In the midst of a national discussion regarding sexual harassment in the workplace, the laws prohibiting such egregious behavior as well as the methods of reporting and investigating related complaints have come under scrutiny. Many businesses across the country are reviewing their anti-harassment policies to become legally compliant and limit their liability when sexual harassment occurs at their workplace. In New Jersey, a claim of sexual harassment was first recognized in 1993, in the landmark New Jersey Supreme Court case Lehmann v. Toys ‘R’ Us. Commonly referred to as Lehman by New Jersey employment lawyer and judges, this case set the standard for stating a cause of action for a claim of sexual harassment that created a hostile work environment.

Sexual harassment cases are typically divided into two categories: quid pro quo harassment or harassment that generates a hostile work environment. Quid pro quo sexual harassment occurs when an employer or supervisor attempts to make an employee submit to sexual demands as a condition of his or her employment. Sexual harassment that creates a hostile work environment was ill defined prior to 1993, which made Lehmann v. Toys ‘R’ Us the landmark case for sexual harassment cases in New Jersey.

In 1986, Ms. Theresa Lehmann’s employment with Toys ‘R’ Us was drastically altered upon the hiring of Don Baylous as the Director of Purchasing Administration. Under his supervision, Ms. Lehmann and her female coworkers began to experience pervasive sexual harassment that varied from sexualized comments about Ms. Lehmann’s breasts to an instance where Mr. Baylous physically pulled Ms. Lehmann’s shirt over her head to expose her breasts. Ms. Lehmann attempted to report the conduct to several managers, but very little was done to remedy the situation. Instead of addressing Mr. Baylous’s behavior, Ms. Lehmann was offered a transfer to a different department. She rejected this, and later resigned as a result of the harassing conduct and the retaliation she experienced from reporting it. In response to this inadequate managerial reaction, Ms. Lehmann submitted a formal legal complaint of sexual harassment that was initially heard by a trial court. The trial court dismissed all causes of action except battery. Ms. Lehmann appealed, and the appellate court reversed the trial court’s dismissal of her claims of a hostile work environment brought on by sexual harassment, which they remanded for further fact finding. The case eventually found its way to the New Jersey Supreme Court, where it developed into a monumental case in New Jersey court history.

Smith Eibeler, LLC, on behalf of our client, Katherine Brennan, has filed an Order to Show Cause For Temporary and Preliminary Restraints against the State of New Jersey (hereinafter, the “State”), from (1) enforcing the “strict confidentiality directive” found in N.J.A.C. 4A:7-3.1(j) against Ms. Brennan and any witnesses in the EEO/AA investigation being launched in response to her December 4, 2018, testimony before the Legislative Select Oversight Committee (“LSOC”)(hereinafter, the “EEO/AA Investigation”); (2) requiring Ms. Brennan to participate in any EEO/AA investigation until after this litigation and any criminal proceedings resulting from Ms. Brennan’s allegation of sexual assault are completed; (3) requiring Ms. Brennan and other witnesses in the EEO/AA Investigation to sign the “strict confidentiality directive” form; (4) requiring the EEO/AA to investigate the numerous violations of the State’s Policy Prohibiting Discrimination in the Workplace (“State Policy”) as set forth in the Complaint; and (5) declaring the “strict confidentiality directive”of N.J.A.C. 4A:7-3.1(j)  as null and void.

For the past year, the State has refused to conduct any investigation into any of Ms. Brennan’s reporting that she had been raped by Alvarez. Ms. Brennan exhausted all possible internal avenues of recourse and received no aid or support. Having no other option, Ms. Brennanwas compelled, as a last resort, to bring her allegations into public light. On October 14, 2018, her story was published in The Wall Street Journal. The article laid out in detail not only the rape Ms. Brennan had endured, but also her extensive efforts to prompt the State, through complaints to numerous high level State officials, to take action.

Ms. Brennan’s act of publicly telling her story accomplished what her numerous internal complaints and reports could not: it triggered investigations. As a result of the October 14 Wall Street Journal article, in or about October 2018, numerous investigations and/or reviews were launched in various departments of State and county government, including: (1) an ongoing review by the Middlesex County Prosecutor’s Office of the criminal investigation conducted by the Hudson County Prosecutor’s Office (“HCPO”) into Ms. Brennan’s criminal complaint; (2) a review by Attorney General Gurbir Grewal and the Office of Public Integrity and Accountability (“OPIA”) into Hudson County Prosecutor Esther Suarez’s involvement in the investigation of Ms. Brennan’s allegations of sexual assault; (3) the ongoing investigation by the LSOC into how sexual misconduct complaints are handled by the state, as well as hiring practices; (4) Governor Murphy’s directive to the Division of EEO/AA to review policies and procedures for addressing allegations of sexual misconduct; and (5) an investigation on behalf of the Office of the Governor by former Supreme Court Justice Peter Verniero into the hiring of Alvarez.

Most people know what sexual harassment is when they see it.  Whether an employer is responsible for sexual harassment that occurs at the workplace, however, is a more complicated fact specific inquiry.

It is first important to understand the definition of unlawful sexual harassment.  Sexual harassment is a form of unlawful discrimination under the New Jersey Law Against Discrimination.  The first form of sexual harassment is quid pro quo harassment.  A claim of quid pro sexual harassment occurs when an employer attempts to make an employee’s submission upon a sexual demand or sexual proposition a condition of employment.  The second form of sexual harassment is a claim of hostile work environment sexual harassment.  The elements of a hostile work environment sexual harassment is when the harassment (1) would not have occurred but for the employee’s sex, and the harassment was (2) severe and pervasive enough to make a (3) reasonable woman believe that (4) the conditions of the employment are altered and the working environment is hostile or abusive.

The first issue to determining whether an employer can be liable for sexual harassment that occurs at its workplace in a lawsuit is to identify the damages an employee is seeking in the case.  An employer will be liable for equitable damages and relief  if he or she seeks restoration of the terms, conditions and privileges of employment that he or she would have enjoyed but for the discrimination or sexual harassment.  Equitable relief is not money damages.  Instead, an employee who seeks equitable relief as a result of sexual harassment is looking for the court to require the employer to act or refrain from performing a particular act such as stopping the harassment, job reinstatement or other non-monetary relief.

In July 2018 Elizabeth Rowe, the principal flutist and Walter Piston chair in the Boston Symphony Orchestra (“BSO”), filed a gender discrimination lawsuit alleging that the BSO violated the newly enacted Massachusetts Equal Pay Act.  Rowe argues that the BSO was paying her less to perform substantially similar work – when viewed in terms of skill, effort, and responsibility – than it was paying her male counterparts, simply because she was a woman and they were men.  Gender is a protected class, under the Massachusetts Equal Pay Act and most other civil rights statutes, and discriminating on the basis of one’s membership in a protected class is against the law.

Rowe framed her argument by pointing to one of her BSO colleagues, the orchestra’s principal oboist John Ferrillo.  As another principal in the orchestra, Ferrillo holds a similar position to Rowe, and yet his salary is nearly $65,000 greater than hers. Comparing these two positions is naturally an imperfect exercise, as an oboe and a flute are obviously different instruments.  A rough approximation can be made by looking at one piece of objective data: since joining the BSO in 2004, Rowe has performed as a soloist 27 times, while Ferrillo has performed as a soloist just 14 times.  Notably, Ferrillo supports Rowe’s efforts to obtain equal pay.  At the request of Rowe’s employment attorney, Ferrillo provided a statement of his opinion that Rowe was “every bit [his] match in skill, if not more so.”

Rowe’s case provides a look at the problem of gender discrimination on the individual level, but it is a systemic issue in orchestras, and can be difficult to isolate due to the many factors that impact salary decisions.  The BSO has raised some of these factors in defending the discrepancy in Rowe’s pay: the talent pool for certain instruments is deeper and thus they are in lower demand; individual players can be uniquely talented leading to a bidding war over their services; random factors akin to ‘right time, right place’ can come into play.  When looking at some nation-wide statistics, however, these explanations become dubious.  As the Washington Post reported, an analysis of 78 top-earners from 21 orchestras in the United States shows that: (1) 82% of those top-earners are men; (2) the men in the pool make on average just over $52,000 more than the women; and (3) the top male earner makes $535,789 while the top female earner makes only $410,912.

On Monday, the New Jersey State Assembly approved a bill that would provide a substantial tax benefit to victims of unlawful workplace discrimination, retaliation, or other violations of laws that regulate any aspect of the employment relationship.  This bill was first introduced in the New Jersey State Senate in January 2018, and has enjoyed widespread, bi-partisan support as it has worked its way through the legislative process.  Monday’s approval by the Assembly, by a unanimous vote of 79 to 0, was the final legislative hurdle.  If Governor Phil Murphy signs the bill into law, it will be a great victory for victims of workplace discrimination and retaliation across New Jersey.

In 2004, the United States Congress passed the Civil Rights Tax Relief Act. The Civil Rights Tax Relief Act was intended to, among other things, eliminate a flaw in the tax treatment of awards won by plaintiffs who successfully prosecuted claims of discrimination or retaliation.  Prior to 2004, a plaintiff who received an award in a discrimination or retaliation case were required to include in their gross income the entire amount of that award.

This was the case, despite the fact that a portion of that award constituted attorney’s fees and costs that were awarded along with the amount awarded for the plaintiff’s damages. Not only did this tax treatment negatively impact those plaintiffs, it also subjected that portion of the award to double taxation, as the attorneys who ultimately collected those fees and costs were also required to include that amount in their gross income. Congress cured this flaw by exempting that portion of such a plaintiff’s award from their gross income.  In approving the legislation on Monday, New Jersey is finally following suit.

The #MeToo movement has brought long overdue attention to the systemic societal problems concerning workplace sexual harassment throughout the United States and the State of New Jersey.  Most sexual harassment claims by a New Jersey employee are brought under the New Jersey Law Against Discrimination, a state statute.  While a New Jersey employee or resident may also bring a claim of sexual harassment under the federal statute, Title VII, most New Jersey employment lawyers counsel clients to proceed with their sexual harassment claim under the New Jersey Law Against Discrimination (LAD). This blog outlines the various types of workplace sexual harassment claims brought under the New Jersey Law Against Discrimination.

In enacting New Jersey’s anti-discrimination law, the state legislature expressly declared “discrimination threatens not only the rights and proper privileges of the inhabitants of the State but menaces the institutions and foundation of a democratic State.”  N.J.S.A.10:5-3.  New Jersey courts interpreting the LAD have long and consistently recognized that employers are best situated to avoid or eliminate impermissible, pernicious employment practices relating to sexual harassment, to implement corrective measures to stop future sexual harassment, and to adopt and enforce employment policies that will serve to achieve the salutary purposes of the legislative mandate to end workplace discrimination.  New Jersey courts consistently remind us that the overarching goal of the New Jersey Law Against Discrimination is nothing less than the eradication of the cancer of discrimination.

There are different claims of sexual harassment that are actionable against an employer.  These include claims of hostile work environment, quid pro quo sexual harassment, and sexual harassment retaliation.

An inspiring development is taking place for victims of sexual harassment in the workplace.  Employees who are subjected to sexual harassment at work have faced an increasingly prevalent barrier to getting justice: mandatory arbitration.  This has meant that for many employment disputes, the courthouse doors have been closed, requiring employees to instead seek relief through arbitration.  Earlier this month, Facebook announced that they will be amending their arbitration agreements to no longer require mandatory arbitration for claims of sexual harassment in the workplace. This move comes on the heels of similar announcements earlier this year by Google, Lyft, and Uber, following a wave of protests by employees who felt that the system of requiring mandatory arbitration of all employment disputes contributed to a pervasive culture of sexual harassment.

Arbitration agreements were disfavored historically.  Beginning in England in the 17th century, our legal tradition held that arbitration agreements were freely revocable, up to the point where a dispute was actually subjected to arbitration. This remained the controlling law in the United States up until 1925, when Congress passed the Federal Arbitration Act, signaling a change in how disputes would be resolved going forward. This has gradually led to an increase, and in recent years an explosion, in the prominence that arbitration has played.

Today, it has become the norm for employers to require all new hires to sign arbitration agreements at the start of their employment that bar the employees from suing the employer for any claims arising out of their employment.  A 2017 survey of 1,500 employers conducted by the Economic Policy Institute produced some startling statistics showing just how widespread arbitration has become in the workplace.  According to the survey, among companies with 1,000 or more employees, 65% have mandatory arbitration provisions.  Looking at the employee side, among private-sector non-union employees, 56% are subject to mandatory arbitration.  Extrapolated out, that covers over 60 million American workers.

Wage Gap in the Legal Field

The legal field is supposed to be predicated on justice, equality, and law abiding. While the legal industry should set the standard for respecting laws and providing fair treatment for employees and clients, this is not always the case.  Reports regarding cases in which law firms neglect to follow federal and state laws or allow discriminatory behavior to occur in the workplace tend to surprise many people. One area that law firms are particularly deficient in is that of pay equality. Studies as well as an abundance of recent court cases have shown that firms, particularly those in the BigLaw classification, consistently neglect to compensate their female employees equally in comparison to their male counterparts.

According to a survey conducted in 2016, male partners on average earned salaries that were 44% higher than those of female partners. The average salary of male partners in 2016 was $949,000, while females earned $656,000. Further, an article in the ABA journal states that women make up only 15% of the total amount of equity partners in law firms nationwide, meaning that 85% of these equity partners are men. This gap is typically not explainable by a difference in education or experience, and has also widened as the number of female equity partners has barely increased in recent years. A report produced by the American Bar Association contends that because compensation drives behavior, fair and equitable payment practices bear incredible importance to the success of a firm. An employee’s compensation influences their sense of self worth and how valuable they feel to their employer and therefore discriminatory pay practices are inherently damaging to both employees and their workplace. As part of an effort to increase transparency and lessen the gap in salaries, the United Kingdom has adopted a law that forces all employers with a certain amount of employees to publicly release the differences in pay between men and women. As many of the large law firms in the United Kingdom also have strong presences in the United States, the data that has been released can be used to infer the extent of these issues in our country as well. DLA Piper, for example, reported that men at the company earn 17.8% more than women on average. Norton Rose reported a similar percentage. Weil Gotshal & Manges, on the other hand, even when they removed those in secretarial roles, reported an average gender pay gap of 24.95%.

Defenders of labor rights face an uphill battle addressing the widespread abuses facing workers around the world.  Most industrialized nations have legal protections in place establishing standards for labor conditions, but in many parts of the world this is not the case. In our globalized economy, corporations in industrialized nations take advantage of this reality and set their manufacturing and production operations to those nations, to access relatively inexpensive labor.  In the worst of these cases, workers have no protections whatsoever, and live in slavery. Recently, a United States federal court took a step to hold some of these companies responsible, for being at least complicit in a system supported by slavery, as the court put it in “receiving cocoa at a price that would not be obtainable without employing child slave labor.”

Last month the Ninth Circuit Court of Appeals reversed the decision of a California District Court Judge’s in the case John Doe I, et. al. v. Nestle, S.A., et. al.  In this case, the unnamed plaintiffs allege that a group of corporate defendants in the business of processing cocoa beans were complicit in a system of widespread child slavery that occurred on cocoa plantations in the Republic of Côte d’Ivoire, a nation on the West African coast.   The plaintiffs in the case, identified only as John Doe’s I–VI, allege that they were victimized by these companies and the decisions those companies made in pursuing profits, up to and including condoning the use of child slave labor on the plantations of their cocoa suppliers.

The defendants in this case, Nestle, Cargill, and Archer Daniels Midland, are each large multinational corporations and are among the world’s largest manufacturers, purchasers, processors, and retail sellers of cocoa beans.  The plaintiffs are not U.S. citizens, but were able to file their suit in U.S. Federal Court on the basis of the Alien Tort Statute, or the “ATS.”  That statute, originally passed in the Judiciary Act of 1789, provides original jurisdiction to the federal courts for foreign citizens to seek redress for harms suffered as the result of a tort committed in violation of the law of nations. Among other torts, courts have found torture, genocide, war crimes, and slavery to be actionable under the ATS.

Termination clauses are among the most important aspects of any independent sales representation agreement.  Without a strong termination clause, an independent manufacturing representative is left without little legal protection should the principle decide it no longer needs its services.

The recent Tax Court case Potter v Commissioner, T.C.M. 2018-153 (T.C. Sep. 17, 2018)   provides a great example of the type of protection that a termination clause can provide to a manufacturing representative.  In that case, Jeff Potter worked as an independent contractor for a company called Green Country, which was in the business of selling garden soil and other related products.  Mr. Potter was well represented when drafting his sales representative contract and was protected by a strong termination clause.  The clause stipulated that if his compensation agreement was terminated, he would be owed a termination payout equal to 150% of his commissions from the previous year.  When his agreement was terminated, the company compensated in accordance with this clause.  The lawsuit that followed did not contest this payment, the dispute was merely over the federal income tax implications of the termination payment.

As we see in Potter, one approach to contracting for compensation in the event the sales representation contract is terminated is to structure it as a payout equal to a percentage of commissions paid over the previous year, or some other period of time.  This is of course not the only way to structure a termination clause pay out. Another popular approach is to structure it in terms of a percentage of sales made on accounts that the independent sales representative generated.  This, in effect, would allow the sales representative to continue earning a commission on sales that were properly attributable to their own work efforts. In order to provide real protection, termination clauses must be negotiated as a part of the initial contract. As a result, some sales representatives may prefer to structure the clause in terms of a flat rate, like a liquidated damages clause.