New Jersey Employment Lawyer Blog
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A recent Appellate Division opinion recognizes that firing an employee because he or she is in the process of getting divorced violates the New Jersey Law Against Discrimination (LAD) because it constitutes marital status discrimination.

Robert Smith worked for the Millville Rescue Squad for 17 years as an emergency medical technician (EMT) for 27 years. Mr. Smith’s wife, who also worked for Millville, was one of his subordinates. The couple separated after Mr. Smith’s wife learned he had been having an affair with another subordinate.

Mr. Smith told his supervisor, John Redden, that he had his wife had separated, and indicated he did not think there was any chance he would reconcile with her. Millville fired Mr. Smith approximately six weeks later.

According to Mr. Smith, Mr. Redden told him Millville was firing him because he supposedly was going through an ugly divorce with his wife. In contrast, Millville claims it fired Mr. Smith as part of a job restructuring and Mr. Smith’s allegedly poor job performance.

closeup of a lawyer sitting in his desk showing a divorce decreeMr. Smith filed a lawsuit in which he claims Millville fired him because of his marital status, in violation of the LAD. The case went to trial, but the judge dismissed the case after Mr. Smith presented all of his evidence. The trial court found Mr. Smith’s evidence could not support a marital status discrimination claim because there was no evidence Millville fired him because he was married or not married. It concluded that employers have the right to fire employees because they are concerned that their divorce would become messy.

However, in the unpublished opinion of Smith v. Millville Rescue Squad the Appellate Division disagreed. It concluded that for purposes of the LAD, “marital status” means more than either being married or single. For example, it also includes being engaged, separated, or involved in divorce proceedings.

The Appellate Division found Mr. Smith’s alleged facts, if true, would be direct evidence of marital status discrimination. In particular, a jury could find Mr. Redden’s statements to Mr. Smith were admissions that Millville decided to fire him because it assumed his divorce was going to be ugly.

The Appellate Division expressly rejected the trial court’s finding that Millville had the right to fire Mr. Smith because of its fear his divorce would turn ugly. It deemed this rationale to be based on stereotypes about divorcing spouses, including the assumption that they “are antagonistic, uncooperative with each other, and incapable of being civil or professional in each other’s company in the workplace.” The court explained that although it would be lawful for an employer to fire an employee because of his or her actual negative behavior at work caused by a difficult divorce, there was no evidence of any such behavior by Mr. Smith. Rather, Millville “acted on a fear, apparently based in stereotype that such conduct would follow.”

The Appellate Division also explained that employers can enforce anti-nepotism rules that prohibit two related employees from working for the same employer even if it means firing an employee because his or her spouse also works for the same employer. However, Millville fired Mr. Smith because he was getting divorced, not because he and his wife worked for the same company. Further, the court found it was irrelevant that Millville did not fire other employees who were divorced or divorcing, since it apparently was discriminating against a “subset of divorcing employees,” namely “those married to a fellow employee.” Accordingly, it remanded Mr. Smith’s case for a new trial.


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Last month, a judge in the United States District Court for the District of New Jersey ruled that an employee who files a wage and hour claim with the New Jersey Department of Labor (“NJDOL”) can be protected from retaliation under the Fair Labor Standards Act (“FLSA”) even if her original claim did not assert that her employer violated the FLSA.

Veronica Reilly worked for Quick Care Medical, P.C., as an office manager. She filed a claim seeking to recover unpaid vacation time and overtime pay with the NJDOL. Specifically, she claimed the company failed to pay her $673.20 to which she was entitled when she used a week of her accrued vacation time. She also claimed she was improperly denied $168.40 in overtime pay. She brought her claims under two state laws, the New Jersey Wage Collection Statute and the Wage Payment Law Statute. Ms. Reilly won both of her claims, and the NJDOL ordered Quick Care to pay the full $841.60 she sought in vacation and overtime pay.

Office ManagerAccording to Ms. Reilly, when she returned to work on the day of her hearing at the NJDOL, her boss, Dr. Neerja Misra, reprimanded her for failing to tell the company she was going to be late for work that day. Dr. Misra apparently told Ms. Reilly not to come to work for the next three days, and then fired Ms. Reilly when she returned to work on the fourth day after her hearing.

Ms. Reilly filed a lawsuit alleging that both Quick Care and Dr. Misra violated the FLSA by firing her because she filed her claim with the NJDOL. The FLSA is a federal law which, among other things, regulates employee compensation and overtime pay. It also prevents an employer from firing an employee because he or she makes a complaint related to one of the FLSA’s provisions.

Quick Care and Dr. Misra asked the court to dismiss Ms. Reilly’s claim, arguing the FLSA’s anti-retaliation provision did not apply because she filed her original claim under New Jersey law rather than under the FLSA. However, the court disagreed. It explained that the FLSA does not indicate it protects an employee only if he or she files a claim that expressly refers to the FLSA by name. Rather, it protects employees who bring claims “related” to the statute. The court found this means the claim must relate to an issue covered by the FLSA, such as a claim about wages or overtime pay. It noted that numerous other courts have reached the same conclusion that the FLSA prohibits employers from retaliating against employees because they file wage and hour claims in state agencies. Thus, in Reilly v. Quick Care Medical it ruled that Ms. Reilly’s complaint to the NJDOL is covered by the FLSA’s anti-retaliation provision. Accordingly, it permitted her to continue to pursue her case.

For more information about retaliation claims under the FLSA you might want to read our previous article: U.S. Supreme Court Rules FLSA Forbids Retaliation Against Employees Who Make Oral Complaints.

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A recent decision by the New Jersey District Court addressed important issues regarding retaliation following an employee’s request for a reasonable accommodation and time off under the Family and Medical Leave Act (“FMLA”).

Supermarket CartsIn Boles v. Wal-Mart Stores, Inc., plaintiff Barry Boles worked for Wal-Mart Stores, Inc. for approximately ten years. As a result of a medical condition, his physician signed him out of work for approximately five months, which included several extensions of leave. Wal-Mart retroactively approved his FMLA leave (12 weeks), and designated his remaining time off as personal leave. The plaintiff claimed he did not receive documentation regarding how his leave was allocated or indicating he could be fired if he failed to return to work following his FMLA leave. Within three days after Boles returned to work, Wal-Mart terminated him for failure to return to work following his approved leave.

The plaintiff had received a performance warning approximately two weeks prior to taking leave. Shortly thereafter, Wal-Mart claimed that on one occasion prior to his leave he failed to complete certain overnight job responsibilities and to notify his supervisors that he was leaving early.

The plaintiff brought claims for (1) retaliation for seeking an extension of medical leave in violation of the New Jersey Law Against Discrimination (“LAD”); (2) disability discrimination under the LAD; (3) failure to reasonably accommodate his disability under the LAD; and (4) interference with his FMLA rights.

Reasonable Accommodation

Regarding the reasonable accommodation claims, Wal-Mart argued the plaintiff could not meet his burden of proof because “taking medical leave does not constitute protected activity that would support a retaliation claim under the NJLAD.” The Court rejected this argument and held that the LAD’s anti-retaliation provision includes as “protected activity” requesting and taking medical leave. As a result, employers found to have retaliated against employees for requesting or taking medical leave can be liable. The Court also found there was sufficient evidence to support the plaintiff’s claim that his discharge was motivated by Wal-Mart’s resentment toward his request for leave. In so concluding, the Court relied on (1) an email his direct supervisor sent to his own supervisor about discharging the plaintiff during his FMLA leave; and (2) the fact that Wal-Mart discharged the plaintiff only three days after he returned to work.

The Court, however, held that because the plaintiff had received a warning indicating unsatisfactory work performance, left work without notifying his supervisors, and failed to complete certain overnight work, he could not meet the necessary initial showing for a disability discrimination case. In particular, the Court concluded that the plaintiff was not meeting his employer’s reasonable expectations regarding his work performance. Surprisingly, the Court also held the plaintiff did not request a reasonable accommodation when he provided a physician’s certification indicating he needed leave beyond the date he originally requested. The Court found the plaintiff did not directly request additional leave from his employer, but rather merely submitted a certification from his physician indicating a later return to work date. The Court found these facts could not maintain a claim for a failure to accommodate a disability. The Court then granted summary judgment to Wal-Mart in these respects.

FMLA Interference

The Court stated it was unclear whether Wal-Mart provided the plaintiff adequate notice that he was eligible for FMLA leave or sufficient information regarding the expiration of his FMLA leave. The Court found that the plaintiff may have been prejudiced by the company’s failure to provide adequate notice since he may have made alternative plans if he understood he could be fired if he did not return to work prior to the expiration of his approved leave. As a result, the Court denied Wal-Mart summary judgment as to the plaintiff’s claim of interference with his FMLA rights.

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New Jersey’s Appellate Division recently ruled that employers can enforce agreements that shorten the statute of limitations for employees to bring claims against them.

Employment ApplicationSergio Rodriguez applied for a job as a helper at Raymour & Flanigan in August 2007. Mr. Rodriguez was born in Argentina and speaks limited English. He filled out a job application, which was in English, with help from a friend. The application included a provision that if Mr. Rodriguez was hired he would have only six months to file a lawsuit after any employment-related claim arose. It also expressly waived any statute of limitations to the contrary, and his right to a jury trial. Mr. Rodriguez signed and submitted the employment application. Raymour & Flanigan hired him the following month.

In 2010 Mr. Rodriguez injured his knee at work. He took a medical leave, had surgery and returned to work on light-duty in September 2010. By September 28, 2010 he was working without restrictions.

Three days later, Raymour & Flanigan announced a reduction in force, and terminated Mr. Rodriguez , along with 101 other employees. Nine months later, Mr. Rodriguez filed a lawsuit claiming Raymour & Flanigan fired him because he had a disability, in violation of the New Jersey Law Against Discrimination (“LAD”), and because he filed a workers’ compensation claim, in violation of the New Jersey Workers’ Compensation Act. Normally, each of those claims has a two-year statute of limitations.

Mr. Rodriguez argued the provision shortening the statute of limitations was unconscionable and unenforceable. The Court found Mr. Rodriguez’s job application was a “contract of adhesion,” meaning it was something he could not have been expected to try to negotiate or change. But it found the employment contract was not so over-reaching or unfair that no reasonable person who understood it would have voluntarily agreed to it. It relied on factors including that (1) the relevant language was in bold print and capital letters in a two-page contract, not buried in fine print in a lengthy document; (2) the provision was relatively clearly and simple; and (3) Mr. Rodriguez was able to take the agreement home and read it at his leisure rather than being pressured to sign it on the spot.

The court explained that an agreement to shorten a statute of limitations is enforceable as long as the agreed-upon deadline is reasonable and does not violate public policy. It found both of those conditions were met here, particularly since employees who want to bring LAD claim through the New Jersey Division on Civil Rights (DCR) have to do so within a similar 180-day deadline.

The opinion in Rodriguez v. Raymours Furniture Co., Inc. is published, meaning it is a binding legal precedent. Unless and until it is overturned, more employers are likely to require their employees to agree to similar limits to the statute of limitations. As a result, more employees are likely to inadvertently forfeit their right to sue for discrimination or retaliation because they did not know or remember what they signed. This could force employment lawyers to file lawsuit rather than attempt to negotiate first, out of fear their clients might have agreed to a shorter deadline to assert their legal claims.
There are many important lessons of the Rodriguez case. For example, going forward it is even more important that you:

  1. Carefully read the language of any job application or employment contract, and make sure you understand and agree with them before you sign them;
  2. Save copies of any job applications and employment agreements you sign so can look back at them and potentially provide them to an employment lawyer in the future; and
  3. Contact an employment lawyer as soon you believe you were fired unlawfully or have another claim against your employer.
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On June 16, 2014, the New Jersey Supreme Court ruled that by the Conscientious Employee Protection Act (“CEPA”) did not protect an employee who was fired after he objected because the nursing home for which he worked was not taking sufficient steps to prevent the spread of infectious disease. In the process, it concluded that to be protected by CEPA an objection has to relate to a measurable standard or requirement.

CEPA is New Jersey’s broad “whistleblower” law. Among other things, it prohibits employers from retaliating against employees because they object about activities they reasonably believe constitute “improper quality of patient care,” including any professional code of ethics, or are “incompatible with a clear mandate of public policy concerning the public health.”

James Hitesman, a registered nurse, worked for Bridgeway, Inc., at nursing home in Bridgewater, New Jersey. Bridgeway fired Mr. Hitesman after he complained to the company’s management about high rates of infectious diseases at the nursing home, and raised similar concerns to the Somerset County Department of Health, New Jersey Department of Health and Senior Service, and a television reporter. He sued, claiming Bridgeway fired him in violation of CEPA.

Mr. Hitesman won his retaliation case at a trial, but the jury did not award him any damages. He appealed, asking for a new trial on damages. Bridgeway also appealed, arguing Mr. Hitesman’s objections were not protected by CEPA. The Appellate Division agreed with the company, finding Mr. Hitesman did not have an objectively reasonable belief that its actions either constituted improper quality of patient care or were incompatible with a clear mandate of public policy.

Body Temperature Check UpIn Hitesman v. Bridgeway, Inc., the New Jersey Supreme Court affirmed the dismissal of Mr. Hitesman’s case. To win a CEPA case, an employee has to identify a law, rule, regulation, clear mandate of public policy, or professional code of ethics that has a close enough connection (“substantial nexus”) to the objection or complaint the employee alleges caused the company to retaliate. In Hitesman the Supreme Court ruled the employee’s objection must indicate that the employer violated a standard against which the employer can measure its conduct. For instance, it is not enough to complain that the employer should have done something safer, healthier, or better for the environment. Rather, an employee must object believe the employer was required to do something it failed to do, or was prohibited from doing something it did do.

Mr. Hitesman argued his objections were protected by CEPA because he reasonably believed the nursing home violated the American Nursing Association (ANA) Code of Ethics. The Court agreed a medical ethical code like the ANA Code can be the source for a standard of patient care under CEPA. However, it found the ANA Code did not protect Mr. Hitesman because it does not include any specific requirements for hospitals to control the spread of infection. Rather, it sets general goals and requirements for nurses, such as being committed “to the health, well-being, and safety” of patients, and taking “appropriate action regarding any instances of incompetent, unethical, illegal, or impaired practice by any member of the health care team or the health care system.”

Mr. Hitesman also argued based on the fact that Bridgeway’s Employee Handbook required him to comply with the ANA Code. However, the Court ruled that the handbook did not include any specific standards or requirements regarding nursing homes controlling the spread of infectious disease. Accordingly, it found the handbook could not provide a basis to bring Mr. Hitesman’s objections within the scope of CEPA’s protection.

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Recently, the New Jersey Supreme Court ruled that private claims under the New Jersey Civil Rights Act (NJCRA) are limited to claims against individuals who were acting “under color” of state law. In other words, you can bring a private lawsuit under the NJCRA, but only against someone who was acting in his or her capacity as an employee or agent of the state or local government.

Bitters and infusions on bar counter with blurred bottles in bacThe case was brought by Maryann Cottrell, a resident of Glassboro, New Jersey. Ms. Cottrell apparently made negative comments about Zagami LLC at its public liquor license renewal hearing. Zagami is a company that owns a restaurant and bar in Glassboro. The company subsequently sued Cottrell, claiming her statements at the hearing were defamatory.
Zagami’s lawsuit eventually was dismissed by the Appellate Division. It found that since the liquor license renewal hearing was a “quasi-judicial” proceeding, Ms. Cottrell’s statements at it were protected by absolute immunity, meaning she could not be sued for anything she said at the hearing.

Ms. Cottrell then sued Zagami for malicious use of process, claiming its defamation lawsuit was a Strategic Lawsuit Against Public Participation (also known as a “SLAPP suit”) since it was baseless and intended to retaliate against her for speaking out against Zagami at the hearing and to deter her from doing so again in the future. Ms. Cottrell also brought a claim under the New Jersey Civil Rights Act (NJCRA), a state law that provides remedies for certain violations of the United States and New Jersey Constitution. For more information about the NJCRA, please read our Frequently Asked Questions (FAQ) About the New Jersey Civil Rights Act.

The trial court dismissed Ms. Cottrell’s case, finding there was probable cause for Zagami to bring a defamation claim, meaning there was a good enough basis for the company to file its defamation lawsuit that Ms. Cottrell could not prove that lawsuit was brought maliciously. The lower court also dismissed Ms. Cottrell’s NJCRA claim, ruling you cannot bring a private lawsuit under the NJCRA unless the defendant was acting under color of law.

The Appellate Division reversed on both of those issues. If concluded there was no probable cause for Zagami’s defamation lawsuit, and therefore Ms. Cottrell could proceed with her malicious abuse of process claim. It also ruled that the NJCRA does permit private claims against individuals who were not acting under color of law, as long as the lawsuit alleges the plaintiff was deprived of one of his or her protected rights, in this case the right to free speech.

However, last week in Cottrell v. Zagami, LLC and a companion case, Perez v. Zagami, LLC, the New Jersey Supreme Court reversed the Appellate Division’s ruling with respect to Ms. Cottrell’s NJCRA claim. It held the NJCRA creates a private cause of action only against individuals who are acting under color of law. Accordingly, since Zagami is a private company and not a government agency, it cannot be sued under the NJCRA.

The Supreme Court noted that Ms. Cottrell still has a remedy for Zagami’s effort to deter her from publically speaking about matters of public interest at a municipal hearing. Specifically, she still can continue to pursue her malicious use of process claim.

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While minorities are most frequently the victims of discrimination, it is well-established that reverse discrimination also violates the New Jersey Law Against Discrimination (LAD). For example, it is unlawful for a company to discriminate against an employee because he is male, white, or under 40 years old. However, since reverse discrimination is less common, New Jersey courts have established a higher standard for employees who bring reverse discrimination or harassment claims by requiring them to present evidence that they work for the unusual employer that discriminates against the majority.

WarehouseA recent decision out of the United States District Court for the District of New Jersey denied an employer’s motion to dismiss a claim of reverse race discrimination, finding the employee had enough evidence to meet this heightened standard. The court explained there are two categories of evidence that employees can use to help meet this standard: (1) evidence that the specific employer has a reason to want to discriminate against the majority, and (2) evidence there is “something ‘fishy’” about the facts of the case that suggests the employer is discriminating.

The case was brought by Frank McQuillan, who worked for Petco Animal Supplies Stores, Inc., as an order picker at a distribution center in Monroe, New Jersey. Mr. McQuillan claims Petco harassed him because he is Caucasian.

Mr. McQuillan was the only Caucasian employee who worked on the floor of the distribution center. He alleges (1) his supervisors and most of his coworkers were Hispanic; (2) signs were posted in the workplace in Spanish without English translations; (4) his coworkers constantly referred to him by the terms “gringo” and “maricon,” which are derogatory terms for foreigners and homosexuals, respectively; (3) a manager praised Mr. McQuillan’s work by saying it was “not bad for a white boy;” and (4) the company’s management did not take any actions to stop the harassment. He also claims the company caused him to have lower productivity than his coworkers by not giving him a headset that would have made it easier to perform one aspect of his job even though it provided them to non-Caucasian employees who were hired after him, and by assigning him to lift heavier pallets than his non-Caucasian peers. The court found these facts, if proven, could meet the heightened standard to prove reverse discrimination because they could support an inference that Petco is the unusual employer that discriminates against employees because they are white.

The court also found that Mr. McQuillan’s allegations are sufficient to support a harassment claim. To be legally actionable, harassment has to be severe or pervasive enough to create a hostile work environment. The court noted that even though each individual act of harassment Mr. McQuillan experience was not severe enough to be actionable on its own, when considered together they could create a hostile work environment and therefore could be legally actionable. Accordingly, in McQuillan v. Petco Animal Supplies Stores, Inc. the court denied Petco’s motion to dismiss Mr. McQuillan’s harassment claim, thereby providing him an opportunity to try to prove his case.

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A recent federal case from the District of New Jersey denied an employer’s motion for summary judgment on an employee’s sexual harassment case, paving the way for a jury trial. In the process, the court provided a good overview of what an employee needs to prove to be able to survive such a motion and get a case to a jury.

Joan Lane worked as a Material Handler for Sears Logistics Services, Inc. She was the only female who held this role on her floor. She claims the Material Handler Lead for her shift, Louis Fine, engaged in unwelcome conduct toward her including (1) calling her a “b*tch;” (2) calling her “dumb;” (3) “inviting her to [his] penis;” (4) claiming “all [she] wants is my d*ck;” (5) telling her to sit on his face; (6) making sexual gestures to her; and (7) claiming a temporary employee wanted her body. Ms. Lane eventually filed a lawsuit against her employer claiming Mr. Fine created a sexually hostile work environment for her in violation of the New Jersey Law Against Discrimination (LAD).

Sexual HarassmentAs the court explained, in a sexual harassment case the employee has to prove the conduct toward her (1) would not have occurred but for her gender, and (2) was severe or pervasive (frequent) enough (3) to make a reasonable woman believe the terms and conditions of her employment were changed and her work environment is hostile or abusive. The judge found Ms. Lane has enough evidence to meet each of those requirements. He indicated that even though Mr. Fine denied Ms. Lane’s allegations, for purposes of deciding a motion for judgment the court has to assume all of her testimony and evidence is true because it is the jury’s job to decide who is telling the truth. The judge further recognized that Ms. Lane’s evidence could support the conclusion that she was the victim of severe or pervasive sexual harassment. Moreover, he found a jury could conclude the harassment occurred because of her gender since she was the only female Material Handler on her floor and some of Mr. Fine’s conduct toward her was sexual in nature.

In addition, the court ruled that Sears Logistics could be held liable for Mr. Fine sexually harassing Ms. Lane. One of the most common reasons a company can be liable for harassment committed by one of its employees is if the harasser is a supervisor. In this context, a supervisor is someone who “has the authority to hire, fire, discipline, control employees’ wages or control employees’ schedules,” or someone the victim of the harassment reasonably believes has that authority. The court found a jury could conclude Mr. Fine was Ms. Lane’s supervisor since she testified he told her he was responsible for directing her daily work environment.

The court indicated a second way a jury can hold Sears Logistic responsible for Mr. Fine sexually harassing Ms. Lane is based on evidence the company did not have an effective anti-harassment policy and its response to Ms. Lane’s complaints about Mr. Fine’s harassment was inadequate. Under New Jersey Law, a company that does not have a sufficient anti-harassment policy can be held liable for harassment committed by its employees. Ms. Lane presented evidence that the company did not even bother to interview her as part of its investigation into her harassment complaint. In addition, there is evidence suggesting the company never disciplined Mr. Fine for his behavior toward her. Accordingly, in Jane v. Sears Logistic Services, Inc., the District Court denied the employer’s motion for summary judgment so a jury can decide whether the company is liable for sexual harassment.

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Last last year, I discussed a federal case, Wang v. Phoenix Satellite TV US, Inc., which concludes that New York Law Does Not Protect Unpaid Interns From Sexual Harassment.  While that still may be true in the rest of New York State, New York City recently amended its anti-discrimination law to make it clear that both paid and unpaid interns are protected by the New York City Human Rights Law (NYCHRL).

Manager with employee working in officeSpecifically, on April 15, 2014, Mayor Bill de Blasio signed into law an amendment to the New York City administrative code which will protect interns in the same way the code currently protects employees.  The law goes into effect sixty days after it was signed.  As a result, starting on June 16, 2014, New York City law will protect interns who work in Manhattan, Brooklyn, the Bronx, Queens and Staten Island from discrimination based on their actual or perceived age, race, creed, color, national origin, gender, disability, marital status, partnership status, sexual orientation, alienage, citizenship, or status as a victim of domestic violence, a sex offense or stalking.  Likewise, New York City law will prohibit employers from harassing interns based on any of those categories, including prohibiting sexually harassment.  It also will prohibit employers from retaliating against interns because they complain about employment discrimination or harassment in the workplace.

The new law defines “intern” to include anyone who (1) receives training or supplements the training they are receiving in an educational environment and (2) receives work experience for the benefit of an employer, and (3) does so under the close supervision of an employer’s staff.  It includes such individuals irrespective of whether he or she is paid or unpaid.  It is unclear whether this may leave a gap of individuals who do not fit the administrative code’s definition of either “employee” or “intern,” such as individuals who receive the required training or work experience, but not both.  However, the alternative potentially would have covered students who receive training for universities and other educational institutions, a group which the New York City Council apparently did not intend to protect.

In its report supporting the amendment, the New York City Council’s Committee on Civil Rights noted that 69% of companies with at least 100 employees had internships in 2012, and that 63% of college graduates in 2012 had participated in at least one internship.  It further recognized that since interns tend to be relatively young, inexperienced and either unpaid or under paid, they are particularly vulnerable in the workplace.  It therefore was concerned that the Wang case concluded they are not protected by the NYCHRL, and wanted to amend the law so it unquestionably protects them in the same way as any other employee.

Whether the rest of New York State follows suit and protects interns from discrimination, harassment and retaliation is yet to be seen.  Until then, at least New York City will provide that protection.

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The Third Circuit Court of Appeals recently reinstated an employee’s class action overtime pay lawsuit under Fair Labor Standards Act (FLSA) and the New Jersey Wage and Hour Law (NJWHL).  In doing so it recognized successor companies can be liable for their predecessors’ overtime violations, and individual owners and supervisors can be held personally liable under both of those laws.

Real estate concept - business-man signs contract behind househoPatricia Thompson was hired by Security Atlantic Mortgage Company as a mortgage underwriter in June 2009.  Security Atlantic quickly assigned her to provide training at a related company, Real Estate Mortgage Network (REMN).  In February 2010, Security Atlantic stopped doing business and Ms. Thompson began working directly for REMN.  Otherwise, her job and the business remained essentially the same.

Ms. Thompson claims Security Atlantic and REMN both failed to pay her and other mortgage underwriters time-and-a-half when they worked more than 40 hours per week, in violation of both the FLSA and the NJWHL.  Specifically, she alleges mortgage underwriters worked through lunch and at home to complete their assignments on time, but were not paid overtime because the companies misclassified them as exempt employees.

Ms. Thompson sued Security Atlantic, REMN, and two co-owners of Security Atlantic, Samuel Lamparello and Noel Chapman.  However, the United States District Court for the District of New Jersey dismissed the entire case. 

In Thompson v. Real Estate Mortgage Network the Third Circuit reversed, ruling Ms. Thompson’s allegations could support finding that Security Atlantic and REMN were her joint employers.  Joint employment is when two or more companies “exert significant control” over the same employee.  I discussed the test to determine whether a company is a joint employer in a previous article, Third Circuit Holds Parent Company Not Responsible For Wholly-Owned Subsidiary’s Overtime Violations.

In reaching this conclusion, the court relied on Ms. Thompson’s claim that Security Atlantic hired her but an REMN trained her; Security Atlantic called REMN its “sister company;” and virtually every employee of Security Atlantic seamlessly became an employee of REMN in June 2010.  However, it cautioned that additional evidence ultimately might establish that Security Atlantic and REMN were too independent to be considered joint employers.

The Third Circuit also concluded the allegations could support finding REMN liable for REMN’s overtime violations as Security Atlantic’s successor in interest.  Under federal law, the factors to determine successor liability are (1) the continuity between the workforce and business operations of the two companies, (2) whether the successor had notice of the predecessor’s legal obligations, and (3) the predecessor’s ability to pay its legal obligation.  It found support for the first factor since Ms. Thompson claims after February 2010 REMN operated the same as Security Atlantic had in the past.  It found support for the second factor since most of REMN’s former management worked for Security Atlantic, making it likely they were aware of any past overtime violations.  Likewise, it found support for the third factor since REMN is apparently defunct, suggesting it would be unable to pay any damages awarded to Ms. Thompson.

Finally, the Third Circuit reversed the District Court’s decision to dismiss the two individual defendants, Mr. Lamparello and Mr. Chapman, from the case.  It explained that a company’s owner, officer or supervisor can be personally liable as a joint employer under the FLSA if he or she had (1) supervisory authority over the employee and (2) some responsibility for the alleged violation.  Since Ms. Thompson alleges Mr. Lamparello and Mr. Chapman are co-owners of REMN, run the company’s day-to-day operations and make decisions about hiring, firing and compensation, they potentially could be personally liable for the alleged overtime violations.


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