Employment Law Alert

Employment Law Alert

News and Updates on Employment Law

“Mere Continued Employment” is Insufficient Consideration for Non-Compete Agreement in Pennsylvania

Posted in Restrictive Covenants

Last week, in Socko v. Mid-Atlantic Systems of CPA, Inc., the Supreme Court of Pennsylvania decided that restrictive covenants not to compete are unenforceable if made during a worker’s term of employment unless supported by “new and valuable consideration, beyond mere continued employment.” That is so, according to the Court, even if the agreement contains language that would otherwise obviate the requirement of consideration pursuant to the Uniform Written Obligations Act (“UWOA”), 33 P.S. § 6. That statute provides that “[a] written release or promise . . . shall not be invalid or unenforceable for lack of consideration, if the writing also contains an additional express statement, in any form of language, that the signer intends to be legally bound.”

The employee in the case, David Socko, worked as a salesman for Mid-Atlantic Systems of CPA, Inc., a provider of basement waterproofing services. While working for Mid-Atlantic in December 2010, and with approximately six months remaining in a two-year employment contract, Mr. Socko signed a superseding agreement with Mid-Atlantic that restricted him from competing with Mid-Atlantic in any jurisdiction for two years following the termination of the employment relationship. The agreement provided for the application of Pennsylvania law, and it stated that the parties intended to be “legally bound.” Continue Reading

Fifth Circuit Upholds Arbitration Agreement Prohibiting Class/Collective Actions and Cautions NLRB to Reconsider Board Policy

Posted in Alternative Dispute Resolution

Last week, in Murphy Oil USA, Inc. v. NLRB, the United States Court of Appeals for the Fifth Circuit upheld an arbitration agreement requiring employees to arbitrate claims on an individual basis, thereby reaffirming its holding in D.R. Horton, Inc. v. NLRB, despite the National Labor Relations Board’s (“NLRB”) aggressive attempt to find arbitration agreements unlawful. The case is noteworthy because the court rebuffed the Board’s effort to circumvent D.R. Horton and cautioned the NLRB “to strike a more respectful balance between its views and those of circuit courts” that review them. One wonders whether the NLRB will change its current stance against arbitration agreements that prohibit class/collective actions. Regardless, the Fifth Circuit’s decision helps to settle the current state of the law at the circuit court level that arbitration agreements and class/collective action waivers are lawful under the National Labor Relations Act (“NLRA”).

D.R. Horton
By way of brief background, in the NLRB proceeding that preceded the Fifth Circuit’s decision in D.R. Horton, the Board decided that an agreement requiring workers to resolve employment-related claims on an individual basis through arbitration both violated employees’ rights to engage in protected concerted activity under the NLRA and was likely to discourage employees from exercising such rights. On review, the Fifth Circuit rejected the NLRB’s conclusion that such agreements violated employees’ rights to engage in protected concerted activity (referred to as “Section 7 rights”), but concurred with the NLRB that the agreement in that case unlawfully could lead employees to believe they waived their rights to bring an administrative action before the NLRA – rights that cannot be waived even by an arbitration agreement.

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NLRB Ruling is Problematic for Employer Workplace Investigation Policies

Posted in Labor

The National Labor Relations Board (“NLRB”) decided that an employer’s workplace investigations policy, which recommends employees keep an internal investigation confidential, violated the National Labor Relations Act (“NLRA”) because it interfered with employees’ rights to communicate regarding matters affecting terms and conditions of employment. The ruling creates a quandary for employers to maintain effective workplace investigation policies and practices including confidentiality statements in anti-harassment policies.


In The Boeing Co., 362 NLRB No. 195 (2015), the NLRB (the Federal government agency that administers the NLRA), adopted findings of an NLRB Administrative Law Judge, who found the Boeing Company’s policy containing the following language to be unlawful: “. . . Because of the sensitive nature of the information, you are directed not to discuss this case with any Boeing employee other than company employees who are investigating this issue or your union representative, if applicable. Doing so could impede the investigation and/or divulge confidential information to other employees.” Boeing had conducted numerous workplace investigations and argued to the NLRB that its policy was appropriate to avoid retaliation or harassment of witnesses, victims, and employees who the Company investigated and to deter employees from spreading unsubstantiated rumors. After the union filed an unfair labor practice charge to challenge the employer’s policy, Boeing issued a revised policy that “recommended” employees refrain from discussing matters under investigation, which the NLRB also found unlawful. The NLRB concluded that whether the policy contained a mandatory obligation or a recommendation, it nevertheless interfered with Section 7 of the NLRA, which gives both unionized and non-unionized employees the right to communicate amongst themselves regarding terms and conditions of employment for their mutual aid and protection (often referred to as “Section 7 rights”). Continue Reading

NJ Supreme Court Holds Employers May Seek Disgorgement of Disloyal Employee’s Pay Without Proof of Loss

Posted in Executive Compensation

In Kaye v. Rosefielde, the New Jersey Supreme Court held that disgorgement of a disloyal employee’s salary can be an appropriate remedy for breach of loyalty claims even in the absence of proof of actual economic loss. In an unanimous decision, the Court noted the trial court’s broad discretion to fashion equitable remedies, including disgorgement of an employee’s salary, and instructed lower courts that the amount of the disgorgement should be limited to the compensation that the employee received during the employee’s period(s) of disloyalty.

Factual Background
Plaintiff Bruce Kaye was the controlling principal of three entities that sold and managed several timeshare interests in properties in Atlantic County, New Jersey. In 2002, Kaye hired Defendant Alan Rosefielde and for about two years, Rosefielde served as Chief Operating Officer and General Counsel for two of Kaye’s timeshare entities. Approximately two years later, Kaye terminated Rosefielde after he discovered that Rosefielde had, among other things, engaged in numerous, egregious instances of “self-dealing,” including the diversion to himself and to several of his companies interests in a number of Kaye’s investment opportunities. Kaye then brought suit against Rosefielde and his companies, asserting claims for breach of fiduciary duty, fraud, legal malpractice, unlicensed practice of law, and breach of the duty of loyalty.

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Reminder: NYC Ban the Box Law Effective October 27, 2015

Posted in Discrimination

Employers must be aware of the changes to the New York City Administrative Code effective October 27, 2015, which prohibits employers from asking applicants regarding their criminal histories (typically called “Ban the Box”) prior to a conditional offer of employment. Under the new law called the Fair Chance Act (the “Act”) – which affects employers of four or more employees – employers may not (1) ask the applicant during an interview, (2) include a question on an application, or (3) conduct a separate search using public sources, such as the internet, to elicit information regarding an applicant’s criminal convictions or arrest records. The Act contains limited exceptions for persons who apply for law enforcement positions or for licenses concerning the regulation of firearms and explosives. Also, the Act does not prevent an employer from conducting a background check required by state, federal or local law that mandates criminal background checks or that bars employment based on a criminal history. An example of such requirement is regulations of a self-regulatory organization such as FINRA.

The new law further makes it unlawful to post an advertisement for a job that contains any direct or indirect employment limitation based on an arrest or criminal conviction.

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Executive Order Mandates Paid Sick Leave

Posted in Wage & Hour

On Labor Day, President Obama issued an Executive Order that increases paid time out for employees of federal contractors. In legislation similar to that enacted in recent years in municipalities, cities, and states across the country, Executive Order 13706 mandates that federal contractors provide paid sick leave on an accrual basis. More specifically, employees must be able to accrue one (1) hour of paid sick leave for every 30 hours worked. While the Order states that its goal is to ensure that employees on federal contracts “can earn up to 7 days or more of paid sick leave annually,” it requires that contractors “not set a limit on the total accrual of paid sick leave per year, or at any point in time, at less than 56 hours.” Thus, the Order mandates a minimum of seven (7) paid days, but permits an employer to allow accrual of a larger number of days. Although the paid time is not required to be paid out when an employee separates from employment, it must be eligible for carry-over from year to year if unused, and must be reinstated if an employee separates and is rehired by the same employer within twelve (12) months. In addition to time needed for an employee resulting from his or her own “physical or mental illness, injury or medical condition,” the Order permits a broad range of uses, such as obtaining diagnostic or preventive care; “caring for a child, a parent, a spouse, a domestic partner, or other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship” and who needs care for an illness, injury or condition, or diagnostic or preventive care “or is otherwise in need of care;” or for recovery from or attending to matters related to domestic violence, sexual assault, or stalking, whether for the employee or any of the members of the employee’s family as defined above. Notably, the Order’s definition of those whom the employee may use paid time to care for – individuals “related by blood or affinity whose close association with the employee is the equivalent of a family relationship” – is among the most expansive of any similar legislation.

Paid sick leave will be required to be provided upon the oral or written request of an employee, which request should include the expected duration of the leave and be made at least seven calendar days in advance where the leave is foreseeable, and “in other cases as soon as practicable.” The employer cannot require that the requesting employee find a replacement to cover the work to be missed. If an employee is absent for three or more consecutive work days, the employer is permitted to request certification from a healthcare provider (if the absence is related to a medical condition) or documentation from the appropriate individual or organization containing the “minimum” information necessary to establish a need for the employee to be absent from work (if the absence is related to domestic violence, sexual assault, or stalking). The Order specifically requires that the employer “shall not disclose any verification information and shall maintain confidentiality about any domestic violence, sexual assault, or stalking, unless the employee consents or if disclosure is required by law.”

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NLRB Expands Reach by Altering Joint-Employer Standard

Posted in Labor

Recently, in Browning-Ferris Indus. of Cal., the National Labor Relations Board continued to expand its reach and once again altered decades old law in favor of labor unions, this time by making it easier for unions to hold multiple businesses responsible for bargaining with a single group of workers over employment conditions and terms. The decision has potentially far-reaching implications for companies that enter into staffing arrangements with third parties, including franchisors, who now may have legal obligations to bargain with unions where they never before did.

Under the new standard, a company can be deemed a statutory employer if it possesses (even if it does not actually exercise) sufficient control over essential employment conditions and terms. Accordingly, a business may be a joint employer if it reserves the right to control employment conditions and terms in an employment arrangement or if it indirectly controls such conditions and terms through its influence over another business. The Board claimed that the new standard was necessary to protect the NLRA’s policy of encouraging collective bargaining due to an uptick in contingent employment arrangements throughout the country.

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Employee May Pursue Claims Under FLSA For No Lactation Breaks

Posted in Discrimination, Employment Agreements, Reductions in Force (RIF)

In Lico v. TD Bank et al., a federal court in the Eastern District of New York upheld an employee’s right to bring claims under the Fair Labor Standards Act (FLSA) against her employer, TD Bank (“the Bank”), for failure to provide adequate facilities and time for lactation breaks. The FLSA requires employers covered by the FLSA to provide employees (1) reasonable unpaid time at work to express breast milk for up to one year following childbirth and (2) a place, other than a restroom, that is not visible and is free from intrusion to do so.

Facts and Analysis

The plaintiff, Aida Lico, a bank teller and customer service representative, claimed that her employer, TD Bank, failed to provide her a time and place to perform lactation following her return from maternity leave. She also alleged that TD Bank terminated her employment for exercising her rights to take lactation breaks. The plaintiff filed a putative class action to represent herself and similarly-situated employees.

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Paid Suspension Not Adverse Employment Action Under Title VII, According to Third Circuit Court of Appeals

Posted in Discrimination

In Jones v. Southeastern Pennsylvania Transportation Authority, the Third Circuit Court of Appeals concluded that a paid suspension is not an adverse employment action in the “substantive discrimination context.” A predicate for a discrimination claim under the various anti-discrimination laws, requires the plaintiff to show she suffered an “adverse employment action,” generally described as an action or incident substantially serious to alter an employee’s compensation, terms, conditions, or privileges of employment. In the absence of an adverse employment action, a discrimination claim fails. Now, a paid suspension, as determined by the Circuit Court, is not significantly sufficient to affect the employment relationship to create liability under Federal and Pennsylvania State anti-discrimination laws.

Facts and Analysis

The plaintiff, Michelle Precia Jones, brought suit in federal district court claiming discrimination under Title VII of the Civil Rights Act of 1964 (Title VII), the Pennsylvania Human Rights Act (PHRA), the 14th Amendment to the U.S. Constitution, common law wrongful termination, and retaliation in violation of the Family Medical Leave Act. Initially, the defendant employer, Southeastern Pennsylvania Transportation Authority suspended plaintiff with pay during an investigation – and subsequently without pay following an investigation – for submitting falsified time records.

The district court held that the initial paid suspension was not an adverse employment action within the context of the employment discrimination laws. The Third Circuit Court of Appeals affirmed. In looking to the rulings of other Circuits, such as the Second Circuit Court of Appeals (covering New York, Connecticut, and Vermont), the Third Circuit concluded that a “paid suspension pending an investigation of an employee’s alleged wrongdoing does not fall under any of the forms of adverse action identified in Title VII’s substantive provision.”

The Circuit Court also affirmed the District Court’s dismissal of plaintiff’s other claims.

Practical Considerations

While an employer considers possible discipline for an employee or decides to conduct an investigation in an anticipation of possible discipline, it may well want to using a paid suspension as an effective tool or remedy. Based on the conclusion reached by the Court in Jones, a paid suspension would not constitute an adverse employment action to substantiate a discrimination claim.

Gibbons Employment & Labor Law Department attorneys regularly advise on workplace matters and handle related litigation.

Mitchell Boyarsky is a Director in the Gibbons Employment & Labor Law Department.

NLRB Calls a Timeout in Northwestern Football Players Case

Posted in Labor

Last week, the National Labor Relations Board (NLRB) issued its long-awaited decision in Northwestern University, a case involving an attempt by scholarship football players to unionize under the National Labor Relations Act. About a year-and-a-half ago, in response to the university’s attempt to dismiss a union election petition filed on behalf of the players, a regional director decided that the students were statutory employees who could unionize. The university challenged the regional director’s decision, which set the stage for the Board’s decision.

In a somewhat anti-climatic fashion, the NLRB declined to decide whether the scholarship football players had the right to unionize, explaining that a ruling at this time would not promote stability in labor relations based upon the facts of the case. Accordingly, the Board left open the possibility that collegiate athletes could unionize and expressly reserved its right to decide that issue in a future case.

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