Tag Archives: workforce

Federal Appeals Court: Company May Fire HR Director Conducting Investigation; Harassment/Discrimination Policies Not a Defense Where Alleged Harasser is High-Ranking Supervisor

By Andrew M. Moskowitz, Esq.

Martha Townsend was an office manager and receptionist.  She alleged that, over a near two-year period, Hugh Benjamin, a vice-president, shareholder and husband of shareholder Michelle Benjamin, had sexually harassed her.  On March 17, 2005, Ms. Townsend reported the sexual harassment to the company’s HR Director, Ms. Grey-Allen.  Five days later, the company fired Ms. Grey-Allen, allegedly because she had discussed Ms. Townsend’s allegations with an outside party.  A day after Ms. Grey-Allen’s termination, Ms. Townsend resigned.

In Townsend v. Benjamin Enterprises (2d Cir. May 9, 2012), the Second Circuit Court of Appeals—which covers federal district courts in New York, Connecticut and Vermont—  addressed the above scenario..  The Court held that the HR Director’s initiation of an internal investigation did not constitute participation “in an investigation, proceeding, or hearing” as defined by Title VII of the Civil Rights Act of 1964.  The Court therefore affirmed the dismissal of the HR Director’s claim.

The Towensend Court also addressed when an employer may claim the Faragher/Ellerth affirmative defense.  This defense permits an employer who has not fired, suspended, or demoted an employee to assert as a defense its implementation of appropriate HR policies and the employee’s failure to avail herself of these policies.  The Towensend court held that, where the supervisor holds a sufficiently high position in the organization, the Faragher/Ellerth defense is not available.The Towensend Court noted that Title VII prohibits an employer from retaliating against an individual who has opposed an unlawful practice or who has participated in any manner “in an investigation, proceeding, or hearing.”  The HR Director, Ms. Grey-Allen, had not alleged that she had opposed an unlawful practice.  Instead, she argued that, by conducting an investigation into Ms. Townsend’s allegations of sexual harassment, she had “participated” in an investigation.

Although the U.S. Equal Employment Opportunity Commission (EEOC) had submitted a brief in support of Ms. Townsend’s position, the Towensend Court nevertheless held that participating in an employer’s internal investigation conducted apart from a formal charge with the EEOC was not an “investigation” as defined by Title VII.

The Towensend Court also addressed whether the Faragher/Ellerth affirmative defense remained available when, by virtue of his high position in the organization, Hugh Benjamin, the alleged harasser, functioned as the employer’s “proxy” or “alter ego.”  The Court held that, under such a scenario, this defense was unavailable.  The Court held that the jury did not err in holding that, as the company’s only corporate vice president, second-in-command and shareholder, Mr. Benjamin served as the employer’s proxy or alter ego.

Therefore, under the holding in Towensend, an employee who conducts an internal HR investigation of a claim that is not the subject of a formal charge with the EEOC does not possess a valid retaliation claim under Title VII.  Moreover, pursuant to Towensend, where a supervisor with a sufficiently high position in a company is the alleged harasser, an employer may not claim as a defense that it exercised reasonable care to prevent and correct sexual harassment and that the employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer.

Can a Contract Dispute With An Employee Become a Whistleblower Claim?

By Andrew M. Moskowitz, Esq.

In a recent case, Powell v. Wachovia Corp. et al., Docket No. A-1727-10T4 (App. Div. Apr. 9, 2012), a panel of the New Jersey Appellate Division reversed a $3.6 million verdict in favor of a former employee of Wachovia Insurance.  The former employee, James Powell, had claimed that Wachovia had fired him in retaliation for his objecting to Wachovia’s plan to change his and others’ commission percentages.  Powell had alleged that his termination violated the Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -14.  However, the appellate court held that, even accepting Powell’s allegations as true, this matter was a mere contractual dispute and that Powell had not demonstrated that he reasonably believed Wachovia’s conduct was fraudulent or in violation of the law.  Accordingly, the appellate court reversed the jury verdict and directed the lower court to dismiss the complaint with prejudice.

Powell began his job as a benefits producer in 1993.  His job involved marketing employee benefits plans such as health, life, and disability insurance to small and medium-size employers.  For approximately thirteen years, his compensation plan was that he would receive 50% of every dollar of commissions that he generated.  However, in early 2006, Wachovia sought to dramatically alter this formula so that Powell and other benefits producers would receive as little as 10% of the commission revenue.

In response, Powell and four other colleagues retained an attorney, who wrote a letter at the end of March 2006 objecting to this proposed new compensation plan.  Ultimately, the parties compromised and agreed to a “a ‘60/40 split’ for new business … and a ‘70/30 [split] for renewals…”  Six months later, Powell and seven other individuals were terminated, purportedly for viewing pornographic emails in violation of Wachovia’s company policy.

The Court noted that, to establish a whistleblower claim under CEPA, a plaintiff must demonstrate either that 1) he or she reasonably believed that the employer’s conduct violated either a law, rule, or regulation promulgated pursuant to law, or a clear mandate of public policy, or 2) he or she reasonably believed the employer’s conduct was fraudulent or criminal.

In reversing the jury verdict in favor of Powell, the Court found that Powell had not demonstrated a reasonable belief that Wachovia’s conduct was fraudulent, deceptive or unlawful.  Rather, as articulated by his attorney at the end of March 2006, Powell believed only that Wachovia had breached his and his colleagues’ contractual right to certain commission percentages.  The Court therefore concluded that, “at its core all that was at stake was a contract dispute,” and that such a dispute “cannot be elevated, as a matter of law, to a CEPA springboard for damages.”

Although it is an unpublished opinion and therefore is not technically binding upon New Jersey courts, the Powell opinion is consistent with New Jersey precedent that private contractual disputes do not give rise to CEPA claims.  See, e.g., Maw v. Advanced Clinical Communications, Inc., 179 N.J. 439 (2004) (New Jersey Supreme Court held that employee fired for refusing to sign restrictive covenant did not state a claim under CEPA).

Unpaid Interns and Trainees Can Become a Big Expense

By Andrew Moskowitz, Esq.

On February 1, 2012, a former Hearst Corporation intern filed a lawsuit in the Southern District of New York.  The suit was filed as a class and collective action under the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq., and purportedly involves hundreds of former Hearst interns.  The case, Wang v. The Hearst Corp., Civ. No. 12-0793, highlights the  dangers that companies face when they employ unpaid individuals to perform routine work tasks.

Employers are required to pay most employees minimum wage (which is $7.25 per hour under New York and New Jersey law) and “time-and-a-half” for all hours worked in excess of 40 hours per week.  Under federal law, to classify someone as an unpaid “trainee,” employers must meet some or all of the following criteria:

  1. The trainees do not displace regular employees, but rather work under close observation;
  2. The training is for the trainees’ benefit and the employer derives no immediate advantage from the trainees’ activities and, on occasion, its operations may actually be impeded;
  3. The trainees are not necessarily entitled to a job at the completion of the training;
  4. The training, even if it includes the actual operation of the employer’s facilities, is similar to that which would be given in an educational environment such as a vocational school; and
  5. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.In general, under federal law, all of the above criteria need not be met; rather, courts look at the totality of the circumstances.

In contrast, under the New Jersey Wage and Hour Law, N.J.S.A. 34:11-56a et seq., all of the above-listed criteria must be met.  In addition, New Jersey law imposes additional requirements.  Specifically, the training must occur outside regular work hours.  Moreover, the employee may not perform productive work while attending the training and the program cannot be directly related to the employee‘s present job.

An employer that fails to comply with the above does so at its peril.  Under federal law, an employee may recover not only back pay but also “liquidated” or double damages and reasonable attorney’s fees and costs.