Employment Law Alert

Employment Law Alert

News and Updates on Employment Law

New EEOC/FTC Joint Informal Guidance on Employers’ Use of Background Checks into Workers’ Criminal Records

Posted in Discrimination

On March 10, 2014, the Equal Employment Opportunity Commission (EEOC) and the Federal Trade Commission (FTC) issued their first joint guidance on employer use of background checks in hiring or firing decisions. The use of background checks by employers in personnel decisions is becoming a more tricky road to navigate. The EEOC enforces the Federal anti-discrimination laws and the FTC enforces the Fair Credit Reporting Act (FCRA), all of which can be implicated in the background check process, particularly when a third party credit reporting agency becomes involved. The EEOC/FTC joint guidance is reduced to two brief, non-technical documents — one for employers and another for job applicants respectively–called “Background Checks: What Employers Need to Know,” and “Background Checks: What Job Applicants and Employees Should Know.” The guidance for employers describes the information and documentation in a background check report that may be used lawfully to make personnel decisions about a job applicant or employee. The document for applicants identifies the employer’s obligations particularly when relying upon a background check to disqualify an applicant or employee.
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New Jersey Law Journal Names Gibbons the 2014 “General Litigation Department of the Year”

Posted in Litigation

The New Jersey Law Journal has named Gibbons P.C. the “General Litigation Department of the Year” for 2014, the top award presented in its second annual “Litigation Departments of the Year” awards program. The general litigation award recognized the firm’s litigation strength in several areas, including commercial litigation, products liability, employment, intellectual property, and media law. In 2013, the firm’s Business & Commercial Litigation Department was named the “Commercial Litigation Department of the Year” in the same awards program.

The 2014 award also recognized the extensive value-added services Gibbons offers litigation clients, including its E-Discovery Task Force, comprehensive Litigation Support Department, innovative and custom alternative fee arrangements, and recruitment focus on former judicial clerks and retired jurists.

The competition was open to any law firm with a litigation practice and New Jersey presence. According to Ronald J. Fleury, Editor in Chief of the New Jersey Law Journal, “In just the second year that the Law Journal has been rating law firm litigation departments based on their recipes for success, participation among firms was noticeably more enthusiastic, and consequently, competition was keener. It was no easy task deciding on winners and finalists among a field of such strong contenders.”

“The cases we have litigated for clients in the past year address some of New Jersey’s more significant projects and hot-button issues,” notes Patrick C. Dunican Jr., Chairman and Managing Director of Gibbons. “Our representative matters included the largest litigation our client had ever faced; one of the most complex groups of business bankruptcies ever filed; a major FINRA arbitration; a huge pharmaceutical class action; and a precedent-setting appellate decision.”

Eleventh Circuit Becomes Latest Court of Appeals to Enforce Agreement to Arbitrate FLSA Collective Action

Posted in Wage & Hour

On March 21, 2014, the United States Court of Appeals for the Eleventh Circuit joined a growing number of federal Courts of Appeals to reject arguments that class waivers contained in arbitration agreements should not be enforced in the employment context. In Walthour v. Chipio Windshield Repair LLC, the Eleventh Circuit (which covers Georgia, Florida, and Alabama) upheld a broad arbitration provision which required employees to bring all employment claims in their “individual capacity and not as a plaintiff of class member in a purported class or representative proceeding ….”

What Was the Case About?

Two individuals employed by the defendant as “Window Repairers” filed an action seeking overtime and minimum wage payments under Section 16(b) the Fair Labor Standards Act (“FLSA”). They styled their case as a putative FLSA “collective action” on behalf of themselves and “others similarly situated.” The employer moved to compel arbitration pursuant to the arbitration provision (quoted above), which the two plaintiff-employees had previously signed in connection with their employment.

Opposing the defendant-employer’s motion to compel arbitration, the plaintiffs maintained they had a statutory and substantive right to file a collective action under the FLSA and that this right was non-waivable based on the FLSA’s text and legislative history. The District Court, however, rejected these arguments and granted the employer’s motion to compel arbitration. The plaintiff-employees appealed to the Eleventh Circuit.

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Supreme Court Holds that Severance Payments to Employees Terminated Involuntarily are Taxable Wage for FICA Purposes

Posted in Wage & Hour

On March 25, 2014, the Supreme Court of the United States unanimously ruled that severance payments ─ that are not linked to the receipt of state unemployment benefits ─ are taxable wages subject to the Federal Insurance Contributions Act (“FICA”). United States v. Quality Stores, Inc., 572 U.S. ___ (2014). Specifically, the Supreme Court ruled that the severance payments made to employees who were terminated involuntarily fit within the broad definition of “wages” under both FICA § 3121(a) and Internal Revenue Code § 3401(a).

As part of Quality Stores’ Chapter 11 bankruptcy, severance payments were made to its employees in amounts that varied based on seniority and time of service. Notably, the severance payments made were not tied to the receipt of state unemployment benefits. After Quality Stores paid and withheld taxes required under FICA, the company determined that the severance payments should not have been taxed as wages and sought a refund. The Bankruptcy Court, District Court, and Sixth Circuit Court of Appeals all ruled in favor of Quality Stores, concluding that severance payments are not wages under FICA. The Sixth Circuit based its decision entirely on the definition of wages set forth by the Internal Revenue Code § 3401(a). The Supreme Court ruled that this interpretation of § 3401(a) was incorrect.

The Supreme Court began its analysis by examining whether the severance payments at issue were wages pursuant to FICA § 3121(a), which defines “wages” as “all remuneration for employment.” “Employment” is defined as “any service . . . performed . . . by an employee.” Under its plain meaning, the Court found severance payments were clearly wages because the amounts paid varied according to the employee’s seniority and time served, which evidences that they were made like any other benefit given to an employee for his/her services. Moreover, the Court found the payments were wages under FICA because the law exempts certain termination-related payments from the definition of wages, including severance payments made because of “retirement for disability,” ─ a provision that would be superfluous if all severance payments were exempt. In addition, relying on its prior decision in Rowan Cos. v. United States, 452 U.S. 247 (1981), the Court ruled that “‘simplicity of administration and consistency of statutory interpretation instruct that the meaning of ‘wages’ should be in general the same for income-tax withholding and for FICA calculations.” Accordingly, the Court held that severance payments “made to employees terminated against their will, [which] were varied based on job seniority and time served, and were not linked to the receipt of state unemployment benefits” constitute taxable wages under FICA.

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NJ Supreme Court to Address “Watchdog” Exception to CEPA

Posted in Whistleblower

The New Jersey Supreme Court recently decided to review a recent decision by the Appellate Division which threatens to expand the protections of the Conscientious Employee Protection Act (“CEPA”) to those employees whose job duties and responsibilities expressly require them to report to their employer potential or actual violations of law or public policy. The issue to be decided by the Supreme Court in Lippman v. Ethicon will be whether employees who are responsible for monitoring and reporting on employer compliance with relevant laws and regulations — so-called “watchdog” employees — seek whistleblower protection under CEPA, and, if so, under what circumstances?

The Appellate Division’s decision in Lippman appears to be at odds with the Appellate Division’s 2008 decision in Massarano v. N.J. Transit, 400 N.J. Super. 474 (App. Div. 2008), which held that reporting violations of law as part of one’s job duties and responsibilities does not constitute “whistle-blowing” activity as required by CEPA. Since Massarano, and as we have previously discussed, the “job duties” exception to CEPA had gained significant support over the course of the last several years, and was shaping up to serve as a strong defense for employers defending against CEPA retaliation claims. Numerous cases decided in the wake of Massarano, in both New Jersey state and federal court, including the much publicized White v. Starbucks decision, have continued to develop and expand upon the “job duties” exception to CEPA.

Factual Background

The Plaintiff, Joel Lippman, served as an executive with Ethicon and one of his primary job responsibilities was to review and report on product safety. On numerous occasions, Plaintiff voiced his concern on a number of different issues and advocated for the recall of certain products that, in his professional opinion, were harmful to the public. Plaintiff was terminated in May 2006, allegedly for having an inappropriate relationship with a subordinate. He thereafter filed a lawsuit under CEPA alleging he was terminated in retaliation for his “whistleblowing” activities. The trial court, relying heavily on Massarano, granted summary judgment in favor of Ethicon, holding that because “it was his job to bring forth issues regarding the safety of drugs and products,” the plaintiff failed to show that he engaged in protected whistle-blowing activity as required by CEPA. Continue Reading

College Football Players Can Unionize Says NLRB Regional Director

Posted in Labor

Did you know that college football players are not “primarily students”? Well, not if the students are football players on regimented schedules, who receive grant-in-aid scholarships to play football from which their school profits, according to a Regional Director at the National Labor Relations Board. In a decision issued yesterday, the Regional Director concluded that Northwestern University football players who receive scholarships are statutory employees under the National Labor Relations Act, and, therefore, directed an election for the players to decide whether to unionize in light of a petition a union recently filed to represent them. The Regional Director relied upon the common law definition of an employee in rendering his decision, finding that: the school’s interest in the students initially stems from their football talents; letters the University sends them offering scholarships to play football (called tenders) are contracts; the school controls the players through rules and regimented workout and playing schedules; and the scholarships the players receive are compensation that cover living expenses. The Regional Director distinguished the case from Board precedent finding that graduate students are not statutory employees, by reasoning that football is unrelated to the students’ academics unlike the case involving the graduate students.

The University certainly will appeal the Regional Director’s decision to the new five-member National Labor Relations Board in Washington, DC, and, if the Board upholds the decision, there will be an election. Should the union win the election, the University could refuse to recognize the union in order to appeal the Board’s decision to a federal court. The Regional Director’s decision applies only to private universities, as the Board does not have jurisdiction over public universities.

The Northwestern University decision is just the latest of a series of concerted efforts to expand the NLRB’s role into traditionally non-union areas. As previously discussed on the Employment Law Alert, for the first time in history, the NLRB is: aggressively challenging workplace polices of non-union businesses (e.g., at-will disclaimers and social media policies); contesting discipline and discharge of non-union employees (e.g., terminations for protected concerted cyber activities on Facebook); attempting to force non-union companies to post a notice in the workplace advising its workers of their rights to unionize; and promulgating rules to speed up the union election process, which could leave businesses insufficient time to communicate with their workers about unions so as to ensure the workers make an informed decision (and piggybacks off a Board decision involving so-called “micro” units that make it easier for unions to select the workers who can vote in a union election).


John C. Romeo is a Director in the Gibbons Employment & Labor Law Department. James J. La Rocca, an Associate in the Gibbons Employment & Labor Law Department, co-authored this post.

NJ Supreme Court Grants Leave to Appeal to Employee After NJ Appellate Division Permits Indictment Arising From Her Theft of Employer Documents to Prove LAD and CEPA Claims

Posted in Discrimination

The New Jersey Supreme Court recently granted defendant Ivonne Saavedra’s leave to appeal the Appellate Division’s decision in State v. Saavedra, the subject of a previous post, affirming the trial court’s denial of her motion to dismiss an indictment charging her with official misconduct for stealing confidential documents from her employer to support her claims under New Jersey’s Conscientious Employee Protection Act (“CEPA”) and the Law Against Discrimination (“LAD”). The majority in the Appellate Division was not persuaded by Saavedra’s argument that her actions were protected under Quinlan v. Curtiss-Wright Corp., also the subject of a previous post, where the Supreme Court held that an employee who was allegedly terminated for using stolen documents in litigation against her employer could assert a claim of retaliation. A dissenting opinion in the Appellate Division in Saavedra, authored by Judge Simonelli, concluded that the indictment should be dismissed with prejudice. For Judge Simonelli, it was fundamentally unfair to criminally prosecute an employee for taking employer documents while engaged in protected activity pursuant to CEPA or the LAD because the law does not give fair warning that the conduct is illegal. Though Saavedra concerns a public employee/employer, it has important implications for private employers as well. The Gibbons Employment & Labor Law Department will continue to monitor developments in the case and provide any updates as they become available.


Lindsay J. Jarusiewicz is an Associate in the Gibbons Employment & Labor Law Department.

Supreme Court Rules that Employees of Private Contractors Can Qualify as Whistleblowers Under Sarbanes-Oxley

Posted in Whistleblower

On March 4, 2014, the U.S. Supreme Court issued its much anticipated decision in Lawson v. FMR LLC, resolving a dispute over the scope of the whistleblower provision of the Sarbanes-Oxley Act, 15 U.S.C. § 7201, et seq. (“SOX”). Private contractors and subcontractors of public companies should give their attention to this decision. Although SOX is generally thought of as a statute that regulates public companies and their employees, the Lawson decision extends SOX’s whistleblower provisions to cover private companies and their employees as well.

Enacted in 2002, SOX implemented new financial and conflict of interest disclosure requirements and greater corporate and criminal fraud accountability for public companies. SOX also includes a whistleblower provision protecting from retaliation employees who report or cooperate in investigations of violations of the federal securities laws or the regulations of the Securities & Exchange Commission (“SEC”). 18 U.S.C. § 1514A (“section 1514A”). In Lawson, the Supreme Court, by a 6 to 3 vote, held that section 1514A not only protects employees of public companies, but also makes it unlawful for private companies to retaliate against their own employees when the private company is a contractor or subcontractor of a public company.


In relevant part, section 1514A prohibits retaliation against an “employee” carried out by a public company “or any officer, employee, contractor, subcontractor, or agent of such company.” The plaintiffs in Lawson were former employees of private companies under contract to advise and manage mutual finds. The mutual funds were public companies and, as is common in the industry, had no employees of their own. Plaintiff Lawson claimed she was constructively discharged by her employer after she raised concerns that certain accounting methodologies resulted in the overstatement of expenses. Plaintiff Zeng alleged he was fired after he raised concerns about inaccuracies in a draft SEC registration statement. Both plaintiffs brought suit in federal district court under section 1514A.

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Susan Nardone to Serve as Panelist at Upcoming NJBIA Employment Seminar

Posted in Policies/Handbooks

Every day, employers are required to understand and navigate the often tricky employment laws that apply to their workplaces. The topic generating the most attention of late is workplace bullying – from proposed legislation that would provide a remedy to the bullied employee to policies that employers can put in place to address workplace bullying. While no state has passed bullying legislation, most agree that it is only a matter of time.

Susan L. Nardone, a Director in the Gibbons Employment & Labor Law Department, will serve as a panelist at the upcoming NJBIA Employment Seminar, “Handling Harassment, Bullying and Hostile Work Environments,” taking place Friday, March 14, at the Forsgate Country Club.

Ms. Nardone, along with other panelists, will discuss the differences between harassment and bullying, how employers would be affected if bullying legislation is passed, distinguishing between legitimate performance management and bullying, and what employers can do to protect their employees and themselves.

For more information on this seminar or to register for this event, please click here.

Arbitration Agreement Nullified by Employee Handbook Disclaimer According to NJ District Court

Posted in Policies/Handbooks

Employers often use arbitration programs with employees to elect a forum that eliminates jury trials and class actions. A New Jersey District Court recently found that the employer’s handbook containing a provision which, gives the employer the exclusive ability to change the provisions of the handbook without notice to employees, invalidated an employee’s arbitration agreement.


In Raymours Furniture Co. v. Rossi, Civ. No. 13-4440 (DNJ January 2, 2014), Plaintiff Raymour Furniture filed a complaint to compel arbitration in Federal District Court after Defendant Rossi threatened to sue the employer for discrimination, retaliation and constructive dismissal. When Rossi started employment, she signed a handbook receipt acknowledging that the employer may change its policies at any time. Years later, Raymour Furniture instituted an arbitration program by which employees signed arbitration agreements requiring employees to submit all employment-related claims to final and binding arbitration. Rossi signed an electronic receipt of the agreement. The following year, Raymour Furniture updated the agreement and required employees to again acknowledge receipt, which Rossi did.


Although the District Court exercised jurisdiction over the matter pursuant to the Federal Arbitration Act (FAA), 9 U.S.C. § 4 and because the underlying employment claims arose under the Americans with Disabilities Act and Title VII of the Civil Rights Act of 1964, the Court ultimately granted Rossi’s motion to dismiss Raymour Furniture’s complaint finding that there did not exist an enforceable arbitration agreement between the parties. Continue Reading