John E. MacDonald's Recent Articles from LexMonitor

Employers in New Jersey May Refuse to Hire an Employee Based on a Prior Bankruptcy

jmacdonald@stark-stark.com (John E. MacDonald) — Mon, 10 Jan 2011 15:13:15 GMT

The federal Third Circuit Court of Appeals, which includes New Jersey, has ruled in a decision, Rea v. Federated Investors, which states that evidence of a former bankruptcy may be used by an employer in making a decision not to hire an employee. Previously, there was some question as to whether the use of a prior bankruptcy to refuse to hire an employee would constitute some form of discrimination, along the same lines as evidence of a prior criminal conviction. However, in a unanimous decision, a Third Circuit Court of Appeals Panel ruled that an employer may do exactly that – review the bankruptcy court records for evidence of prior bankruptcies, and use the existence of a prior bankruptcy to refuse to hire an employee. It was anticipated that the Court would issue a narrower decision that would allow employers to refuse to hire employees with a history of a former bankruptcy if the employer was in the financial/banking industry. However, no such limitation was identified by the Court, and employers in New Jersey, regardless of their industry, may use evidence of prior bankruptcies to deny employment.

New Supreme Court Case Requires Hearing to Determine if Evidence of Discrimination was Hidden From Plaintiff Regarding Claims That Are Otherwise Barred By The Two Year Statute of Limitations

jmacdonald@stark-stark.com (John E. MacDonald) — Wed, 22 Dec 2010 16:39:01 GMT

In an unusual decision, the New Jersey Supreme Court in Henry v. New Jersey Department of Human Services (A-69 September Term) added a new wrinkle in the state’s anti-discrimination law that will not sit well with employers.

The decision gives employee plaintiffs another way around the 2-year limitations period applicable to state discrimination cases. In the Henry case, the Plaintiff alleged that the truth had been withheld from her when she had been unfairly bypassed for promotion by Caucasian co-applicants. The Court found that Plaintiff was allegedly mislead regarding the reasons for her “reclassification,” and that – if she had known the truth - she would have known of (“discovered”) that she had an actionable discrimination claim. Since the employer had allegedly hidden these facts from her, her claims of discrimination should not be barred by the statute of limitations.

In future cases where the date of “discovery” of a claim is at issue, a “Lopez” hearing will be held to determine when/if a plaintiff could have/should have known of the alleged discriminatory action.

This case, although it is intended to have limited application, is not good news for employers because it expands the “discovery” rule that can “toll” the two-year New Jersey Law Against Discrimination. This case may have the unfortunate side effect of producing a rash of demands by plaintiffs for Lopez hearings regarding what discrimination they “could have” known about during their employment.

The Class Action Decision in Iliadis v. Wal-Mart Reconfirmed by New Jersey Supreme Court in Lee v. Carter-Reed Co.

jmacdonald@stark-stark.com (John E. MacDonald) — Thu, 18 Nov 2010 13:00:35 GMT

In a decision released on September 30, 2010, the New Jersey Supreme Court reaffirmed the holding of its previous decision in Iliadis v. Wal-Mart, where the Court emphasized that, where common issues predominate in the litigation, individual factual differences among the class members will not stand in the way of class certification.

Given the significantly more conservative treatment of class action certification by the Third Circuit, this new case clearly confirms the New Jersey Supreme Court’s determination in class action certification applications that all inferences regarding the class action test should be determined in favor of the Plaintiff. The new decision in Lee should resolve any questions as to whether the New Jersey Courts will take a more conservative line after Iliadis, since it is now more than evident that the New Jersey Supreme Court plans to stand firm on its holding in Iliadias.

Genetic Information Non-Discrimination Act

jmacdonald@stark-stark.com (John E. MacDonald) — Mon, 30 Nov 2009 13:01:37 GMT

“GINA” (the “Genetic Information Non-Discrimination Act”) was signed into law on May 21, 2008 by President George Bush. It became effective a few days ago on November 21, 2009, at least with regard to its employment provisions (its health insurance provisions have been in place since May 21, 2009).

Employers need to know that GINA prohibits them from requiring genetic test information from job applicants. More importantly, and less obviously, the Act prohibits potential employers from seeking out and gathering information – even information in the public domain such as on the Internet - regarding job applicants. While inadvertent acquisition of genetic information regarding a job applicant is not a violation of the Act, employers do not want to get into a situation where they need to explain why they have gathered genetic/medical information about their employees.

The information about the employee’s close relatives can also be violative of GINA if that information is acquired for the purpose of learning about genetic health-related problems or conditions. A quick Google search of a potential employee’s name can sometimes produce such information, whether be in the form of a Facebook entry, an obituary, or other seemingly benign sources. The EEOC, the Department of Health and Human Services, the Department of Labor, the Department of Treasury, and similar state agencies will all have a hand in enforcing GINA. Like HIPPA, GINA is easy to violate if an employer is unaware of its requirements. Employers should seek guidance in updating their internal employment procedures and policies to avoid an expensive GINA violation.

New Class Action Filed Against SpongeTech

jmacdonald@stark-stark.com (John E. MacDonald) — Fri, 16 Oct 2009 21:12:18 GMT

A recent class action complaint has been filed against SpongeTech alleging various violations of the securities laws, including the alleged forgery of an attorney’s opinion letter authorizing the sale of a security. The complaint also alleges that “short selling” was engaged in by inside executives that lead to the rapid implosion of the stock price.

These claims are unusual in that the forging of an opinion letter allowing the sale of securities is almost unheard of. Even in the era of egregious conduct by executives in public companies, the allegations in this case are unique. Follow this blog for more updates on this and other similar claims. To learn more about this and other securities class action issues, contact Saul Roffe, Esquire, Shareholder in Stark & Stark's Securities Group at (609) 791-7007.

Franchisors May Be Held Liable for the "Constructive Termination" of a Franchise

jmacdonald@stark-stark.com (John E. MacDonald) — Tue, 18 Aug 2009 13:02:56 GMT

In a recent Appellate Court Decision, the New Jersey Court of Appeals has determined that a “constructive termination” of a franchise constitutes a violation of New Jersey’s Franchise Practices Act. In Maintainco Inc. v. Mitsubishi Caterpillar Forklift American, Inc., A-1485-07T2, the Appellate Division considered a situation where a franchisee learned from a customer that the franchisor had placed another franchisee (using a different platform concept) in the Plaintiff’s “area of proper responsibility.” After learning of this development, the Plaintiff concluded that its franchise had been “constructively terminated” and sued for damages. The Appellate Division agreed that constructive termination may constitute a violation of the New Jersey Franchise Practices Act. Also in the decision, was a holding that expert fees in this context are not allowable as damages under the Act.

Employer/Employee Relationships: Non-Compete, Confidentiality and Non-Solicitation Clauses

jmacdonald@stark-stark.com (John E. MacDonald) — Mon, 02 Feb 2009 18:28:42 GMT

During recessionary times, most people are acutely aware of the general business relationship they have with their employer. Few, however, fully appreciate the legal duties they may owe their employer as a result of documents they signed when they joined the company. This lack of understanding can lead to problems when employees, frustrated by cut-backs in compensation, decreased wages and general job instability take actions that run “afoul” of the contractual and common law agreements they have with their employers. Three (3) major pitfalls are outlined below:

Example One: Confidentiality Agreements
All but a few employers require that new employees sign some form of confidentiality agreement. This agreement usually comes in the stack of medical forms and other documents that are presented to the employee at or around their first day of work. Most of these confidentiality agreements require that the employee maintain the confidentiality of information they learn while employed at the company. This would include company policy information, customer information, financial information, sales information, technological information, etc. which it does not want shared with its competitors. Employees should use caution against downloading confidential information and removing it from the company’s premises.

Example Two: Non-Solicitation Agreements
Many companies that hire sales staff require that their sales employees sign a non-solicitation agreement. The purpose of this agreement is to stop employees from soliciting from customers (whose identities they learned of while employed by the company). Employers consider sales information to be owned by the company. Most non-solicitation agreements contain a provision called an “injunctive relief provision” which allows the company to go to Court for an Order that will stop an employee from soliciting any customers whose identities the employee learned of while employed at the company. These agreements usually contain an attorneys’ fees provision that allows the company to seek an order giving it all the attorneys’ fees the employer accrued to enforce the non-solicitation agreement. As a result, an employee who violates a non-solicitation agreement can find him or herself unable to contact customers and also responsible for expensive attorneys’ fees. There is a popular misconception that such agreements are not enforceable. This is a myth. Such agreements are generally enforceable in New Jersey to the extent that they are reasonable in scope and are designed to protect a company’s legitimate business interest.

Example Three: Non-Competition Agreements
This type of agreement is not as ubiquitous as non-solicitation agreements, but it is often used with employees such as scientist and other researchers who have access to sophisticated scientific or technological information. The affect of such an agreement is to stop an employee from working for a competitor of the former employer for a specific period of time. While these types of agreements are not generally as easily enforceable as non-solicitation agreements, many courts will enforce these types of agreements if it is shown that as a result of working for the competitor, the employee will “inevitably disclose” sensitive information. Obviously, this kind of agreement, if enforced, can have a significant impact on the employee. The employee may be barred from working in the industry that he or she is trained for some period of time. This can have a devastating economic effect on the employee.

While many of the employees may have forgotten that they signed a confidentiality agreement, most will remember signing a non-solicitation or non-competition agreement. If the employee is not certain about this, they should take reasonable steps to determine whether or not they signed such agreements. Many prospective employers will require that employee candidates sign a document stating whether or not they have entered into a non-solicitation or non-confidentiality agreement. If an employee has concerns about an agreement they signed, or about confidential information that they may have learned, and are unsure how these things effect a potential employment with a new employer or a new business, the time to ask questions is before the employee resigns, not after. Their best bet is to consult with an employment attorney prior to making mistakes that could prove to be very costly.

New Jersey Employers Brace Yourself: "Card Check" Is Coming

jmacdonald@stark-stark.com (John E. MacDonald) — Wed, 26 Nov 2008 13:04:45 GMT

To add to their other current woes, it is anticipated that New Jersey employers will soon be faced with higher employee costs due to proposed federal legislation known as “Card Check.” This legislation will make union organization far simpler in the Garden State (and everywhere else). In general, “card check” removes the “secret ballot” from the union organization process. Union organization will be largely accomplished by getting potential union members to simply sign a card indicating their desire to unionize.

Opponents of the bill think this will lead to intimidation and threats to employees who do not wish to unionize – and will inevitably increase labor costs. Backers of the legislation state that this step is necessary to revitalize union organization in the United States and will lead to higher wages for employees. Most federal Democratic Party legislators favor the legislation, while most Republican Party members of Congress oppose it. Given the new balance of power in Washington, passage of “card check” legislation is almost a certainty. Look for passage of this legislation within the first 100 days of the new administration.

Remember the WARN Act

jmacdonald@stark-stark.com (John E. MacDonald) — Tue, 18 Nov 2008 13:03:54 GMT

Many of you may remember the Federal Warn Act - an Act which requires 60 days notice of a company’s intent to shut down a location with 100 or more employees (with various exceptions, of course). What is not largely known is that New Jersey passed a “baby” Warn Act earlier this year.

This Act reduces the number of required full time employees from 100 to 50. The New Jersey WARN Act also eliminates the useful exception in the federal Act, which allows for termination of employees within a certain time period and other exceptions, which weakened the original federal Act.

In short, the New Jersey Warn Act is a force to be reckoned with as we head deeper into the current recession. Employers shutting down any office location should seek legal counsel prior to taking action.

State Committee takes a first look at the "Mobile" Franchise Bill

jmacdonald@stark-stark.com (John E. MacDonald) — Tue, 28 Oct 2008 13:06:04 GMT

Bill A2491, which was originally filed in March 2008, was “introduced” on Thursday October 23, 2008 and then referred to the Assembly Commerce and Economic Development Committee on Friday October 24, 2008. It will likely have a “second reading” before proceeding in the substantive legislative process.

Members of the International Franchise Association gave a thorough argument against the bill, despite some tough questioning by the Committee members. I also gave some brief testimony on the technical aspects of the proposed bill. The fight against this bill is just beginning – and since passage of this bill could have a chilling effect on all types of franchising in New Jersey – this is a fight the franchising community needs to win.

"Mobile Franchise" Act Moves One Step Closer to Passage

jmacdonald@stark-stark.com (John E. MacDonald) — Mon, 20 Oct 2008 21:00:44 GMT

The “Mobile Franchise” Act has been scheduled for a legislative session on October 23, 2008 at 2:00 p.m. The session will take place in front of the Commerce and Economic Development Committee, Room 9 on the Third Floor of the State House Annex located in Trenton, New Jersey.

As I mentioned in a previous blog post:

House Bill 2491 and Senate Bill 1539 of the New Jersey Legislature seek to expand the type of franchises, which are subject to the New Jersey Franchise Practices Act. In general, the New Jersey Franchise Practices Act currently applies to franchises where: 1) the franchisor has granted the franchisee a license, mark, trade name, etc.; 2) there is a “community of interest” in the marketing of goods and services; 3) where the franchisee has established or maintains a “place of business” in New Jersey; 4) where the gross sales between franchisor and franchisee are more than $35,000 in the prior year; and 5) more than 20% of the franchisee’s sales are derived from the franchise. The proposed change in the statute would apply the provisions of the Franchise Practices Act to “mobile” franchises, in other words, franchises that do not have a brick and mortar location. Under the proposed Bill, a “place of business” would include a location where the franchisee “displays for sale or at which or from which the franchisee sells the franchisor goods.” This would include an office or warehouse from which franchisee personnel visit or call upon customers or, perhaps more importantly from which the franchisor’s goods are delivered to customers.

New Expansion of Discrimination/Sexual Harassment Law

jmacdonald@stark-stark.com (John E. MacDonald) — Fri, 26 Sep 2008 13:42:55 GMT

In an interesting new development, the Appellate Division of New Jersey, in the matter of Cerdeira v. Martindale Hubbell, Appellate Division A-5855-06T1 (September 18, 2008) has expanded liability for discrimination in situations where: (a) an employee is subjected to discrimination/harassment by a co-worker (as opposed to a supervisor); and (b) the employer does not have an effective policy for employees to use in reporting harassment. Relying on a form of negligent liability which has previously only been recognized in federal court, the Appellate Division has now established that in New Jersey state courts, under the circumstances set forth above, there can be liability for a company. This new form of liability only underscores the need for employers in New Jersey to have a clear written policy on how employees are to report incidents of discrimination and harassment to their company.

Trans-Gender Issues For Employers Under The New Jersey Law Against Discrimination

jmacdonald@stark-stark.com (John E. MacDonald) — Mon, 07 Jul 2008 13:18:11 GMT

Last Summer, the New Jersey Legislature added “affectional orientation” to the list of protected classes of people under the New Jersey Law Against Discrimination (NJLAD). Now New Jersey employers are faced with another tricky issue on a very practical level which may have not been considered by the Legislature. How does an employer respond to a trans gender employee who wishes to use the bathroom of the opposite “biological” sex? For example, a biologically male employee who dresses as a woman wants to use the “ladies room.” Should the employer allow this? What about the other employees? The courts in New Jersey have done almost nothing to answer these questions to date. In a recent unpublished decision Opilla v. Parker, the Appellate Division sidestepped these issues in a case which would have otherwise provided employers with real guidance on this issue. In Opilla, a trans gendered biologically male employee entered the women’s locker room of the corporate gym and allegedly stared at a semi-dressed female co-worker. The coworker was uncomfortable enough to complain about the incident to her employer and eventually filed a lawsuit.

The court determined that one single incident of alleged discrimination would not rise to the severe and pervasive level required under NJLAD, thereby neatly avoiding the rather obvious issues presented in the case. Other jurisdictions have taken on this issue and provide some guidance. For example, a Federal Court in Minnesota dealt with the trans gender bathroom question and made the following, seemingly reasonable determination: If an employee presents “as a male,” the employee should use the mens bathroom – likewise if the employee presents “as a female,” the employee should use the womens bathroom. While this is obviously not a perfect solution, and does not really address the issues other employees may have with sharing lavatories or locker room with transgendered coworkers, it is probable that this “middle of the road” solution will eventually become the law in New Jersey. Only time will tell if New Jersey employers will take on the additional economic impact of creating a third “gender neutral” bathroom in their place of business.

Vermont House Bill Which Would Have Rendered Non-Competes Unenforceable Does Not Pass

jmacdonald@stark-stark.com (John E. MacDonald) — Wed, 25 Jun 2008 18:37:39 GMT

In a previous blog post I discussed House Bill 790 in Vermont which would have had a substantial negative impact upon franchising in Vermont. It would essentially void non-compete provisions in franchise agreements.

The Bill apparently languished in committee through the end of the May session, which effectively kills it for the time being. The danger of such bills is that they tend to leach into “sister” states. The demise of the Vermont Bill is a positive development for franchisors and helps strengthen the franchise community in general because it protects the general integrity of franchise systems.

President Signs Genetic Information Nondiscrimination Act into Law

jmacdonald@stark-stark.com (John E. MacDonald) — Wed, 21 May 2008 21:35:36 GMT

Earlier today (May 21, 2008) President Bush signed into law a bill that prohibits employers from using genetic information about prospective employees to make decisions on hiring. The Bill had received almost unanimous support in both the House and Senate. The Bill contains, among other things, the following two Congressional findings (as stated in the bill):

(4) Congress has been informed of examples of genetic discrimination in the workplace. These include the use of pre-employment genetic screening at Lawrence Berkeley Laboratory, which led to a court decision in favor of the employees in that case Norman-Bloodsaw v. Lawrence Berkeley Laboratory (135 F.3d 1260, 1269 (9th Cir. 1998)). Congress clearly has a compelling public interest in relieving the fear of discrimination and in prohibiting its actual practice in employment and health insurance.
(5) Federal law addressing genetic discrimination in health insurance and employment is incomplete in both the scope and depth of its protections. Moreover, while many States have enacted some type of genetic non-discrimination law, these laws vary widely with respect to their approach, application, and level of protection. Congress has collected substantial evidence that the American public and the medical community find the existing patchwork of State and Federal laws to be confusing and inadequate to protect them from discrimination. Therefore Federal legislation establishing a national and uniform basic standard is necessary to fully protect the public from discrimination and allay their concerns about the potential for discrimination, thereby allowing individuals to take advantage of genetic testing, technologies, research, and new therapies.

This Bill contains the following prohibition:

SEC. 202. EMPLOYER PRACTICES.

(a) Discrimination Based on Genetic Information- It shall be an unlawful employment practice for an employer--

(1) to fail or refuse to hire, or to discharge, any employee, or otherwise to discriminate against any employee with respect to the compensation, terms, conditions, or privileges of employment of the employee, because of genetic information with respect to the employee; or
(2) to limit, segregate, or classify the employees of the employer in any way that would deprive or tend to deprive any employee of employment opportunities or otherwise adversely affect the status of the employee as an employee, because of genetic information with respect to the employee.

(b) Acquisition of Genetic Information- It shall be an unlawful employment practice for an employer to request, require, or purchase genetic information with respect to an employee or a family member of the employee except--

(1) where an employer inadvertently requests or requires family medical history of the employee or family member of the employee;
(2) where--

(A) health or genetic services are offered by the employer, including such services offered as part of a wellness program;
(B) the employee provides prior, knowing, voluntary, and written authorization;
(C) only the employee (or family member if the family member is receiving genetic services) and the licensed health care professional or board certified genetic counselor involved in providing such services receive individually identifiable information concerning the results of such services; and
(D) any individually identifiable genetic information provided under subparagraph (C) in connection with the services provided under subparagraph (A) is only available for purposes of such services and shall not be disclosed to the employer except in aggregate terms that do not disclose the identity of specific employees;

(3) where an employer requests or requires family medical history from the employee to comply with the certification provisions of section 103 of the Family and Medical Leave Act of 1993 (29 U.S.C. 2613) or such requirements under State family and medical leave laws;
(4) where an employer purchases documents that are commercially and publicly available (including newspapers, magazines, periodicals, and books, but not including medical databases or court records) that include family medical history;
(5) where the information involved is to be used for genetic monitoring of the biological effects of toxic substances in the workplace, but only if--

(A) the employer provides written notice of the genetic monitoring to the employee;
(B)(i) the employee provides prior, knowing, voluntary, and written authorization; or
(ii) the genetic monitoring is required by Federal or State law;
(C) the employee is informed of individual monitoring results;
(D) the monitoring is in compliance with--

(i) any Federal genetic monitoring regulations, including any such regulations that may be promulgated by the Secretary of Labor pursuant to the Occupational Safety and Health Act of 1970 (29 U.S.C. 651 et seq.), the Federal Mine Safety and Health Act of 1977 (30 U.S.C. 801 et seq.), or the Atomic Energy Act of 1954 (42 U.S.C. 2011 et seq.); or
(ii) State genetic monitoring regulations, in the case of a State that is implementing genetic monitoring regulations under the authority of the Occupational Safety and Health Act of 1970 (29 U.S.C. 651 et seq.); and

(E) the employer, excluding any licensed health care professional or board certified genetic counselor that is involved in the genetic monitoring program, receives the results of the monitoring only in aggregate terms that do not disclose the identity of specific employees; or

(6) where the employer conducts DNA analysis for law enforcement purposes as a forensic laboratory or for purposes of human remains identification, and requests or requires genetic information of such employer's employees, but only to the extent that such genetic information is used for analysis of DNA identification markers for quality control to detect sample contamination.

(c) Preservation of Protections- In the case of information to which any of paragraphs (1) through (6) of subsection (b) applies, such information may not be used in violation of paragraph (1) or (2) of subsection (a) or treated or disclosed in a manner that violates section 206.

Employers should note this prohibition, and immediately stop any hiring practices that would run afoul of the Act.

NJ Legislature to Consider Applying the Franchise Practices Act to "Mobile" Franchises

jmacdonald@stark-stark.com (John E. MacDonald) — Wed, 23 Apr 2008 13:09:33 GMT

Potentially more significant than the proposed changes to the definition of “place of business” is the additional language that the Bill would tack on to the “general purpose” section of the Franchise Practices Act. The proposed Bill would add the following language:

“…and to protect franchisees from unreasonable termination by franchisors that may result from a disparity of bargaining power between national and regional franchisors and small franchisees. The legislature finds that these protections are necessary to protect not only retail businesses, but also wholesale distribution franchisees that “through their efforts” enhance the reputation and goodwill of franchisors in this State. Further, the legislature declares that the courts have in some cases more narrowly construed the Franchise Practices Act then was intended by the legislature”.

This additional language should concern franchisors doing business in New Jersey, since it is unnecessary to achieve the expansion to the “place of business” definition that is the focus of the Bill. This tougher language may indicate that there are further changes to the statute being considered. Certainly, the inclusion of the proposed language would be used as a justification by judges to give much broader application to the Act than has been the case in years past.

The two Bills are currently in the initial stage of the legislative process, and will probably not be acted upon until May or June of this year. The current sponsors of the two Bills are Assemblyman Joseph Cryan – District 20 (Union County) and Senator Bob Smith – District 17 (Middlesex and Somerset Counties). The legislation was introduced in the House on March 10, 2008, and in the Senate of March 17, 2008.

Vermont Legislature Introduces Legislation That May Render Non-Compete Provisions in Franchise Agreements

jmacdonald@stark-stark.com (John E. MacDonald) — Mon, 07 Apr 2008 14:05:26 GMT

The Vermont legislature introduced House Bill No. 790 on February 1, 2008. The Bill would render non-compete provisions of franchise agreements void unless the franchisor can prove to the Court’s satisfaction that the franchise agreement is: (1) consistent with public policy; (2) necessary to protect the franchisor; (3) not a contract of adhesion; and (4) reasonable considering the subject matter and conditions. Clearly the third requirement is problematic.

A “contract of adhesion” is legal-speak for “non-negotiable” and is “take-it-or-leave-it” in nature. Most franchise agreements are non-negotiable because it is important for the system to maintain uniform and consistent standards. However, various courts have deemed franchise agreements to be contracts of adhesion because of the superior bargaining power of the franchisor. Since most franchise agreements are contracts of adhesion, and if this Bill passes, it will be extraordinarily difficult for franchisors to enforce non-competition agreements among franchisees in Vermont.

One can only hope that this idea does not spread beyond the borders of the Green Mountain State. Vermont’s legislature appears intent of following this strange course of action, which is out of step with the other states. Watch this log for more updates.