On June 12, 2017, U.S. District Judge Joseph Rodriguez denied a motion to dismiss the U.S. Department of Labor’s lawsuit against the operator of 17 New York and New Jersey Houlihan’s restaurants for allegedly taking portions of employees’ tips, failing to pay employees for all hours worked, failing to pay overtime premiums, and failing to make and preserve employee time records, in violation of the Fair Labor Standards Act.

The defendant, Houlihan’s restaurants’ parent company A.C.E. Restaurant Group, Inc., filed a motion to dismiss the lawsuit, arguing that the complaint should be dismissed because it was not sufficiently specific, but Judge Rodriguez said that the federal government, suing on behalf of the workers, had included enough factual information to make the basis of a claim. Quoting the 2009 U.S. Supreme Court ruling in Ashcroft v. Iqbal, he said, “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged . . . Defendants’ demand that the Complaint include additional information is understandable. Comprehensive pleadings, however, are not required at this stage of the case.”

A.C.E. also argued that the workers’ claims should be dismissed because the New Jersey Department of Labor made a determination of “no violation.” Judge Rodriguez said that because the New Jersey state claims were investigated by a state agency rather than litigated in court, the lawsuit did not need to be dismissed on these grounds.

Attorneys for A.C.E. said that the company may move for summary judgment during the discovery stage of the lawsuit. They also said that the suit was filed under the Obama administration, and the lawyers hoped the Trump administration would give employers like their clients a more “fair shake.”

We will continue to monitor this litigation.

On May 30, 2017 New York City Mayor Bill deBlasio signed into law five bills recently passed by the New York City Council intended to regulate scheduling and workplace management practices in the retail and fast food industries. The package, known as the “Fair Work Week” legislation, provides several new protections for these workers.

For fast food workers, the law requires employers to give 14 days’ notice before scheduling shifts. If an employer violates this requirement, it must pay the employee a premium which increases based on how little notice an employee is given before the schedule is changed. The law bans “clopening” shifts where an employee works back-to-back closing and opening shifts unless the employee consents in writing and the employer pays an additional $100, and the law requires employers to offer shifts to existing employees before hiring additional workers to fill those shifts. The law also allows fast food employees to authorize contributions to non-profit organizations through payroll deductions.

For retail workers, employers may no longer use “on-call” scheduling, a practice where an employer requires a worker to be available during a shift and either wait for a call to come in or contact the employer on the day of the shift to find out whether to come in. The law also requires 72 hours of notice before cancellation or scheduling of a shift, and only allows cancellation or scheduling of a shift within 72 hours if the employee requests or consents to the change, or there is an event that prevents the employer from operating that day, like a natural disaster or fire.

“Predictable schedules and predictable paychecks should be a right, not a privilege,” said Mayor de Blasio. “With these bills, we are continuing to build a fairer and more equitable city for all New Yorkers.”

On May 15, New York City’s “Freelance Isn’t Free Act” took effect. The new law protects freelance workers who live in the city from late payment or non-payment by companies who use their services.

Employers are increasingly utilizing freelancers and independent contractors in the growing “gig economy.” Writers, drivers, personal shoppers, photographers, computer programmers and many others provide services for companies who pay them by the job or task.

These workers are not considered employees, which can have advantages and disadvantages. On one hand, they may have flexible schedules, the ability to be their own boss, and the opportunity to build their own businesses with entrepreneurial skill and hard work. On the other hand, they lack the basic protections the law gives employees—like minimum wage and overtime pay—and are not provided optional benefits like health insurance and paid sick days may employees enjoy. Another major drawback is that freelancers are often underpaid, not paid at all, or forced to wrangle with companies who change the terms of their agreement after the work is done.

Under the new law, which applies to  freelance work with a value of $800 or more (either $800 at once, or a total of $800 when adding together the value of all work performed within 120 days), companies must provide written agreements setting out, among other terms, the services that will be provided, the payment amount, and the payment date. If no payment date is provided, payment must be made within 30 days of completion of the job.

Workers can have their claims heard by city investigators or state courts, and a plaintiff can receive $250 in damages for a single violation. Employers who are found to commit an ongoing pattern of violations could be liable for up to $25,000 in civil penalties, as well as punitive damages and attorneys’ fees.

If you are a freelance or contract worker and you think you haven’t been paid correctly, contact this office for a free consultation.

Non-competition agreements (also known as “non-competes”) are contracts, or clauses within contracts, that prevent an employee from working for a competitor after leaving their current employer. Employers sometimes require new employees to sign a non-compete as a condition of hiring, or after a period of employment in exchange for new perks like stock options. Non-compete agreements protect employers from things like dissemination of trade secrets or the loss of clients who might follow a departed employee to a new company in the same geographic area, but they can also severely impact an employee’s ability to earn a living.

Traditionally, non-competes were found in fields like technology or sales, where trade secrets are closely held and specialized skills are often required. But now, non-competes are so common that you might be required to sign one to work as a factory manager, camp counselor, yoga instructor, or even a summer intern.

Just because an employer requires an employee to sign a con-compete agreement, it does not necessarily mean that it is valid and can be used against the employee. These clauses are treated differently by the courts than most other contract terms. In general, in order to be valid, a non-compete agreement must (1) protect a legitimate business interest of the employer, (2) be supported by consideration, and (3) be reasonable in the geographical area it covers and the length of time it is in effect.

In New Jersey, non-compete agreements are viewed unfavorably as restraints of trade. To be arguably enforceable, such an agreement must protect the legitimate interests of the employer, not impose an undue hardship on the employee, and not be injurious to the public. See, e.g., Solari Industries, Inc. v. Malady.

The type of industry may affect what is considered a legitimate interest for the employer to protect. For example, in the medical context, there is no legitimate interest in preventing competition as such, but there is a legitimate interest in protecting the employer’s relationship with current patients utilizing the practice.

See, e.g., Karlin v. Weinberg. Hardship on an employee can be undue when termination of employment “occurs because of a breach of the employment contract by the employer.” Id. at 423.

“It’s one thing to have a bump in the road and be in between jobs for a little while; it’s another thing to be prevented from doing the only thing you know how to do,” said a Pennsylvania tree-trimmer to the New York Times, after his employer threatened legal action against him for leaving to work for a competing tree service.

Did you sign a non-compete when you started with your employer? Have you been asked to sign one after you’ve been working for your employer for some time? Contact this office and we can help you determine whether it affects your ability to get a new job in your field.

Last week, New York City Mayor Bill DeBlasio signed a new law banning employers in New York City from asking prospective employees about their salary history. The law amends the New York City Human Rights Law, making it an illegal discriminatory practice for an employer to inquire about or use an applicant’s “current or prior wage, benefits or other compensation” to set a salary offer during hiring.

Mayor DeBlasio said the law is intended to help close the wage gap for women and people of color, by preventing employers from relying on their previous salaries in setting new salary offers. The City’s Public Advocate says the wage gap costs women $5.8 billion in earnings each year. “It is unacceptable that we’re still fighting for equal pay for equal work. The simple fact is that women and people of color are frequently paid less for the same work as their white, male counterparts,” said DeBlasio.

Under the law, employers may not ask applicants or their previous employers for their salary histories, search public records for salary histories, or rely on an applicant’s salary history when making an offer of employment. The New York City Commission on Human Rights will be charged with enforcing the new law, and will have the power to impose fines ranging from $125 to $250,000.

The law takes effect on October 31, 2017.

Earlier this month, in Saleem v. Corporate Transportation Group, Ltd., the U.S. Court of Appeals for the Second Circuit affirmed the District Court’s ruling that “black car” drivers in the tri-state area were properly classified as independent contractors, and thus not entitled to overtime pay under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL).

Black car drivers provide luxury transportation services to clients who prearrange for rides. In 2012, a group of black car drivers operating in New York, New Jersey, and Pennsylvania filed suit against their employer, Corporate Transportation Group, Ltd. (“CTG”), alleging that it had misclassified them as independent contractors, and as a result failed to pay them overtime. Under the FLSA and NYLL, employees—but not independent contractors—must be paid time-and-a-half for hours worked over 40 in one week.

CTG owned a license that allowed it to run a black car dispatch, and the drivers rented or purchased franchises from CTG. A franchise gave the drivers access to CTG’s central dispatch service, which connected the drivers with customers. The drivers entered into agreements with CTG stating that they were not employees and were not subject to the company’s control or direction, and the drivers were allowed to provide transportation services to other clients or companies while also serving CTG customers. The drivers were required to follow certain company policies, including vehicle condition and dress code.

The District Court granted summary judgment in favor of CTG, holding that the black car drivers were independent contractors, and thus not entitled to overtime pay. The black car drivers appealed to the Second Circuit, and on April 12, the Second Circuit affirmed.

In its decision, the Second Circuit applied the economic realities test and found that “despite the broad sweep of the FLSA’s definition of “employee,”” the drivers were small business owners working for themselves, not employees of CTG. The Court found four facts most persuasive in coming to its conclusion: “Plaintiffs independently determined (1) the manner and extent of their affiliation with CTG; (2) whether to work exclusively for CTG’s accounts or provide rides for CTG’s rivals’ clients and/or develop business of their own; (3) the degree to which they would invest in their driving businesses; and (4) when, where, and how regularly to provide rides for CTG’s clients.” Saleem, 2017 U.S. App. LEXIS 6305 *, *13-*14.

While the court in this case found that the drivers were independent contractors, the analysis varies from case to case. If you believe you are not receiving overtime pay because your employer has misclassified you as an independent contractor, contact this office for a free consultation.

,p>Last month, San Franciso-based on-demand grocery delivery startup Instacart agreed to settle for $4.6 million class action lawsuits filed by workers who shop and deliver groceries to customers. These Instacart “shoppers” filed suits against the company in 2015 and 2016, alleging that the company misclassified them as independent contractors, and as a result denied them minimum wage, overtime, breaks, and reimbursement for work-related expenses required under federal and state laws. The shoppers also alleged that Instacart illegally withheld portions of their tips.

Instacart works like many other on-demand companies, like Uber and Lyft, by hiring workers as independent contractors. Instacart’s mobile app connects shoppers to customers, who order groceries to be delivered. Customers enter their shopping lists, then shoppers pull the items from grocery store shelves and deliver them to the customers. Instacart pays shoppers a flat fee per drop-off, as well as a commission per item, and shoppers may receive tips. Shoppers pay Instacart a $0.25 fee per order for use of the Instacart app.

The shoppers, however, alleged that they are treated as employees, and are therefore entitled to the protections employees receive under state and federal laws. Shoppers claimed that they were required to be available during a designated “shift” each workday, wear clothing bearing Instacart’s logos, maintain their vehicles in certain conditions, interact with customers in certain ways, notify Instacart of the times they began and completed work activities, and comply with a number of other specific requirements by Instacart, failure to comply with which could result in termination.

Instacart agreed to settle the shoppers’ claims for $4.6 million, which will cover shoppers who worked for Instacart in 17 states, including New York, New Jersey, and Pennsylvania. The more than 31,000 class members involved in the settlement will receive between $500 and $5,000 each. The company has also agreed to institute a new policy that shoppers may only be terminated for cause, to clarify the difference between a service fee and tip on its app, to allow shoppers to access detailed information on their work through the app, and to inform shoppers of insurance requirements before they undertake any work for the company.

There is a growing trend in equal-pay legislation to ban employers from inquiring about prospective employees’ salary history. These laws are intended as a remedy to the disparity in pay that follows women throughout their careers, when employers base salaries and raises on what women are already earning—which is often less than their male counterparts. These policies can give women a clean slate when negotiating with new potential employers.

In 2015, California passed an amendment to its equal pay law prohibiting employers from asking candidates about salary history, which took effect this January. In August 2016, Massachusetts passed its own law banning the practice. Philadelphia joined the trend in January of this year, becoming this first city in the nation to pass a law banning the practice of asking prospective employees for past salary information. New York City passed its own ban earlier this month, and Washington, D.C.’s city council is considering a comparable bill.

But businesses are pushing back. Philadelphia’s ban is set to take effect in May, but on April 6, the Chamber of Commerce for Greater Philadelphia filed a lawsuit in U.S. District Court for the Eastern District of Pennsylvania seeking to enjoin enforcement of the law. The Chamber, a vocal opponent of the law, argues that it violates employer’s First Amendment rights to free speech, and does not advance the purpose of closing the gender wage gap. We will monitor developments in this case.

Last week, in the case of Hively v. Ivy Tech, the Seventh Circuit Court of Appeals held that Title VII of the Civil Rights Act of 1964 protects employees from discrimination on the basis of sexual orientation.

The plaintiff, Kimberly Hively, is an openly gay college professor who worked as a part-time adjunct professor at Ivy Tech Community College in Valparaiso, Indiana. She applied unsuccessfully for several full-time positions at Ivy Tech from 2009 to 2014, and then in 2014 Ivy Tech did not renew her part-time contract. Hively believed she was being discriminated against because of her sexual orientation, and sued Ivy Tech alleging violations of Title VII of the Civil Rights Act of 1964, which prohibits employers subject to the law from discriminating on the basis of a person’s “race, color, religion, sex, or national origin … .” 42 U.S.C. § 2000e-2(a).

Ivy Tech argued that Title VII does not protect against discrimination based on sexual orientation. The district court agreed, and dismissed the complaint. On appeal, the Seventh Circuit affirmed, but also noted that they were bound by precedent that could be interpreted to conflict with evolving Supreme Court jurisprudence. The full Seventh Circuit voted to hear the case en banc, and reversed, holding 8-3 that “discrimination on the basis of sexual orientation is a form of sex discrimination,” breaking with holdings of other federal circuits and setting the stage for possible Supreme Court review.

The court held that sexual orientation discrimination is not a newly protected category of discrimination, but rather a subset of discrimination based on sex. It relied on three related reasons for this conclusion. First, the Supreme Court held in Price Waterhouse v. Hopkins that sex stereotyping is sex discrimination.

The Seventh Circuit reasoned that because the “ultimate case of failure to conform to the female stereotype” is having romantic relationships with women instead of men, Ivy Tech was alleged to have discriminated against Hively for failing to conform to this sex stereotype. Second, Title VII bars discrimination “because of sex,” and if Hively were a man in a relationship with a woman, she would not face the same discrimination. Third, in Loving v. Virginia, the Supreme Court held that discrimination against a person who associates with a different race is discriminating on the basis of race. The Seventh Circuit applied the same logic to Hively’s case, reasoning that discriminating against a woman for being in a relationship with another woman is discrimination on the basis of sex.

Last month, the New Jersey State Appellate Division, in the case of Acevedo v. Flightsafety International, Inc., held that unemployment benefits received by a former employee cannot be used to reduce the amount of back pay the employee recovers in a suit for employment discrimination.

The plaintiff, Rex Fornaro, was a flight instructor who worked for Flightsafey International, Inc., a flight training school. At trial, the jury found that Flightsafety fired Fornaro because he is disabled and because he requested reasonable accommodation for his disability. The jury awarded Fornaro back pay of about $83,000, but the trial judge reduced the award by $14,000, which represents one half of the unemployment compensation Fornaro had received since his termination. The trial judge reasoned that because both Fornaro and Flightsafety had contributed to the state unemployment fund, reduction by half was the equitable result.

Fornaro appealed, arguing that the trial court should not have reduced the damages at all, and Flightsafety cross-appealed, arguing that the damages should be reduced by the entire amount of the unemployment compensation.

The three-judge Appellate Division panel reversed the trial court and reinstated the full jury award to Fornaro. The court held that New Jersey’s collateral source statute (N.J.S.A. 2A:15-97), which requires that damages be reduced in some cases where the plaintiff has already received compensation from another “collateral” source, was intended to apply to automobile accident cases, and could not be applied to cases under the New Jersey Law Against Discrimination. The court reasoned that damages under the Law Against Discrimination are intended to deter employers from discriminating, and reducing damages in these cases would not serve the purpose of the statute.