New Jersey Employment Lawyer Blog

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Employee taking company's money for himselfOne important employment law principle is that employees owe a duty of loyalty to their employers. This generally means they cannot act contrary to the interest of their current employer. The New Jersey Supreme Court recently explained that an employee who breaches this duty can be required to pay back the salary he received while he was disloyal, even if the breach did not cause the employer any damage. The concept of requiring an employee to pay back his salary based on his misconduct is called “equitable disgorgement.”

Bruce Kaye owned and managed three separate timeshare businesses in New Jersey, Flagship Resort Development Corporation, Atlantic Palace Development, LLC and La Sammana Ventures, LLC. His employee, Alan Rosefielde, is an attorney who served as the Chief Operating Officer and General Counsel for two of those businesses. Mr. Rosefielde’s salary was $500,000 per year.

The trial court ruled that Mr. Rosefielde violated his duty of loyalty to his employers. For example, when he formed a new business to manage the timeshare properties owned by one of Mr. Kaye’s businesses, Mr. Rosefielde gave himself a larger percentage ownership in the new business than he and Mr. Kaye had agreed. Mr. Rosefielde also falsely claimed another new business he formed would manage sales only for one of Mr. Kaye’s businesses, but tricked Mr. Kaye into signing documents authorizing the new company to manage sales for companies all over the world. Mr. Rosefielde’s other misconduct included receiving reimbursement for $4,000 of personal expenses by falsely claiming they were business expenses, directing someone to forge the signatures of defaulting timeshare unit owners who could not be located to transfer their ownership without foreclosure proceedings, and making misrepresentations to an insurance company to provide health insurance to independent contractors working for Mr. Kaye’s businesses.

After Mr. Kaye discovered many of these transgressions he fired Mr. Rosefielde and filed a lawsuit against him.

After a trial, the court found Mr. Rosefielde had committed legal malpractice and fraud. It ordered him to pay $4,000 in damages and over $800,000 in attorney’s fees and costs. It also required him to give up his ownership interests in Mr. Kaye’s businesses. The court further ruled that Mr. Rosefielde had breached his duty of loyalty, finding “[i]t is difficult to imagine the commission by a corporate officer of more egregious conduct.” Nonetheless, it did not grant equitable disgorgement because Mr. Rosefielde’s breach of the duty of loyalty did not cause any actual damages to Mr. Kaye’s businesses.

The Appellate Division reversed portions of the trial court’s ruling, but affirmed the decision denying disgorgement. However, in Kaye v. Rosefielde the New Jersey Supreme Court reversed. It held that the remedy of equitable disgorgement can be available even if the business did not suffer any economic loss as a result of the employee’s disloyalty. But the Court made it clear that disgorgement can apply only to compensation the employee received during pay periods in which he was violating the duty of loyalty.

 The Supreme Court indicated that “[w]hen an employee abuses his or her position and breaches the duty of loyalty, he or she fails to meet the employer’s expectation of loyalty in the performance of the job duties for which he or she is paid.” It explained this is true irrespective of whether the employee’s breach of the duty of loyalty caused any economic loss. It concluded that, in determining whether disgorgement should apply, a court should consider, among other things:

  1. The employee’s level of responsibility with the company;
  2. The employee’s compensation;
  3. The number of times the employee acted disloyally;
  4. The extent to which the disloyal acts placed the business in jeopardy; and
  5. The degree to which the employee planned out his disloyalty.

The Supreme Court therefore sent the case back to the trial court to apply this new test to determine whether disgorgement is an appropriate remedy for Mr. Rosefielde’s behavior.

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Last month, New Jersey passed a new employment law that provides some protection to individuals who have criminal records. Officially named The Opportunity to Compete Act, the law is more commonly referred to as a “ban-the-box” law because it limits when employers can include a box on job applications to indicate whether the job candidate has been convicted of a crime.

The law was passed because it has become extremely common for large companies to conduct criminal background searches before they make hiring decisions. According to the New Jersey Legislature, this impacts tens of millions of adults who have criminal records, even though they can make a valuable contribution to the workforce. The Legislature considers this particularly important since finding employment significantly reduces the likelihood someone will repeat their criminal behavior.

The Act prohibits employers from requiring job candidates to indicate whether they have a criminal record, or from asking questions about a job candidate’s criminal record during the job application process. However, it permits employers to ask limited follow up questions if a job applicant discloses that he or she has a criminal history.

Officer Arresting Young ManThe law, which will not go into effect until March 1, 2015, permits employers to ask an individual about his or her criminal history once they decide the individual is their first choice for a position. It also permits employers to refuse to hire someone based on their criminal record. However, it prohibits employers from considering an arrest or accusation that did not result in a conviction (unless it is still pending) or to consider any criminal record that has been expunged or pardoned (with limited exceptions under federal and state law).

The law also restricts employers from considering older convictions (more than 5 years old for disorderly persons offenses, and generally more than 10 years old for crimes). However, the 10 year period does not apply to specific very serious crimes, including homicide, attempted murder, arson, sex offenses, robbery, kidnapping, human trafficking, weapon possession during certain crimes, burglary, aggravated assault, and terrorism.

If an employer asks an employee about his or her criminal history as permitted by the act, it is required to consider other factors including the nature of the offense; how long ago the offense occurred; the job duties and settings of the job; information about the accuracy of the criminal record; and information about the job candidate’s rehabilitation and good conduct.
With limited exceptions, the law prohibits employers from publishing advertisements which indicate they will not consider job applicants who have been arrested or convicted in the past.

The law includes exceptions to numerous provisions for job openings in law enforcement, corrections, the judiciary, homeland security or emergency management. It also invalidates and supersedes any county or local laws or regulations regarding using criminal background information in the employment context.

The law applies to both employees and independent contractors. However, it applies only to employers with 15 or more employees over a 20 week period. It expressly applies to the state, counties and municipalities, as well as job placement companies and employment agencies.
Unfortunately, violations of the law come with a very limited penalty. Specifically, the maximum penalty for violating the law is $1,000 for a first violation, $5,000 for a second violation, and $10,000 for any subsequent violations. The law does not include any other remedies, and does not permit a private claim against companies that violate it.

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New Jersey law prohibits employees from disclosing or using certain confidential information that belong to their employers. Since many companies are sensitive about having their trade secrets used by their competitors, they frequently require employees to sign confidentiality and trade secret agreements prohibiting employees from using or disclosing their confidential information. Employees should be aware that earlier this month employers gained additional protection for their trade secrets when Governor Christopher Christie signed the New Jersey Trade Secrets Act into law.

What Does The New Jersey Trade Secrets Act Prohibit?

The New Jersey Trade Secrets Act prohibits individuals from misappropriating someone else’s trade secret. It defines “misappropriation” as (1) obtaining someone else’s trade secret from someone who you know or have reason to know obtained it improper means; or (2) disclosing or using someone else’s trade secret without their consent if you: (a) used improper means to learn it; or (b) knew or had reason to know it was obtained by improper means when you disclosed or used it; or (c) knew or had reason to know it was obtained by improper means before you materially change your position based on it. It defines a “trade secret” as information in any form that has actual or potential economic value because it is not generally known or knowable by others through a proper means, but only if the owner of the information uses reasonable efforts to keep it secret.

What Damages Are Available Under the New Jersey Trade Secrets Act?

Businessman Trade Secret.jpgThe New Jersey Trade Secrets Act allows someone who had its trade secrets misappropriated to recover any actual damages it suffered, plus any money the person misappropriating the trade secret unjustly earned as a result. Alternatively, a company can recover the amount of a reasonable royalty from the person who misappropriated its trade secret. In addition, the Act permits a court to issue an injunction preventing an actual or threatened misappropriation of a trade secret. It also allows a court to award punitive damages if the misappropriation was willful and malicious. However, the punitive damages cannot be more than twice the actual damages award. Moreover, under limited circumstances a court also has the right to require the losing party to pay the winning party’s reasonable attorneys’ fees and costs.

How Quickly Does Someone Have to Bring a Claim Under the New Jersey Trade Secrets Act?

For most situations, the New Jersey Trade Secrets Act has a three year statute of limitations. That means an employer cannot bring a claim under the Act if it waited more than three years after it either knew about the misappropriation, or would have known about it if it had exercised reasonable diligence. However, the Act indicates that a continuing misappropriation constitutes a single claim, which means that the three year statute of limitations does not begin to run until the misappropriation stops. Perhaps more importantly, even if the New Jersey Trades Secrets Act does not apply, other legal obligations, including any provisions in your employment contract, still might apply.

When Does the New Jersey Trade Secrets Act Go Into Effect?

The New Jersey Trade Secrets Act is a version of the Uniform Trade Secrets Act. It has been adopted by most states, but has not been adopted in New York. The New Jersey version went into effect immediately, but does not apply to misappropriations that occurred before January 9, 2012, including ongoing misappropriations that began prior to January 9.

What Can I Do if My Employer Claims I Misappropriated a Trade Secret?

It can be a very serious matter if your current or former employer claims you misappropriated one of its trade secrets. Contact an experienced employment law attorney who can help defend your legal rights.

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On December 22, 2009, President Obama signed into law the Fiscal Year 2010 Defense Appropriations Act. This new employment law extends the period during which certain employees who are laid off or otherwise lose their jobs through no fault of their own can receive a federal subsidy of their health care costs.

More specifically, this new law extends the period of the subsidy under the American Recovery and Reinvestment Act, commonly called the 2009 Economic Stimulus package. Specifically, for a limited period the United States government will pay 65% of the health insurance premiums for qualified employees, for up to nine months after an employee is involuntarily fired or laid off. Under the Stimulus package, that subsidy applies to qualified employees who lose their jobs between September 1, 2008 and December 31, 2009. The 2010 Defense Appropriations Act extends that period through February 28, 2010. It also extends the maximum length of the subsidy from 9 months to 15 months.

This benefit applies to former employees who are covered by the Consolidated Omnibus Budget Reconciliation Act (COBRA) who involuntarily lose their jobs between September 1, 2008 and December 31, 2009. COBRA applies to people who are eligible to receive health insurance benefits from a company with at least 20 employees. The government subsidy also applies to former employees who work in states that have “comparable continuation coverage” that apply to smaller companies (often called mini-COBRA laws). That includes employees who work for smaller companies in both New York and New Jersey.

The government stipend is reduced for people who make more than $125,000 per year, and married couples who file joint tax returns and earn more than $250,000 combined. The benefits phase out completely for individuals who make more than $145,000 and for couples filing joint tax returns who earn more than $290,000 combined.

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A new amendment to an important employment law was included in the American Recovery and Reinvestment Act, a law which you might know better as President Obama’s most recent Economic Stimulus package. Under that law, the United States government will pay 65% of an employee’s health insurance premiums for up to nine months after an employee is involuntarily fired or laid off. This new provision is part of the Consolidated Omnibus Budget Reconciliation Act (COBRA). It applies to individuals who are covered by COBRA who involuntarily lose (or lost) their jobs between September 1, 2008 and December 31, 2009. It even covers individuals who have already turned down COBRA benefits since September 1, 2008.

The government stipend toward COBRA benefits is reduced for individuals who make more than $125,000 per year and married couples who file joint tax returns and earn more than $250,000 combined. The benefits phase out completely for individuals who make more than $145,000 and for couples filing joint tax returns who earn more than $290,000 combined.

COBRA is a law that allows many employees, as well as their spouses and dependent children, to continue to receive health insurance benefits for at least 18 months (and under certain circumstances, for as long as 36 months) after they lose their health insurance coverage from an employer. COBRA allows those individuals to pay for their health insurance based on the employer’s group rates, plus a 2% administrative cost. Prior to the stimulus package, employees who elected to continue their health insurance benefits under COBRA had to pay the entire cost of keeping their medical benefits out of their own pockets. Employees who are eligible for the new government subsidy only have to pay 35% of that cost.

COBRA itself applies to individuals who are eligible for health insurance benefits from a company with at least 20 employees. However, the new government subsidy applies to individuals in states that have “comparable continuation coverage” that apply to smaller companies (often referred to as mini-COBRA laws). That includes employees in both New York and New Jersey.

Although the new government subsidy only applies to individuals who were laid off or who are otherwise involuntarily terminated, COBRA applies to employees who are no longer covered by a company’s health insurance plan because their employment voluntarily or involuntarily ends for any reason other than “gross misconduct,” or their hours were reduced. It also applies to spouses and dependent children if the are no longer entitled to health benefits from their spouse’s or parent’s employer because (1) the employee voluntarily or involuntarily left his employment for any reason other than “gross misconduct,” (2) the employee’s hours were reduced below the minimum to qualify for benefits, (3) the employee becomes entitled to Medicare; (4) the employee divorces or legally separates from his or her spouse; (5) the employee dies; or (6) in the case of a dependent child, because the child is no longer eligible for benefits under the employer’s health insurance plan.

If you have recently lost your job, or have another question about your rights under COBRA, you should contact an employment lawyer in your area to discuss who can help you understand your employment law rights.

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The New York Department of Labor recently issued guidelines for employee blood donation leave under New York State Labor Law Section 202-j. That law, which went to effect late last year, requires companies with twenty or more employees to allow employees to take time off to donate blood. Those companies must choose either to allow employees at least one leave of absence of up to 3 hours each year to donate blood (off-premises blood donation leave), or allow employees to donate blood during work hours at least twice a year at a “convenient time and place set by the employer,” such as allowing employees to participate in a blood drive at their place of employment, without having to use accumulated leave time (on-premises blood donation leave).

The New York Department of Labor’s new guidelines provide additional detail regarding the rights and requirements of New York’s blood donation leave law. For example, they indicate that:

Off-Premises Blood Donation Leave:

  • Employers are not required to pay employees during off-premises blood donation leaves.
  • The right to take off-premises blood donation leave is based on a calendar year, meaning that covered employers that elect off-premises blood donation leave must permit employees to take at least one such leave during each calendar.

On-Premises Blood Donation Leave:

  • Employers cannot require employees to use accumulated vacation, personal, sick, or other leave time for on-premises blood donation leave.
  • The right to take leave is based on a calendar year, meaning that covered employers that elect on-premises blood donation leave must offer employees two on-premises blood donation leaves during each calendar year.
  • The requirement that on-premises blood donation leave must be at a “convenient time” means during an employees’ normal scheduled work hours.
  • The requirement that on-premises blood donation leave must be at a “convenient place” means employers cannot require employees to travel an unreasonable distance.
  • Covered employers must offer an alternative option for employees who are unable to participate in an on-premises blood donation leave, such as when an employee is sick or on vacation during a scheduled company blood drive.
  • Covered companies must give employees who donate blood at an on-premises blood donation leave enough time off to donate blood, recover (including eating something after donating blood), and return to work.
  • Covered employers must prominently post notice of any on-premises blood donation leave at least two weeks in advance.
  • Companies cannot schedule an on-premises blood donation leave when a significant number of employees are out of the office, such as during the last week of December or around other major holidays.

Required Notice of Employees’ Rights:

  • Employers must notify employees in writing of their right to take blood donation leave in a place that ensures employees will see it, such as by posting the information prominently in a place where employees gather, or including the information with employees’ paychecks or in the employee handbook.
  • Employers can require employees to give advance notice of when they plan to take a blood donation leave. Ordinarily, employers can require employees to give up to 3 workdays’ notice before taking an off-premises blood donation leave, or 2 days notice before an employee participates in an on-premises blood donation leave. However, employers can require up to 10 working days advance notice if necessary because the employee’s position is essential to the company’s operation, and employees can give less than 3 days’ notice if they are donating blood because of an emergency surgery of the employee him or his or her family member.

The employment lawyers at Rabner Allcorn Baumgart & Ben-Asher are dedicated to enforcing the employment law and civil rights of employees in New York and New Jersey.

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