Isolated ‘Highly Offensive Gender Slur’ Insufficient to Warrant Employee’s Termination

The New Jersey Supreme Court overturned the termination of a state employee who uttered a highly offensive gender slur that was overheard by other employees.  William R. Hendrickson, Jr., a fire safety inspector with the New Jersey Department of Consumer Affairs (“DCA”) was terminated from his employment as a result of the slur, but his termination was reduced to a six-month suspension following a hearing before an Administrative Law Judge (“ALJ”) with the New Jersey Office of Administrative Law.  The Supreme Court ruled that suspension, not termination, was the proper punishment in light of the offense.

Facts

On December 1, 2013, while on an assignment at MetLife Stadium, which was hosting a New York Jets football game, inspectors from DCA’s Division of Fire Safety were tasked with ensuring the stadium complied with applicable safety codes.  Hendrickson and two other inspectors met in the parking lot before beginning their assignments.  Their supervisor was Senior Inspector Margaret Knight, who was not present with the three men in the parking lot.

While in the parking lot, Hendrickson learned that Senior Inspector Knight assigned him to inspect the pyrotechnics display (fireworks) which were on the roof of MetLife Stadium.  After being informed of his assignment, the two other inspectors overheard Hendrickson made an obscene remark about Senior Inspector Knight, calling her the “c-word.”  Both inspectors were offended by Hendrickson’s remark and reported the incident.  At the hearing, Hendrickson provided a different account of his reaction to the assignment, stating that he walked away and “muttered” to himself that he hoped Senior Inspector Knight “gets a disease.”  Hendrickson testified that he said a few things he was not proud of but claimed to have no recollection of using the offensive language.

After learning of Hendrickson’s outburst, Senior Inspector Knight announced to a number of inspectors, including Hendrickson, that if anyone had any issues with her, to respect her position and come to her directly to discuss and resolve the issue.  Hendrickson walked away without talking to Senior Inspector Knight and completed his assigned task without incident.

ALJ and Appellate Decisions

After the hearing, the ALJ issued a written decision holding that Hendrickson uttered a gender slur in the workplace and violated the State’s policy prohibiting gender discrimination and engaged in conduct unbecoming a public employee.  While the ALJ rejected Hendrickson’s account as not credible, the ALJ found that termination was too harsh a remedy given Hendrickson’s lack of disciplinary history in the 15-months prior and 9-months after the incident.  The ALJ ordered Hendrickson be suspended for 6-months.

The Department of Consumer Affairs appealed the ALJ’s decision to the Appellate Division.  The Appellate Division, substituting their judgment for that of the ALJ, reinstated the penalty of removal and Hendrickson thereafter appealed to the New Jersey Supreme Court.

Supreme Court Decision

The Supreme Court overturned the Appellate Division’s decision and reinstated Hendrickson’s 6-month suspension imposed by the ALJ.  The Supreme Court determined the proper standard of review was to assess whether the sanction imposed by the ALJ was “so disproportionate to the offense, in light of all circumstances, as to be shocking to one’s sense of fairness.”

While acknowledging that Hendrickson’s use of a highly offensive gender slur in a public place which was overheard by co-workers must be firmly condemned, the Supreme Court concluded that the ALJ’s decision to impose a 6-month suspension was not shocking to one’s sense of fairness.  In making this determination, the Supreme Court found the ALJ considered:  (1) Hendrickson’s outburst to be an isolated incident; (2) the incident was mitigated by Hendrickson’s unblemished disciplinary record prior to and after the incident; and (3) Hendrickson was ultimately redeemable.  As the Supreme Court stated: “A belittling gender insult uttered in the workplace by a state employee is a violation of New Jersey’s policy against discrimination and Hendrickson’s conduct was unbecoming a public employee.” Thus, the Supreme Court deferred to the ALJ’s conclusions and reinstated Hendrickson’s 6-month suspension.

Bottom Line

Employers have a responsibility to investigate complaints employees raise about harassment and discrimination in the workplace.  If the investigation concludes that an employee has engaged in the conduct complained of, often the employer is faced with a choice of how to properly discipline the employee.  In this case, while the Supreme Court did not does not excuse Hendrickson’s conduct, it found that the ultimate decision by the employer to terminate the employee was too harsh in light of the circumstances. While termination can always be considered, an employer must take into account, and properly document, any mitigating factors that apply in imposing discipline lesser than termination.

For more information please contact John C. Petrella, Esq., Chair of the firm’s Employment Litigation Practice Group, at  jpetrella@nullgenovaburns.com, or Dina M. Mastellone, Esq., Chair of the firm’s Human Resources Practice Group, at dmastellone@nullgenovaburns.com, or 973-533-0777.

“Burn Files” and Employee Self-Help: Effective Policies Protect Documents Wrongfully Taken by Former Employee

A New Jersey appellate court recently upheld the disqualification of a former employee’s attorneys in a whistleblower claim against his former employer, because the employee had improperly taken documents containing privileged attorney-client communications to use against the employer “when they try to get him.”

Facts

The defendant, Maquet Getinge Group (“Maquet”), a German pharmaceutical company, designs, develops, manufactures, and distributes medical devices.  Because of the medical and technological focus of defendant’s business, Maquest maintains sensitive research and development data, new products, quality processes and procedures and protocols for the preparation of inspections by the Food and Drug Administration (“FDA”) on its computer systems.  Maquet had in place comprehensive policies designed to protect its confidential, proprietary information, including a “Standards of Conduct” policy, an “End User Acceptable Use Policy.”  Plaintiff, Oscar Sanchez (“Sanchez”), was employed by Maquet as the Chief Quality and Compliance Officer for approximately 18 months, until he was terminated in April 2015.  As a condition of his employment, Sanchez and other similarly situated employees had to sign a “Confidential Information, Invention Assignment, and Non-Compete Agreement.”  This agreement contained, inter alia, a “Covenant Not to Disclose” and a provision on “Return of Company Documents.”  Two months prior to his termination, Sanchez was disciplined after an investigation into numerous complaints about his conduct and deportment involving employees who reported to him.  After receiving the complaints, Sanchez informed a Senior Vice President of Marketing at Maquet that “he had personally retained copies of all kinds of Maquet-owned documentation – which he referred to as his ‘burn files’ and which included copies of . . . two executives’ hard drives and a binder full of emails and documents,” which he allegedly told his co-worker he “would use the ‘burn files’ to “f***” Maquet ‘when they tried to get him.’”

On July 2, 2015, Sanchez filed a complaint against Maquet alleging he had been wrongfully terminated for whistleblowing activities, in violation of the Conscientious Employee Protection Act (“CEPA”).  Maquet served Sanchez with its First Request for the Production of Documents in October 2015, to which plaintiff responded on February 1, 2016.  Upon receipt of the documents, Maquet claimed the documents plaintiff’s counsel had produced were owned by Maquet and had been improperly taken by Sanchez without Maquet’s knowledge or consent. Further, Maquet claimed the documents produced contained privileged attorney-client communications between Maquet’s staff and its attorneys, including correspondence regarding FDA compliance issues, results of third-party audits, budgeting issues, research and development, quality processes and procedures, and FDA findings.

Lower Court Decision

Defendant moved to preclude plaintiff from using these documents against defendant, and to remove plaintiff’s chosen counsel and his firm from continuing to represent plaintiff in the case.  In its decision, the lower court rejected plaintiff’s argument that Maquet had waived the attorney-client privilege. The Judge then found that Plaintiff’s chosen counsel “knew or should have known the material was privileged” yet failed “to promptly notify the opposing side that they had received privileged information” until nine (9) months after the case had been initiated. In disqualifying chosen counsel from serving as plaintiff’s counsel, the Judge found he would neither be harmed in the prosecution of the case nor that he would be unable to secure competent substitute counsel, as the case was still in its early stages.

Appellate Court’s Decision

Sanchez appealed arguing that the motion judge erred in reaching her decision to disqualify his chosen counsel without conducting an evidentiary hearing and that the judge misapplied the multi-factor analysis the NJ Supreme Court established in the seminal case, Quinlan v. Curtiss-Wright Corp. The Appellate Division rejected these arguments and affirmed the lower court’s decision.

The Appellate Division concluded the motion judge properly found the documents in question to be covered by the attorney-client privilege, particularly finding that the motion judge had noted the documents in dispute contained communications between Sanchez, Maquet’s Global Chief Quality Assurance & Regulatory Officer, and Maquet’s General Counsel. The record also indicated the documents included emails labeled “ATTORNEY CLIENT PRIVILEGE” by plaintiff. The Appellate Division found no legal basis to question the motion judge’s conclusion that Maquet’s counsel was included in the communications to offer legal advice and guidance if he so chose.

The Appellate Division then rejected as untimely and legally unnecessary, plaintiff’s argument that the motion judge should have conducted an evidentiary hearing to consider the Quinlan factors.  Quinlan set forth seven (7) factors to consider when an employee may take or use documents belonging to his or her employer. The first consideration a judge must make is “how the employee came to have possession of, or access to, the document.” In reviewing the record, the court found that Sanchez removed the documents at issue in direct violation of Maquet’s policies related to confidential documents containing proprietary information in an act that was outside of his ordinary duties because he wanted to [get] the company when they tried to get him.  The court also noted that Sanchez copied the documents to share with his attorneys for the purpose of evaluating whether he had “a viable cause of action” against Maquet and conversely, that Maquet had a strong interest in keeping the materials confidential.

Finally, while recognizing that the disqualification of counsel is a harsh discretionary remedy that must be used sparingly, the Appellate Division concluded that Sanchez’ extra-judicial self-help measures deprived Maquet of the opportunity to prevent the disclosure of the privileged information and that plaintiff’s counsel’s unreasonable delay in disclosing this information rendered futile any attempt to mitigate this harm.

Bottom Line

Employers need to maintain robust policies related to maintaining and access to proprietary and confidential information, and in appropriate circumstances, agreements like those used by Maquet. These policies should: (1) set forth what materials are confidential or proprietary; (2) specify who within the company is permitted access to the proprietary and confidential information, whether by job title, level, need to know basis, etc.; and (3) set forth the purpose for which the employee is granted access and any limitations on access to the proprietary and confidential information. These policies and agreements will be critical in allowing a court to determine the employee was unauthorized in taking the documents and acted outside their ordinary duties of employment.

For more information about the potential impacts of this ruling or what steps your company can take to effectively prevent and address whistleblower complaints, please contact John C. Petrella, Esq., Chair of the firm’s Employment Litigation Practice Group, at jpetrella@nullgenovaburns.com, or Dina M. Mastellone, Esq., Chair of the firm’s Human Resources Practice Group, at dmastellone@nullgenovaburns.com, or 973-533-0777.

Morgan Stanley Abandons Broker Industry Recruiting Pact

In a major blow to the Protocol for Broker Recruiting, which limited restrictive covenants in the broker industry and resulting litigation, according to Reuters (October 30, 2017), Morgan Stanley has decided to withdraw from the Protocol. Created in 2004, the Protocol is made up of thousands of registered representatives, with the stated goal of “furthering clients’ interests in privacy and freedom of choice in connection with the movement of their registered representatives.” The move by Morgan Stanley to leave the Protocol was apparently motivated in part, according to Reuters, by industry changes as the top brokers are increasingly leaving the large brokerages that are members of the Protocol to work for smaller independent brokerages, which are not members.

The impact of Morgan Stanley’s departure from the agreement is unknown, but the next question remains whether the other major Wall Street brokerages follow suit. Regardless, it appears that restrictive covenants in the brokerage industry will be making a comeback as will the resulting litigation that the Protocol was created to lessen. For our clients in the brokerage industry, including Registered Investment Advisors (“RIA”), restrictive covenants are likely to become a much more important part of employment agreements again, and hiring of rival brokers will require more diligence in terms of existing non-competes.

For questions about restrictive covenants in the brokerage industry, please contact John C. Petrella, Esq., Chair of the firm’s Employment Law & Litigation Practice Group, Partner Harris S. Freier, Esq. or Associate Christopher M. Kurek, Esq. at 973-533-0777. Please also sign-up for our free Labor and Employment Law Blog to keep up-to-date on the latest news and legal developments.