Rutgers Case Teaches Valuable Lesson: The Best Defense Is Documentation

The New Jersey Conscientious Employee Protection Act (“CEPA”) is arguably the broadest employee protection law in the country. CEPA protects an employee from workplace retaliation related to the employee’s “whistle-blowing” activities. Thanks, in part, to documentation of performance issues, in late November 2018, the New Jersey Appellate Division upheld a trial court’s decision dismissing an employee’s CEPA claim against her employer and supervisor. The decision marks an important victory for employers, since CEPA claims are rarely decided in favor of the employer. This case also teaches the valuable lesson that diligent documentation can be an employer’s best defense to whistle-blowing and harassment claims.

Facts

In May 2012, Tammy Russell was hired by Rutgers Associate Chancellor to serve as the Director of the Rutgers Camden Educational Opportunity Fund Program (“EOF”). The EOF is funded by the State, and provides scholarships, academic year and summer program access to higher education for economically or educationally disadvantaged students.

Russell was responsible for oversight of the program budget, which is submitted annually to the state. Early in her employment, Russell discovered that EOF funds may have been used to pay salaries for non-EOF Rutgers staff. Russell also complained about issues the state raised regarding the EOF reports, and that the employees who replaced her EOF duties lacked experience and therefore did not complete the reports correctly.  Once notified of the issues by Russell, Rutgers performed an internal investigation of its EOF program. The report concluded that there was no need for further investigation.

Russell alleged after she notified Rutgers of the issues in the EOF program, she was treated differently in the workplace. Russell alleged that budgeting responsibilities were taken away from her, she was told that she would no longer have access to the budget, and that she was no longer responsible for completing state mandated EOF reports. However, Russell was still responsible for reviewing and approving items in the budget, and signing off on Camden’s ultimate EOF budget. Although Russell also claimed that she was retaliated against, she admitted that her supervisor never forced her to approve the budget or otherwise threatened her about it in any way.

Russell also had performance issues throughout her employment at Rutgers. Although she received “meets expectations” on her performance reviews, Russell had communication issues with both her supervisors and co-workers. Employees complained she was “abrasive, harsh, and combative.”  Additionally, Rutgers documented complaints from employees regarding Russell’s job performance, and shared a memo with Russell regarding her “poor communication and program management” and failure to follow instructions regarding the completion of certain tasks.  As a result of her documented poor work performance, Rutgers sent Russell a pre-termination letter and scheduled a conference for the following day. The next day, Russell was terminated. Russell sent a letter to Rutgers advising she was “fully prepared to have legal counsel represent [her] and [was] very prepared to go outside of Rutgers University regarding this case.”  Rutgers investigated and found that no violation of their policies had occurred, and that there was no nexus between Russell’s alleged whistle-blowing complaints and her impending termination.

Well-documented defense

To prevail under her CEPA claim, Russell was required to prove four elements:  (1) that she reasonably believed that the employer’s conduct was violating a law, rule, regulation, or a clear mandate of public policy; (2) that she engaged in “whistle-blowing” activity; (3) an adverse employment action was taken against her; and (4) her whistleblowing activity caused the adverse employment action.

If an employee establishes these elements, the employer must set forth a legitimate, non-retaliatory reason for the adverse conduct against the employee. The employee must then provide factual reasons why the employer’s proffered reason is pretextual.

In this case, the trial court found that Russell’s apparent “issues on the job” were the real reason for her termination. The court was persuaded by the various complaints against her,  the timing of those complaints – both before and after her alleged whistle-blowing complaint – and the fact that Russell’s job performance did not improve even after she was informed of her performance deficiencies. Thus, Rutgers was entitled to summary judgment.

The Appellate Division affirmed the decision of the trial court and noted that although stripping an employee of her job responsibilities could constitute retaliation, in this case, Russell’s duties shifted, but she bore the same responsibility to ultimately approve the program budget as she did prior to her complaint.  Although she testified that she “perceived” that her boss would make her job more difficult if she did not approve the budget, she could not identify anything that her boss did or said to that effect. According to the Appellate Division, this lack of specifics did not support Russell’s claim of retaliatory reduction in job responsibilities.

Bottom Line

Not every action which makes an employee unhappy constitutes retaliation under CEPA. However, employers are reminded to document all workplace performance issues. Your documentation of performance issues will be critical in allowing a court to determine whether a termination was due to retaliation, or the employee’s poor performance. A termination that is warranted can still be misconstrued by an employee, and perceived as retaliatory by the courts, if the employer lacks sufficient documentation. Here, Rutgers persuaded the court through written complaints in the employee’s personnel file, despite performance reviews that the employee “met expectations.”  In the end, Rutgers’ diligent documentation when the employment issues arose helped them to achieve a pre-trial win, and to avoid the cost of a protracted litigation.

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.

New York Legislature Amends Paid Family Leave Act

On June 20, 2018, the New York legislature overwhelmingly passed a bill to give employees up to 12 weeks of partially paid bereavement leave. The bill will still require the approval of Governor Andrew Cuomo. The bill expands the Paid Family Leave Act (the “Act”), which went into effect on January 1, 2018. The Act already provided employees up to 12 weeks of leave paid at a percentage of their salaries for situations including child birth or adoption, a qualifying exigency arising out of a family member’s military service, or the need to care for a sick relative. The Act covers the care of a spouse or domestic partner, child, parent, parent-in-law, grandparent, or grandchild, by blood or marriage. The recent amendment was passed in an effort to explicitly clarify the legislative intent that bereavement leave for the death of such relative would be covered by the Act as well.

The original Act guarantees an employee the same or comparable job when they return from leave, and bars employers from cutting off health insurance. While employees with planned births or adoptions are required to provide 30 days’ notice under the Act, the bereavement amendment will permit employees to give notice “as soon as practicable.” Employees eligible for leave under this amendment will be required to provide a death certificate.

While some employers are concerned that the bill will impose hardship on small businesses, the New York State Assembly justifies the amendment because “[g]rief-related losses cost U.S. companies as much as $75 billion annually.” As such, the legislature purports that the amendment will result in “greater employee loyalty, better outcomes, better quality of life for that person, and an overall healthier workforce that has been given the necessary time to mourn their loss.” The bill is sponsored by State Senator Rich Funke, who suffered the sudden loss of his adult son. If the bill is signed by Governor Cuomo, New York will offer the most generous bereavement leave benefits in the country.

For more information on what your company can do to ensure compliance with New York or New York City employee benefits laws, 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.

“Pass the Trash” Compliance Update

Private employers (“Employers”) holding contracts with New Jersey school districts and charter schools are reminded that it is now time to comply with the extensive background check requirements under the New Jersey “Pass the Trash” Act (the “Act”) in order to screen applicants and employees for child abuse and sexual misconduct in their former employment.  This law became effective on June 1, 2018, and requires employers/independent contractors to conduct a 20 year employment review of its applicants and employees who will have “regular contact with students.”  This employment review requires employers to:

  • Request information from the applicant/employee about child abuse and sexual misconduct with current and former employers for the last 20 years;
  • Collect the names, addresses, telephone numbers and relevant contact information of an applicant’s current and former employers for the 20 year time span, where the applicant/employee worked for a school or in a position that involved direct contact with children and inquire about child abuse and sexual misconduct.
  • Obtain authorizations from applicants to conduct the employment review;
  • Contact any out-of-state employers with whom the applicant/employee held a position involving regular contact with students; and
  • Update employment applications for positions that involve regular contact with students to include the penalties for applicants who provide false information. The penalties include termination or denial of employment and fines up to $500.

In addition to its affirmative obligation to conduct an employment review for child abuse and sexual misconduct, New Jersey employers will also be on the receiving end of these inquiries.  If an employer receives a request for information under the Act, it must respond within 20 days and disclose the requested information. Failure to do so may be grounds for the applicant’s automatic disqualification from employment. Importantly, the Act provides immunity to Employers who provide the requested information in good faith.

Employers who do business with New Jersey school districts or charter schools should review and revise existing hiring policies, practices and procedures to ensure compliance with the Act.  Human Resources personnel should also be trained on these new legal requirements to ensure that internal hiring processes and employment applications are updated to comply with the Pass the Trash Act.

For more information about the potential impacts of the “Pass the Trash” Act or forms your company can use to comply with this new law, please contact Dina M. Mastellone, Esq., Chair of the firm’s Human Resources Practice Group, at dmastellone@nullgenovaburns.com, 973-533-0777 or Brigette N. Eagan, Esq., Counsel in the Human Resources Practices Group at beagan@nullgenovaburns.com, 973-535-7114.

New Jersey Courts Double-Down on Arbitration Enforcement

In late June 2018, New Jersey state and federal courts issued opinions on arbitration agreements that effectively reinforced the state’s rocky pro-arbitration bearings. The first opinion came from the Third Circuit Court of Appeals on June 20, 2018, in a case called Ace American Insurance Co. v. Guerriero. In Ace, the Third Circuit held that an employee must arbitrate his employment-related claims, despite his allegations that the company never provided him a full copy of the arbitration agreement. Only one day later, in Victory Entertainment, Inc., et al. v. Schibell, et al., the New Jersey Appellate Division held that strip club owner/managers must arbitrate an ownership dispute despite the employee’s argument that the arbitration agreement lacked clear and unambiguous language to do so.

An “Ace” In the Pocket for Arbitration Agreements In Federal Court

In Ace, after the employee and his counsel refused to arbitrate the employee’s employment claims, Ace filed a complaint in U.S. District Court in Newark, New Jersey, to compel arbitration under the Federal Arbitration Act (“FAA”). One day later, the employee filed a whistle-blower suit in New Jersey state court claiming that his employer illegally fired him after he reported to his supervisors that the company was destroying documents it was required to preserve in violation of the New Jersey Conscientious Employee Protection Act (“CEPA”). The employee alleged that he was never provided the company’s full three-page Employee Dispute Arbitration Policy and instead was only provided the signature page. The employer produced the signed acknowledgment page, which at the top read “Arbitration Agreement.” Moreover, the employee’s offer letter, which expressly referenced the Employment Dispute Arbitration Policy, was also signed by the employee.  Employees could also access the Employee Dispute Arbitration Policy using the company’s intranet site. The U.S. District Court enjoined the employee from pursuing his state court case and ruled in ACE’s favor, which was upheld on appeal to the Third Circuit.

Reinforcing the FAA’s “strong federal policy” of resolving parties’ disputes through arbitration by enforcing the parties’ arbitration agreements, the Third Circuit affirmed the District Court’s finding that the arbitration agreement was still enforceable, whether or not the employee actually read the agreement. The court found that the Employee Dispute Arbitration Policy unambiguously stated that the employee would “submit any employment-related legal claims to final and binding neutral third-party arbitration …” and specifically mentioned CEPA.  This decision confirms New Jersey’s strong pro-arbitration stance in federal court.

A “Victory” In State Court

In Victory Entertainment, employers also enjoyed a victory in the Appellate Division. The plaintiff was a manager part-owner of The Den, holding company for Delilah’s Den strip clubs throughout the state. His two business partners certified that plaintiff suffered spells of delusion that led him to mismanage the company, including brandishing a gun in the workplace, refusing to remit payment to vendors, and sexually harassing entertainers. After plaintiff was hospitalized for mental health issues, his two business partners, along with plaintiff and plaintiff’s counsel, executed a Sales Agreement whereby plaintiff’s trusted associate, as plaintiff’s agent, would purchase the two other owner’s shares of The Den over a 10-year period. The parties also drafted a separate Shareholder/Stakeholder (Deadlock) Agreement to resolve impasses between the shareholders and stakeholders, which created a 1/3 voting right between plaintiff’s agent/associate and the two part-owners. This Deadlock Agreement contained a binding arbitration clause. Although the shares in The Den were expressly subject to the terms and conditions of the Sales Agreement and the Deadlock Agreement, plaintiff and his trusted agent/associate were the only parties to the Deadlock Agreement.

When plaintiff’s mismanagement issues re-arose, the two part-owners executed their authority to remove plaintiff from managing the business. Plaintiff filed suit, claiming he was improperly removed.  The trial court dismissed his complaint and ordered that the parties arbitrate the dispute. Plaintiff appealed. In affirming the trial court’s decision, the Appellate Division found that although only the plaintiff and his trusted associate were parties to the arbitration clause, the two owners could enforce the arbitration clause since the Sales Agreement and the Deadlock Agreement arose from the same transaction. The two agreements were executed on the same day, pertain to the control and management of the same company, and contain numerous cross-references. Further, the Appellate Division determined the two part-owners could enforce the arbitration provision as either third-party beneficiaries or the trusted associate’s agents. Finally, the Appellate Division held the plaintiff claims were within the scope of the arbitration provision because they implicated the Deadlock Agreement explicitly or the alleged conduct occurred after the parties executed the agreement or related to the execution of the Deadlock Agreement.

Bottom Line

Unlike New York, and arguably contrary to the Federal Arbitration Act, New Jersey state courts have historically imposed a higher standard to enforce an arbitration agreement. The New Jersey Supreme Court has ruled that arbitration agreements in the state must provide “clear and unambiguous” terms that the parties are waiving the right to a jury trial. Although federal courts staunchly enforce arbitration agreements in favor of employers, employees sometimes reap the benefits of this state court hurdle for employers. Together, these recent opinions stand for the proposition that arbitration agreements may be strictly enforced in New Jersey.

While these opinions are triumphs for the enforcement of arbitration agreements, it is still imperative to include explicit language that your employees waive the right to a jury trial for all employment-related claims. Likewise, the law surrounding arbitration agreements is constantly shifting and all arbitration agreements should be carefully reviewed with counsel.

If you have questions on drafting arbitration agreements or arbitration disputes, 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.