July 12, 2019On June 26, 2019, United States District Court Judge Denise Cote, Southern District of New York, held in Latif v. Morgan Stanley & Co., LLC, et al., No. 1:18-cv-11528 (S.D.N.Y. June 26, 2019), that New York’s ban on mandatory arbitration agreements of employment-related sexual harassment claims is preempted by the Federal Arbitration Act (“FAA”)
April 25, 2019
On April 24, 2019, the United States Supreme Court decided Lamps Plus, Inc. v. Varela, No. 17-988, in which it held (by a 5-4 vote) that, under the Federal Arbitration Act (FAA), parties have not agreed to class arbitration where the arbitration clause at issue is ambiguous about the availability of such arbitration. There, a Lamps Plus employee sued the company on behalf of a putative class of employees after a data breach exposed approximately 1,300 employees’ tax information, but the employee had signed an arbitration agreement at the outset of his employment. The agreement stated that all disputes arising out of the employment relationship would be resolved by arbitration and provided that the claims would be resolved in accordance with the rules of the arbitral forum.
Reversing both the district court’s order compelling class arbitration and the Ninth Circuit’s affirmance, the Supreme Court, relying on one of its prior decisions in 2010, reasoned that ambiguity—like silence—in an arbitration agreement regarding class arbitration is insufficient to infer that the parties affirmatively agreed to such arbitration. The Court also rested heavily on what it deemed the fundamental differences between class and individual arbitrations, only the latter of which the Court claimed was envisioned by the FAA. Class arbitration, the Court proffered, does not allow for “lower costs, greater efficiency and speed, and the ability to choose expert adjudicators to resolve specialized disputes.” The Court also eschewed the lower courts’ reliance on the contra proferentem doctrine (ambiguity in a contract construed against the drafter), which it called a “doctrine of last resort,” reasoning that its use by the lower courts was inconsistent with the fundamental rule that arbitration is a matter of consent.
In dissent, Justice Ginsburg pilloried the majority for “how treacherously the Court has strayed from the principle that arbitration is a matter of consent, not coercion.” Observing the current state of arbitration and its present uses, her dissent called for urgent action by Congress to “correct the Court’s elevation of the FAA over the rights of employees and consumers to act in concert. In a separate dissent, Justice Kagan believed that resort to the neutral state contract law principle of contra preferendum—a neutral interpretive principle utilized by all 50 states—was appropriate and required if the arbitration agreement was ambiguous. Justice Kagan chided the majority for disregarding the parties’ actual arbitration agreement.
The Lamps Plus decision is important because it signals that arbitration agreements that are ambiguous as to the availability of class arbitration will be construed as prohibiting the same. Indeed, Lamps Plus (and the Court’s prior decision in Stolt-Nielsen regarding an arbitration clause completely “silent” as to class arbitration) raises an interesting question: is there even a need for an affirmative class arbitration waiver? While in the abstract, perhaps the answer is “no,” the safer and less expensive answer for employers and other companies seeking to preclude class arbitration (and class actions) is “yes.” Dissents notwithstanding, Lamps Plus is yet another win for companies in the Roberts’ Court.
March 26, 2019
On March 18, 2019 groundbreaking employment legislation was enacted in New Jersey. While it is only a few paragraphs long, it makes three significant changes to the employment law landscape in the Garden State.First, Senate Bill No. 121 bars provisions in an employment agreement that waive any substantive or procedural right or remedy relating to a claim of discrimination, retaliation or harassment (although it does not apply to union employees covered by a collective bargaining agreement (“CBA”)).
November 14, 2018As the weather gets colder and the days shorter, the end of the year can’t be too far away. Now is a good time to start reviewing your Company’s personnel policies so that your house can be in order to start the new year.
October 9, 2018
Every employer in New Jersey, regardless of size, needs a written Paid Sick Leave policy in place and distributed to employees no later than October 29, 2018. Please contact us if you need assistance drafting this policy or updating your other personnel policies.
Whether as stand-alone policies or those accumulated in an employee manual, the following are the types of policies which must, or at the very least should, be in writing in NJ:
May 29, 2018
On May 21, 2018 the United States Supreme Court delivered another blow to employee rights. In Epic Systems v. Lewis, the Court issued a monumental decision protecting employers from class action lawsuits.In Epic Systems, the Court upheld the right of employers, as a condition of employment, to require employees to arbitrate claims individually on a one-on-one basis rather than collectively or as a class. According to the Court, this can be accomplished simply by sending an e-mail to employees informing them if they don’t note their objection, they will be considered to have consented to arbitration on an individual basis. This decision effectively precludes workers from suing in court or filing for arbitration when their claims are small, such as when suing for an employer’s failure to pay minimum wages or overtime pay. According to Justice Ruth Bader Ginsburg in her dissent, “[t]he inevitable result of today’s decision will be the underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers.” Tip to Employers: Consider requiring employees to sign arbitration agreements or send an e-mail informing employees that, if they don’t object, they will be bound to arbitrate their dispute on an individual basis.
May 9, 2018
On April 12, 2018, Governor Cuomo signed New York’s latest budget that includes six laws reflecting the concerns of the Metoo# movement that employers need to know.
Effective July 11, 2018:
Effective October 9, 2018:
Mandatory Sexual Harassment Policy, Prevention Training and Complaint Procedure. The New York State Department of Labor and Division of Human Rights are required to develop and publish a model sexual harassment prevention policy and a model sexual harassment prevention training program for use by employers. All New York employers are required (a) to adopt the model policy and training program or, establish their own that equals or exceeds the minimum standards of the model policy and program; and (b) distribute the written policy and provide sexual harassment training to all employees at least annually.
Effective January 1, 2019:
Government Contractors. As part of the bidding process for State contracts, bids must include a statement certifying that the bidding entity has implemented a written policy addressing sexual harassment in the workplace and sexual harassment training to all of its employees. With respect to no-bid projects, the State has the discretion to request such certification.
March 21, 2018
The Me Too and Time's Up movements rekindled the nation's collective awareness concerning sexual harassment and abuse which had all but disappeared since the Clarence Thomas Supreme Court confirmation hearings in 1991.
What contributed to this lack of discourse concerning the prevalence of sexual harassment in our society over the past 25 years? The use of nondisclosure agreements (NDAs) and confidentiality clauses in settlement agreements surely played a part -- as have mandatory arbitration agreements required by employers.
NDAs and confidentiality clauses are standard fare when parties settle sexual harassment and abuse cases.
In exchange for a settlement payment -- such as the $130,000 payment made on President Trump's behalf to Stormy Daniels -- the victim of harassment agrees not to discuss the claims made, or the terms, and sometimes even the existence, of the settlement.
These agreements usually also call for significant financial penalties should the plaintiff violate the confidentiality clause. For example, in the agreement at issue in the Trump-Daniels lawsuit, Daniels, whose legal name is Stephanie Clifford, is required to pay the president $1 million for each of her breaches of the confidentiality clause. Trump's lawyer claims she has violated the terms 20 times.
Is this agreement enforceable?
Probably not because the $1 million liquidated damage amount for each breach appears to be an unenforceable penalty rather than an estimation of likely damages should confidentiality be breached. For the same reason, it also isn't fair and most plaintiffs' attorneys would never allow a client to sign such a provision (unless their client is desperate for the money or the attorney believes the clause is unenforceable).
So far, however, this confidentiality clause has kept Daniels relatively quiet. Had there been no such provision, or if the court in the pending litigation refuses to uphold it, she undoubtedly will "tell all" of the sordid details in a book deal, which is likely to follow -- and, regardless, she may possibly do so on "60 Minutes" this weekend.
Meanwhile, as the porn star touted passing a polygraph test to prove she's not lying about her 2006-2007 tryst with Trump, another woman is suing to get out from under a 2016 confidentiality agreement so she can discuss her alleged affair with Trump. This week former Playboy Playmate of the Year, Karen McDougal, has filed suit in Los Angeles.
Confidentiality clauses serve useful purposes.
They protect the reputation of the alleged harasser when frivolous claims are brought. They also protect the plaintiff who does not want it known that she was subjected to sexual abuse or that she sued her employer. Finally, confidentiality clauses make it easier to settle cases because they protect the good will of the employer.
In fact, companies will pay more to a victim of harassment as hush money to avoid the impact of these types of allegations on their bottom-lines. Bad publicity from these cases can be devastating, as Harvey Weinstein's now bankrupt company recently learned.
On the other hand, as seen lately, confidentiality clauses enable harassers to continue their pattern of abuse and expose other unsuspecting victims to this same treatment. Weighing the advantages and disadvantages of these provisions, the time has come to limit the use of these "gag-orders" and Congress agrees.
Buried deep inside the new Tax Cuts and Jobs Act is a provision which disallows tax deductions for monies employers pay to harassment victims and for legal fees if the parties enter into a confidentiality agreement. In essence, since late December parties must choose between deductibility and confidentiality.
For now this seems to be a fair middle ground. It enables companies to protect themselves and alleged harassers against frivolous claims by insisting upon confidentiality while at the same time also providing victims with some leverage to insist upon no confidentiality.
Lawyers of course will find some work-arounds, whether through stronger clauses confirming that the settlement is not an admission of liability or requiring the victim to confirm in an agreement -- whether or not it is true -- that there simply was no harassment. The settlement value of harassment cases also might go down somewhat to make up for a company's loss of the tax deduction when it is insisting upon confidentiality.
Only time will tell whether this law goes far enough to expose harassers and deter their behavior in the first place.