Articles Posted in Severance Negotiations

The NJ Appellate Division has ruled, once again that it will not require enforcement of an arbitration clause absent a showing that the clause constituted a clear waiver by the plaintiff of his or her right to a jury trial.

In Anthony v. Eleison Pharmaceuticals LLC, Docket No. A-932-15T4 (App. Div. July 18, 2016), a former executive filed a lawsuit against his former employer under the New Jersey Wage Payment Act, alleging that the company failed to pay him wages that were due to him following the termination of his employment. The lawsuit also included breach of contract claims. The employer filed a motion to dismiss the lawsuit and order arbitration pursuant to a clause in the employment agreement which stated, among other things, that “[t]he parties agree that should any dispute arise out of this Agreement, a phased dispute resolution process shall resolve the dispute,” ending in binding arbitration. The trial court granted the employer’s motion, stating that the arbitration clause constituted a valid waiver by the employee of his right to pursue his claims in a judicial forum.

The lower court’s ruling in Anthony was clearly in error. The New Jersey Supreme Court ruled in Atalese v. U.S. Legal Services Group LP, 219 N.J. 430 (2014), that NJ courts will not enforce arbitration clauses unless they contain explicit language informing the employee that he or she was giving up the right to go to court and have a jury trial. The arbitration clause at issue in Anthony clearly did not contain such language. Accordingly, the Appellate Division reversed the lower court and the case will proceed to trial.

A recent case from the United States Court of Appeals for the Eighth Circuit makes clear that an employer will lose its contractual right to arbitration if it proceeds in litigation for eight months.  In Messing v. North Central Distributing Inc., the plaintiff, a former Vice President, brought a breach of contract and wrongful termination claim against his former employer.  The company actively engaged in defending the case in the litigation, including filing an answer with 24 affirmative defenses, removing the case to federal court, attending discovery conferences and setting discovery schedules, filing a venue transfer motion, and agreeing to a trial date.  Eight months into the litigation, the employer sought to compel arbitration under the Vice President’s employment contract.  The District Court denied the employer’s motion to compel arbitration, reasoning that the company had waived its right to arbitrate since 1) it knew of the existing right to arbitration, and 2) it had prejudiced the employee by acting inconsistently with that right.
On appeal, the Eighth Circuit upheld the lower court’s ruling, stating that the employer had failed to do “all it could reasonably have been expected to do” to assert its right to arbitration earlier.  Indeed, the employer’s answer did not plead the arbitration clause in its affirmative defenses, nor mention it at the pretrial scheduling conference, nor raise the issue in its motion to transfer venue.  Moreover, the Court credited the lower court’s finding that the employer’s actions had caused the employee prejudice, in that he had been forced to expend considerable time and money litigating the matter in federal court.
While there is a long line of cases which favor arbitration as an alternative way to resolve disputes between parties, employers and employees alike should be aware that a contractual right to arbitrate claims must be asserted in a timely way by the party seeking arbitration.  This “use it or lose it” principle is sometimes an effective way to defeat an otherwise unassailable arbitration provision.

As reported by NJ.com, Governor Chris Christie has vetoed SB 992, a bill which sought to bar gender-based pay discrimination.  A full text of the proposed legislation may be read here.  The bill would have amended the New Jersey Law Against Discrimination by adding language prohibiting an employer from paying one gender less than the other for “substantially similar” work.  Employers would be permitted to pay workers of different sexes doing similar jobs in an unequal manner only if they could demonstrate that the unequal treatment was justified based on factors such as training, education, experience, or job performance.  The bill also contained a triple damages provision for employees who won cases brought under the law, and a transparency provision mandating that businesses who contract with the State file equal pay information to ensure compliance with the statute.

Governor Christie, in his veto message, criticized the law as “depart[ing] significantly from well-established law” and stated that the law would make New Jersey “very business unfriendly.”  The bill’s main sponsor, Sen. Loretta Weinberg (D-Bergen), has signaled that she may attempt a veto override, in that the bill passed by decisive margins in both houses — 28-4 in the Senate and 54-14-6 in the Assembly.

Pay equity is an important issue to New Jersey’s professional workforce.  There is no question that women and men should be paid the same for the same or similar work.  There is also no question that this bill would have helped New Jersey to achieve its goal of eradicating discrimination from the workplace.

 

As reported today by CNN, United Airlines CEO Jeff Smisek received a severance package of over $36 million upon resigning from the company last September, amid a federal investigation into corruption involving the Port Authority of New York and New Jersey.  The severance package included a $4.9 million dollar payout, a $1.7 million bonus, $29 million in equity-based awards, lifetime flight and airport parking privileges, and life insurance and health benefits until he qualifies for Medicare.

Executive severance packages like the one described above have come under scrutiny by federal and state regulators, shareholders, labor unions, and consumers.  Not only do such excessive severance packages have the potential to be challenged in the courts, and cause public outcry, they are often ineffective in obtaining the highest-quality executives.  Indeed, as one corporate researcher noted, when a company guarantees its executives large severance packages even when they perform poorly (or, as in the case of Mr. Smisek, subject the company to a federal corruption probe), it may undermine the executives’ desire to build long-term value for shareholders.  “They don’t care if they are fired or not.”

In an era of high airline tickets prices, rising baggage and other fees, and smaller airplane seat sizes, United’s decision to honor this severance package is unsettling.  United’s Board of Directors has the right to force Mr. Smisek to repay roughly $10.1 million of his severance pay.  Doing so may alleviate some of the negative press regarding this issue going forward.

 

The New York Times reported today about a study recently undertaken by Rutgers and Syracuse universities.  Researchers sent resumes and cover letters on behalf of fictitious applicants for thousands of accounting jobs.  Disappointingly, they found that employers expressed interest in candidates who disclosed a disability about 26 percent less frequently than in candidates who did not.  This could explain the low national employment rate for persons with disabilities.

The researchers created two separate resumes: one for a highly qualified candidate with six years of experience, and one for a novice candidate about one year out of college.  For each resume, they composed three different cover letters: one for a candidate with no disability, one for a candidate who disclosed a spinal cord injury in the letter, and one for a candidate who disclosed having Asperger’s syndrome, a disorder that can make social interactions difficult.

Interestingly, employers had less interest in interviewing the experienced candidate that was disabled than the disabled candidate just out of school. Employers were about 34 percent less likely to show interest in an experienced disabled candidate, but only about 15 percent less likely to express interest in a disabled novice candidate.  The researchers speculated that the steeper drop-off in interested for experienced disabled candidates arose because more experienced workers represent a larger investment for employers, who must typically pay such workers higher salaries and assume the employment relationship will last longer.  Also, experienced workers are also more likely to interact with clients on a regular basis so employers may believe that hiring these workers are riskier.

According to the Insurance Journal, retaliation claims by employees were the most frequently asserted type of employment claim in fiscal year 2014.  The data comes from the Equal Employment Opportunity Commission, the federal agency which investigates claims of employment discrimination.  In fiscal year 2014, the percentage of claims which asserted that an employer retaliated against an employee for participating in a complaint of discrimination reached an all-time high of 42.8%.  Next on the list were, in order, race, sex (including pregnancy and sexual harassment), disability age, national origin, religion, color, equal pay act, and genetic information.

The EEOC data shows that employment discrimination claims in general are decreasing nationwide.  I see this as a positive development because it indicates that, at least to some degree, employers appear to be getting the message that discrimination is wrong, both from a moral and an economic perspective.  However, the rise in retaliation claims is troubling.  This could indicate that the reason why discrimination claims are in decline is not because there is less discrimination going on, but because employees are fearful of retaliation if they report discrimination.  We would like to see a decline in discrimination coupled with a decline in retaliation.

In a recent decision of the New Jersey Superior Court, Appellate Division, the court reversed a grant of summary judgment in favor of the employer, PSE&G.  The employee, a female manager in her forties, had made numerous complaints of a “glass ceiling” (my words) at PSE&G to her supervisors and Human Resources over a number of years.  According to the decision, the employee alleged that her supervisor finally had enough of her complaints and began “investigating” her for violations of the company’s expense reimbursement policy.  PSE&G then fired the employee based on its finding that she had, it alleged, violated the policy in certain respects.  The employer filed a motion for summary judgment, arguing that the termination was proper.  The employee argued that the investigation and firing were pretextual; in other words, that these actions were retaliatory and false.  The trial judge agreed with the employer, and the case was dismissed.

The appellate court reversed this decision and reinstated the complaint.  The court noted that the employee had provided evidence that at least one male peer had also “misused” his company expense accounts, without repercussion.  The company argued that this male peer had permission to do so, and that the female employee did not.  However, since questions of fact like this can only be decided by a jury, and not by a judge, the appellate court ruled in favor of the employee.

The takeaway from this case is that discrimination and retaliation claims can rise and fall upon one crucial detail.  If you have experienced discrimination or retaliation at work, you need a smart employment attorney who can identify these crucial facts and use them to their advantage.

Four more New Jersey’s cities, Paterson, East Orange, Passaic, and Irvington, have adopted paid sick leave ordinances similar to the one which was passed in Jersey City late last year. These laws make it mandatory for employers with more than 10 employees to pay employees for up to five sick days per year. The state legislature is currently considering a bill which would extend paid sick leave to employers state-wide.

Proponents of the bill point to the fact that there are 1.2 million New Jerseyans who currently do not get paid if they take a sick day, which results in a big hit to our economy. At the same time, studies have shown there is no significant downside to employers, a large majority of whom have reported no negative consequences to their profits.

This kind of common-sense legislation will benefit New Jersey’s working families and employers and we wholeheartedly support it.

Both houses of the New Jersey State Legislature have passed a bill making it unlawful for New Jersey employers to discriminate against the unemployed. The bill prohibits employers from making decisions regarding hiring or terms and conditions of employment based on whether an applicant is unemployed. Employers are still permitted to inquire into an applicant’s prior employment, including the reasons for separation from a former employer. However, employers cannot, in a blanket way, decide to hire only candidates who are currently employed.

In terms of penalties, the bill provides for fines assessed by the New Jersey Department of Labor and Workforce Development. Employers who violate the law may be fined up to $1,000 for the first offense, $5,000 for the second offense, and $10,000 for each subsequent offense.

There is no private cause of action in this law, meaning that private citizens cannot bring lawsuits if they believe the law has been violated. Rather, they would file a complaint with the NJ Department of Labor and Workforce Development. A full text of the bill is available online.

According to employment practices liability insurer Hiscox, California, Illinois, Alabama, Mississippi, and the District of Columbia are the top five riskiest places in the country for employee lawsuits. Employers in these states face a larger than average chance of being sued for employment law violations.

Hiscox states that “[a]ccording to the study, on average, a U.S.-based business with at least 10 employees has a 12.5 percent chance of having an employment liability charge filed against it.” Businesses with over 100 employees can expect to defend an employment related claim at least once every three years. Lower risk states for employment litigation include West Virginia, Massachusetts, Michigan, Kentucky and Washington.

The statistics used for this study included only federally-filed claims and discrimination charges brought before the Equal Employment Opportunity Commission. Data on state law claims, such as claims brought pursuant to New Jersey’s Law Against Discrimination, is not routinely collected. Suffice it to say that New Jersey employers, of any size, should have adequate personnel policies, training, and regular compliance audits to minimize the risk of being sued by an employee.