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.

On August 24, 2018, New Jersey has passed Bill A-3871, which amends N.J.S.A. 43:21-5 of the New Jersey Unemployment Insurance Law by eliminating the severe misconduct disqualification as well as other changes to New Jersey unemployment laws.  One of the key changes in the bill is revising the definition of legal definition of what constitutes misconduct, along with modifying the misconduct disqualification period for misconduct was also changed in the new law from 7 weeks to 5 weeks.

Under the new unemployment law, misconduct is now defined as follows:

[b]ehavior, other than gross misconduct, conduct which is improper, connected with the individual’s work, malicious, within the individual’s control, not a good faith error of judgment or discretion, and is either a deliberate refusal without good cause, to comply with the employer’s lawful and reasonable rules made known to the employee or a deliberate disregard of standards of behavior the employer has a reasonable right to expect, including reasonable safety standards and reasonable standards for a workplace free of drug and substance abuse.

On October 4, 2018 the Equal Employment Opportunity Commission (“EEOC”) released the preliminary report of the sexual harassment data they collected for fiscal year 2018 (ending September 30, 2018).  This report shows that the #MeToo movement has had a widespread impact on reporting of sexual harassment and related workplace abuses.

The EEOC is the federal agency of the United States charged with administering and enforcing civil right laws against workplace discrimination including claims of sexual harassment, unlawful discrimination and retaliation.  Individuals who have suffered wrongful termination or discrimination at the workplace can file a charge with the EEOC by themselves or through the assistance of a private employment lawyer.  The EEOC was formed in 1965 and maintains its headquarters in Washington, DC with offices throughout the United States, including New Jersey.

Over the course of the past year, there has been a seismic shift in the way that sexual harassment has been viewed and addressed across all aspects of our society in large part due to the #MeToo movement.  Nowhere has this change been seen more drastically than in the incidents of sexual harassment at the workplace.  In the past year there has been a reckoning across the United States, with a clear message being sent to harassers that discriminatory and harassing behavior and conduct will no longer be tolerated at the workplace, our schools or in any other circumstances.

A New Jersey District Court has allowed an independent sales representative to proceed with his lawsuit against his principal company for failing to pay his earned sales commissions.  This case reaffirms New Jersey’s strong public policy in assuring sales representatives are timely paid their earned sales commissions.

Prior to New Jersey passing the Sales Representatives’ Rights Act,  independent sales representatives often faced an uphill battle when it came to legal disputes concerning unpaid commissions. As an independent contractor who is paid on a 1099 basis, New Jersey Wage Payment law does not protect independent sales representatives from being paid their sales commissions because they are not considered employees under the law.  In recognizing the need to protect independent sales representatives from receiving their hard-earned commissions, New Jersey enacted the New Jersey Sales Representatives’ Rights Act that allows for sales representatives to sue for their unpaid earned commissions and imposes significant penalties against principals for failing to pay the commissions in a timely manner.

In the recent case TLE Marketing Co. v. WBM, LLC, No. CV-17-11752 Slip Op. (D.N.J. Sep. 14, 2018) the plaintiff raised a novel argument that, if successful, could expand the reach of the Act.  TLE Marketing Corporation is an independent sales agency based in Minneapolis, Minnesota, and has been providing marketing and sales representation for companies since 1976.  WBM, LLC is a developer, importer, and distributor of a variety of distinctive products, with a primary focus on Himalayan salt products.  WBM is based out of Flemington, New Jersey and has been in business for over 20 years.  Starting in 2007, TLE and WBM began working together, signing a sales representative contract that provided that TLE would market and sell WBM products.  The two companies enjoyed a lengthy business relationship of almost 10 years until, in June 2017, WBM terminated the sales representative contract.  In response, TLE filed a complaint in Minnesota alleging wrongful termination, breach of contract, and failure to pay commissions in violation of Minnesota state statute.

An extensive independent investigation into the Dallas Mavericks has substantiated numerous claims of sexual harassment and other serious workplace misconduct within the organization over a span of over 20 years.  In response to the findings, Mavericks owner Mark Cuban has apologized to all the women involved and promised that the organization will be better in addressing issues of sexual harassment in the future.  Mr. Cuban will also pledge $10 million to women’s groups in response to the findings of report.

Incidents of sexual harassment first became public in a February 20, 2018 Sports Illustrated article titled “Exclusive: Inside the Corrosive Workplace Culture of the Dallas Mavericks.  In the article, SI details various allegations of severe and pervasive sexual harassment within the Maverick organization. The allegations included more than a dozen current and ex-employees referring to the sexual harassment, domestic violence and other serious misconduct within the workplace as being as an “open secret.” Many of the incidents of the sexual harassment came from Team President and CEO, Terdema Ussery, who was accused of sexually harassing employees from the very beginning of his employment in 1998 when he became President and CEO.  The allegations against Mr. Ussery included him repeatedly positioning employees for sex, unwelcomed touching of employees during meetings and other incidents of sexual harassment.  Mr. Ussery left the Mavericks in 2015 to take a position with Under Armour as president for global sports.  It has been reported thecomeback.com/nba/mavericks-former-president-terdema-ussery-accused-serial-sexual-harassment.html that Mr. Ussery was accused of sexual harassment at Under Armour and resigned after two months in the position.

The Dallas Mavericks responded to the SI story by hiring prominent employment lawyers from the law firms of Lowenstein Sandler and Krutoy Law, P.C. to conduct a thorough investigation into the allegations in the article and all other any issues of serious misconduct.  According to the investigation report, the employments lawyers conducted interviews of 215 witnesses during the seven-month long investigation.  The employment lawyers reviewed 1.6 million documents and emails with the assistance of an independent forensics firm.  They also reviewed human resource files, employee handbooks, policies and training and other information on the hiring, firing, promotions salaries, salary increases and bonuses provide to employees.

A federal Court of Appeals has affirmed a jury verdict in favor of a former Costco employee in connection with her claim of a hostile work environment based upon sexual harassment by a customer.  This case reaffirms that an employer can be held legally responsible for allowing a hostile work environment created by non-employees if the conduct is severe or pervasive enough to render the employee’s work environment hostile.

In the matter of EEOC v. Costco Wholesale Corp., the EEOC sued on behalf of a former Costco employee, Dawn Suppo.  Ms. Suppo was initially employed as a seasonal, part-time employee in 2009 and then became a regular, part-time employee in May, 2010.  Around the time she became a regular employee, a customer named Thad Thompson began approaching Ms. Suppo and asking her personal questions that her uncomfortable.  Initially, Ms. Suppo did not report the interactions to her supervisor or other management.  However, in or about July/August, 2010, the conduct did not stop and Ms. Suppo informed her supervisor of Mr. Thompson’s harassing conduct and the fact that she was scared of him.  Her supervisor instructed her to notify him if she sees Mr. Thompson again.

Soon thereafter, Ms. Suppo noticed Mr. Thompson in the store again watching her through the store aisles. Ms. Suppo reported to her supervisor that Mr. Thompson was back in the store stalking her and that she was scared of him.  As a result, Ms. Suppo’s supervisor and other management brought Mr. Thompson into the warehouse office and instructed him to leave Ms. Suppo alone.  Mr. Thompson responded with anger and loudly yelled that it is a “free country” and that he had “freedom of speech.”  Ms. Suppo was extremely scared at this point and decided to call the police and file a report.  Later that day, the one of the Costco Assistant Managers yelled at Ms. Suppo for calling the police and instructed her to be nice to Mr. Thompson.