Old Adage “To Get a Job, You Must Already Have a Job” Will Soon be Unlawful under New York City Human Rights Law

Posted on May 21, 2013 | Leave a comment

By Andrew M. Moskowitz, Esq.
amoskowitz@pashmanstein.com

Job Description:

Account Manager

Highly regarded service company seeks an Account Manager to call on Third Party Administrators in an assigned geographic region. You will call on new TPA’s as well as handle an assigned list. Candidates must have 3+ years of inside sales experience, must be currently employed and have a very stable work history.

Listing from CareerBuilder.com (emphasis added). 

The New York City Human Rights Law (NYCHRL) bars discrimination based on a variety of factors including race, age, national origin, gender, sexual orientation, and disability.  On June 11, 2013, an amendment to the NYCHRL prohibiting discrimination against unemployed individuals will take effect.  The amendment adds employment status as an additional protected category.  Although other jurisdictions (including New Jersey) prohibit discrimination against the unemployed, the New York City law is reportedly the first to provide a private cause of action. Under the NYCHRL, individuals may file a complaint with the New York City Division on Human Rights or file a civil lawsuit and recover compensatory and punitive damages, injunctive relief, and attorneys fees and costs.

The amendment to the NYCHRL provides that, unless otherwise permitted by city, state or federal law, covered employers may not base an employment decision on the fact that the applicant is unemployed, a term defined as someone who does not have a job, is available for work, and is seeking employment.  In addition, the law prohibits facially neutral policies—such as, for example, requiring a minimum level of professional experience—which disparately impact the unemployed, unless an employer can demonstrate either that these requirements are substantially job-related or that the policy did not have a disparate impact upon the unemployed.

The amendment to the NYCHRL, which passed over Mayor Bloomberg’s veto, applies to most employers and employment agencies with four or more employees and/or independent contractors.  Exceptions include certain public employees and/or agencies (including the Mayor’s office) as well as individuals employed pursuant to a collective bargaining agreement.

The new law does not prohibit employers from granting preferential treatment to their own employees.  Thus, an employer may state that only applicants who are current employees will be considered for a particular position, or that current employees will be given priority.

In certain other instances, the new law permits employers to consider applicants’ employment status. An employer may still inquire into the circumstances surrounding an applicant’s separation from his or her prior employment; request that an applicant have a certain amount of experience; and/or make compensation and benefit decisions based on an applicant’s experience. In addition, where it can demonstrate “a substantially job-related reason for doing so,” an employer may consider an applicant’s employment status.

The new law continues to permit employers to require a current and valid professional or occupational license; a certificate, registration, permit, or other credential; a minimum level of education or training; or a minimum level of professional, occupational, or field experience.  However, where an employer does impose such qualifications, it may be required to demonstrate that each prerequisite is substantially job-related.  Where there is substantial evidence that an alternative policy with less disparate impact is available, the employer then bears the burden of proving that the alternative would not serve it as well.  If the employer cannot meet this burden, it may be deemed to have violated the law.

Going forward, New York City employers would be wise to refrain from employing some of the terms in the CareerBuilder.com listing such as requiring applicants to be “currently employed” or to “have a very stable work history.”  To the contrary, employers should revise their policies to affirmatively state that they do not discriminate against individuals who are unemployed.  Finally, employers should be prepared to explain why each qualification for a position is substantially job-related.

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Insurers Obligation to Notify Policyholder About Change in Coverage Limits

Posted on April 17, 2013 | Leave a comment

By Dennis Smith, Esq.
dsmith@pashmanstein.com

If you like many other insurance policy consumers renew your policy on a yearly basis with the same insurer assuming your coverage limits remain constant — what is the insurer’s notification obligation when a newly added policy provision alters your coverage limits?

Our Supreme Court has held that policy changes must be conveyed fairly to the policyholder, although in no particular form.  Skeete v. Dorvius, 184 NJ 5 (2005). Thus if a policy change altering your coverage amount is buried within a few paragraphs of a 100 page insurance policy this is insufficient. Placement of Notice of a Policy Change is critical and for the new policy language to be enforced the insurer should notify its insured in a cover letter outlining significant policy changes for the upcoming year so that the policyholder is aware of them.  Such a practice gives the policyholder “a chance to digest the changes before drowning …in a sea of paper.”  Skeete, 184 NJ at 9.  For example in Newman v. Insurance. Co., 2009 WL 2243779 (App. Div. 2009), Newman was driving a truck owned by his employer when he was struck and seriously injured by an uninsured driver. Newman had three possible policies under which to assert his uninsured motorist claim: the employer’s Insurance policy, his own insurance policy which had uninsured limits of $15,000 and because he was a resident of his parents’ their NJM policy which had $300,000 limits.  The NJM policy had a step down uninsured motorist provision which stated that NJM’s limits would not exceed the highest applicable limit of liability under any insurance providing coverage to Newman.  NJM took the position that its liability was limited to the $15,000 maximum amount Newman elected under his own automobile policy for uninsured coverage not the $300,000 limit chosen by his parents.  While the court acknowledged that the step – down provisions are enforceable Newman’s parents were not provided with adequate notice of the step – down clause and NJM “should have informed Newman’s parents when the step – down clause was added, that the coverage for any insured who was not a named insured (Newman) would be greatly limited.”  2009 WL 2243779 at p. 5.  Consequently the court found that NJM’s limits applied and Newman was not limited to a $15,000 recovery for his significant injuries.

If your understanding of the scope of coverage purchased by you differs from the insurers after notice of your claim is provided to the company, we can help you navigate through the issues and advise as to the merits of your claim based on policy language and case law.

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Dealership Scams and the Consumer Fraud Act – What You Need to Know

Posted on April 9, 2013 | Leave a comment

By Janie Byalik, Esq.
jbyalik@pashmanstein.com

Have you ever seen an advertisement for a new or used car?  Does the deal sound too good to be true?  What about when you get to the dealership – the car you were promised is nowhere to be found, the price you were quoted suddenly jumps by thousands of dollars, or you are offered a car that you didn’t want, something the dealers called bait and switch.  And what if everything up until the sale goes smoothly, you buy a car that the dealership assured you was in excellent condition only to later discover that car has sustained previous damage, that it was a showroom demonstrator, that it was used as a rental car, or that it was totaled and rebuilt, and none of this information was disclosed to you.

The law in New Jersey protects innocent consumers from unscrupulous actions such as these.  The New Jersey Consumer Fraud Act prohibits the use of any unconscionable commercial practice, deception, fraud, false pretense, false promise, or misrepresentation in connection with the sale or advertisement of any merchandise, including new and used cars.  The Act further prohibits sellers from knowingly concealing or omitting any material fact with the intent that the consumer rely upon the concealment in his or her decision to make a purchase.

The law also prohibits dealership conduct such as:

  • offering a vehicle for sale without disclosing its prior use (such as a rental car)
  • offering for sale a used motor vehicle without disclosing the prior damage to the vehicle;
  • failing to disclose the actual odometer reading
  • overcharging for registration/title fees

This list is by no means exclusive.  There are numerous restrictions placed on dealerships and host of guidelines by which they must abide in advertising and selling cars.  For detailed information, please see the full text of the New Jersey Consumer Fraud Act, the Motor Vehicle Advertising Regulations, and information on New Jersey’s Lemon Law, which can be found on the Division of Consumer Affairs’ website.

Two extremely common schemes by dealerships are overcharging for title and registration fees and selling damaged vehicles.  By law, dealerships are not allowed to charge more for title and registration fees than they pay to the Department of Motor Vehicles.  If there are ancillary fees charged in connection with processing  a title or registration, those fees must be itemized and disclosed to the customer.  A common scheme among dealerships is to charge a set amount as a title/registration fee and note in the sales agreement that the customer may be entitled to a partial refund after it pays the DMV fees, and then to never issue a refund in the hopes that the customer will have forgotten about it.  Just recently,  in 2012, a class action alleged that two Morris County car dealerships were charging customers unlawful fees, including registration fee overcharges.   The case resulted in more than a $3 million settlement.

The most common scam by dealerships is to sell a vehicle that sustained previous damage without disclosing that information to the consumer.  By law, a seller of a vehicle must not misrepresent the mechanical condition of the vehicle and should disclose all material defects in the mechanical condition of the vehicle which is known to the dealer.  The best way to protect yourself against purchasing a previously damaged car is to run a CarFax and if possible, ask the dealers to have an independent mechanic inspect the car before purchasing it.  If you already purchased the car that is later discovered to have sustained accident damage, you may have a claim against the dealership if this information was not disclosed to you.

New Jersey has some of the strictest consumer protection laws in the country.  The Consumer Fraud Act not only is a useful means of providing consumers with a vehicle to bring forth these claims, but also permits the consumer to recover triple damages and attorney’s fees if the case is successful.  For dealership scams, the Consumer Fraud Act is just one of the many tools at your disposal.  You may also have a claim for breach of various warranties, breach of contract, fraud, and possible relief afforded through the New Jersey Lemon Law.

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New Jersey Adopts Significant Changes Affecting Shareholder Derivative Lawsuits and Shareholder Rights

Posted on April 5, 2013 | Leave a comment

By Sean Mack, Esq.
smack@pashmanstein.com

On April 1, 2013, Governor Christie signed into law three bills designed to impose greater restrictions on shareholder derivative suits and to make New Jersey’s corporate governance law more business-friendly.

The new legislation permits companies to opt-in or out of certain provisions.   Company’s should therefore quickly review and understand these changes, and if desirable, adopt and file an appropriate amendment to their certificate of incorporation or bylaws.

The new legislation, which amends N.J.S.A. 14A:3-6, governs derivative lawsuits brought by minority shareholder(s) against the corporation, its directors and officers.

Under the new legislation, prior to the initiation of a derivative lawsuit, the complaining shareholder must make a written demand on the corporation for action.  Absent a demonstrable “irreparable injury to the corporation,” no lawsuit can be filed until the earlier of, the shareholder receiving a written rejection of the demand, or the passing of ninety days from the date of the written demand.  If the shareholder commences litigation after demand has been rejected, the complaint must meet a heightened pleading standard showing particular facts establishing that a majority of the board of directors, or all members of a committee, who determined the matter, did not consist of independent directors at the time the decision was made.

The new legislation provides additional grounds for moving to dismiss a derivative suit.  A court must dismiss a derivative lawsuit if the court finds that independent directors or a majority of independent shareholders have determined that the suit is not in the best interests of the corporation.  Specifically, the law permits the establishment of an independent committee of 1 or more directors, and a court shall dismiss a derivative complaint if the majority of the independent committee has determined in good faith, after reasonable inquiry, that the derivative proceeding is not in the best interests of the corporation.  A corporation also may request that the Court appoint an independent panel of one or more individuals to determine whether the maintenance of the lawsuit is in the best interests of the corporation, and provides that the plaintiff shall have the burden to demonstrate to the panel that the suit is in the best interests of the corporation.

To help ensure that the plaintiff shareholder fairly and adequately represents the interests of the corporation, in addition to being a shareholder at the time of the complained of conduct or having received the shares by operation of law from someone who held them at the time, the new legislation requires that a suing shareholder continue to be a shareholder during the course of the litigation.

The legislation also expressly mandates that the shareholder pay the corporation’s reasonable expenses if the court determines that the proceeding was brought without reasonable cause or for an improper purpose.  Also, for any shareholder holding less than 5% of the corporation’s stock, which is worth less than $250,000, the plaintiff shareholder must post a bond to cover the reasonable expenses of the corporation, including attorney’s fees.

For these new provisions to apply, existing corporations must amend their certificate of incorporation to adopt these provisions.

Another newly enacted piece of legislation amends the New Jersey Shareholder Protection Act, N.J.S.A. 14A:10A-1, et seq., which applies to all “resident domestic corporations.”  The new legislation revises the definition of “resident domestic corporations” to now include all corporations organized under New Jersey law.  However, a New Jersey corporation that does not have its principal executive offices located in New Jersey and does not have significant business operations in New Jersey as of April 1, 2013, may opt out of this new legislation by adopting an amendment to its bylaws opting out of this legislation before September 28, 2013.  Additional changes now permit a resident domestic corporation to engage in a business combination with an interested stockholder if the transaction that caused the holder to become an interested stockholder was approved by the corporation’s board of directors prior to the stock acquisition date.

The third piece of legislation also now permits shareholders to participate in shareholder meetings by means of remote communications.  What constitutes remote communications will be determined by guidelines and procedures established by the board, so long as each shareholder can participate in and have access to the same information and materials as those present for the meeting.

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Posted in Business Protection, Shareholders

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Establishing Fair Market Rent Through Arbitration

Posted on April 2, 2013 | Leave a comment

By Scott R. Lippert, Esq.
slippert@pashmanstein.com

In the commercial lease context, it can be difficult to reach an agreement concerning the methodology for arriving at the amount of base rent for any extensions of the term.  There are several different approaches:  there can be a stated, fixed amount; an amount derived by formula (e.g. CPI increases); or an amount derived by an appraisal process, frequently referred to as “fair rental value”.  In the first two instances, the drafting should be pretty straight-forward.  It is in the last instance where the parties have room to disagree about the process for resolving conflicting appraisals.

Frequently, the language in the lease will require either that the landlord propose the new base rent during the extended term, or that the landlord obtain an appraisal report from a qualified appraiser, stating the proposed rent.  The tenant would then be given the opportunity to dispute the landlord’s position with the tenant’s own appraisal.  The point of contention then becomes how to resolve the difference, if any, between the respective positions of landlord and tenant.

Some clauses provide for an averaging of the two positions if they are within a certain range, say within 5% or 10% of each other.  If not within that range, or if the parties prefer not to provide for averaging, generally a third appraisal is then required, which will be binding upon the parties.  The third appraiser may or may not be aware of the other appraisals. 

There is another approach, one which has been around for a while, which in my experience has recently come into vogue.  It is called “Baseball Arbitration”.  Baseball Arbitration requires each party to submit its number to a neutral, and the neutral’s charge is to pick one number or the other.  The neutral either comes up with his own figure without knowing the figures of the parties and the figure closer to the neutral’s figure will prevail (“night baseball arbitration”) or the neutral is made aware of each party’s figure and picks one or the other.  No averaging, nothing in between.  The theory is that, out of fear that the other side’s number will be chosen, the parties will each submit a reasonable number, within the midrange of possible outcomes.  There’s no point in submitting an outlier, since it is not likely to prevail, or at least so the thinking goes.

This, I believe, is risky business and it surprises me that business people are proponents of this device.  It is unlikely that the three appraiser process will lead to a result that is not within the range of reasonable outcomes.  In contrast, with baseball arbitration, one of the parties could really get hurt.  Chances are the parties will have done some negotiating before reaching an impasse and seeking arbitration.  If the parties are wildly far apart, baseball arbitration seems very risky, as they will likely be more entrenched at that point, in their respective positions.  To reduce the likelihood of a disastrous result, my advice is to stay away from baseball arbitration when establishing fair rental value.

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Posted in Real Estate

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Renewal Options in Commercial Real Estate Leases

Posted on March 25, 2013 | Leave a comment

By Louis Pashman, Esq.
lpashman@pashmanstein.com

Let’s assume you own a building.  You have a tenant with a written lease.  That lease contains an unambiguous clause that gives the tenant an option to renew the lease on terms set forth.  In order to exercise the option, the tenant must notify you in writing during a specified time period that he intends to exercise the option.  The tenant does notify you in writing but a bit outside the specified time period.

The general rule is that the exercise of an option is a “time of the essence” provision.  There are two cases, however, which have held that, when it comes to renewal options in a landlord-tenant relationship, that general rule is modified.

In the first case, thirty-nine days after the deadline for exercise, the tenant had not notified the landlord.  Landlord wrote to tenant informing him that he had to vacate because he, the landlord, was planning to expand into the tenant’s space.  Within a day or two of receiving that notice, the tenant wrote to landlord notifying him that he intended to exercise the option.  Tenant had been there for ten years and argues it would be unjust and inequitable to forfeit his lease.

The court agreed.  Finding that the tenant would suffer substantial harm if forced to relocate and that the landlord had not changed his position based on the non-exercise of the option, the court held that this “special circumstance” justified renewal of the option.

A decade later, another court reached the same conclusion in a case where the tenant had exercised the option prematurely.

From these two cases we know that a technically non-compliant exercise of the option will not work forfeiture when:

  1. Substantial harm would result to the tenant if forced to relocate;
  2. The landlord did not change his position in reliance on the delay;
  3. The failure by the tenant to give notice was based on an “honest mistake of fact;”
  4. The delay was “slight;”
  5. The loss to the landlord, if any, was “insignificant;”

Clearly, courts will not allow landlords to use “tactics” to avoid the option.  A landlord can, however, diminish the equitable argument a tenant might otherwise have if he reminds the tenant in advance of the approaching deadline or, if no notice is received, he takes significant action in reliance on his belief that he has no tenant.  From a tenant’s point of view, don’t rely on this exception to the general rule.  Be sure to comply completely with all requirements of the option clause.

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Posted in Leasing, Real Estate

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Three Legal Developments Are Designed to Ease and Speed Sandy-Related Disaster Relief Process for New Jersey Residents and Businesses

Posted on March 7, 2013 | Leave a comment

By Samantha Sherman, Esq.
ssherman@pashmanstein.com

New Jersey Establishes New Insurance Mediation Program to Speed Sandy-Related Claims

A new mediation program will allow New Jersey residents whose property was damaged or destroyed by Sandy to settle disputed insurance cases without having to engage in costly and time consuming litigation.  Under the program, property owners will be able to submit homeowner’s, automobile and commercial property insurance claims to a mediator who will review the case and assist in settlement discussions.  Insurance carriers will pay for the cost of the mediator.

The program will be available for non-flood Sandy-related claims greater than $1,000 that do not include a reasonable suspicion of fraud and are based on policies in force at the time Sandy made landfall.  The program initially will not include flood insurance claims because the National Flood Insurance Program (NFIP) handles those claims pursuant to federal regulations.   However, the New Jersey Department of Banking and Insurance will monitor and assess the viability of securing NFIP participation in certain cases at a later date.

State regulated insurers must notify insureds with open or unresolved homeowner’s, automobile and commercial property claims that they can request a mediation conference and detailed instructions regarding how to file such a request.

Insurers authorized or admitted to transact business in New Jersey and the New Jersey Insurance Underwriting Association will be required to participate in the program.  Surplus lines insurers and risk retention groups may elect whether or not to participate on a case-by-case basis.  Participation by policyholders is entirely voluntary.

FEMA Extends Deadline for Sandy Disaster Assistance Registration by 30 Days

New Jersey residents affected by Sandy now have until April 1, 2013 to register for individual disaster assistance through the Federal Emergency Management Agency (FEMA).  The deadline extension applies to homeowner, renter and business registration with the Small Business Administration (SBA) for Disaster Loan Assistance.

New Jersey businesses also have until July 31 to apply for SBA economic injury disaster loans.

Shore Businesses to Enjoy Expanded Seasonal Alcoholic Beverage License Term

Because shore businesses were unable to remain open through November 2012 as a result of mandatory evacuations, power outages and other disruptions caused by Sandy, seasonal alcoholic beverage consumption licensees will be permitted to serve alcoholic beverages beginning on March 1 instead of May 1 for the 2013 tourism season.

Seasonal alcoholic beverage licensees will be able to serve alcoholic beverages through November 14, 2013.

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