the use of stereotypes commonly associated with one gender to assess an employee’s performance or a job applicant’s suitability for a job. Many cases deal with sex stereotyping as a way of penalizing an employee who fails to embody outward stereotypes, such as a female employee who an employer thinks appears too masculine, or a male employee who appears feminine. A recent study addresses another aspect of sex stereotyping that could lead to workplace discrimination: the association of traits like confidence and intelligence with men, leading to more negative impressions of women possessing those same traits.

The U.S. Supreme Court first recognized sex stereotyping as a form of sex discrimination in Price Waterhouse v. Hopkins, 490 U.S. 228 (1989). The plaintiff in that case alleged that the defendant passed her over for partnership because she did not conform to various feminine stereotypes. While partners at the firm praised the plaintiff’s ability to do her job, they also stated that her “aggressiveness apparently spilled over into abrasiveness.” Id. at 234. These traits, however, were not necessarily viewed as negatives in male employees. The court held that employers may not “evaluate employees by assuming or insisting that they matched the stereotype associated with their group.” Id. at 251.

The Third Circuit addressed sex stereotyping of male employees in a case involving a self-described “effeminate man” who did not “fit in” with his “rough around the edges” male coworkers. Prowel v. Wise Business Forms, Inc., 579 F.3d 285, 287 (3rd Cir. 2009). He alleged a lengthy pattern of workplace harassment, including the use of nicknames like “Princess,” “Rosebud,” and others best not repeated. The defendant sought to dismiss the case on the ground that the plaintiff, who is gay, was actually making “an artfully pleaded claim of sexual orientation discrimination,” which the Third Circuit has found not to be covered under federal law. Id. at 291. See also Bibby v. Phila. Coca Cola Bottling Co., 260 F.3d 257 (3rd Cir. 2001). The court found, however, that the plaintiff’s claim centered on discrimination “because he did not conform to [the defendant’s] vision of how a man should look, speak, and act,” rather than his sexual orientation itself. Prowel at 292.

May 15, 2018

New Jersey Whistleblower Lawsuit Alleges Retaliation by Auto Maker

by Resnick Law Group, P.C.

Employees who report or object to practices that they believe to be illegal or contrary to public policy are commonly known as “whistleblowers.” Some of the biggest cases of fraud and corruption in recent history—both in government and in the private sector—have resulted from whistleblower reports. Employees and other insiders are often in the best position to provide evidence of wrongdoing, but doing so can pose great risk to their own jobs. Numerous laws therefore protect whistleblowers from retaliation, including New Jersey’s Conscientious Employee Protection Act (CEPA). A lawsuit filed in New Jersey alleges that an automobile manufacturer retaliated against the plaintiff, in violation of CEPA, after he reported concerns to several supervisors and managers about possibly deceptive practices. Williams v. Tesla, Inc. et al., No. BUR-L-000194-18, complaint (N.J. Super. Ct., Burlington Cty., Jan. 26, 2018); removed to No. 1:18-cv-04120 (D.N.J., Mar. 23, 2018).Under CEPA, employers may not retaliate against an employee who reports suspected illegal, fraudulent, or otherwise wrongful conduct to a supervisor or a public body, including law enforcement, regulatory agencies, and legislative bodies. Retaliation is also prohibited if an employee participates in a public investigation of allegedly fraudulent or illegal activity, such as by testifying or providing other information; or if an employee “objects to, or refuses to participate in” acts that the employee believes to be illegal or in violation of public policy. N.J. Rev. Stat. 34:19-3. Aggrieved employees can file suit, and remedies may include reinstatement, lost wages, attorney’s fees and costs, and injunctive relief. Id. at § 34:19-5.

The defendant in Williams manufactures electric-powered automobiles and sells them to the general public. The plaintiff states in his complaint that he began working for the defendant in 2011. He claims that he became aware that the defendant “fail[ed] to disclose to consumers high-dollar, pre-delivery damage repairs prior to any transaction with consumers.” Williams, complaint at 2. The plaintiff “believed this practice to be illegal and/or fraudulent.” Id. He also allegedly learned that the defendant would “receiv[e] vehicles designated as ‘lemons,’” a term referring to a car with irreparable defects. Id. The plaintiff claims that the defendant would sell these vehicles to consumers without disclosing their “lemon” status, as required by state law. See N.J. Rev. Stat. § 56:12-35.

The plaintiff alleges that he reported his concerns to his direct supervisor, a regional manager, and a vice president in late 2016 and early 2017. He was working as a regional manager at that time. The supervisor and the regional manager reported to a director identified in the plaintiff’s complaint. The plaintiff claims that this director demoted him from regional manager to service manager, allegedly telling the plaintiff that he had “a ‘brand’ at the company and that there was no place for” him there. Williams at 3. The director allegedly demoted him again in July 2017, and he claims that a regional manager terminated him in September of that year, offering only pretextual reasons.

May 3, 2018

Congress Passes Law Protecting Tipped Employees in New Jersey and Nationwide

by Resnick Law Group, P.C.

The Fair Labor Standards Act (FLSA) establishes a nationwide minimum wage, which has been $7.25 per hour since 2010. This does not apply to all workers, however. The minimum wage that employers of tipped employees, such as restaurant servers, must pay is considerably less than $7.25 per hour, with the understanding that tips received from customers will at least make up the difference. In late 2017, the U.S. Department of Labor (DOL) proposed a rule that would give employers more control over the distribution of tips, which met with considerable criticism. In March 2018, a member of the House of Representatives from Connecticut introduced the Tip Income Protection (TIP) Act of 2018. While this bill has not advanced, a similar measure made it into the Consolidated Appropriations Act (CAA) of 2018, which was signed into law on March 23. This effectively rendered the proposed DOL rule moot.

A “tipped employee,” under the FLSA, is someone who, in the course of their job, “customarily and regularly receives more than $30 a month in tips.” 29 U.S.C. § 203(t). Employers are obligated to pay tipped employees a base rate of $2.13 per hour. Id. at § 203(m)(1), 29 C.F.R. § 531.50(a). If the amount of tips received by a tipped employee, when added to this base income amount, is less than $7.25 per hour, the employer must pay the employee the difference. 29 U.S.C. § 203(m)(2). The statute allows tipped employees to pool their tips, but employers may not require them to do so. A New Jersey wage and hour lawyer can help you bring a claim if your employer instituted an improper tip pooling program.

In December 2017, the DOL published a proposed rule that would remove restrictions on employers’ control over tips paid by customers, essentially allowing them to require tip pooling. 82 Fed. Reg. 57395 (Dec. 5, 2017). The DOL claimed that this would allow a more fair allocation of tip income among employees, including cooks and dishwashers who do not ordinarily receive tip income. Since the proposed rule would only apply to employers that already pay tipped employees at or above the minimum wage, critics alleged that the rule would allow employers to pocket any tip income above the minimum wage threshold. The proposed rule received more than 218,000 comments from the public.

April 27, 2018

Workers Claim Disability Discrimination Based on Sleep Apnea

by Resnick Law Group, P.C.

Employment laws in New Jersey prohibit discrimination based on disability. Most employment statutes include an exception for situations in which a particular individual’s specific disability prevents them from performing the ordinary duties of a particular job, even with reasonable accommodations by the employer. Several recent lawsuits claiming disability discrimination based on the medical condition known as sleep apnea have raised questions about whether the condition falls under this exception. Different courts have reached different conclusions about whether sleep apnea constitutes a “disability” under employment anti-discrimination laws.The New Jersey Law Against Discrimination (NJLAD) offers a broad definition of “disability,” which includes both mental and physical conditions that impede “normal” functioning. N.J. Rev. Stat. § 10:5-5(q). A “physical disability” or “infirmity…which is caused by…illness” qualifies as a disability under the NJLAD. Id. The definition provided by the federal Americans with Disabilities Act (ADA) focuses on whether a condition “substantially limits one or more major life activities.” 42 U.S.C. § 12102(1)(A).

Both statutes bar employers from denying employment to a person, or firing them, on the basis of a disability. The NJLAD provides an exception in New Jersey disability discrimination cases in which an employer can “clearly show[] that a person’s disability would prevent such person from performing a particular job.” N.J. Rev. Stat. § 10:5:29.1. The ADA includes this exception in its prohibition on discrimination by specifying that it only applies to “qualified individuals,” defined as people who “can perform the essential functions of the employment position” that they have or want. 42 U.S.C. §§ 12111(8), 12112(a).

Sleep apnea is a condition in which a person’s upper airway becomes obstructed during sleep, interfering with sleep cycles. The condition usually causes snoring, but the more important effect is a lack of sleep caused by repeatedly waking up due to obstructed breathing. Left untreated, sleep apnea can cause drowsiness and fatigue in the short term. In the long term, it can contribute to a variety of serious of serious conditions, including heart disease and cancer. The question in an employment discrimination context is whether it interferes with one’s ability to do their job. Many sleep apnea patients can function without much difficulty if they receive treatment, but symptoms of the condition—specifically, falling asleep on the job—have reportedly been connected to some serious public safety risks.

April 26, 2018

New Jersey Judge Rules for Former Employee in Dispute Over Noncompete Clause

by Resnick Law Group, P.C.

When an employee ceases to work for an employer, many employers will want to protect their investment in that employee in any way they can. Nondisclosure agreements and trade secret laws cover confidential and proprietary information that employees might obtain during their employment. Employees who bring a particular set of skills or knowledge, and who might obtain additional valuable skills through their work for the employer, could potentially have a negative impact on the employer’s business if they took that knowledge to a competitor. Some employers therefore try to protect themselves with noncompete agreements, which state that the employee may not accept employment with a competitor after they leave the employer. New Jersey employment laws only allow enforcement of noncompete agreements when they have strict limitations, such as a limited geographic area and a limited duration. A New Jersey Superior Court judge in Bergen County recently ruled in favor of a former employee who was seeking to invalidate a noncompete clause. Abuaysha v. Shapiro Spa, No. L-000988-18, complaint (N.J. Super. Ct., Bergen Cty., Feb. 1, 2018)

Injunctive relief is one of the main methods of enforcing a noncompete agreement. Employers often file suit against a former employee and seek a preliminary injunction, but it is also possible for a former employee to file suit first. In order to obtain a temporary injunction in New Jersey, a movant must establish four elements: (1) “irreparable harm” without the injunction, (2) a settled legal right underlying the movant’s claim, (3), “a reasonable probability of ultimate success on the merits,” and (4) a balance of hardships faced by the parties that favors granting the injunction. Crowe v. De Gioia, 90 N.J. 126, 132-34 (1982). In the case of noncompete agreements, courts must look closely at the second and third parts of this test.

New Jersey courts use the “Solari/Whitmyer test,” named for two New Jersey Supreme Court decisions, to determine whether a noncompete agreement is enforceable. Solari Industries, Inc. v. Malady, 55 N.J. 571 (1970); Whitmyer Bros., Inc. v. Doyle, 58 N.J. 25 (1971). This test has three parts: (1) protection of legitimate employer interests, (2) no undue hardship on the employee, and (3) no injury to the public. When determining whether a noncompete agreement protects the employer’s interests, the court has noted that an “employer has no legitimate interest in preventing competition as such.” Whitmyer, 58 N.J. at 33. Examples of legitimate interests include protection of confidential information, trade secrets, and customer relationships. Id. The geographic limits, duration, and other restrictions in a noncompete agreement must be “no broader than necessary to protect the employer’s interests.” Cmty. Hosp. Grp., Inc. v. More, 183 N.J. 36, 58-59 (2005).