Nissenbaum Law Blog

Court Expands Scope of Title VII to Protect Transgendered People

Employment Law: Pursuant to Title VII of the Civil Rights Act of 1964, it is unlawful for an employer to discriminate in its hiring, firing and/or other employment practices against an individual on the basis the individual’s “race, color, religion, sex, or national origin.”

In Schroer v. Billington, the plaintiff, who was a male at the time, interviewed with the Library of Congress and was offered an analyst position. After plaintiff revealed to the hiring manager that he was transitioning from male to female and would commence his employment with the Library of Congress as a female, the Library of Congress rescinded its offer of employment. Plaintiff sued the Library of Congress alleging sex discrimination pursuant to Title VII. In Shroer, the District Court for the District of Columbia found in the plaintiff’s favor, finding that he was unlawfully discriminated against on the basis of his transgendered status.

This reflects the first time that a federal court has expanded the scope of Title VII to cover protection for transgendered people.

The Court’s decision relied, in part, upon recent caselaw history indicating that employers who engage in sexual stereotyping commit unlawful sex discrimination. The Court cited the United States Supreme Court’s opinion in PriceWaterhouse v. Hopkins, in which the Supreme Court held that “a female senior manager was denied partnership in a large accounting firm in part because she was perceived to be too “macho” for a woman,” and suggested that her promotion opportunities would be enhanced if she acted more feminine. In Schroer, the United States District Court for the District of Columbia specifically deviated from prior caselaw on transgender discrimination and found in the plaintiff’s favor. In doing so, it held that the employer refused “to hire Diane Schroer because her appearance and background did not comport with the decisionmaker's sex stereotypes about how men and women should act and appear, and in response to Schroer's decision to transition, legally, culturally, and physically, from male to female, the Library of Congress violated Title VII's prohibition on sex discrimination.”

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New York State Worker Adjustment and Retraining Notification Act

Employment Law: The New York Legislature recently passed the New York State Worker Adjustment and Retraining Notification Act (“NY WARN”), which will require certain employers to provide advance notice of mass lay off, relocation, or employment loss. The law is effective as of February 1, 2009. It is essentially the New York analog to the Federal WARN Act, 29 USC § 2102 et seq. (the Worker Adjustment and Retraining Notification Act).

NY WARN specifically requires qualified employers to provide written notification to employees under certain circumstances of mass terminations or office closings. The law applies to employers with fifty or more full-time employees. The law provides that unless specific exceptions apply, a company must give advance, statutory notice to affected employees, the New York Department of Labor, and any local workforce investment boards in the event that it engages in a triggering event.

In general, statutory notice is required where there is:

1. A mass layoff consisting of a reduction in the workforce that does not result from a plant closing, but results in an “employment loss,” as defined by the statute, at a single work site. To trigger the statutory requirements, the “employment loss” generally must consist of a loss to 33% or more full-time employees, or 25 employees, whichever is less, within a 30 day period. In the alternative, an “employment loss” could likewise trigger the notice requirements if 250 or more full-time employees are affected.
2. A relocation consisting of the complete or substantial removal of the employer’s commercial operations to a location that is 50 miles or more away from the existing location.
3. An employment loss consisting of an employment termination (excluding discharge for cause, resignations or retirement) or a mass layoff in excess of six months or a reduction in work hours of more than 50% during each month of any consecutive 6 month period.

NY WARN requires that qualified employers provide the requisite notice at least 90 days prior to the triggering event. Important to note is that the NY WARN provides added requirements on employers, as compared to the Federal counterpart. Although, NY WARN does incorporate aspects of the Federal law, its reach is broader. For instance, the Federal WARN Act only applies to employers with 100 or more employees; NY WARN, as stated above, applies to employers with 50 or more employees. In addition, the Federal WARN Act requires that the requisite notice be provided within 60 days prior to the triggering event, whereas the New York analog requires 90 days advance notice.

Notably, there is a potential claim that might help a terminated employee in a way that may have been unintended, based on what appears to be a flaw in the statute. The statute states that the notice is required in the event of “a mass layoff, relocation, or employment loss,” and then defines “employment loss” as including application to “an employment termination, other than a discharge for cause, voluntary departure, or retirement.” Arguably therefore, the statute could be deemed to apply to a single instance of employee termination without cause. However, it is doubtful that the statute was meant to apply in such a situation and that a Court would agree with that interpretation absent some imaginative arguments.

In accordance with the NY WARN, where the employer violates the statutory notice requirement, assuming that a statutorily proscribed exception does not exist, the employer is generally required to compensate each employee with back pay through the period of the violation, up to 60 days. The back pay is calculated as the higher of (a) the employee’s average regular rate of compensation over the past three years; or (b) the final regular rate of compensation paid to the employee. In addition, the employer is generally required to compensate the employee the value of any other benefits to which that employee would have been entitled. This may include medical expenses that would have been covered by the employee’s health insurance plan obtained through employment. The Act does provide certain facts that would reduce the total amount owed to each employee by the employer’s failure to comply with the Act.

This becomes even more pertinent in light of the number of office and full-business operations, shut-downs that businesses are currently experiencing. However, when dealing with these already difficult circumstances, employers need to be sure that they are not further exacerbating problems by failing to comply with the law’s edicts. Accordingly, New York employers should consult with counsel at the outset with regard to any major corporate strategy change, including closing an office or engaging in any significant termination or layoff plan.
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Failure to Use Prescribed Renewal Provision Results in Employment at Will

Employment Law: The New York Court of Appeals in Goldman v. White Plains Center for Nursing Care, LLC, 11 N.Y.3d 173 (Oct. 16, 2008) determined that an employee and employer had transitioned from a contractual term of employment to “employment at will” by failing to renew the agreement according to its terms. In Goldman, the employee, Ms. Goldman, had entered into an employment agreement with a nursing care facility. The agreement provided for a two year period of employment. The contract provided that thereafter, the parties would need to engage in good faith negotiations to renew the agreement on “mutually agreeable terms.” Such negotiation was to take place at least nine months prior to the expiration of the original employment term.

However, the parties in Goldman failed to engage in any renewal negotiations. Yet, after the contract term’s expiration, Ms. Goldman continued in her role at the nursing facility, and it continued to pay her accordingly. Following a sale of the facility to the defendant, Ms. Goldman’s employment was terminated.

Ms. Goldman sued for breach of contract, arguing that because her employer failed to renegotiate the contract and continued her employment under the original terms, that those actions gave rise to an implied intent to renew the agreement on one-year terms. The Court of Appeals disagreed. Specifically, the Court noted that unless there is an agreement which specifically provides a fixed period of employment, “an employment relationship is presumed to be a hiring at will, terminable at any time by either party.”

The Goldman Court specifically noted that the contract had included renewal provisions that went unused. It continued that there can be no “automatic contract renewal when an agreement imposes an express obligation on the parties to enter into a new contract to extend the term of employment.”

The Goldman decision highlights the importance of careful drafting of employment agreements, on both the employer’s and the employee’s behalf. Moreover, it is critical that both parties to an employment agreement understand the implications of not adhering to a contract’s renewal terms.

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Final Resolution is Reached on Executive Commission Question

Employment Law: Executive Compensation: An ongoing legal battle revolving around whether an employer was permitted, under New York law, to make deductions to commission payments has been finally concluded. The case of Pachter v. Bernard Hodes Group, Inc., has been litigated in the courts for several years, reaching the Second Circuit Court of Appeals twice.

The case is derived from a lawsuit brought by Elaine Pachter, an executive who was employed by the Bernard Hodes Group (“Hodes”), a recruiting, marketing and staffing company. Pachter’s compensation was derived from commissions based upon her monthly billings. Over the years she had been paid based on a calculation of those billings with a deduction being made for finance charges and costs attributable to her assistant, late fees, uncollectible advances and bad debts. The Court noted that during her tenure with Hodes, Ms. Pachter never objected to these deductions being made.

Nevertheless, once she left the company, Ms. Pachter sued claiming that the deductions made from her commissions were violative of New York Labor Law section 193. That section specifically prohibits an employer from making deductions against employee compensation unless those deductions are generally (a) in accord with the law; (b) made with the express, written authorization of the employee for her benefit (i.e., health insurance premiums). Hodes responded that, as an executive, Ms. Pachter was not an “employee” under the purview of the statute.

In its first review of the case, the Second Circuit certified two questions to the New York Court of Appeals: (1) is an “executive” an “employee” under Section 193 of the Labor Law; and (2) when is a commission “earned”? The Second Circuit in the instant decision determined that the Court of Appeals decision resolved the case. The Court of Appeals determined that an executive is an employee under this provision, unless specifically exempted. This executives can also avail themselves of the protections of the provision.

However, the Court also determined that Ms. Pachter was nevertheless not entitled to recoup monies for the deductions made based on the implied agreement that existed between Hodes and her. The Court of Appeals determined that “a commission is ‘earned’ and becomes a ‘wage’ for purposes of Labor Law article 6 [based on] the parties’ express or implied agreement; or if no agreement exists, by the default common-law rule that ties the earning of a commission to the employee’s production of a ready, willing and able purchaser of the services.” The Court determined that by agreeing to the compensation formula that was utilized over the years, at the very least an implied agreement existed between them. Therefore, in this instance, the parties had “agreed” that the commissions were earned only after specific deductions were made.

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© 2008 Nissenbaum Law Group, LLC

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Are Personal Emails Sent From Work Protected in New York?

Internet Law: New York courts are still developing the law as it applies to electronically stored information. Generally, there are numerous legal issues associated with the use of email and other forms of electronically stored data.

One such issue is an employee’s right to privacy when sending personal email from work. Courts often look at whether a workplace has a written email policy when determining the level of privacy to give to an employee's email. If there is an email policy, courts will look at where it is posted and whether it was sent to each employee. Even if an employee does not sign and acknowledge that they received or read the policy, courts may still be able to find that an employee has no privacy rights if the employee should have known about the policy. Even emails to an employee's personal attorney from a work computer may not be protected against an employer's perusal, and therefore the employee may have waived the attorney-client privilege as it relates to that communication. Courts will also look to the language of an employer's email policy to determine if the employer has the right to review and/or prohibit such email communications.

Under the circumstances, it is imperative that every business consult with an attorney prior to creating an email and computer usage policy and properly inform employees of such regulations. A well drafted email and computer usage policy may provide an employer with an advantage in litigation and may legally minimize employee misconduct. On the other hand, it is important that employees understand that emails sent from work may not be private and therefore may become evidence in a lawsuit. For more advice on an employee's privacy rights, an inquisitive employee should consult a qualified attorney.

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© 2008 Nissenbaum Law Group, LLC

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In New York, Can An Email Confer Jurisdiction Upon An Out-of-State Business?

Internet Law: New York courts have discussed whether email can confer jurisdiction upon a business. More specifically, an out-of-state company that merely sends an email to purchase goods may not be subject to the jurisdiction of the courts of New York. Nonetheless, New York courts will examine the email’s content to see how far it goes to specifically solicit business from New Yorkers. Courts will also look to the content of an email to find out whether there is a nexus between the email that was sent and the reason that the business is being sued. Further, courts will examine whether the potential subjects of any lawsuit purposely availed themselves of the privilege of transacting business within New York.

Unfortunately, there are no bright-line rules. Since each case is different, prior to soliciting business via the Internet, a business should consult an attorney to be sure that it fully understands the legal implications of such solicitations.

As technology begins to take a more active role in the administration and solicitation of business, it is important to keep in mind that the use of that technology may have unintended legal consequences which could become irreversible if not handled in a timely manner.

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© 2008 Nissenbaum Law Group, LLC

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The Legal Aspects of Spyware

Internet Law: As most of us know, spyware is something that is hard to define. As Justice Potter Stewart said in the famous Supreme Court opinion, Jacobellis v. Ohio, 378 U.S. 184 (1964), "I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it . . . .” He was referring to obscenity, but he could just as easily have been discussing spyware.

Perhaps a reasonable definition would be a program that allows a third party to monitor another’s computer activities. As one might imagine, since most people have an expectation of privacy in their own computer operations, when a third party surreptitiously monitors that usage, lawsuits inevitably follow.

However, those lawsuits are not always successful. In Zango v. Kaspersky, Lab, Inc., No. C07-0807 (W.D. Wash. August 28, 2007), a lawsuit was brought against a company that manufactured software that had inserted spyware on another’s system. The Court ruled in favor of the software manufacturer. It based its holding on Section 230(c)(2)(b) of the Communications Decency Act based on a determination that the software manufacturer was an “access software provider” and that it had provided a means to restrict the utility of the spyware. Similarly, in Zango v. PC Tools Pty. Ltd., 494 F. Supp. 2d 1189 (W.D. Wash. 2007), the Court concluded that the spyware was a legitimate tool to prevent illegal downloading.

On the other hand, there are certainly other lawsuits in which the spyware claim has been successful. One notable example is Kerins v. Intermix Media, Inc., No. 05-4408 (C.D. Cal. 2006) in which California state law was the basis for the Court’s ruling that the claims could proceed. But, it is important to keep in mind that California has numerous state laws that are specifically applicable to Internet and computer related acts. Many of these provisions do not have counterparts in other states. It would therefore not be surprising to see a claim that failed elsewhere succeed under California law.

The law of spyware is constantly evolving. Only time will tell whether current law provides sufficient remedies to those adversely affected by it.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

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New York‘s Consumer Protection Laws

Consumer Protection Law: New York’s consumer protection laws generally prohibit deceptive acts or practices when conducting business or providing services. Where a person or entity has engaged in a deceptive act or practice, the injured consumer may commence a private cause of action and recover either actual damages or statutory damages in the amount of $50.00, whichever is greater.

However, the Court has discretion to increase actual damages subject to certain constraints in situations involving an individual or entity that willfully engaged in a deceptive act or practice. But, this discretion is limited in that the amount cannot exceed three times the actual damages up to $1,000.00. In addition, and unlike New Jersey’s mandatory attorneys’ fee shifting provision in its Consumer Fraud Act, New York courts have wide discretion to award or not award attorneys’ fees to a prevailing consumer.

New Jersey’s Consumer Protection Act is superior to New York’s in a number of other respects. In New Jersey, there is no limit on the compensatory amount; it is tripled automatically; and there is a very elaborate set of regulations that define what is a per se violation of the Consumer Fraud Act. In sum, if a transaction involves both New York and New Jersey, careful attention should be given to decide whether New Jersey’s enhanced remedies are available.

Much of the law of consumer fraud relates to class actions. Recently, class actions have been brought by consumers alleging deceptive acts or practices in violation of New York’s consumer protection laws. Many of these claims are based on the failure of a seller to disclose a material fact about a product or service being offered for sale. Although class actions may prove effective where a seller repetitively engages in deceptive acts and practices, the Court will first have to certify the class of consumers. In accordance with general principals of law, the Court will likely not certify a class where the class is overbroad or the claims among the class members are distinct.

It is truly important to carefully evaluation the potential of consumer protection related claims to determine the preferred laws under which to sue and whether it should be structured as an individual lawsuit or a class action, among other things.

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Are E-mails Sufficient To Satisfy The New York Statute Of Frauds? It Depends.

Commercial Real Estate: The New York Statute of Frauds requires certain agreements to be in writing in order to be enforceable. Among the types of agreements that must be in writing are those conveying an interest in real estate (other than a lease for a term not exceeding a year) and a contract to pay compensation for services rendered in negotiating a purchase and sale of real estate. However, New York, by statute, provides different standards as to what constitutes a writing for these purposes.

Specifically and with respect to a contract to pay compensation for services rendered in negotiating a real estate transaction, an email exchange between the parties will constitute a writing where it contains the essential terms and there is an indication by the sender of the email as to his intention to authenticate this transmission. This is because this section of New York’s General Obligations Law was amended to specifically include a provision that written text produced by electronic signals constitutes a writing.

However, and with respect to an agreement for the purchase and sale of real estate, it appears that an email exchange is insufficient to constitute a writing even if it contains all of the essential terms and the e-mail sender authenticates the transmission. Thus, the revision made to the statute as to the brokerage services was not made to the statute pertaining to a conveyance of real estate.

In this day and age, the use of email to transact and conduct business is commonplace and occurs in a large quantity and variety of transactions. It makes sense for the legislature to deem certain agreements as more important than others and, thus, require a higher standard for them to be deemed “in writing.” However, once this determination is made, it is confusing to the public to render an e-mail a sufficient writing with respect to certain agreements and not others. It will not be surprising if the New York State Legislature clarifies this. Hopefully, this will occur sooner rather than later so that the general public can proceed with certainty as to whether or not they are bound.

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Avoiding Potential Pitfalls of Electronic Discovery Rules

Commercial Litigation: Courts are taking a hard line in requiring litigants to preserve evidence. It is only logical that given the increased use of technology in our lives, courts are taking an active role in sanctioning litigants for destroying electronically stored data. The problem arises because electronically stored data can be voluminous and often erased by a mere click of a button. Sometimes evidence is destroyed by companies who routinely erase data. However, it can be difficult to determine whether documents were destroyed in the ordinary course of business or in an effort to avoid presentation in a lawsuit. For this reason, simply asserting that the destruction of electronic documents was routine might not avoid court sanctions.

The problem becomes more burdensome since many litigants are not aware of some of these rather elaborate court rules regarding discovery and yet the litigants are still required to follow the rules. And the consequences of failing to abide by electronic discovery rules may be harsh. Sanctions may include requiring a litigant to pay an adversary’s attorney’s fees, preclusion of evidence and/or striking a litigant’s pleadings, the latter two of which could certainly prejudice a litigant in his case.

Even more troubling are situations where discovery is destroyed prior to the filing of a lawsuit. A potential litigant should be aware that courts can impose sanctions for failing to comply with the litigant’s discovery obligations even if the destruction of the documents happened prior to the commencement of the litigation.

Accordingly, there are some steps that can be taken to help minimize the risk of sanctions. First, we generally recommend that all businesses have a document retention policy, that it has prepared with its attorney. This should outline what can be destroyed and when. Moreover, businesses should always be prepared for a situation where litigation is commenced or threatened. At that point, the attorney for the claimant may create what is called a “litigation hold.” During that time, there is usually a moratorium placed on any destruction of emails, documents and other materials in the possession of the business. In such event, the “hold” would likely interrupt the destruction that may have transpired in the ordinary course of business under the document destruction policy.

In short, it is important to consult an attorney sooner rather than later when a lawsuit is brought or threatened. In addition to evaluating the claim, defenses and potential counterclaims, you need an attorney to advise you as to the type of information that should be preserved and the amount of time that preservation should last.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

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