Trends in New Jersey Employment Law - February 2014

by Proskauer Rose LLP
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Appellate Division Roundup

In recent months, New Jersey's Appellate Division has rendered three significant employment law decisions.

  • State v. Saavedra, No. A-1449-12T4, 2013 N.J. Super. LEXIS 185 (App. Div. Dec. 24, 2013): The Court affirmed that a public employee could be indicted for stealing confidential documents from her employer, despite the New Jersey Supreme Court's holding in Quinlan v. Curtiss-Wright Corp., 204 N.J. 239 (2010), which allowed the employee in that case to use confidential documents that she had taken from her employer to support her discrimination and whistleblower claims under the Law Against Discrimination ("LAD") and Conscientious Employee Protection Act ("CEPA"), respectively. (For more on Quinlan, see our prior alert).

  • New Jersey Department of Labor and Workforce Development v. Crest Ultrasonics, No. A-0417-12T4, 2014 WL 43989 (App. Div. Jan. 7, 2014): The Court upheld the constitutionality of New Jersey's landmark law that banned employers from advertising the unemployed "need not apply." N.J.S.A. 34:8B-1, et seq.

  • Baanyan Software Services, Inc. v. Kuncha, No. A-2058-12T3, 2013 WL 6670221 (App. Div. Dec. 19, 2013): The Court declined to exercise personal jurisdiction over a consultant who was sued by his former New Jersey-based employer where the employment agreement at issue did not contain a forum selection clause.

This newsletter summarizes these three Appellate Division decisions and discusses their implications for New Jersey employers.

State v. Saavedra

Background & Holding

Ivonne Saavedra ("Saavedra") worked for the North Bergen Board of Education ("Board") as a clerk for a child-study team. Saavedra filed a civil suit against the Board, alleging gender, ethnic, and sex discrimination. During discovery, Saavedra's counsel learned that she had taken "hundreds of documents" containing confidential medical and educational information of children. Based upon this theft of confidential records, a grand jury indicted Saavedra and charged her with theft and official misconduct.

Arguing that Quinlan had established a right for employees to take confidential employer documents to support discrimination claims, Saavedra moved to dismiss the indictment. The lower court denied the motion. While the court concluded that Quinlan did not apply to the instant criminal matter, it nonetheless performed a Quinlan analysis "out of an abundance of caution" and determined that the seven factor test devised by the Supreme Court to determine whether an employee is privileged to take or to use documents belonging to the employer weighed heavily in favor of the Board. Saavedra filed an interlocutory appeal with the Appellate Division, which was denied.

In affirming the trial court decision, the Appellate Division refused to afford employees absolute protection from prosecution for stealing confidential documents from their employers to support discrimination claims. In reaching this holding, the Court distinguished the criminal case in Saavedra from Quinlan, a civil matter in which an employee alleged that her private employer discriminated against her by promoting a less qualified man. Given this key distinction, the Appellate Division underscored, the New Jersey Supreme Court had not intended that Quinlan be used to challenge an indictment in a criminal case. The Court further clarified that, as the multi-factor test demonstrates, "Quinlan did not establish a bright-line rule that automatically entitled Saavedra to seize the Board's highly confidential original documents."

Saavedra also argued that, if she had committed any wrongdoing, she made an "honest error." This argument was premature, the Appellate Division opined, for the time to raise a "claim of right" defense is at trial, not in a motion to dismiss. Finally, Saavedra contended that the State's prosecution would have a chilling effect on LAD claims; the Court did not agree and, in fact, listed several ways that plaintiffs (including Saavedra) could try to obtain documents lawfully.

Takeaway

Saavedra makes clear that Quinlan does not protect per se the taking or use of confidential documents in a LAD suit, nor does it prevent the criminal prosecution of public employees for taking such documents. In addition, although Saavedra concerned a public employee, the Court did not state that the outcome would have been any different had the employee worked in the private sector. Finally, it is worth noting that Judge Simonelli dissented in this case, concluding that it was "fundamentally unfair" to prosecute an individual for theft or official misconduct for taking or copying employer documents while engaging in protected activity under LAD or CEPA. Given this split decision and the public policy at stake, further developments are likely.

New Jersey Department of Labor and Workforce Development v. Crest Ultrasonics

Background & Holding

On June 1, 2011, New Jersey became the first state to prohibit employers from discriminating against the unemployed in print and Internet job advertisements. Under the law, employers cannot knowingly or purposefully publish a job posting that states (1) current employment is a qualification for the job; (2) currently unemployed applicants will not be considered for hire; or (3) only currently employed job applicants will be considered for hire. Employers who violate the law are subject to a civil penalty of up to $1,000 for the first violation, $5,000 for the second violation, and $10,000 for each subsequent violation.

On a record of stipulated facts, Crest Ultrasonics challenged the constitutionality of the advertisement ban when it received a $1,000 fine from the New Jersey Department of Labor and Workforce Development's ("DOL") for posting a help-wanted advertisement requiring applicants to be currently employed. Though Crest Ultrasonics argued that the statute improperly restrained speech in violation of the First Amendment of the U.S. Constitution and Article I of the New Jersey Constitution, the Appellate Division affirmed the DOL's decision. The Court ruled that the slight burden on commercial speech here could not overcome the strong and narrowly defined governmental interest that more applicants should be able to apply for open job positions.

Takeaway

Given the outcome in Crest Ultrastronics (and subject to appeal), employers in New Jersey should continue to refrain from references to employment status in their advertisements. Employers in other states also should take heed of this decision and brace for the possibility that courts in their jurisdictions also may uphold the constitutionality of bans on unemployment discrimination. Although Oregon and the City of Chicago codified more modest advertisement bans like New Jersey's, the District of Columbia, New York City, and Madison, Wisconsin all more broadly limit employers from considering unemployment status in the hiring decisions (the latter two cities having afforded a private right of action with the promise of substantial damages in court). With such risks, employers in these cities should comply with their obligations under the law unless and until a court deems it unconstitutional.

Baanyan Software Services, Inc. v. Kuncha

Background & Holding

Baanyan Software Services, Inc. ("Baanyan")—an information technology development and software consulting company headquartered in Edison, New Jersey—employed Hima Bindhu Kuncha ("Kuncha") as a computer systems analyst pursuant to a written consulting agreement. Kuncha negotiated the agreement by email and telephone with various Baanyan representatives, and ultimately signed it outside of New Jersey. Baanyan, in turn, executed the agreement at its New Jersey headquarters. The agreement did not include a forum selection clause.

Under the terms of her employment, Kuncha relocated from California to Illinois and provided services for two of Baanyan's clients located in Illinois. At no time during her employment with Baanyan did Kuncha work in New Jersey or provide services for any Baanyan client located in New Jersey. After Kuncha left her employment to join a competitor, Baanyan filed suit against her in New Jersey state court, claiming breach of contract, tortious interference with business relationships, breach of fiduciary obligations, unjust enrichment, and fraud. The lower court dismissed the complaint for lack of personal jurisdiction and the Appellate Division affirmed.

In short, the Appellate Division held that Baanyan could not establish general or specific jurisdiction over Kuncha. Baanyan lacked general jurisdiction, according to the Court, because (1) Kuncha never resided nor did business in New Jersey and (2) at all relevant times she acted in Illinois. The Court also refused to extend specific jurisdiction over Kuncha on the following grounds. First, no evidence existed in the record to establish that Kuncha sought employment with Baanyan in New Jersey. Second, Kuncha's telephonic and electronic communications with Baanyan did not establish "minimum contacts" with New Jersey. Third, exercising jurisdiction over Kuncha would violate principles of "fair play and substantial justice," as her connection to New Jersey was "attenuated at best" and "more akin to random, fortuitous contacts." The Court did not state whether the outcome would have been different had the employment agreement between Baanyan and Kuncha contained a forum selection clause.

Takeaway

For New Jersey-based employers who sue employees working outside of the state, the Appellate Division's decision outlines the jurisdictional limits of New Jersey courts. Indeed, an employer executing an employment contract in New Jersey was not sufficient to establish "minimum contacts." Nevertheless, while Baanyan was a case against an employee who was hired to work in Illinois and never lived in, worked in, or visited New Jersey, a more balanced mix of in-state and out-of-state contacts might bring the employee under New Jersey's jurisdiction.

Moreover, had the consulting agreement in this case deemed New Jersey as the forum in which to litigate the dispute, the Court's decision may have been different. An important takeaway here is that employers should include a forum selection clause in their agreements with employees, where appropriate. Indeed, while a well-drafted clause could still be challenged, it would reduce the risk of a costly fight over the appropriate forum and would increase the likelihood of the employer controlling the location of the lawsuit. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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