In a prior post we discussed the new test adopted by the National Labor Relations Board for determining when two entities can be deemed “joint employers” equally liable for unfair employment practices in violation of the National Labor Relations Act.  Now, the Third Circuit Court of Appeals (with jurisdiction over federal courts in NJ, DE and Eastern PA), has announced the test for determining when two entities can be deemed “joint employers” equally liable for violations of federal anti-discrimination laws.

The bad news is that the Third Circuit’s decision in Faush v. Tuesday Morning, Inc., D.C. Civ. No. 2-12-cv-07137 (Nov. 18, 2015) may significantly impact companies who secure workers through staffing agencies or other third party providers. The good news is that the Tuesday Morning court rejected a broad test that would have made it easier for employees to establish “joint employer” status in favor of a narrower test that may make it easier for an employer to resist “joint employer” status.

The Facts: Matthew Faush, African American, was employed by Labor Ready, a staffing agency providing temporary workers to retailer Tuesday Morning, Inc.  Following his termination, Rauch filed suit against Tuesday Morning claiming race discrimination in violation of Title VII and the Pennsylvania Human Relations Act (PHRA). Tuesday Morning moved for summary judgment, claiming that Faush was not its “employee” and thus it could not be liable for employment discrimination under Title VII or the PHRA.  The court below agreed and dismissed the case.   Rauch appealed.

On March 1, 2015 most New Jersey employers with 15 or more employees became subject to the requirements of the “The Opportunity To Compete Act” (the “Act”), more commonly known as the “Ban the Box” law that places significant restrictions upon employer inquiries into an applicant or employee’s criminal history. As explained more fully in our prior article on New Jersey’s Ban the Box law, with certain exceptions the law precludes an employer from i) placing an advertisement indicating that applicants for employment with criminal record will not be considered; ii) require an applicant to complete an employment application that makes inquiry into the applicant’s criminal record  prior to the completion of an initial interview; or iii) asking any questions about the applicant’s criminal record during the initial interview.

Following the Act’s passage, many employers had residual questions about how the Act was to be implemented, including questions  about  whether there needed to be a time interval between the first interview (where the inquiry about a criminal record is prohibited) and the second interview (where the inquiry about a criminal record is permitted); whether an “interview” would include an email exchange or written questionnaire; the extent to which employers, including multi-state employers, could make references to criminal background checks in employment applications; etc.

The Final Rules and Agency Guidance: On December 7, 2015 the New Jersey Department of Labor and Workforce Development issued its Final Rules for implementing the requirements of the Act. In addition, the Department published specific “Responses” to comments submitted by employers  seeking clarification of the Act’s requirements and the proposed regulations.   The Department’s clarifications include (but are not limited to) the following:

A recent decision from the New Jersey Appellate Division serves as a warning to employers that arbitration clauses contained in employee handbooks are likely unenforceable.  In C.M. v. Maiden Re Insurance Services, LLC, (“Maiden Re”), the employee filed an action in the New Jersey Superior Court alleging that she was wrongfully terminated by Maiden Re for seeking a reasonable accommodation to her disability in violation of the New Jersey Law Against Discrimination.  Maiden Re moved to dismiss the Complaint and instead compel the employee to resolve the dispute before an arbitrator pursuant to the arbitration clause contained Maiden Re’s employee handbook.  The Trial Court granted Maiden Re’s motion, sending the matter to arbitration.   On appeal, the Appellate Division refused to enforce the employee handbook’s arbitration clause and remanded the matter back to the Trial Court for resolution of the discrimination claim.

Handbook Disclaimer Renders Agreement to Arbitrate Unenforceable: Like most employee handbooks, Maiden Re’s handbook contained a contractual disclaimer specifically providing that its terms and conditions, “should be regarded as management guidelines only…” and were “not intended to create contractual obligations…” nor “intended to create a contract…”  The inclusion of the contractual disclaimer proved fatal to Maiden Re’s efforts to compel the employee to arbitrate her claims.   The Appellate Division reasoned that Maiden Re “cannot selectively disavow the [disclaimer] language in the handbook to insulate the “arbitration” provision from the legal consequences of the disclaimer provision.”

The court also questioned whether the employees’ electronic acknowledgement of the handbook that failed to include language indicating that the employee was waving her right to adjudicate employment disputes in a judicial forum, was sufficient evidence of an ”unambiguous intention” to arbitrate statutory claims.  The court noted that it did not need to rule on the issue because the disclaimer rendered the arbitration provision unenforceable.