New Jersey Employment Lawyer Blog
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The Third Circuit Court of Appeals recently ruled that when an employee submits a deficient medical certification in support of a request to take time off pursuant to the Family Medical Leave Act (“FMLA”), the employer has to give the employee an opportunity to correct the deficiencies before it can deny the request. The Third Circuit is the federal appellate court which handles appeals stemming from New Jersey, Pennsylvania, Delaware and the Virgin Islands.

Businesswoman need medical leave from workDeborah Hansler worked for Lehigh Valley Health Network as a technical partner. In March 2013, she began experiencing medical symptoms including shortness of breath, nausea and vomiting. On March 13, she requested an intermittent FMLA leave and submitted her doctor’s supporting medical certification form. The certification indicated that she needed two days off per week for approximately a month. However, it did not identify her medical condition because her doctor had not yet diagnosed her.

Ms. Hansler took a total of 5 days off from work for medical reasons between March 13 and March 25, 2013. Lehigh Valley never asked Ms. Hansler or her doctor to explain why she needed this time off. Instead, on March 28, 2013, the company fired her for “excessive absences” including the five days she took off due to her medical condition. When Ms. Hansler reminded Lehigh Valley that she had requested time off pursuant to the FMLA, Lehigh Valley told her it had denied her request for a leave.

After Lehigh Valley fired her, Ms. Hansler received a letter dated March 26, 2013 indicating that the company denied her request for a medical leave because her “condition presently does not qualify as a serious health condition under the criteria set forth by the [FMLA].”

In early April, after she had been fired, Ms. Hansler’s doctor diagnosed her with diabetes and high blood pressure. According to Ms. Hansler, those medical conditions caused the symptoms that necessitated her time off from work in March.

Ms. Hansler sued Lehigh Valley, alleging it violated the FMLA by denying her a medical leave and by firing her because she requested one. The District Court dismissed her case, finding she was not protected by the FMLA because her medical certification did not establish that she had a “serious health condition” that would have entitled her to time off pursuant to the FMLA.

However, the Third Circuit Court of Appeals disagreed. In Hansler v. Lehigh Valley Hospital Network, it held that Lehigh Valley was required to give Ms. Hansler an opportunity to cure the deficiencies in her doctor’s certification before it could deny her request for a medical leave. It explained that the United States Department of Labor’s regulations require that, whenever an “employer does not have sufficient information about the reason for an employee’s use of leave, the employer should inquire further of the employee . . . to ascertain whether leave is potentially FMLA-qualifying.” The regulations also require employers to specify, in writing, what information they believe is missing from an employee’s FMLA medical certification. Lehigh Valley never sought any such information from Ms. Hansler.

In further support of its ruling, the Third Circuit noted it is not uncommon for a doctor to need time to diagnose a medical condition. As a result, “the difference between a medical certification that supports [FMLA] leave and one that is deficient might be a matter of days.” Thus, even though Ms. Hansler’s doctor had not diagnosed her condition when she initially requested her leave, she presumably would have been able to provide that information if her employer had requested additional information.

Similarly, the Third Circuit ruled that the evidence could support a finding that Lehigh Valley fired Ms. Hansler in retaliation for requesting an FMLA leave. Accordingly, it reinstated that claim to give Ms. Hansler an opportunity to try to prove it.

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A recent decision from the District of New Jersey recognizes that employers are not entitled to compensatory damages from employee who breach their non-competition agreements unless the employer can prove it would have received the income but-for the violation.

The case involved Jose Munoz and Roberto Abreu, two former employees of Job Connection Services, Inc. (“JCS”). JSC provides employers with job placement and human resources support.

Mr. Munoz and Mr. Abreu each signed one year non-compete agreements with JSC when it hired them. Those agreements prohibited them from owning, operating, or joining a business that directly or indirectly competes with JSC within sixty mile of any JCS office.

After they stopped working for JCS, Mr. Munoz and Mr. Abreu formed a business, Right Hand Staffing Solutions, LLC. In June 2013, JCS sued Right Hand, Mr. Munoz and Mr. Abreu, claiming they violated their restrictive covenants. For example, JCS claimed Right Hand used its confidential customer lists to obtain business with one of its former customers, APC Postal Logistics.

Three months later, after a settlement conference, the parties entered into a consent order. Under the order, Mr. Munoz, Mr. Abreu and Right Hand agreed not to do business with a list of customers until after August 31, 2014. In exchange, JCS dismissed its lawsuit. Although the consent order had exceptions for some customers, including some employees who Right Hand had already placed at jobs, there were no such exceptions for APC.

In January 2015, JCS filed a motion alleging Mr. Munoz and Right Hand had solicited business from APC in violation of the consent order. In fact, Right Hand had billed APC for more than 28,000 hours of employee time between September 2013 and August 2014.

In response, Mr. Munoz and Right Hand claimed they were permitted to continue to do business with employees who they had placed at APC before the agreed to the consent order. In JobConnection Services, Inc., v. Munoz, the Court rejected this argument, concluding this purported exception “flies in the face of the plain terms of the agreement,” especially since there were similar exceptions for other companies but none for APC. Accordingly, it ruled that Mr. Munoz and Right Hand had violated the non-compete provision in the consent order.

Judge with gavel non-compete agreementHowever, the Court rejected JCS’s request for damages based on the net profits Right Hand received from APC. It explained that compensatory damages are intended “to put the injured party in as good a position as . . . if performance had been rendered.” But JCS did not prove it would have received this income if Right Hand had not violated the consent order. To the contrary, by the time the parties entered into the consent order APC already had stopped using JCS as a result of its “unsatisfactory experience with JCS.” Thus, JCS did not prove it lost any money as a result of the violation of the consent order.

The Court also ruled that JCS could not seek damages based on the original non-compete agreement Mr. Munoz signed with JCS since the company gave up its right to enforce that contract when it entered into the consent order. Accordingly, it did not award any compensatory damages to JCS.

Nonetheless, the court entered an injunction prohibiting Mr. Munoz or Right Hand from doing business with APC until after August 31, 2014. It explained that JCS bargained “for a chance at regaining APC as a customer without any interference from Defendants.” Accordingly, an injunction would protect JCS’s right to attempt to win back its business with APC without any competition from JCS.

Finally, the court awarded JCS attorneys’ fees and costs in an amount to be determined. It did so pursuant to a provision in the consent order which entitles the prevailing party to recover its reasonable attorneys’ fees and legal costs from the other party.

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A recent employment law case from the District of New Jersey demonstrates that you might be entitled to time off from work for a disability under the New Jersey Law Against Discrimination (“LAD”) even if you are not protected by the Family & Medical Leave Act (“FMLA”).

Colleen Pizzo worked as a custodian for the Lindenwold Board of Education. Ms. Pizzo suffers from bipolar depression. She took several days off from work for depression after her girlfriend and coworker died in February 2012. A few months later she took approximately 6 weeks off for depression pursuant to the FMLA. She continued to take additional time off due to her depression after she returned from that medical leave.

Depressed businesswoman denied reasonable accommodation for disabilityBy March 2013, Ms. Pizzo had taken 12 weeks of FMLA leave during the previous 12 months. She asked the Board to allow her to use “sick bank,” meaning sick leave donated by her coworkers, so she could take time off for “work-related stress.” The Board ignored her request.

According to Ms. Pizzo, on March 21, 2013 she called out sick. Although she apparently needed this time off due to her depression, she did not say that when she called out. Ms. Pizzo remained out of work, and on March 28, 2013 the Board fired her. It claimed she said she did not know when she was going to return to work and it could not permit an “indefinitely” leave of absence.

Ms. Pizzo sued, claiming the Board fired her in violation of the FMLA and the LAD. Both parties eventually moved for summary judgment, asking the judge to enter a judgment in their favor.

In Pizzo v. Lindenwold Board of Education, the court dismissed Ms. Pizzo’s FMLA claims. It recognized a factual dispute about whether Ms. Pizzo was entitled to an additional 12 weeks of FMLA starting on January 1, 2012. However, it ruled that even if she still had FMLA time left in March 2012, since she did not mention depression or any other serious health condition when she called out sick on March 21, her request was “inadequate to alert [the Board] that she was invoking her FMLA rights.” Accordingly, the court concluded that request for time off was not protected by the FMLA.

The judge also dismissed Ms. Pizzo’s claim that the Board discriminated against her in violation of the LAD by firing her because of her disability, bipolar depression. Among other things, it found no evidence to disprove the Board’s explanation that it fired Ms. Pizzo because she requested an indefinite leave of absence. Although the LAD can require employers to permit employees to take time off from work as a reasonable accommodation for a disability, they are not required to permit indefinite medical leaves.

However, the court refused to dismiss Ms. Pizzo’s claim that the Board violated the LAD by failing to provide a reasonable accommodation for her work-related stress. Specifically, the Board failed to engage in an “interactive process” to discuss what accommodation Ms. Pizzo needed for this disability. In fact, it did not even communicate with her about her request until March 21, the day on which it both denied her request and fired her.

Similarly, the court did not dismiss Ms. Pizzo’s claim that the Board fired her because she requested this accommodation. It explained that firing an employee because she requested an accommodation for a disability would be retaliation in violation of the LAD. It noted that Ms. Pizzo requested this accommodation on March 16, 2012, and the Board denied her request and fired her only 16 days later. The court found that based on this close timing between Ms. Pizzo’s request for an accommodation and the Board’s decision to fire her, especially when combined with the Board’s failure to engage in the interactive process, would permit a jury to conclude the Board retaliated against Ms. Pizzo in violation of the LAD.

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Restaurant employee tired from working overtimeThe Second Circuit Court of Appeals recently ruled that the parties to a lawsuit cannot agree to dismiss a case under the Fair Labor Standards Act (“FLSA”) as part of a settlement unless they have the approval of a Judge or the United States Department of Labor (“DOL”). The FLSA is a federal wage and hour law which establishes minimum wage and overtime requires.

Dorian Cheeks worked as a server for Freeport Pancake House, Inc. and W.P.S. Industries, Inc. He filed a lawsuit in the Eastern District of New York against both companies in which he asserted claims under the FLSA and New York Labor Law. He is seeking unpaid overtime pay and liquidated (double) damages, as well as attorneys’ fees. He also alleges that the Pancake House demoted him and eventually fired him because he objected about the company’s failure to properly pay overtime to him and its other employees, and is seeking damages for his past and future lost wages.

Mr. Cheeks and the Pancake House eventually agreed to settle the case. Accordingly, they filed a stipulation with the court seeking to have the case dismissed with prejudice. However, the court refused to dismiss the case. Instead, it directed the parties to file a copy of their settlement agreement as part of the public record, and to explain why they believe the settlement is “fair and reasonable.” The Court did so because the FLSA prohibits employees from waiving their rights under it unless their settlement agreement either was supervised by the DOL or approved by a court.

Despite the court’s instruction, the parties did not file a copy of their settlement agreement, presumably because, like most settlements in employment law cases, they agreed to keep the terms confidential. Instead, they asked the court to certify a question to the Second Circuit, namely whether they had the right to agree to dismiss their case without needing the court’s approval. The district court did so, and the Second Circuit agreed to hear the appeal.

On August 7, 2015, the Second Circuit concluded that the parties’ attempt to dismiss the case was improper. In essence, it found they were trying to circumvent the requirement that either a court or the DOL approve settlements of FLSA claims. Therefore, in Cheeks v. Freeport Pancake House, Inc., it ruled that parties could not voluntarily dismiss FLSA cases.

The appellate court acknowledged its ruling is likely to make it more difficult for parties to amicably resolve FLSA cases. It noted that many such cases are too small to warrant employees filing lawsuits or even administrative actions with the DOL, and many employers cannot afford to engage in legal proceedings. However, it also explained that the FLSA’s requirement to obtain approval of any settlement in an FLSA case is intended to protect one of the primary purposes of the FLSA, namely “to prevent abuses by unscrupulous employers, and remedy the disparate bargaining power between employers and employees.” Accordingly, it remanded the case to the district court for further proceedings.

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A recent decision by New Jersey’s Appellate Division makes it clear that merely having an anti-harassment policy does not insulate employers from sexual harassment lawsuits. The ruling comes on the heels of the New Jersey Supreme Court’s ruling earlier this year in Aguas v. State of New Jersey, which created a new affirmative defense for employers in sexual harassment cases under the New Jersey Law Against Discrimination (“LAD”). I discussed Aguas in my article: Importance of Reporting Sexual Harassment Reinforced by New Jersey Supreme Court.

The Appellate Division ruling involved Anita Jones, who worked for Mott’s LLP as a machine operator. For most of her employment, Ms. Jones was a temporary employee.

According to Ms. Jones, numerous Mott’s employees sexually harassed her. For example, she says the individual who initially trained her repeatedly touched her breasts. She says that when she objected, the harasser yelled at her. She did not report this sexual harassment to anyone because she was just a temporary employee. When she complained to a supervisor about the employee yelling at her, the supervisor promised he would take care of it. However, she alleges that when she complained to the same supervisor several other times he either put his arm around her shoulders or touched her back. She did not object to this harassment because the supervisor warned her that “temps come a dime a dozen and [if] one don’t do what you want, you get another one,” implying he would have her fired if she complained about him.

Ms. Jones further claims her immediate supervisor asked her out on dates, offered her a massage, and made a sexually explicit comment to her while he was moving his hands from his thigh toward his genitals. She also asserts that another employee occasionally touched her shoulder and back, and at one point told her he liked her butt. She did not complain to anyone about these acts of harassment because she was afraid Mott’s would fire her.

Ms. Jones eventually sued. Among other things, she claimed Mott’s was liable for creating a sexually hostile work environment. The trial court dismissed the case, and Ms. Jones appealed.

In Jones v. Dr. Pepper Snapple Group, the Appellate Division reversed.  It explained that the Aguas defense applies only if the employer has an “effective” anti-harassment policy.  It recognized that Mott’s has taken steps to prevent sexual harassment. For instance, its Employee Handbook includes an anti-harassment policy which directs employees who experience sexual harassment to complain either to their supervisors or the Human Resources Department. The handbook also indicates that Mott’s is committed to resolving discrimination and harassment complaints,and  does not tolerate retaliation against employees who make such complaints. However, the court ruled that a jury could find the company’s anti-harassment policy was not effective because it did not provide a copy of the handbook to Ms. Jones until after the harassment stopped, and never provided her any anti-harassment training.

The Appellate Division also noted that an employer can be held liable for harassment committed by one of its supervisors if it fails to exercise reasonable care to prevent and promptly correct the harassment. It noted that if the company had trained Ms. Jones about its anti-harassment policy when it initially hired her, she “may not have endured — or at least may have been able to minimize — the sexual harassment she experienced.”

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A recent ruling by New Jersey’s Appellate Division makes it clear that, in some circumstances, an employee can enforce an employment contract even if the individual who entered into it on behalf of the company did not have the authority to do so.

The case was filed by four individuals, Arkadiusz Lukaszewski, Dariusz Gocal, Tadeusz Ogrodnik, and Ryszard Klysinski.  They each worked for Jasticon, Inc. as bricklayers.  They claim another employee, Piotr Zablocki, promised them “they would be given long-term employment” with Jasticon for “at least 18 months.”  They also claim Mr. Zablocki assured them they would work on “big projects” in New Jersey and that they “would never run out of work.”

Nonetheless, the company fired them after less than a year.  They subsequently filed a lawsuit in which they asserted numerous claims, including breach of an 18-month employment contract.

Construction workers reach handshake employment agreementJasticon filed a motion for summary judgment, asking the lower court to dismiss the breach of contract claim.  The court granted the motion.  It concluded that although Mr. Zablocki had the authority to hire employees, he did not have the authority to guarantee them a job for any particular period. It also found that Mr. Zablocki did not have apparent authority to hire the four employees for 18 months since the company did not take any actions to lead them to believe he had the authority to make such an offer on its behalf.

On appeal, New Jersey’s Appellate Division agreed that there was no evidence Mr. Zablocki had the actual authority to guarantee the employees would have jobs for at least 18 months.  However, it found a question of fact with respect to whether he had apparent authority.

In the context of an employment agreement, apparent authority exists when: (1) the employer’s actions lead a person to reasonably believe a particular employee (or agent) has the authority to act on the employer’s behalf; and (2) the person relies on the employee’s (or agent’s) actions, believing he or she is acting on the employer’s behalf.

In an unpublished opinion, Lukaszewski v. Jasticon, Inc., the Appellate Division found there was enough evidence for a jury to find Jasticon led the four employees to believe Mr. Zablocki had the authority to guarantee them jobs with the company for at least 18 months.  It relied on the fact that Mr. Zablocki was the only person who offered them employment with the company, and they actually worked for and were paid by Jasticon after he did so.  In fact, Jasticon admitted that Mr. Zablocki hired them. It only disputed that he had the authority to guarantee them jobs for 18 months, as opposed to offering them employment at will.

Accordingly, the appellate court reversed the lower court’s ruling that had granted summary judgment to Jasticon.  It concluded there needs to be a trial to determine whether Mr. Zablocki had apparent authority to guarantee the four employees jobs for at least 18 months, and whether Mr. Zablocki actually assured them that they would have jobs for that long.

For additional information, you may want to read my previous article:  The Doctrine of Apparent Authority.

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Yesterday afternoon, New York States’ Fast Food Wage Board approved a set of three resolutions that recommend raising the minimum wage for employees who work for fast food chains to $15 per hour. This would be $6.25 more than New York’s current $8.75 minimum wage.

The Fast Food Wage Board was formed the past May, at the request of Governor Andrew M. Cuomo, to review wages in the fast-food industry.

Under the three resolutions, covered “Fast Food Establishments” include any business in New York State that serves food and drink (1) at which customers order and pay before they eat; (2) which provides “limited service,” which presumably means they offer limited or no table service; and (3) which are part of a chain that has at least 30 locations throughout the United States.

The resolutions are not yet law. They still need to be ordered by New York State’s acting State Labor Commissioner, Mario J. Musolino.  However, the expectation is that Mr. Musolino will do so soon.

The resolutions would apply to all employees of any Fast Food Establishment, expressly including employees whose jobs relate to “customer service, cooking, food or drink preparation, delivery, security, stocking supplies or equipment, cleaning, or routine maintenance.”

The proposed increase would be gradually phased in over time, which would happen more quickly in New York City than the rest of the state. Specifically, in New York City the minimum rate will increase to $10.50 by the end of this year; $12.00 by the end of next year; $13.50 by the end of 2017; and $15.00 by the end of 2018. In contrast, for the rest of the state the rate will increase to $9.75 by the end of this year; $10.75 by the end of 2016; $11.75 by the end of 2017; $12.75 by the end of 2018; $13.75 by the end of 2019; $14.50 by the end of 2020; and $15.00 by July 1, 2021.

In a statement announcing the resolutions yesterday, Governor Cuomo declared it to be “one of the really great days of [his] administration.” He indicated that “[y]ou cannot live and support a family on $18,000 per year in the state of New York, period. That’s why we have to raise the minimum wage.” He also vowed to work to increase the minimum wage for other workers, stating: “we will not stop until we reach true economic justice and we raise the minimum wage for every worker in every job in this state.”

A copy of the full text of the resolutions is available on the Fast Food Wage Board’s website.

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Yesterday, the New Jersey Supreme Court ruled that New Jersey’s whistleblower law, the Conscientious Employee Protection Act (“CEPA”), protects employees who blow the whistle about issues that relate to their job duties.

CEPA is a broad whistleblower law. It prohibits employers from retaliating against employees who, among other things, object to or refuse to participate in activities they reasonable believe are illegal, fraudulent, or violate a clear mandate of public policy relating to public health, safety, welfare or the environment. It also protects licensed medical professionals who object to or refuse to participate in activities they reasonably believe constitute improper quality of patient care.

On several occasions, New Jersey’s Appellate Division has ruled that employees are not protected by CEPA if their objections relate to their job duties. This threatened to dramatically limit the scope of CEPA’s protection since employees typically are in the best position to blow the whistle on activities related to their job functions.

A Happy WatchdogMore recently, in Lippman v. Ethicon, Inc., another panel of the Appellate Division recognized that employees can be protected by CEPA even if their objections related to their job duties. However, it added an extra requirement for those so-called “watchdog” employees. Specifically, it required them to prove they either made every effort to secure compliance with the law, or that they refused to participate in the conduct they found objectionable. I discussed the Appellate Division’s opinion in Lippman in my article: New Jersey’s Whistleblower Law Protects “Watchdog” Employees Whose Jobs Require Them to Report Violations of Law.

Both the employer and employee in Lippman asked the New Jersey Supreme Court to reverse its ruling. Mr. Lippman asked the Supreme Court to remove the additional requirements the Appellate Division had placed on watchdog employees, and Ethicon asked it to rule that CEPA does not protect employees who object in the course of performing their job duties.

In its opinion in Lippman v. Ethicon, Inc., the New Jersey Supreme Court explained that CEPA expressly protects “any employee” who engages in a protected activity. Further, the statute defines “employee” very broadly to even include individuals who might otherwise be considered independent contractors. As a result, the Court ruled that CEPA protects all employees, whether or not they can be considered “watchdogs.”

The Court noted that there is nothing in the language of CEPA to even hint that an employee’s job duties are relevant to whether he is protected by it. To the contrary, the statute protects employees who “refuse to participate” in an activities they believe are unlawful, implying it protects activities related to an employee’s normal job duties, since “it would be likely that the employee would be asked to participate in employer activity within the course of, or closely related to, his or her core job functions.”

The Court further found no basis for the extra requirement the Appellate Division had imposed on watchdog employees. Rather, it concluded that the same standard applies irrespective of whether the employee objects to an activity that is related or unrelated to her job duties.

Lippman is an extremely important ruling for employees. It removes an argument employers repeatedly have made in an attempt to dismiss otherwise valid retaliation claims. The Supreme Court’s ruling should now eliminate that argument once and for all, making it clear that all New Jersey employees are protected by CEPA.

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A recent decision by the Second Circuit Court of Appeals makes it more difficult for unpaid interns to successfully bring overtime and minimum wage claims under the Fair Labor Standards Act (“FLSA”) and New York State’s wage and hour law. The FLSA is a federal law that requires employers to pay certain employees at least the minimum wage, and time-and-a-half when they work more than 40 hours per week. The Second Circuit handles appeals from federal courts in New York, Connecticut and Vermont.

unpaid intern making photocopies for employerThe case was filed by Eric Glatt, Alexander Footman, Eden Antalik. Mr. Glatt and Mr. Footman worked for Fox Searchlight Pictures, Inc. in connection with the movie Black Swan, and Ms. Antalik worked for the company in another capacity. Their job duties varied, but included things like copying and scanning documents, taking lunch orders, making deliveries, hotel reservations and catering arrangements, and taking out the trash. They worked between 30 and 50 hours per week. Fox classified all three as interns and did not pay them at all. They sued, claiming Fox failed to pay them minimum wage and overtime in violation of the FLSA and New York State law.

The United States Department of Labor (“DOL”) has a longstanding guidance which sets a very high requirement before a company can treat someone as an unpaid intern without violating the FLSA. Under it, an employer must pay an intern unless all six of the following conditions are met:

  1. The internship . . . is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Most interns fail this test because, among other things, the work they perform provides an immediate advantage to the employer.

In Glatt v. Fox Searchlight Pictures, Inc., the Second Circuit rejected this test. Although it acknowledged some employers exploit unpaid interns by using them for free labor, it also noted that internship programs can be beneficial to the interns. With that in mind, it ruled that the proper test to determine whether the FLSA requires an employer to pay an intern is whether “the intern or the employer is the primary beneficiary of the relationship.”

The Second Circuit provided examples of some of the factors a court should consider when applying this new test. These factors include the extent to which:

  1. The intern and the employer both clearly understand there is no expectation of compensation;
  2. The internship provides training that is similar to what would be provided in an educational environment;
  3. The internship is tied to a formal education program by integrated coursework or academic credit;
  4. The internship corresponds to the academic calendar;
  5. The internship’s is limited to the period in which it provides the intern beneficial learning;
  6. The intern’s work complements, rather than displaces, the work of paid employees while providing the intern significant educational benefits; and
  7. The intern and the employer both understand that the intern is not entitled to a paid job at the conclusion of the internship.

The Court made it clear no one of those factors is determinative. It also instructed that Courts can consider other factors when determining which party is the primary beneficiary of the relationship. However, by making it a balancing test rather than six absolute requirements, it made it much easier employers to treat their workers as interns without violating the FLSA.

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The United States Court of Appeals for the Third Circuit recently ruled that the United States District Court for the District of New Jersey applied the wrong test to determine whether Sleepy’s LLC misclassified its delivery workers as independent contractors, rather than as employees. The case was decided under the New Jersey Wage Payment Law (“WPL”) and the New Jersey Wage and Hour Law (“WHL”).

The lawsuit was brought as a class action by Sam Hargrove, Andre Hall, and Marco Eusebio. They each worked for Sleep’s LLC as mattress delivery workers. They had signed Independent Driver Agreements (“IDAs”) which deemed them to be independent contractors rather than employees. Sleepy’s requires its delivery workers to sign similar agreements.

three mattressesThe workers claimed Sleepy’s misclassified them and the company’s other mattress delivery workers as independent contractors, rather than employees, in violation of the WPL, the WHL, the Family Medical Leave Act (“FMLA”) and the Employee Retirement and Income Security Act (“ERISA”). For example, they claim Sleepy’s improperly withheld money from their wages in violation of the WPL, and failed to pay them overtime as required by the WHL.

In 2012, the District Court ruled that Sleepy’s had correctly treated the deliverers as independent contractors. Accordingly, it dismissed their case. The workers appealed.

On appeal, the Third Circuit recognized that the New Jersey Supreme Court had not determined which test a court should apply to determine whether an individual is an employee under the WPL or the WHL. Accordingly, it asked the state Supreme Court to answer that question.

Earlier this year, the New Jersey Supreme Court answered that question. It indicated that the “ABC” test should be used to determine if an individual is an employee or an independent contractor under both the WPL and the WHL. Under that test, a worker is an employee unless: (1) the company does not exercise control over him and does not have the ability to do so; (2) the services the worker provides either are outside the company’s usual business, or are performed outside any places of business where the company performs those services; and (3) the individual normally works in an independently established trade, occupation, profession or business. I discussed this test in a previous article: New Jersey Supreme Court Broadens Definition of “Employee” Under Wage and Hour Law.

Since the District Court applied a different test to determine whether the mattress deliverers were employees or independent contractors of Sleepy’s, in the Third Circuit’s May 12, 2015 opinion, the court remanded the case so the lower court can apply the ABC test.

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