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Non-disparagement clauses in settlement agreements are provisions designed to prohibit designated parties from making negative, critical, or disparaging statements about the releasing party or each other. Until recently these clauses were used in employment settlement agreements to prevent claimants from bad-mouthing former employers or associated parties, or more broadly, to prevent settling parties from discussing the claims which served as the subject of the settlement agreement. However, in Christine Savage v. Township of Neptune, 2024 N.J. LEXIS 377 (2024), the New Jersey Supreme Court held that the use of non-disparagement clauses in settlement agreements resolving claims of discrimination, retaliation, and harassment are unenforceable. This pivotal ruling emphasizes the legal protections granted to individuals who wish to disclose their experiences of discrimination in the workplace thereby reinforcing the principles upheld by the New Jersey Law Against Discrimination (LAD).

In 2013, Christine Savage, a police sergeant in the Neptune Township Police Department (NTPD) brought a lawsuit against the NTPD claiming she was the victim of pervasive sexual harassment, gender discrimination, hostile work environment and retaliation. Her legal claims against the NTPD were settled in 2014 with the parties entering a settlement agreement which included promises of future promotion and training for Savage. Also included in the agreement was a non-disparagement clause which aimed to prevent her from speaking out about her experiences of harassment, discrimination, and retaliation when working for the NTPD. Unfortunately, the discriminatory and harassing behaviors sought to be remedied by the 2013 lawsuit not only continued but intensified according to Savage. This ongoing mistreatment compelled Savage to file a second lawsuit in April 2016 asserting similar claims against the same defendants as in the 2013 lawsuit but also claiming the defendants had breached the settlement agreement by failing to comply with its material terms.

Specifically, the second complaint filed by Savage in 2016 alleged the NTPD subjected her to unfair assessments, arbitrary internal affairs investigations, and overall directed more severe scrutiny of Savage’s actions as compared to her male counterparts on the police force. This second lawsuit resulted in a settlement agreement being entered between Savage and the NTPD in July 2020 which included a non-disparagement clause. After the settlement agreement was fully signed by all parties, Savage participated in a television interview where she discussed the discrimination she claimed she was forced to endure at the NTPD. The interview was considered by the NTPD as a violation of the non-disparagement clause and lead to another legal dispute over whether Savage had a legal right under the LAD to speak about these matters notwithstanding the terms of the non-disparagement clause.

Historically there has been an inherent imbalance of power between employers and employees in the workplace. Indeed, the employer-employee relationship in law used to be referred to as a “master-servant relationship”. www. law.cornell.edu. An example of this disparate power is found in noncompete agreements forced on employees which typically act to restrict the ability of employees to enter the marketplace to attain higher paying jobs and/or those with better work conditions. According to a recent article in the Washington Post more than 30 million employees or 18% of the United States workforce, have been required to sign noncompete agreements. Traditionally, noncompete agreements were created to protect a company’s trade secrets, confidential information, and competitive advantage. The primary purpose of noncompete agreements was supposed to be to prevent individuals from using proprietary information gained from their current employer for the benefit of a competitor or for their own self gain. However, the use of noncompete agreements has become so widespread that many employers now require low-wage employees, such as janitors, landscapers, and hairstylists, to sign these restrictive agreements. However, the pendulum appears to have finally swung in favor of employees as evidenced by the Federal Trade Commission (FTC)‘s enactment of a groundbreaking rule banning the use of noncompete agreements for most employees.

In its final rule banning the use of non-competition agreements enacted on April 23, 2024 (“the Non-Compete Ban”), the FTC in a 3-2 vote by its Commissioners concluded that such agreements constitute an unfair method of competition and violate Section 5 of the Federal Trade Commission Act (FTCA), which ““declared” that “unfair methods of competition in commerce” are “unlawful,” and it “empowered and directed” the Commission “to prevent” entities subject to its jurisdiction from “using” such methods.” 15 U.S.C. 45(a). The FTC found non-disclosure agreements to be less burdensome alternatives to noncompete agreements since they enable employers to protect their proprietary and confidential information without violating fair competition.

The Non-Compete Ban states that noncompete agreements constitute an unfair method of competition and therefore employers are banned from the following:

On February 6, 2023, New Jersey Governor Phil Murphy signed into law the Temporary Workers’ Bill of Rights (“TWBR”) The enactment the TWBR marked a significant stride forward towards ensuring fair and just treatment for all New Jersey workers because it elevates labor standards and holds employers accountable.

The TWBR protects a category of workers known as “temporary laborers.” These temporary laborers include workers in diverse fields such as construction, service and food preparation, installation, repair, and many others. Specific examples of covered occupations under the law range from construction labors, security guards, and janitors. The Temporary Workers’ Bill of Rights ensures that a diverse range of temporary workers receive their essential protections and rights.

Furthermore, the TWBR outlines specific pay requirements to guarantee fair compensation for temporary workers in various scenarios. First, if a temporary worker is assigned to a location where there is no work available or if they are transferred to another location, they are still entitled to be paid for their hours. Additionally, if a temporary worker is scheduled to work for a third-party client but their services are not needed, they must be compensated with a minimum of four hours’ pay for the cancelled shift at the agreed upon rate of pay. Furthermore, if a temporary worker is asked to change locations during their shift, they must receive a minimum of two hours of pay for the change in location at the agreed upon rate of pay. The temporary agency is also responsible for compensating them for any hours worked at the new location. TWBR requires temporary workers to be fairly compensated for their time and efforts, even in situations where their assignments may change unexpectedly.

Each claim brought against an employer has a statute of limitations which is the deadline for filing a lawsuit. Most lawsuits must be filed within a certain amount of time. In general, once the statute of limitations on a case expires the legal claim is no longer valid. However, a legal doctrine called the continuing tort or continuing violation theory if applicable may create an equitable exception to the statute of limitations deadline. Under this doctrine for an individual who is subjected to a continual, cumulative pattern of tortious conduct, the statute of limitations does not begin to run until the wrongful action ceases.   In Youngclaus v. Residential Home Funding Corp., 2024 N.J. Super. Unpub. LEXIS 347 (App. Div. Mar. 5, 2024), our Appellate Division recently applied the continuing violation theory in a gender discrimination and wrongful termination lawsuit brought under the New Jersey Law Against Discrimination (LAD).

In Youngclaus, plaintiff Georganne Youngclaus, was employed as a marketing manager and director of marketing at Residential Home Funding Corp. (RHFC). Youngclaus filed a lawsuit against RHFC, alleging gender discrimination, sexual harassment, emotional distress, and wrongful termination, and in doing so, detailed twenty-one instances of discriminatory acts spanning from 2016 to 2020.

However, in January 2022, plaintiff’s initial complaint faced dismissal due to failing to state claim upon which relief could be granted based on the LAD’s two-year statute of limitations. Undeterred, plaintiff filed a second lawsuit in March 2022, emphasizing her wrongful termination on July 20, 2020, as the last act of the discriminatory actions. Despite this, the trial court dismissed her second complaint, arguing she again failed to specify identifiable discriminatory acts within the two-year statutory period.

A crucial element in proving a claim brought under the New Jersey’s Conscientious Employee Protection Act (CEPA) is establishing a causal connection between the whistleblowing activity and the alleged resulting an adverse employment action (e.g., termination, suspension, demotion, denial of promotion, transfer, cut in pay, hostile work environment, etc.). In the recent New Jersey Appellate Division case, Ugarte v. Barnabas Health Med. Grp. PC, 2024 N.J. Super. Unpub. LEXIS 240 (App. Div. Feb. 16, 2024), the significance of this causal nexus was underscored.

In Ugarte, the plaintiff complained to her supervisor that several employees brought HIPAA protected patient charts home. Plaintiff alleged in her Complaint that her employment was eventually terminated in retaliation for her reporting HIPAA violations to her supervisor earlier in the year. However, discovery revealed that plaintiff got into a serious altercation with a subordinate. Numerous witnesses testified during discovery that the plaintiff was antagonistic towards the subordinate and did nothing as a supervisor to deescalate the conflict. The plaintiff’s supervisor witnessed the altercation and tried to intercede, before instructing another employee to call the police. Plaintiff was placed on paid leave and the plaintiff’s supervisor recommended the plaintiff be transferred. The defendant/employer alleged this altercation led to the termination of plaintiff’s employment. Notably, the individuals who made the decision to terminate the plaintiff testified to not having knowledge of her HIPAA violation complaints until after the plaintiff was terminated. Moreover, the supervisor who was the subject of plaintiff’s HIPPA violations apparently did not make the decision to terminate her, nor did the supervisor recommend for her to be terminated. Following the close of discovery the court granted a motion for summary judgment brought by the employer/defendant finding as a matter of law insufficient evidence of a causal connection between the alleged whistleblowing and the plaintiff’s employment being terminated.

CEPA aims to protect whistleblowers from retaliation by their employers. To establish a prima facie case under CEPA, an employee must demonstrate: (1) he or she reasonably believed that his or her employer’s conduct was violating either a law, rule, or regulation promulgated pursuant to law, or a clear mandate of public policy, (2) he or she performed a “whistle-blowing” activity described in N.J.S.A 34:19-3(c), (3) an adverse employment action as taken against him or her, and (4) a causal connection exists between the whistle-blowing activity and the adverse employment action. .” Dzwonar v. McDevitt, 177 N.J. 451, 461, 828 A.2d 893 (2003), 177 N.J. at 462 (quoting Kolb v. Burns, 320 N.J. Super. 467, 478, 727 A.2d 525 (App. Div. 1999). The fourth element, the causal connection, is critical. It requires plaintiffs to establish that their whistleblowing activity was a motivating factor behind the adverse employment action.

Earlier this month, Mashel Law defeated an attempt by a Defendant-Employer to dismiss our client’s whistleblowing lawsuit brought under New Jersey’s Conscientious Employee Protection Act (CEPA) and compel it to be decided through forced private arbitration. Arbitration is where parties contractually agree to resolve legal disputes through a private method of alternative dispute resolution involving what is supposed to be a neutral person who sits as judge and jury and renders a binding decision. This means under arbitration parties waive their right to sue in court to resolve their legal disputes. Employers often force employees to sign arbitration agreements as a condition of employment because arbitration is extremely one sided in favor of employers. As explained in an article published in the Nation last year it is so one sided because arbitrators:

“… are typically defense lawyers who have experience defending companies against discrimination claims … “It’s not like a jury where you have a cross section of society,” he said. What they decide is binding; there is no right to appeal the outcome. And years of evidence shows that their decisions are overwhelmingly slanted in favor of employers. Employees win in arbitration only about 20 percent of the time, compared to a nearly 60 percent win rate in state courts. If they do win, they are likely to get less money. Average damages for employees in arbitration are less than $24,000 but nearly $144,000 in federal court and over $328,000 in state court.”

In our client’s case, the Defendant-Employer argued in support of its motion application that our client was provided an Employee Handbook, and she signed an Acknowledgement which specified that all disputes arising out of her employment would be subject to mandatory arbitration. Therefore, the Defendant-Employer submitted that our client should be compelled to proceed through arbitration in the manner specified in the Employee Handbook and Acknowledgement. In opposition, Mashel Law argued that the motion to dismiss and compel arbitration should be denied because, among other reasons, no valid contract to arbitrate existed and the Defendant-Employer could not satisfy its burden of establishing as a matter of law that our client knowingly and voluntarily entered into an agreement to arbitrate her whistleblower claims.

Mashel Law filed a Complaint in the Middlesex County Superior Court on behalf of a client, whose initials are Q.B., alleging she was constructively terminated by out of state defendants because of her protected whistleblowing activities in violation of New Jersey’s Conscientious Employee Protection Act (CEPA).  Q.B. was hired by the defendants to be their Senior Human Resources Operations Manager tasked with performing payroll duties. During the course of her employment, the Defendants requested Q.B. to remove overtime hours from non-exempt hourly staff persons’ timesheets. As nonexempt hourly employees, the federal Fair Labor Standards Act (FLSA) and the New Jersey Wage and Hour Law require that employees be compensated at a rate of not less than one-and-one-half times their regular rate for all hours worked in excess of forty (40) hours in a workweek. See 29 U.S.C. § 207(a) and N.J.S.A., 34:11-56a4b. Q.B. refused to participate in the unlawful activity of removing overtime hours from Defendants’ staff members. The Defendants then side stepped around Q.B. and directly removed the overtime hours from their employee timesheets. Furthermore, Q.B. also objected to the Defendants’ unlawful practice of misclassifying certain staff as 1099 independent contractors when they were in fact W-2 employees; this too, was done to unlawfully avoid paying overtime wages. In response to Q.B.’s objections to Defendant’s violation of wage and hour laws and her refusal to engage in or facilitate such illegal practices, the Defendants retaliated against Q.B. by demoting and decreasing her salary and verbally reprimanding her. Because of this retaliation and the intolerably hostile work environment it created for her, Q.B. involuntarily resigned her position of employment with the Defendants (i.e., constructive discharge) and hired Mashel Law to file a CEPA based whistleblowing lawsuit against the Defendants.

In response to the Complaint filed on Q.B.’s behalf, the Defendants immediately filed a motion with the Court seeking to dismiss the Complaint by arguing, among others, that the Defendants did not do business in New Jersey and that their only contact with New Jersey was employing Q.B. who worked for them from her home in New Jersey, was insufficient as a matter of law to form the minimum contacts necessary for the New Jerseys courts to exercise personal jurisdiction over the Defendants.  In opposing the motion to dismiss, Mashel Law countered by arguing that New Jersey had sufficient minimum contacts with the Defendants because they: 1) chose to employ Q.B. to work for them from her New Jersey home, 2) provided Q.B. with company-issued equipment, including a laptop, a monitor, and a docking station, in New Jersey to perform her job functions remotely, 3) deducted New Jersey state income taxes, as well as New Jersey disability insurance, New Jersey unemployment insurance and New Jersey family leave insurance from Q.B.’s pay, 4) frequently communicated with Q.B. from her home in New Jersey using videoconferencing, email and telephone, 5) demanded that Q.B. commit violations of federal and state wage and hour laws from her home in New Jersey and 6) received Q.B.’s whistleblowing complaints which she communicated to them from her home in New Jersey.

In deciding whether the court had specific jurisdiction over the Defendants, the Superior Court Judge deciding the Motion to Dismiss was required to consider that decades ago in International Shoe Co. v. Washington, 326 U.S. 310, 316-17 (1945), the United States Supreme Court had instructed that a nonresident defendant must have certain “minimum contacts” with the forum state, “such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.'” (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). As the Court more recently explained, the “primary focus of [the] personal jurisdiction inquiry is the defendant’s relationship to the forum state.” Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773, 1779 (2017). In line with United States Supreme Court precedent, New Jersey courts have held that “courts may exercise personal jurisdiction over a non-resident defendant consistent with due process of law.’” Baanyan Software Servs., 433 N.J. Super. at 473 (quoting R. 4:4-4(e)).  Therefore, “a nonresident defendant must have certain ‘minimum contacts’ with the forum state, ‘such that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice.’” Jardim v. Overley, 461 N.J. Super. 367, 375 (App. Div. 2019) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). “[T]he fact-specific nature of the jurisdictional assessment…must be conducted on ‘a case-by-case basis.’” Jardim, 461 N.J. Super. at 377 (quoting Bayway Ref. Co., 333 N.J. Super. at 429). The court must consider “the burden on the defendant, the interests of the forum State and the plaintiff’s interest in obtaining relief.” Asahi Metal Indus., 480 U.S. at 113. New Jersey courts have “focused upon whether the contacts in question ‘resulted from the defendant’s purposeful conduct and not the unilateral activities of the plaintiff.’” Jardim, 461 N.J. Super. at 377-78 (quoting Lebel, 115 N.J. at 323). So too has the United States Supreme Court. “The plaintiff’s claims…’must arise out of or relate to the defendant’s contacts’ with forum.” Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., U.S., 141 S. Ct. 1017, 1020 (2021) (quoting Bristol-Myers, 137 S. Ct. at 1780). “[T]here must be ‘an occurrence between the forum and the underlying controversy, principally, [an] activity or an occurrence that takes place in the forum State and is therefore subject to the State’s regulation.’” Bristol-Myers, 137 S. Ct. at 1781 (quoting Goodyear, 564 U.S. at 919).

On March 11, 2024, the U.S. Department of Labor’s (USDOL) final rule for determining whether a person is an employee or an independent contractor under the federal Fair Labor Standards Act (FLSA) will take effect. 29 CFR part 795. FLSA establishes minimum wage, overtime pay, recordkeeping and child labor standards affecting full and part time workers in both the private and public sectors. Employees receive the protection of the FLSA as opposed to independent contractors who do not because they are considered in business for themselves.

Whether a worker is an employee or an independent contractor under the FLSA is determined by looking at the economic realities of the worker’s relationship with the employer.  See generally USDOL, Wage and Hour Division Fact Sheet 13 (Fact Sheet 13). If the economic realities show that the worker is economically dependent on the employer for work, then the worker is an employee. If the economic realities show that the worker is in business for themself, then the worker is an independent contractor.

The new final rule adopted the USDOL a six-factor test that delves into the economic relationship between potential employers and workers: 1) Opportunity for profit or loss depending on managerial skill; 2) Investments by the worker and the potential employer; 3) Degree of permanence of the work relationship; 4) Nature and degree of control; 5) Extent to which the work performed is an integral part of the potential employer’s business; 6) Skill and initiative. Additional factors may be considered if relevant to whether a worker is in business for themselves but economically dependent on the employer for work. See Fact Sheet 13.

Using enhanced powers provided by legislation signed by Governor Phil Murphy in 2020 and 2021 the New Jersey Attorney General’s Office recently filed a complaint (the “Complaint”) in the New Jerey Superior Court of Essex County on behalf the of the Commissioner of the New Jersey Department of Labor and Workforce Development (the “Commissioner”) alleging two trucking companies named STG Logistics, Inc. (STGL) and STG Drayage LLC (“STGD”) violated New Jersey wage and hour laws by knowingly misclassifying hundreds of drivers (“Drivers”) as independent contractors when they should have been classified as employees. Through this lawsuit the Commissioner seeks to immediately enjoin STGL and STGD from engaging in alleged ongoing unlawful misclassification of Drivers and seeks as well to impose statutorily authorized fines and penalties, recover reasonable costs of enforcement, including attorney’s fees, and obtain wages that have been improperly withheld from the Drivers.

According to the Report of Gov. Murphy’s Task Force on Employee Misclassification published in July 2019 (“the Report”), misclassification is the practice of illegally classifying workers as independent contractors rather than employees for the purpose of reducing labor costs.  The Report explains that:

“[M]isclassification deprives workers of a suite of rights guaranteed to employees, but not independent contractors, including the right to earn overtime for working in excess of 40 hours per week; to receive workers’ compensation benefits if injured on the job; to receive unemployment benefits; to receive earned sick leave; to take job-protected family leave and receive family leave benefits; to receive health and safety protections, as well as protection under state and federal antidiscrimination laws; and to organize under the National Labor Relations Act.”

A legal question recently presented to the New Jersey Superior Court on a Motion to Dismiss filed by a New Jersey based Defendant Corporation for answering was whether its former Plaintiff employee who worked remotely for it from her home in North Carolina was protected from an alleged unlawful retaliatory discharge in violation of New Jersey’s whistleblower law entitled the New Jersey Conscientious Employee Protection Act (CEPA). In answering this question in the affirmative by denying Defendant’s motion, the Superior Court accepted Plaintiff’s argument that CEPA applied to the Plaintiff because based on the facts pled in the Complaint, New Jersey had a substantial relationship to the parties and facts at issue. The Plaintiff in this case is represented by Mashel Law, L.L.C. (Mashel Law).

Plaintiff worked from her home in North Carolina for the Defendants as its Human Resources Manager. As such, she was tasked with applying New Jersey labor and employment laws when drafting an employee handbook for the Defendant. Plaintiff was responsible for ensuring Defendant complied with New Jersey laws. In her role as Human Resources Manager, Plaintiff repeatedly complained to her superiors about how the Defendant Corporation was violating the New Jersey Earned Sick Leave law and the New Jersey Secure Choice Savings Program Act by failing to have a policy in place paying their New Jersey employees paid sick time.  Plaintiff alleges in this lawsuit that she was wrongfully discharged by the Defendant (and individual decisionmakers) for disclosing and objecting about her reasonable belief that the Defendant was violating New Jersey law by engaging in these alleged unlawful practices.

In arguing for dismissal of Plaintiff’s Complaint, the Defendant claimed the fact that the Plaintiff worked for it from North Carolina meant that as a matter of law she could not avail herself of New Jersey’s CEPA law. In opposition, Mashel Law argued, inter. alia., that even though the New Jersey Supreme Court had yet to determine whether an out-of-state remote worker who worked for a New Jersey-based company is protected by New Jersey’s employment laws, the New Jersey Appellate Division in Halliday v. Bioreference Labs, 2022 N.J. Super. Unpub. LEXIS 1394 *32 (App. Div. August 3, 2022) had explicitly stated the New Jersey Legislature did not intend to limit CEPA’s protections to only employees who live and work in New Jersey. Notably, in Halliday, a CEPA case, the Plaintiff employee worked for a New Jersey corporation from a job site located in Houston, Texas. Our Appellate Division in reversing a dismissal below and remanding for further factfinding found the trial level court had court failed to sufficiently analyze all factors relevant to determining if New Jersey had a substantial relationship to the parties and facts at issue.

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