Labor & Employment Insights

In February of 2019 Governor Murphy signed into law sweeping legislation that significantly expands employee rights to family leave entitlements, provides greater family leave insurance benefits to employees during a leave, expands the definition of “family members,” and finally, provides greater job security to individuals taking family leave. It is critical for employers to understand the multiple changes resulting from this this legislation to ensure that employee’s rights are not being violated.

Amendments to the New Jersey Family Leave Act: While most employers are aware that those with 50 or more employees are covered by the federal Family and Medical Leave Act (FMLA) that accords employees 12 weeks of protected unpaid leave for personal medical leave, or to care for a newborn/newly adopted child or family member with a serious medical condition, many are unaware that New Jersey also has a similar Family Leave Act (NJFLA) that likewise applied to employers of 50 or more and accords 12 weeks of protected unpaid leave to qualifying employees. However, unlike the FMLA, NJFLA leave is only available for bonding with a newborn or newly adopted child, or to care for a family member with serious medical condition; the employee has no personal medical leave rights available under the NJFLA.

Effective June 30, 2019, the employee headcount for coverage under the NJFLA dropped from 50 to 30 employees, taking it out of alignment with the FMLA and making many more small employers subject to the requirements of the NJFLA to provide guaranteed protected bonding and family medical leave to qualifying employees. The amendments further expanded the NJFLA to include family leave in connection with the placement of a child into foster care with the employee or the birth of a child conceived using a gestational carrier agreement; in addition, leave in connection with the birth or adoption of a child which rights were available to employees prior to the amendments.

When hiring, many employers do not give proper consideration to whether newly hired employees should be classified as “exempt” employees who by law are not entitled to overtime pay for hours worked in excess of 40 hours in any workweek, or “nonexempt” employees who are entitled to overtime pay. A failure to properly apply the legal criteria for employee classification can be a costly oversight for employers.

The federal Fair Labor Standards Act (“FLSA”) mandates that employees be paid on an hourly basis of at least the federal minimum wage, currently $7.25. States and municipalities are free to enact higher minimum wage rates. New Jersey recently passed legislation that will progressively increase the current $8.85 per hour minimum wage to $15.00.

The FLSA further mandates that employees be paid at an overtime rate of not less than 1 ½ times the employee’s regular rate for each hour of work time in excess of 40 hours in any one workweek unless the employee qualifies for one of the exemptions from these overtime requirements set forth in the statute. So how does an employer determine the proper classification of an employee as either nonexempt or exempt? Unfortunately, there are no bright-line rules an employer can rely upon in making these determinations, and the employee’s job responsibilities and the employer’s control over the employee largely dictate the proper classification under the FLSA. However, the statue specifies the criteria that must be met if the employer intends to avail itself to one of the three principal exemptions set forth in the statute: i) the Executive exemption; ii) the Administrative exemption; and the Learned Professional exemption. These requirements will be discussed below, as well as certain other exemption classifications that are available under the FLSA Thankfully, New Jersey has adopted the general same criteria for determining an employee’s exempt classification under state law.

As yet another consequence of the #metoo movement, the New Jersey Legislature has passed legislation aimed at prohibiting employers from including certain waiver provisions and non-disclosure clauses routinely found in employment agreements. Senate Bill No. 121 (“the Bill”) , which is expected to be signed by signed by the Governor, will bring about a sea change for employers on several fronts.

The Ban on Waiver of Rights Under the LAD: Until now, employers were free to enter into agreements with employees to waive rights to jury trial and arbitrate all employment-related claims, including claims under the New Jersey Law Against Discrimination (“LAD”). In recent years New Jersey courts have declined to enforce individual arbitration agreements unless the employer agrees to preserve certain procedural and substantive rights, such as statutory rights to punitive damages and attorney fees, the full benefit of the statute of limitations period, and the absorption of the costs of arbitration by the employer. Nevertheless, properly crafted waivers and arbitration agreements were enforced by the courts despite the employee’s surrender the right to a jury trial in a judicial or arbitral forum.

Under the Bill, a provision “in any employment contract that waives any substantive or procedural right or remedy relating to a claim of discrimination, retaliation or harassment shall be deemed against public policy and unenforceable.” Moreover, the Bill bars any prospective waiver of any right or remedy under the LAD or any other state statute. Whereas the rights conferred by the LAD include a jury trial, the Bill effectively prohibits an employer from entering into any agreement i) to waive a trial by jury of LAD claims in a judicial forum, or ii) to arbitrate LAD claims which necessarily dispenses with a jury. At the very least, employers may be required to exclude claims for discrimination, retaliation and harassment from arbitration agreements. No surprisingly, these mandates do not apply to collective bargaining agreements.

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: