Labor & Employment Insights

In an example of how informal management can come back to haunt employers, a U.S. District Court judge recently ruled that a former Starbucks regional manager had sufficiently demonstrated that a jury could determine that the justification Starbucks provided in terminating her was pretext for unlawful discrimination.

Plaintiff Shannon Phillips, who is Caucasian, claims that Starbucks discriminated against her and other white employees to repair its public image after drawing negative media attention for the 2018 arrest of two Black men at a Starbucks in Philadelphia, alleging reverse discrimination under Title VII of the Civil Rights, and the New Jersey Law Against Discrimination. Starbucks denies engaging in discrimination, alleging that Plaintiff was terminated for failing to lead and perform her role as a regional manager and, more specifically, was aloof, overwhelmed by the position, and failed to perform the essential functions of her job.

On Starbucks’ motion for summary judgment, the judge determined that Plaintiff had presented sufficient evidence allowing a reasonable jury to conclude that the company discriminated against her and other white employees. The judge further found, however, that Starbucks presented a legitimate, non-discriminatory reason for Plaintiff’s termination. As part of the burden-shifting analysis conducted in discrimination claims, when an employer produces sufficient evidence of legitimate, non-discriminatory reasons for the employee’s termination, the employee must then provide evidence that the employer’s reasons were pretext for discrimination. As it applied to Plaintiff’s claim of discrimination, the judge found that she had presented sufficient evidence creating a genuine dispute of material fact that Starbucks’ stated rationale for terminating her constituted pretext.

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The New Jersey Division on Civil Rights (DCR) recently adopted new and amended regulations concerning the “Display of Official Posters of the Division on Civil Rights.” Under these regulations, covered employers must display revised posters advising employees of their rights under the New Jersey Law Against Discrimination (“LAD”) and the New Jersey Family Leave Act (“FLA”). Both the LAD and FLA posters must be printed on 8 ½” by 11″ paper (or larger) and contain text that is fully legible. The official posters can be found on the DCR’s website located here and here. Employers should immediately replace their now outdated LAD and FLA posters with the updated ones.

New electronic posting option: The new regulations now expressly allow employers to satisfy the posting requirement by displaying posters electronically on an internet or intranet site accessible to all employees. Additionally, the new regulations require employers to distribute the updated posters annually on or before December 31st and upon an employee’s first request.

Additional posting requirements: As a reminder, the New Jersey Department of Labor and Workforce Development also requires employers to display posters regarding child labor, workers’ compensation, wage and hour rules, payment of wages, unemployment insurance, temporary disability benefits, the Conscientious Employee Protection Act (CEPA), family leave insurance, records, the SAFE Act (if you have 20 or more employees), gender equity (if you have 50 or more employees), paid sick leave, and worker misclassification.

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Early in the onset of the COVID-19 pandemic the Equal Employment Opportunity Commission (EEOC) issued guidance clearing the way for all employers to mandate COVID-19 viral testing for all employees without the need for any individualized justification or assessment. The health risks posed by the virus at that time prompted the agency to conclude that the health emergency trumped the Americans with Disabilities Act’s prohibition against medical testing that was not “job related and consistent with business necessity.”

The Heightened “job Related and Consistent with Business Necessity” Requirement.   In a hopeful sign that the COVID-19 pandemic may be waning, on July 12, 2022, the EEOC revised its mandatory testing guidance to now require employers to assess whether current pandemic circumstances and individual workplace circumstances justify COVID 19 testing of employees to prevent workplace transmission. The EEOC cautioned that the reinstitution of the “job related and consistent with business necessity” standard “is not meant to suggest that such testing is or is not warranted; rather, the revised [guidance] acknowledges that evolving pandemic circumstances will require an individualized assessment by employers to determine whether such testing is warranted.”

The updated guidance lists the following possible factors that an employer may want to consider during the assessment to satisfy the heightened standard:

New Jersey has one of the most comprehensive statutes protecting employees against discrimination in the workplace. On October 5, 2021, Governor Murphy signed legislation expanding these protections even further by amending New Jersey’s Law Against Discrimination (“NJLAD”) to prohibit private-sector employers from discriminating against employees over the age of 70. Specifically, the legislation eliminates a provision of the NJLAD that previously permitted employers to refuse to hire or promote workers over the age of 70. It further expands the remedies available to an employee who is forced to retire due to age.

History of the NJLAD

The NJLAD, originally enacted in 1945, prohibits an employer from refusing to hire or employ, fire, or otherwise discriminate against an individual in compensation or other terms, conditions or privileges of employment based on the individual’s protected status. While not included in the original list of protected classes, in 1962 the NJLAD was amended to recognize age as a protected status. In 1985, the NJLAD was amended again to clarify that while employers were prohibited from terminating or demoting employees based on their age, they were nonetheless allowed to “refus[e] to accept employment or to promote any person over 70 years of age.” The 1985 amendment also limited the remedies available to employees forced to retire as a result of age to back pay only. While New Jersey continued to broaden the NJLAD and expand protections to a number of groups over the following years, the limited protections against age discrimination were never modified, thereby placing it on separate, inferior footing to the State’s other protected categories.

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Since early 2020, New Jersey has passed a series of legislation aimed at identifying and penalizing businesses for misclassification of employees as independent contractors. On July 8, 2021, New Jersey enacted A5890, which empowers the Commissioner of the Department of Labor and Workforce Development (“DOL”) to issue broad stop-work orders to employers in violation of wage and hour laws that extend across “all of the employer’s worksites and places of business.” As set forth more fully below, we are beginning to see the DOL invoking this extraordinary power to effectively shut down an employer’s business in its entirety.

A5890 Stop-Work Orders and Injunctions

Prior to the passage of this bill, the Commissioner’s shut-down orders could only extend to the specific location where the wage and hour violation occurred. Under A5890, however, the Commissioner may now issue stop-work orders that extend across “all of the employer’s worksites and places of business.” Moreover, these stop-work orders can remain in effect until the Commissioner determines that the employer is compliant and has paid any penalties due. Employers must pay workers affected by a stop-work order for the first ten days of work lost due to the order, and the DOL can impose up to $5,000 in civil penalties for each day the employer continues to operate the business in violation of the stop-work order.

On Monday, Jan. 24, 2022, in the case Hughes vs. Northwestern, the U.S. Supreme Court ruled that a fiduciary’s duty to monitor investments in defined contribution retirement plans means the plan cannot include non-prudent investments. In reaching this conclusion, the Court recognized that fiduciaries have an ongoing obligation to monitor plan investments. Simply offering participants a diverse menu of investment options is not sufficient to insulate fiduciaries from potential liability.

The Holding in Hughes v. Northwestern.

In Hughes, employees of Northwestern University participated in two defined contribution 401(k) plans offered by the University. The employees alleged that the trustees of the plans breached their fiduciary duty to the participants by “(1) failing to monitor and control recordkeeping fees, resulting in unreasonably high costs to plan participants; (2) offering mutual funds and annuities in the form of “retail” share classes that carried higher fees than those charged for otherwise identical share classes (institutional share class) of the same investments; and (3) offering investment options that were likely to confuse investors.” Both the trial court and the Seventh Circuit Court of Appeals accepted Northwestern’s argument that even if some options were not prudent, there was no violation of ERISA’s prudence standard because the plans offered a diverse menu of investment options that the plaintiffs agreed were prudent.

President Biden is expected to sign a bill amending the Federal Arbitration Act by banning pre-dispute employment arbitration agreements for sexual harassment and sexual assault disputes. The proposed law, “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021,” is the latest in a series of workplace changes initiated by the #MeToo movement.

Sexual assault and harassment claims no longer subject to mandatory arbitration. The amendment prohibits the enforcement of mandatory pre-dispute arbitration agreements, as well as agreements prohibiting participation in a joint, class or collective action in any forum “at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct.” The Act also provides that any dispute as to whether or not a claim falls within the scope of the Act’s prohibitions will be decided by a court, not an arbitrator, irrespective of the designation set forth in the arbitration agreement. Although the bill bans pre-dispute agreements to arbitrate sexual harassment and sexual assault claims, employees can still voluntarily elect for arbitration after the claim arises. This carve-out was intended to allow victims of sexual assault or sexual harassment to voluntarily avoid going through the often-public process of the court system.

Under the legislation, the term “sexual assault dispute” retains the same definition as used in 18 U.S. Code §2246 as one “involving non-consensual sexual act or sexual conduct.” The term “sexual harassment dispute” is defined as one “relating to conduct that is alleged to constitute sexual harassment.” Sexual harassment is narrowly redefined under the Act to only include the following behaviors: a) unwelcome sexual advances, b) unwanted physical contact that is sexual in nature, including assault, c) unwanted sexual attention, including unwanted sexual comments and propositions for sexual activity, d) conditioning professional, educational, consumer, health care, or long-term care benefits on sexual activity, and e) retaliation for rejecting unwanted sexual attention. Notably, this definition does not include other forms of harassment that are not sexual in nature but may nonetheless constitute gender-based discrimination (e.g., disparate pay between similarly situated male and female employees).

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A recent amendment to the New York City Human Rights Law aimed at promoting wage equity for women and minority groups historically receiving less compensation than other groups will have a large impact on recruiting practices for City employers. By doing so, New York City joins a national trend of legislative initiatives promoting transparency and equity in compensation practices.

Beginning on May 15, 2022, employers with four or more employees (which includes independent contractors and employed family members) must include a minimum and maximum salary range in all job listings. This includes advertised jobs, promotions, and transfer opportunities. The range of the minimum and maximum salary may extend from the lowest to the highest salary the employer “in good faith believes at the time of the posting” it would pay for the advertised position.

While the term “salary” is not defined in the law, employers should comply with the minimum and maximum rage requirements regardless of whether the position is paid on a salary or hourly basis. It is not clear whether these requirements only apply to jobs that will be located in New York City, or if it extends to any job postings in New York City regardless of where the job will be physically located. The New York City Commission on Civil Rights is expected to issue regulations clarifying these issues.

UPDATE:  On March 7, 2022, Governor Murphy once again lifted the COVID-19 public health emergency, and consequently the presumption created by SB2380.

In an effort to combat the rapidly spreading COVID-19 Omicron variant, on January 13, 2022, Governor Murphy reactivated a presumption that essential workers’ contraction of the virus is work-related for purposes of workers’ compensation claims.

The Rise and Fall of The Workplace Presumption for Essential Workers. To establish a compensable COVID-19 claim under New Jersey’s Workers’ Compensation Act, the employee must show that he/she contracted the virus directly from the workplace. The difficulty in establishing where an individual contracts a communicable disease explains the scarcity of compensable seasonal influenza workplace claims. However, on September 14, 2020, Governor Murphy signed SB2380, retroactive to March 9th, removing this requirement in COVID-19 cases for essential workers during a public health emergency declared by the Governor, by creating a presumption that the employee contracted the virus in the workplace. Under the bill, the presumption of workplace contraction can only be refuted by a preponderance of the evidence showing the essential worker was not exposed to COVID-19 in the workplace.

On November 4, 2021, the Occupational Safety and Health Administration (OSHA) issued an Emergency Temporary Standard (ETS) requiring employers of 100 or more to adopt COVID-19 policies, maintain rosters of vaccinated employees, and provide paid time off to employees to vaccinate or recover from its effect. These mandates were to go into effect on January 10, 2022. By February 9, 2022, employers were to require employees to show proof of COVID-19 vaccination or undergo weekly testing.

On that same date the Centers for Medicare & Medicaid Services (CMS) issued an interim rule mandating COVID-19 vaccination and other requirements for workers in most healthcare settings participating in Medicare and Medicaid programs by January 22, 2022.

Legal challenges quickly wound their way through the federal courts, leaving businesses in limbo about their obligations to implement these vaccination and testing mandates. On January 13, 2022 the Supreme Court of the United States (SCOTUS) issued decisions on both mandates, imposing a stay on the OSHA ETS vaccination and testing mandates, but upholding the vaccination mandate and other aspects of the CMS for healthcare facilities.

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