New Jersey Employment Lawyer Blog
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The United States Supreme Court recently ruled that the federal Pregnancy Discrimination Act (“PDA”) can require employers to provide reasonable accommodations to women who are pregnant even if they are not disabled.

The PDA establishes that pregnancy discrimination in the workplace violates federal law. It also includes a provision that requires employers to treat “women affected by pregnancy . . . the same for all employment-related purposes . . . as other persons not so affected but similar in their ability or inability to work.”

Supreme CourtIn the case, Peggy Young worked for United Parcel Service, Inc. (“UPS”) as part-time driver. Although UPS requires its drivers to be able to lift packages up to 75 pounds, during the first 20 weeks of her pregnancy Ms. Young’s doctor advised her not to lift more than 20 pounds. UPS provides accommodations to disabled employees who are unable to lift 75 pounds, as well as to employees who have lost their Department of Transportation certifications. The company refused to provide this accommodation to Ms. Young. Instead, it placed her on an unpaid leave of absence during most of her pregnancy. Ms. Young sued, alleging UPS violated the PDA by failing to accommodate her lifting restrictions.

Both the District Court and the Court of Appeals dismissed Ms. Young’s case, finding it was not relevant that UPS provided the same accommodation to its disabled employees. It reasoned that those employees were not similar enough to Ms. Young to provide a valid comparison. On appeal, the Fourth Circuit affirmed.

However, in Young v. United States, the Supreme Court disagreed. It held that an employee can establish an initial case of a failure to accommodate pregnancy under the PDA by showing (1) she is pregnant; (2) she sought an accommodation; (3) the employer did not accommodate her; and (4) the employer accommodated other employees who are “similar in their ability or inability to work.” If the employee does so, then the employer has to identify a non-discriminatory reason for failing to accommodate the employee. This cannot simply be the fact that it is more expensive or less convenient to accommodate pregnant women.

Assuming the employer identifies a non-discriminatory reason for failing to accommodate the pregnant worker then the employee can show that the employer’s justification for failing to accommodate her is a pretext (or excuse) for pregnancy discrimination. The Supreme Court indicated that a worker can establish this by showing the employer’s justification for failing to accommodate her is not “sufficiently strong” to justify a “significant burden on pregnant workers” imposed by its policies. For example, an employee show the employer accommodates a significant percentage of non-pregnant employees, but does not accommodate a significant percentage of its pregnant workers.

Based on its ruling, the Supreme Court sent the case back to the Fourth Circuit to determine whether Ms. Young has presented enough evidence to support her claim.

While Young may be a groundbreaking case in many parts of the county, as I previously discussed, both New Jersey (New Jersey Passes Law Prohibiting Pregnancy Discrimination) and New York City (New Rights for Pregnant Employees in NYC) already require even more generous accommodations to women who are pregnant.

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Last week, I discussed how to calculate the potential value of a wrongful termination case at a trial. However, most employment law cases settle rather than going to a trial. Accordingly, it also is important to be able to assess the potential settlement value of your case.

Risk of Loss

Trial CourtroomSince proving discrimination or retaliation requires you to show what is in someone else’s mind, most of these cases are inherently risky. As a result, when trying to determine what might be an acceptable settlement you should factor in the risk that you could lose your case.

For example, if you estimate your damages are approximately $1 million and you have a 50% chance of winning your case, then mathematically your case might be viewed as having a $500,000 settlement value. In contrast, if you have a 70% chance of winning the same case, then it would have a mathematical value of $700,000.

Of course, nobody can predict the actual odds that you will win or lose your case. However, with the advice of an experienced employment lawyer you can make reasonable predictions about whether your case involves a relatively high or low risk of winning or losing at a trial.

Risk Adversity

Most people try to avoid taking unnecessary risks in life, especially when they the stakes are high. For example, although a 50% chance of receiving $1 million theoretically has a mathematical value of $500,000, most people would be willing to accept a guaranteed $450,000 instead of taking this risk. This concept is known as risk adversity.

Someone who is especially risk adverse might be willing to accept $300,000 rather than taking this risk. In contrast, someone who is a gambler might not be willing to accept less than $500,000. Your current personal financial circumstance often impacts how much risk you are willing or able to take.

Costs of Litigation

Another factor you should consider in estimating an appropriate settlement value for your case is what it will cost you to get to (and through) a trial. Depending on your agreement with your lawyer, this may include actual dollar costs such as out-of-pocket costs or legal fees. While most employment discrimination and retaliation cases allow you to can recover these legal fees and costs from your former employer if you win, you will not be able to recover these costs if go to trial and lose your case.

Aside from dollar costs, every employment law case requires a significant commitment of time and energy. As a result, when deciding your settlement position you should consider the dollar and energy you would save.

Emotional Considerations

Aside from dollars, there are emotional factors to consider with respect to settling your case. Most employment law cases are deeply personal. You have to determine whether you will feel better if you are able to resolve your case and move on with your life, or will regret your decision to settle and always wonder if you made a mistake. In litigation, individuals often change how these emotional considerations impact their decisions as time passes.

Practical Considerations

Yet another factor you should be aware of when assessing the settlement value of your case is what your former employer is likely to be willing and able to afford to pay. For example, you should understand that a relatively small and unprofitable company that does not have insurance coverage is unlikely to be able to make the same type settlement that a Fortune 500 company, or a smaller company with insurance coverage, might be able to afford. While that does not necessarily mean you should accept a lower settlement as a result, it is something you should at least understand.

Bottom Line

There is no one right or wrong answer to determine your settlement position. Rather, you should speak to your employment lawyer about these and any other relevant factors to help you assess your position.

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There is no one way to predict the precise value of an employment law case before a trial. Among other things, juries do not necessarily use any particular formula, and verdicts often represent compromises. However, it is possible to estimate what you might receive if you win your case at a trial.

Economic Damages

To estimate your economic damages in a wrongful termination case, you need to calculate your total annual compensation (salary, bonus, commissions and benefits) from the job you lost. Unless you use an expert, this is likely to require you to estimate the value of some of your lost benefits, and to make assumptions about future raises, discretionary bonuses and commissions.

Civil jury in employment law caseOnce you calculate your annual compensation, you should multiple it by the number of years you actually were unemployed, and if applicable the number of years into the future you reasonably anticipate you will remain unemployed. In doing so, you should keep in mind your obligation to make all reasonable efforts to mitigate your damages by finding another job. You also should factor in any likely raises or other changes to your compensation package.

If you already have found another job that has equal or better compensation to the job you lost, then your economic damages stop when you begin that job. Until that happens, you need to subtract from your economic damages any income you earned after you were fired, unless you can prove you would have earned that additional income even if you had not been fired (such as income from a second job you held before you were fired).

Emotional Distress Damages

Emotional distress damages can be more difficult to predict than economic damages because they are totally subjective. There is no formula for a jury to calculate emotional distress damages. However, in New Jersey emotional distress awards in employment law cases tend to range between $50,000 and $150,000.

Factors that would make an emotional distress damages worth closer to or above $150,000 include a diagnosed medical condition that was caused by the wrongful termination or harassment such as Major Depressive Disorder or Post Traumatic Stress Disorder, or a severe personal harm that was caused by being fired, such as a divorce due to the stress of losing your job or losing your home due to financial problems caused by losing your income.

Likewise, severe harassment such as physical sexual harassment or the use of particularly hateful racial epithets can warrant especially high emotional distress damages award.

Punitive Damages

Punitive damages can be awarded in some employment law cases to punish your former employer. However, punitive damages are reserved for a relatively small percentage of cases in which the employer’s actions were “especially egregious.” In addition, they are not permitted unless the employer’s upper management participated in the unlawful conduct toward you. As a result, in predicting the value of employment cases it is difficult to give too much (if any) value to punitive damages unless the facts are particularly extreme and appalling. That being said, when punitive damages are awarded they can be many times higher than your actual damages.

Attorneys’ Fees and Costs

In most discrimination and retaliation cases in New Jersey, if you win at a trial your former employer is likely to be required to pay for your attorneys’ fees. This calculation is based on what you would have paid your lawyer if you had paid by the hour, which might not be how you actually agreed to pay your lawyer. These legal fees, as well as your out-of-pocket costs of pursuing the lawsuit, are part of your potential verdict at a trial.

Now that you have an idea how to estimate the value of a wrongful termination case at a trial, next week I will discuss how to figure out a reasonable settlement value of an employment case.

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New regulations issued by the United States Department of Labor (DOL) make it clear that the Family & Medical Leave Act (FMLA) protects spouses in same sex marriages.

same-sex marriage protected under FMLAThe FMLA is a federal law which, among other things, guarantees covered employees can take up to 12 weeks per year off from work to care for their own serious health condition, a serious health condition of a member of their immediate family, or for pregnancy, childbirth or adoption. To be covered, an employee must have worked for the employer for at least 12 months, worked at least 1,250 hours for the employer during the previous 12 months, and worked at a location at which the employer has at least 50 employees within a 75 mile radius.

The FMLA defines “immediate family” to include a parent, child or spouse. However, until last year’s Supreme Court decision in United States v. Windsor, the federal government did not recognize same sex marriages. Therefore, the FMLA did not protect employees in same sex marriages to the same extent it protects employees in opposite sex marriages. The new regulations are intended to correct this problem.

For instance, the new regulations make it clear that the term “spouse” includes partners in same sex marriages. Specifically, it includes (1) any individual who is considered married under the law of the State in which the marriage was entered into, and (2) any individual who is married outside of the United States if the marriage is recognized both in the country in which the marriage took place and in at least one State.

In addition to expanding the definition of spouse, the new regulations make it clear that irrespective of whether they are the same or opposite sex, both parents are entitled to take FMLA leave for the birth or adoption of their child, and to bond with their newborn child during the first year after birth. The previous version of the regulations referred to these rights belonging to the “mother” and “father,” terms that assumed a marriage is only be between a man and a woman.

Likewise, the new regulations make it clear that a spouse of either gender is entitled to take time off to care for his or her pregnant spouse who is incapacitated, providing prenatal care, or has a serious health condition following childbirth. Previously, the regulations only gave this right to the “husband” on the assumption that the spouse who is not pregnant would be a man.

Numerous other provisions of the FMLA regulations were revised to be consistent with same sex couples. For example, previous rights of “the mother” were changed to be rights of the “expectant mother” in recognition that marriages can have two mothers, and the rights in question belong to the mother who is pregnant. These rights include time off due to incapacity as a result of pregnancy, for prenatal care, or for the expectant mother’s own serious health condition following childbirth.

These new regulations are scheduled to go into effect on March 27, 2015.

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A recent employment law case recognizes that in certain circumstances, an employer does not violate federal law if it requires former employees to sign away their legal claims against it as a condition to rehiring them as independent contractors.

In 1999, Allstate Insurance Company decided to treat all of its sales agents as independent contractors. Accordingly, that November Allstate fired 6,200 sales agents and gave them four options: (1) return to work as an independent contractor and receive a $5,000 bonus and other benefits; (2) receive $5,000 and the right to sell the employee’s Allstate account in September 2000; (3) receive 12 months of “enhance severance” pay; or (4) receive 13 weeks of ordinary severance pay.

To accept any of the first 3 options, a sales agent was required to sign a release waiving any existing legal claims he or she had against Allstate. Most of the employees accepted one of those three options. The employees who refused to sign releases received only 13 weeks of severance pay.

Employee Termination AgreementThe Equal Employment Opportunity Commission (“EEOC”) filed a lawsuit against Allstate. It claimed the company violated federal law by requiring the employees to release any legal claims they had against Allstate if they wanted to be hired as independent contractors since that meant they would have to give up any discrimination claims they had against the company. Specifically, the EEOC claimed this violated the anti-retaliation provisions of Title VII, the Age Discrimination in Employment Act (“ADEA”) and the Americans with Disabilities Act (“ADA”). Two employees also filed their own lawsuits claiming the releases they signed were invalid.

All three cases eventually were consolidated and Allstate moved to dismiss all of the claims. The court granted partial summary judgment on the claims filed by the former employees. However, it ruled that a trial was necessary to determine whether the employees signed the releases knowingly and voluntarily, and whether the releases were unconscionable.

The trial court also dismissed the EEOC’s entire case. Among other things, it concluded it was not unlawful for Allstate to require former employees to agree to waive their legal claims against it as a condition to hiring them as independent contractors. The EEOC appealed.

Earlier this year, in Equal Employment Opportunity Commission v. Allstate Ins. Co., the Third Circuit affirmed the trial court’s ruling that dismissed the EEOC’s case. The Third Circuit explained that it is well established that employers can offer terminated employees additional benefits if they agree to release their legal claims against their former employer. Of course, such a release is enforceable only if the employee signs it knowingly and voluntarily, receives something of value in exchange for it, and the release does not waive claims that might occur in the future.

The Third Circuit rejected the EEOC’s argument that this case was unique in that Allstate required the employees to sign releases before it would allow them to work as independent contractors. Among other things, it found this argument was illogical since the EEOC admitted companies can offer employees severance pay in exchange for releasing their legal claims. The Third Circuit indicated that Allstate offered employees another alternative to severance pay — working for it as an independent contractor. It ruled that offering this additional option did not make the releases retaliatory or unenforceable, but rather was a benefit to the employees.

The Court further found Allstate could not have retaliated against the employees because refusing to sign a release is not legally protected under Title VII, the ADA or the ADEA because it is not necessarily related to an objection about unlawful discrimination. Likewise, it found the company’s refusal to hire former employees who did not sign the release as independent contractors was not an adverse employment action since the former employees did not have a legal entitlement to be rehired.

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In a recent employment law case, Davis v. Husain, the New Jersey Supreme Court held that a judge may not engage in any communication with a member of the jury outside of the presence of the lawyers involved in the case (known as ex parte communications), including discussions after the jury has rendered a verdict. In this case involving a claim of sexual harassment, the jury found plaintiff’s former employer liable for having engaged in sexual harassment. After the verdict was rendered and the jury was dismissed, a juror mentioned to the trial court judge that the defendant had not placed his hand on the Bible when taking the oath before he testified. The conversation between the judge and the juror occurred outside the presence of counsel involved in the case.

The judge later advised the attorneys for both parties of the comment by the juror. In motions filed after the trial, the defendant moved for a new trial. The trial court denied the motion, and the Appellate Division agreed with the trial Court. The defendant then appealed to the New Jersey Supreme Court.

In reaching a decision in the case, the Supreme Court noted that under the Court Rules all communications between a judge and a jury during a trial must be in open court. The Court considered two Appellate Division cases in New Jersey, a civil case and a criminal case. In both of these cases, the Appellate Division expressed disfavor as to the ex parte communications between the judge and jury after the jury reached a verdict.

The Court indicated that it wanted to be clear in terms of the rule and to provide a “bright-line” for judges concerning communications with jurors outside of the involvement and presence of counsel and parties to a litigation. The Court stated specifically, “[p]ost-verdict ex parte communications between the trial court and jurors cannot be countenanced. The informality of such encounters, however benign their intended purpose, creates the possibility for the innocent remark or question to spark an attempt to plumb jurors’ decision-making processes.”   The Court held that all ex parte communications between a judge and juror are prohibited, including post-verdict communications.

Jury in sexual harassment lawsuitThe Court then discussed the facts of the Husain case, noting that as a general matter jury deliberations are to remain secret unless “good cause” can be shown indicating the potential for prejudice during the jury deliberation process. Instances of “good cause” might include circumstances in which it appeared that a juror either communicated to fellow jurors facts outside of those revealed during the trial, or made comments reflecting unlawful prejudice that tainted the jury deliberations.

The case was remanded for the trial court to determine whether the comment made by the juror to the judge post-verdict had any impact on the jury deliberations or the ultimate verdict. In remanding the case, the Court provided that the investigation be conducted by a different judge than the trial judge involved in the case, and that the investigation be narrow to preserve the secrecy of the jury deliberations.

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New Defense to Sexual Harassment Claims

Earlier this week, in Aguas v. State of New Jersey, the New Jersey Supreme Court provided employers a new defense to sexual harassment claims under the New Jersey Law Against Discrimination (“LAD”).

Specifically, the Court adopted a defense that previously applied only in federal cases. That defense is often referred to as the “Faragher/Ellerth defense,” from the two United States Supreme Court cases that initially adopted the defense under federal law: Faragher v. City of Boca Raton and Burlington Industries v. Ellerth.

To understand this defense it is important to understand two ways in which employers can be held liable for sexual harassment committed by one of their employees. One way is if the victim of the harassment proves the employer was negligent. This is usually accomplished by showing the employer did not have an anti-harassment policy, or that its policy was not effective.

A second way employers can be liable for harassment committed by their employees is called vicarious liability. Vicarious liability can be proved by showing the employer put the harasser in a position of authority. In other words, it holds employers responsible for harassment committed by their supervisors.

The Faragher/ Ellerth defense applies in limited circumstances. It applies only to the vicarious liability theory, not to the negligence theory described above. It also does not apply when the harassment led the victim of the harassment to experience a tangible employment action such as being fired, demoted, suspended, or forced to resign.

Sexual Harassment In The OfficeBut when the Faragher/Ellerth defense does apply, it provides the employer a defense to liability. Specifically, under this this defense an employer cannot be held responsible for sexual harassment if it can prove:

  1. It “exercised reasonable care to prevent and correct promptly any sexually harassing behavior”; and
  2. The victim of the harassment “unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise.”

Broader Definition of “Supervisor”

The Aguas case is not all bad news for employees. It also expands the definition of a “supervisor” under the LAD.

In interpreting the primary federal anti-discrimination law, Title VII, the United States Supreme Court has ruled that a supervisor is someone who has the authority to make decisions regarding hiring, firing, promotions, demotions, discipline, compensation, or other tangible employment actions.

Fortunately, the New Jersey Supreme Court declined to apply this relatively narrow definition under the LAD. Instead, it defined supervisors not only to include individuals who have the authority to make tangible employment decisions, but also ones who have the authority to impact the employee’s day-to-day work, such as by giving out job assignments.

The Bottom Line

In light of the new defense to harassment claims created by the Aguas case, it is now even more important that employees who experience sexual harassment at work should complain to the company’s human resources department or someone else designated to receive complaints.

Of course, there are times when it is reasonable for an employee not to make an internal complaint about harassment, such as when the employee does not even know there is a policy, has been threatened with retaliation if she makes a complaint of harassment, or has evidence that the policy is not effective. However, failing to make a complaint can jeopardize a potential sexual harassment case.

In short, Aguas can leave employees in a difficult position. They can complain about harassment and risk that they will face retaliation, or they can choose not to complain and risk they will not be able to pursue a sexual harassment lawsuit. Accordingly, if you have experienced a hostile work environment at your job, we highly recommended that you consult with an experienced employment lawyer to help you decide if and how you should report the harassment you have experienced.

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New Jersey has many well-known laws that protect employees. Perhaps the two best know are the New Jersey Law Against Discrimination (“LAD”), an anti-discrimination law, and the Conscientious Employee Protection Act (“CEPA”), a whistleblower law. The state has many other employment laws as well.

One much less known law is the Worker Freedom From Employer Intimidation Act, which went into effect in 2006. It protects employees against certain forms of religious and political intimidation at work. Specifically, it prohibits companies from requiring employees to attend meetings or to participate in communications regarding the employer’s opinion about religious or political issues. The law defines “political matters” to include affiliation with a political party, as well as decisions to join, not join, or participate in “any lawful political, social, or community organization or activity.”

Despite that prohibition, the act allows employers to invite employees to voluntarily attend employer-sponsored meetings and to provide other religious and political communications to their employees as long as make it clear the employees will not be penalized if they refuse to attend the meetings or accept the communications.

The Act includes an exception permitting communications about religious or political matters that the employer is legally required to communicate to the employee. However, this exception applies only to the extent the communication is legally required.

Office PoliticsThe law also permits religious organizations to require employees to attend employer-sponsored meetings or to participate in any communications with the employer to communicate the employer’s religious beliefs, practices or tenets. Similarly, it permits political organizations and political parties to require employees to attend meetings or participate in communications about the employer’s political purposes and beliefs. Further, it permits educational institution to require student or instructors to attend lectures on political or religious matters as long as they are part of the institution’s regular course work.

In addition, the law prohibits retaliation. In particular, it makes it unlawful for an employer to fire, discipline or otherwise penalize, or to threaten to fire, discipline or penalize an employee because he or she reported an actual or suspected violation of the Act.

The Act allows a wide range of relief to employees whose rights have been violated under it. Those remedies include: (1) a restraining order prohibiting continuing violations; (2) reinstatement of the employee to his/her former job or an equivalent one; (3) lost wages and benefits; and (4) reasonable attorneys’ fees and costs. It also permits an award of punitive damages, but caps those damages at three times the employee’s actual damages.

Unfortunately, the Act has only a 90-day statute of limitations. As a result, an employee who wants to pursue a claim under it must act extremely quickly. It also makes it clear it does not limit the right to bring a common law wrongful termination claim which, when applicable, has a two-year state of limitations. Further, individuals who have claims under the Act may also have claims of religious discrimination under the LAD, retaliation under CEPA, or other related claim.

For information about other New Jersey employment laws, please see my previous article which provides an Overview of New Jersey Employment Law Statutes.

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A recent case, Kaplan v. Greenpoint Global, provides a good example of several claims an employee might be able to bring if an employer fails to live up to the promises it made.

On December 1, 2010, Leslie Kaplan began working for Greenpoint Global as its Director of Legal Services. Greenpoint is a company that outsources legal services to businesses, law firms and individuals.

Before accepting the job, Ms. Kaplan told Greenpoint’s Chief Executive Officer, Jacklyn Karceski, that her most recent salary exceeded $200,000 and she was seeking similar compensation from Greenpoint. Ms. Karceski indicated that her goal was realistic. Ms. Kaplan also told the company’s founder, Sanjay Sharma, that her salary needed to “start with a two.” Mr. Sharma responded “No problem.” According to Ms. Kaplan, she relied on these assurances by Greenpoint and declined pursuing an opportunity to return to her former job. Despite its promises, Greenpoint actually paid Ms. Kaplan at the rate of $80,000 per year.

In her lawsuit, Ms. Kaplan asserted numerous claims relating to the fact that Greenpoint did not pay her $200,000 per year. She also brought a wrongful termination claim in which she claims Greenpoint fired her in retaliation for complaining about numerous misrepresentations the company made to convince her to accept its job offer. For example, she alleges: (1) the address the company claimed was its New York headquarters actually is Mr. Sharma’s home address; (2) Ms. Karceski grossly overstated the number of lawyers and other employees Greenpoint had working for it; (3) Mr. Sharma told her a specific client was doing a million dollars of business with Greenwood when it actually had done only $36,000 of business; and (4) Mr. Sharma told her Greenpoint was comparable to a competitor whose annual revenues exceeded $25 million, when Greenpoint actually lost at least half a million dollars in 2010.

Greenpoint eventually filed a motion for summary judgment, asking the judge to dismiss each of her claims. However, the court upheld all of Ms. Kaplan’s claims.

Employer makes false promise to employeeAlthough Ms. Kaplan did not have a written employment contract, the court upheld her breach of contract claim. It found enough evidence for a jury to conclude that Greenwood had entered into an oral employment contract to pay her $200,000 per year. Likewise, it upheld her claim under the New Jersey Wage Payment Law, finding sufficient support for her claim that the company violated the law by failing to pay her full agreed-upon wages.

The court also permitted Ms. Kaplan to proceed with her promissory estoppel claim, finding evidence that the company made a “clear and definite promise” to pay her at least $200,000 per year, a promise it expected her to rely upon; and Ms. Kaplan relied on that promise to her detriment by not pursuing an opportunity to return to her previous job. Notably, the court reached this conclusion even though Ms. Kaplan’s former employer never actually offered her that job.

Additionally, the court refused to dismiss Ms. Kaplan’s claim for negligent misrepresentation. It found enough evidence to demonstrate she relied on misinformation the company provided to her about its financial status and about her own salary when she accepted the job offer.

The judge also allowed Ms. Kaplan an opportunity to prove her quantum meruit claim. In that claim, Ms. Kaplan is trying to require Greepoint to pay her the reasonable value of the services she provided to it. The court concluded that a jury needs to determine whether the reasonable value of Ms. Kaplan’s services were $80,000 per year, $200,000 per year, or some other amount.

Finally, the court permitted Ms. Kaplan to continue with her wrongful termination claim. It ruled that a reasonable jury could find Greenpoint fired her because she objected to the misrepresentations it had made to her. It further concluded that Ms. Kaplan could reasonably believe those misrepresentations constituted fraud and violate the New Jersey Consumer Fraud Act.

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The question of whether you are an employee or an independent contractor can be very important. It can determine many issues, including how you will be taxed, whether you are entitled to health insurance and other employee benefits, and whether you are protected by various employment laws. However, the issue whether you have been misclassified as an independent contractor can be confusing because there are different tests under different laws.

Earlier this month, in Hargrove v. Sleepy’s, LLC, the New Jersey Supreme Court clarified which test applies under two important state laws: The New Jersey Wage and Hour Law (“NJWHL”) and the New Jersey Wage Payment Law (“NJWPL”). The NJWHL is a law that, among other things, entitles covered employees to be paid at least the minimum wage, and overtime at time-and-a-half when they work more than 40 hours in a week. Similarly, the NJWPL requires most employers to pay employees at least twice per month.

Group of industrial workers. Isolated on white background.The case was filed in federal court. The Unites States District Court for the District of New Jersey applied a relatively narrow definition of “employee.” It concluded the plaintiffs were independent contractors, and therefore were not protected by the NJWHL or the NJWPL. Accordingly, it dismissed their case.

The plaintiffs appealed to the Third Circuit Court of Appeals. The Third Circuit then asked the New Jersey Supreme Court to answer the question because it involves an interpretation of state law.

In Hargrove the New Jersey Supreme Court answered the Third Circuit’s question by adopting something called the “ABC test.” This is the same test the New Jersey Department of Labor uses to determine if someone is covered by the New Jersey Unemployment Compensation Act.

Under the ABC test, an individual is presumed to be an employee. The employer can prove the worker is not an employee if it can establish three things:

  1. The company did not exercise control over regarding any aspect of the person’s work, and did not have the ability to exercise any such control.
  2. In determining whether the employer has the right to exercise control over an individual, a court can consider the contract between the employer and the worker, but it cannot rely on the contract alone. Rather, it has to look at all of the circumstances relating to the actual performance of the work;
  3.  The services provided by the person are either “outside the usual course of the business for which such service is performed” or are “performed outside of all the places of business of the enterprise for which such service is performed;” and
  4.  The individual normally works in an independently established trade, occupation, profession or business, and is likely to continue to do so after this relationship ends. A company cannot meet this factor if the worker is likely to join “the ranks of the unemployed” after the relationship is over.

This definition of “employee” is significantly broader than the definition under the Fair Labor Standards Act, a federal law that provides similar protections to the NJWHL. In fact, it is even more expansive than the broad definition under the New Jersey Law Against Discrimination and the Conscientious Employee Protection Act (“CEPA”). This is likely to significantly expand the number of workers in New Jersey who are entitled to be paid minimum wage and receive overtime pay.

For more information about the relevant definition of an “employee” under CEPA, please read my previous article: Independent Contractors Protected by Conscientious Employee Protection Act.

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