Labor & Employment Insights

The Third Circuit has long held that the provisions of Title VII only protect “employees” and not independent contractors from unlawful discrimination in the workplace. On the state side, New Jersey courts have similarly found that the employment discrimination provisions of the New Jersey Law Against Discrimination (LAD) extend only to those individuals deemed “employees”, and not to individuals properly classified as independent contractors.

However, unlike Title VII, the LAD also includes a provision that prohibits discrimination in the creation or termination of contracts, which makes it unlawful for any person to refuse to “contract with . . . or otherwise do business with any other person” on the basis of any individual characteristic (e.g., race, gender, age) protected under the LAD. In J.T.’s Tire Serv., Inc. v. United Rentals, N.A., Inc., the court recognized that this provision permitted a cause of action for quid pro quo sexual harassment where the defendant was alleged to have refused to do business with the independent contractor plaintiff unless she succumbed to his sexual demands.

In Axakowsky v. NFL Productions, the plaintiff independent contractor asserted a claim for hostile work environment harassment against the defendants for ongoing harassment while performing services for the defendant NFL. The Unites States District Court rejected Axakowsky’s claim that the holding in J.T.’s Tire Service – recognizing a quid pro quo sexual harassment claim for independent contractors under the LAD – should be extended to her hostile work environment claim. The court observed that while the LAD protects against refusals to do business with an individual because of their sex or other protected characteristic, it does not extend to hostile work environment harassment claims that may arise during the ongoing execution of the contractual relationship. In addition, the court noted that the plaintiff’s complaint did not expressly assert a quid pro quo sexual harassment claim.

The Federal Arbitration Act, 9 U.S.C.A. §1 et seq., and the New Jersey Arbitration Act, N.J.S.A. 2A:23B-1 et seq., reflect the federal and state public policies favoring arbitration as a means for resolving disputes. Since these legislative initiatives, New Jersey courts have routinely enforced agreements to arbitrate employment disputes. Nevertheless, whether a specific arbitration agreement is enforceable under standard contract principles remain an issue that is often challenged before the courts. Enforceability will turn on whether there was a “meeting of the minds” to arbitrate, and whether both parties “clearly and unambiguously” agreed to waive statutory rights, such as a judicial forum and a right to trial by jury.

A recent ruling from the New Jersey Appellate Division in Flanzman v. Jenny Craig, No. A-2580-17, is a cautionary tale for employers seeking to draft or enforce agreements to arbitrate. In Flanzman, the Court invalidated the arbitration agreement, finding that there was no “meeting of the minds” because the agreement failed to specify the forum where the arbitration would be held (e.g,, the American Arbitration Association or the Judicial Arbitration and Mediations Services) or specify a method for selecting a different arbitration forum, nor any process for conducting the arbitration. The Court observed that “had this been done, the parties then would fully understand both the [jury] rights that had been waived and the rights that have taken their place.”

In reaching its conclusion, the Court pointed to the following cases where arbitration agreements were invalidated by the courts: Atalese v. US Legal Serv. Group (agreement failed to clearly indicate the waiver of a trial by jury); Leodori v. Cigna Corp. (finding no evidence that the employee consented to an arbitration agreement contained in an employee handbook that included a contractual disclaimer); Kleine v. Emeritus at Emerson (finding a lack of mutual assent because the arbitration process contemplated by the arbitration agreement was unavailable when the parties executed their contract); and NAACP v. Foulke (invalidating agreement because it did not clearly and consistently express the nature and locale of the arbitration forum).

Most employers are aware that employee handbook rules that impede employees’ abilities to engage in protected concerted activity – e.g., organizing unions, discussing wages, discipline or other terms and conditions of employment – run afoul of rights guaranteed by Section 7 of the National Labor Relations Act (NLRA). Under the prior administration the National Labor Relations Board (NLRB) took a very narrow view, finding that facially-neutral policies that could conceivably be construed to chill Section 7 rights are unlawful. As a result, employers were in peril of having the most innocuous workplace rules aimed at advancing basic employer interests, such as workplace civility, subject to challenge. Thankfully, the newly-constituted Board overruled years of precedent in favor of a much more reasonable and employer-friendly approach to assess the legality of employee handbook rules.

In December 2017, the Board issued its ground-breaking decision in The Boeing Co., 365 NLRB No. 154, announcing a new three category test that balances the employer’s interests in maintaining discipline and productivity and protecting its property, against employee rights to engage in concerted activities protected by the NLRA. On June 6, 2018, General Counsel of the NLRB issued a memorandum entitled “Guidance on Handbook Rules Post-Boeing” that serves as a useful roadmap for how the Board will apply its new three-category standard to a wide array of workplace rules commonly found in employee handbooks and other policies. The Guidance makes is clear that that the mere possibility that a workplace rule could be interpreted to preclude Section 7 activity is no longer a justification for finding the rule unlawful, and that “ambiguities in rules are no longer to be interpreted against the drafter, and generalized provisions should not be interpreted as banning all activity that could conceivably be included.”

The New Three-Category Test: When assessing the legality of workplace rules, the NLRB will now assign workplace rules to one of the following three categories:

In its June 27, 2018 opinion in Janus v. AFSCME, Council 31 authored by Justice Alito, a divided U.S. Supreme Court resolved a long-standing battle over the ability of public sector unions to charge non-members “fair share” or “agency fees” to cover the cost of collective bargaining and other representational activities. In a major defeat for unions, the Court struck down these mandatory union fees as impermissible violations of nonmembers’ First Amendment speech rights. While the decision is limited to union fee practices in the public sector, it portends to have significant consequences for the private sector labor movement as well.

Agency Fees Pre-Janus: Since the Court’s 1997 ruling in Abood v. Detroit Board of Education, the status of agency fees assessed against employees who opt not to join their representative labor union has been the subject of ongoing debate. The Abood case was the first time the Court squarely addressed the tension between nonmembers’ First Amendment Rights and compulsory union dues in the public sector. Consistent with its prior rulings concerning private sector union fees, the Court concluded that any portion of compulsory fees attributable to contract negotiations and administrative expenses was permissible because employees who elected not to join the union nevertheless benefited from the union’s representation activities, and agency fees were justified as a way to eliminate these “free riders.” However, the Abood Court reasoned that forcing nonmembers to fund any portion of fees attributable to the union’s support of ideological or political causes that they may not agree with would be an impermissible impingement of First Amendment speech rights.

In recent years, the Court has been called upon to consider the continued constitutional viability of the agency fees assessment sanctioned by Abood. In Harris v. Quinn, the Court struck down on First Amendment grounds mandatory agency fees assessed to home health aides, but that ruling was limited to that particular class of employees at issue in that case. Two years later, the Court appeared to be poised to overrule Abood in Friedrichs v. California Teachers Ass’n, an action by teachers challenging agency fees, but the unexpected death of Justice Scalia derailed that effort. Instead, the court issued a per curiam opinion upholding mandatory agency fees.

Kathleen Connelly of Lindabury, McCormick, Estabrook & Cooper in Westfield has been handling management-side employment law matters for 25 years, but has also distinguished herself as a mentor. She helped found in 2007, and continues to take a leadership role in, the firm’s Women’s Business Initiative, and has a reputation at the firm of always being willing to take time to show and explain to colleagues how to handle challenging tasks.

“I have always had an inner teacher instinct that does not want to simply delegate, but strives to educate individuals so that they are armed with the information they need … I remember often feeling both terrified and incompetent in my early years, and I try to change that experience for young associates to the extent I can.” says Kathleen.

You can read the full article, Connelly Uses ‘Inner Teacher Instinct’ at Lindabury McCormick, on the New Jersey Law Journal’s website (subscription may be required).