The New Jersey Employment Law Firm Blog

March 10, 2017

Federal Trade Secrets Law Grants Immunity to Employees Who Act as Whistleblowers

The balance of power between an employee and an employer is usually very uneven in favor of the employer. At times, laws intended to help businesses can inadvertently harm employees. The Defend Trade Secrets Act (DTSA) of 2016 gives businesses important tools for protecting their proprietary information, but it could also give employers an additional advantage over their workers. Congress therefore added provisions to the DTSA granting immunity to whistleblowers and others reporting suspected legal violations. A court recently ruled on an employee’s immunity claim, possibly for the first time since the law’s passage.

The DTSA amends federal criminal laws dealing with the theft of trade secrets, 18 U.S.C. § 1831 et seq., to allow the owners of trade secrets to file civil lawsuits for the misappropriation of trade secrets. The law defines “trade secret” broadly to include both tangible and intangible information that the owner “has taken reasonable measures to keep…secret” and that “derives independent economic value” from being kept secret. Id. at § 1839(3). The intentional theft of a trade secret may be prosecuted as a felony. The owner of a trade secret can sue in federal court for injunctive relief and other damages, including “the seizure of property necessary to prevent the propagation or dissemination of the trade secret.” Id. at § 1836(b)(2)(A)(i).

The unauthorized disclosure of a trade secret is not always based on criminal or otherwise wrongful intent. Sometimes, disclosure might be necessary to prevent even greater legal violations. People who have access to trade secrets and disclose them to government officials or others, with the intent of reporting suspected unlawful activity, are commonly known as “whistleblowers.”

March 7, 2017

How Federal Anti-Hacking Laws Could Affect Employment Disputes in New Jersey and Elsewhere

by Resnick Law Group, P.C.

The U.S. Congress has enacted several statutes addressing unauthorized access to computer systems, commonly known as “hacking.” These statutes include both civil and criminal components. The Stored Communications Act (SCA), 18 U.S.C. § 2701 et seq., deals with digital information stored by third parties, usually internet service providers (ISPs). It comes into play when someone accesses another person’s email or other stored communications data without authorization. The statute allows civil claims in certain cases. 18 U.S.C. § 2707. When an employer accesses an employee’s online information without permission, it could be liable to the employee for damages under the SCA.

Third-party ISPs include companies that provide internet access, email servers, and social media services. The use of a third-party ISP involves voluntarily entrusting personal information to someone else’s care. The SCA seeks to protect people’s privacy rights with regard to this information against both the government and private individuals and entities. The Fourth Amendment to the U.S. Constitution guarantees people’s right to “be secure in their…papers and effects,” but voluntarily turning materials over to a third party can negate the Fourth Amendment’s protection. The SCA extends Fourth Amendment-like protections against government access to stored communications. Since non-government actors are not constrained by the Fourth Amendment, the SCA also prohibits unauthorized access by private actors.

The same principle that excludes voluntarily disclosed information from Fourth Amendment protection also applies to the SCA. The “authorized user exception” states that SCA protection does not apply to “conduct authorized…by a user of that service with respect to a communication of or intended for that user.” 18 U.S.C. § 2701(c).

February 26, 2017

Court Rules Against “Persuader Rule” Regarding Union Organizing Rights

by Resnick Law Group, P.C.

The U.S. Department of Labor (DOL) issued a final rule, known as the “persuader rule,” in early 2016. The rule dealt with actions by employers, both direct and indirect, “to persuade employees about how to exercise their rights to union representation and collective bargaining.” 81 Fed. Reg. 15923, 15924 (Mar. 24, 2016). It marked a significant change from the agency’s previous interpretation of an employer’s obligation to disclose communications related to labor organizing activity. A court permanently enjoined implementation of the new rule in November, however, finding that the DOL exceeded its rulemaking authority. The old version of the rule, based on the old interpretation of the statute, remains in effect.

The Labor Management Reporting and Disclosure Act (LMRDA) of 1959, 29 U.S.C. § 401 et seq., requires employers to disclose various payments and communications made to labor organizations, employees, and others with regard to union organizing activities. For example, an employer must disclose payments made to an employee or a group of employees to induce them “to persuade other employees” with regard to “the right to organize and bargain collectively through representatives of their own choosing.” Id. at § 433(a)(2). The statute might also require the disclosure of communications involving attorneys or consultants specifically involved in advising an employer about ongoing labor negotiations.

Section 203(c) of the LMRDA, id. at § 433(c), exempts certain communications from the disclosure requirement. The persuader rule determines how far this exemption applies. Under the previous interpretation of the persuader rule, disclosure was only required if a consultant communicated directly with employees. The DOL concluded that this “left a broad category of persuader activities unreported” and therefore “den[ied] employees important information” they might need to make an informed decision about union representation. 81 Fed. Reg. at 15924. It modified the persuader rule to include the disclosure of both “direct” and “indirect” activities aimed at “persuading” employees. See 29 C.F.R. § 406.2(a).

February 16, 2017

EEOC Issues New Guidelines on National Origin Discrimination in Employment

by Resnick Law Group, P.C.

Title VII of the Civil Rights Act of 1964 prohibits employment discrimination on the basis of five distinct factors: sex, religion, race, color, and national origin. The “national origin” category can apply to individuals who are not originally from the United States and also to people who are perceived to have a particular national origin. Title VII enforcement is the responsibility of the Equal Employment Opportunity Commission (EEOC). In late 2016, the EEOC issued new guidelines for enforcement of Title VII’s national origin discrimination provisions. These guidelines help the agency identify its priorities and provide examples of situations that constitute unlawful employment practices.

National origin discrimination under Title VII should not be confused with discrimination on the basis of citizenship or immigration status, also known as “alienage” discrimination. The Immigration Reform and Control Act (IRCA) of 1986 states that employers cannot discriminate against workers because of alienage, provided that the employees in question have work authorization issued by the federal government. The U.S. Supreme Court has held that discrimination based solely on alienage is not actionable under Title VII. Espinoza v. Farah Mfg. Co., Inc., 414 U.S. 86 (1973); see also Cortezano v. Salin Bank & Trust Co., 680 F.3d 936 (7th Cir. 2012). It is possible for a case to involve violations of both statutes, but the responsibility for enforcing these laws is placed in different agencies. An office within the Department of Justice enforces these provisions of IRCA.

The EEOC’s definition of national origin discrimination includes adverse employment decisions based on a person’s place of origin, or that of the person’s ancestors, or because the person has “physical, cultural or linguistic characteristics of a national origin group.” 29 C.F.R. § 1606.1. This applies to currently existing countries, such as Canada, Mexico, or China, or countries that formerly existed, like Yugoslavia. It can also apply to regions that have a distinct identity but are not “countries” in the traditional sense—the EEOC gives the examples of Kurdistan and Acadia.

February 9, 2017

New Federal Overtime Rule Blocked by Judge, Faces Uncertain Future

by Resnick Law Group, P.C.

In May 2016, the U.S. Department of Labor (DOL) issued a new rule that reportedly would have extended overtime pay for millions of workers around the country. Twenty-one U.S. states, led by Nevada, filed suit against the DOL in September to challenge the rule, alleging that it violated provisions of the Fair Labor Standards Act (FLSA), the Administrative Procedures Act (APA), and the U.S. Constitution. State of Nevada et al. v. U.S. Dep’t of Labor et al., No. 4:16-cv-00731, complaint (E.D. Tex., Sep. 20, 2016). A federal judge granted an injunction against the rule in November, temporarily halting its implementation nationwide. An appeal is still pending in the Fifth Circuit as of late January, but a new administration has also moved into the White House. It is not at all clear whether the DOL will continue to pursue the appeal or even defend the rule in the remainder of the trial court proceedings.

The FLSA establishes a national minimum wage and requires employers to pay nonexempt workers overtime pay at a rate of one-and-a-half times their regular rate of pay. Certain employees are exempt from the FLSA’s overtime provisions, including workers in executive, administrative, and professional positions. The DOL refers to these as EAP exemptions or white-collar exemptions. See 29 U.S.C. § 213(a)(1), 29 C.F.R. Part 541. The exemptions apply to employees who work in these fields and earn income above a certain threshold.

The new rule would raise the threshold from the current $455 per week for a full-time employee to $913 per week, or from $23,660 to $47,476 per year. 81 Fed. Reg. 32391, 32393 (May 23, 2016). The DOL estimated that this would affect about 4.2 million people nationwide. The rule was scheduled to take effect on December 1, 2016, but a lawsuit and an injunction changed that.

February 2, 2017

Federal Judge Addresses Injury-in-Fact in New Jersey Employment Class Action

by Resnick Law Group, P.C.

A plaintiff in a civil lawsuit must establish that they have standing, meaning that they are legally eligible to bring this particular claim against this particular defendant. The method of establishing standing varies considerably among different types of claims. In many cases, a plaintiff must demonstrate that they have suffered actual harm, known as an “injury-in-fact.” The U.S. Supreme Court recently established an injury-in-fact requirement for claims under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., which can include employment-related claims. In a putative class action brought by a group of employees under the FCRA, a New Jersey judge denied class certification on the ground that the plaintiffs had not alleged an injury-in-fact but gave the plaintiffs the opportunity to amend their complaint. In re Michael’s Stores, Inc. Fair Credit Reporting Act (FCRA) Litigation, Nos. 14-7563, 15-2547, 15-5504, opinion (D.N.J., Jan. 24, 2017).

The FCRA regulates the collection, distribution, and use of consumer credit information by credit reporting agencies, employers, and others. Since many employers want to review credit history and related information when making employment decisions, the FCRA regulates how employers may obtain that information. In addition to getting consent from each employee or job applicant, employers make specific disclosures to those individuals about how they intend to use the information. The disclosure must be “clear and conspicuous” and “in writing,” and it must be presented to the individual “in a document that consists solely of the disclosure.” 15 U.S.C. § 1681b(b)(2)(A).

The Supreme Court ruled on the FCRA’s injury-in-fact requirement in Spokeo, Inc. v. Robins, 578 U.S. ___ (2016). The defendant in that case operates a search engine that aggregates personal information from a variety of sources, allowing users to gather information about specific individuals. The plaintiff filed suit under the FCRA after finding that the site created a profile page for him that contained inaccurate information. He alleged that the defendant violated his rights under the FCRA by mishandling his personal credit information. The Supreme Court ruled that the plaintiff had not demonstrated an injury-in-fact, noting three required elements: (1) “an invasion of a legally protected interest” that is both (2) “concrete and particularized” and (3) “actual or imminent, not conjectural or hypothetical.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).

January 27, 2017

Sex Discrimination Lawsuit Describes “Boys’ Club” Atmosphere, Alleges Attempted Securities Fraud in Major Bank

by Resnick Law Group, P.C.

Federal and state employment statutes protect employees from discrimination on the basis of sex and other protected traits, and they also prohibit retaliation for reporting alleged violations of these laws. Protections against retaliation also extend to workers who act as “whistleblowers” by reporting suspected financial crimes. A lawsuit in New York City combines allegations of sex discrimination with whistleblower retaliation claims under two major financial laws. The plaintiff’s complaint describes an alleged culture of unequal treatment based on gender, including unequal pay and job responsibilities. She further alleges that a supervisor harassed her to obtain information to use in insider trading, and the defendant terminated her in retaliation for reporting the matter. The lawsuit asserts causes of action under state and federal anti-discrimination laws and federal financial statutes.

The plaintiff asserts sex discrimination, harassment, and retaliation claims under a New York state law, which is similar to the New Jersey Law Against Discrimination. N.J. Rev. Stat. § 10:5-12(a). She is also alleging gender-based pay discrimination under the Equal Pay Act of 1963, 29 U.S.C. § 206(d). She has reportedly filed a claim with the Equal Employment Opportunity Commission, and she will add claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2(a), once the administrative process is complete.

The plaintiff is also claiming violations of the whistleblower protection provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, 15 U.S.C. § 78u- 6(h)(1); and the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A. Employers that are subject to these laws cannot terminate or otherwise retaliate against an employee for reporting alleged financial fraud or impropriety, for participating in an investigation of alleged financial impropriety, or for disclosing information to a government agency in the manner required by law. Both statutes allow private causes of action by aggrieved employees.

January 20, 2017

New Jersey Class Representatives in Multidistrict Employee Misclassification Lawsuit Object to Proposed Settlement

by Resnick Law Group, P.C.

Protections enjoyed by New Jersey employees under federal, state, and, in many areas, local employment statutes include minimum wage, overtime pay, and prohibitions on discrimination and workplace harassment. Legal protections for independent contractors, on the other hand, are mostly limited to the provisions of the contract between that individual and the employer. Wrongfully classifying an employee as an independent contractor violates federal law and can lead to damages for the misclassified worker. The exact definition of an “employee” varies from one state to another. This can complicate claims that cover multiple states. The New Jersey class representatives in an ongoing misclassification lawsuit have formally objected to a proposed settlement, arguing that it fails to account for specific New Jersey statutes and caselaw. In re FedEx Ground Package System, Inc. Emp’t Practices Litig., No. 3:05-cv-00595, objection (N.D. Ind., Nov. 14, 2016), see also No. 3:05-md-00527 (MDL).

The federal Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., sets minimum wage and overtime standards, and it also allows civil claims for misclassification. It defines an “employee,” with some exceptions, as “any individual employed by an employer.” Id. at § 203(e)(1). Since this definition is not especially helpful in adjudicating misclassification claims, courts look at state law to determine whether a claimant is an employee or an independent contractor.

New Jersey defines “employee” very broadly in the context of misclassification laws, thanks to a recent New Jersey Supreme Court ruling, Hargrove v. Sleepy’s, LLC, 106 A.3d 449 (N.J. 2015). The court adopted the “ABC test,” which is based on provisions found in the New Jersey Unemployment Compensation Act. An individual is an “employee” under the ABC test unless they meet three criteria: (1) they are “free from control or direction over the performance of” their jobs by the employer; (2) their job is either “outside the [employer’s] usual course of…business” or “performed outside of all the [employer’s] places of business”; and (3) the individual’s job is part of their “independently established trade, occupation, profession or business.” N.J.S.A. §§ 43:21-19(i)(6)(A) – (C).

January 6, 2017

EEOC Settles Genetic Discrimination Lawsuit for $125,000

by Resnick Law Group, P.C.

Federal law protects employees against discrimination based on a wide and expanding range of factors. Congress enacted the Genetic Information Non-Discrimination Act (GINA), 42 U.S.C. § 2000ff et seq., in 2008 to protect employee privacy with regard to genetic information and to prohibit discrimination on the basis of such information. The Equal Employment Opportunity Commission (EEOC) recently announced that it had settled a lawsuit against an employer that allegedly violated GINA by requesting family medical history from employees and job applicants. EEOC v. BNV Home Care Agency, Inc., No. 1:14-cv-05441, complaint (E.D.N.Y., Sep. 17, 2014). In a consent decree filed in October 2016, the employer agreed to pay $125,000 in damages, along with other injunctive and equitable relief.

GINA defines “genetic information” broadly to include the results of an individual’s genetic tests and those of the individual’s family members, as well as “the manifestation of a disease or disorder” in members of that individual’s family. 42 U.S.C. § 2000ff(4)(A). “Family members” include first-degree relatives, including “parents, siblings, and children,” through fourth-degree relatives, including great-great-grandparents and -grandchildren. Id. at § 2000ff(3), 29 C.F.R. § 1635.3(a)(2). Genetic testing includes screening for various genetic abnormalities or genetic variants indicating a predisposition to certain diseases, such as “the BRCA1 or BRCA2 variant evidencing a predisposition to breast cancer.” 29 C.F.R. § 1635.2(f)(2)(i).

Employers may not discriminate in hiring, firing, compensation, or other features of employment on the basis of a person’s genetic information. 42 U.S.C. § 2000ff-1(a). For example, an employer violates GINA if they refuse to hire someone based on genetic tests showing a predisposition to cancer. Employers are also prohibited from “request[ing], requir[ing], or purchas[ing] genetic information” on an employee or an employee’s family member(s), with some exceptions. Id. at § 2000ff-1(b). The EEOC and aggrieved individuals may bring claims for alleged violations of GINA in the manner prescribed under Title VII of the Civil Rights Act of 1964. Id. at §§ 2000ff-6, 2000e-5(f).

December 23, 2016

White House Calls on States to Limit the Scope of Non-Compete Agreements

by Resnick Law Group, P.C.

The American economy is largely based on the principle that competition is beneficial to everyone. No system of laws is ever perfect, of course, and ours requires regular revisions to balance different interests, such as an employer’s interest in retaining its investment in an employee and an employee’s interest in choosing where—and in which field—to work. Non-compete agreements (NCAs) limit an individual’s ability, upon ceasing to work for an employer, to work in a similar job. This obviously protects the employer’s interest but can be quite damaging to the former employee. Several states have outlawed NCAs entirely, while most states, including New Jersey, have established strict criteria for their enforcement. The White House issued a call to state governments in October 2016 to restrict the enforceability of NCAs even further, in ways that benefit employees.

Laws governing the enforceability of NCAs differ considerably from state to state. Some states have enacted legislation, while others rely on court rulings based on statutory or common law. In a very general sense, NCAs prohibit an employee from working for a competitor or starting a competing business while working for the employer or after their employment ends. An open-ended NCA is almost universally unenforceable, but many states allow NCAs that are limited in time and geographic scope. For example, an NCA that bars a former employee from working for a competitor within 20 miles of the employer’s location, for a period of six months after the end of their employment, is likely to be enforceable in most jurisdictions.

At least four states, California, Hawaii, North Dakota, and Oklahoma, have banned the use of NCAs in employment contracts almost entirely. Under New Jersey law, NCAs are only enforceable if they meet a three-prong test called the Solari/Whitmyer test. The NCA must be “necessary to protect the employer’s legitimate interests,” it cannot create an “undue hardship” for the employee, and it cannot be “injurious to the public.” Community Hosp. Group, Inc. v. More, 869 A.2d 884, 897 (N.J. 2005); citing Solari Industry v. Malady, 264 A.2d 53, 56 (N.J. 1970); and Whitmyer Bros., Inc. v. Doyle, 274 A.2d 577 (N.J. 1971).