Harassment, Discrimination and Retaliation

On March 27, 2018, the New Jersey Legislature passed the Diane B. Allen Equal Pay Act (the “Act”), which amends the New Jersey Law Against Discrimination (“LAD”), to strengthen protections against employment discrimination and promote equal pay for women.  A link to the Act can be found by clicking here. Governor Phil Murphy, who campaigned vigorously on a platform of women’s rights and equal pay for equal work leading into last year’s election, has indicated he will sign the legislation when it is presented to him, giving New Jersey one of the nation’s most comprehensive equal pay initiatives.  The Act takes effect on July 1, 2018.

The Act amends the LAD by making it an unlawful employment practice for an employer to pay any employee who is a member of a protected class less than the rate paid to other employees who are not members of that protected class for “substantially similar work when viewed as a composite of skill, effort and responsibility.”  The Act is thus much broader than just advocating gender pay equity.  Instead, the Act expands equal pay on the basis of membership in the protected class which includes, inter alia, race, creed, color, national origin, ancestry, age, marital status, civil union status, domestic partnership status, affectional or sexual orientation, genetic information, pregnancy or breastfeeding, sex, gender identity or expression, disability or atypical hereditary cellular or blood trait of any individual, or liability for service in the armed forces.  With the passage of the Act, the LAD, which was already one of the broadest anti-discrimination laws in the country, only intensifies and strengths the protections afforded to members of protected classes who work and/or live in New Jersey.

The Act does, however, carve out limited exceptions concerning when an employer may pay a different rate of compensation to members of the protected class, including if the pay differential is due to a seniority or merit based system.  An employer may also pay different rates to individuals if they can demonstrate each of the following:

  1. That the differential is based on one or more legitimate, bona fide factors other than the characteristics of members of the protected class, such as training, education or experience, or the quantity or quality of production;
  2. That the factor or factors are not based on, and do not perpetuate differential in compensation based on sex or any other characteristic of members of a protected class;
  3. That each of the factors is applied reasonably;
  4. That one or more of the factors account for the entire wage differential; and
  5. That the factors are job-related with respect to the position in question and based on a legitimate business necessity.

See here

Under the Act, an unlawful employment practice can occur each time an employer’s pay practices discriminate against an employee, and the employee can seek back pay for a six (6) year period.  Thus, the Act lengthens the statute of limitations for claims based on pay equity to a period of six (6) years in contrast to the LAD’s two (2) year statute of limitations.

Lastly, in terms of damages, if an employer is found guilty of violating the pay practices in the Act described above, a judge or jury can award treble damages for the violation.  Treble damages are also available to an employee who can successfully prove that her employer retaliated against her for requesting, discussing, or disclosing to (i) any other employee or former employee of the employer, (ii)  a lawyer from whom the employee seeks legal advice, or (iii) any government agency, information regarding employee compensation/pay practices.  Likewise, treble damages are available to an employee or prospective employee who is asked by the employer to sign a waiver regarding discussing or disclosing pay practices or rates.

Employers should be aware of the July 1, 2018 effective date for the Act.  In the meantime, businesses should carefully review their employee handbooks as well as hiring and compensation practices to insure pay equity for employees who perform “substantially similar work”.

In a landmark decision, the Second Circuit (which covers New York, Connecticut, and Vermont), ruled that discrimination based on an employees’ sexual orientation is actionable under Title VII.  The Second Circuit in Zarda v. Altitude Express, Inc. is only the second appellate court in the United States to expressly find that employers who discriminate on the basis of an employees’ sexual orientation violate federal law.  The Second Circuit joins the Seventh Circuit, who reached a similar decision in Hively v. Ivy Tech Cmty. Coll. of Indiana.  The decision in Zarda intensifies an existing circuit split bolstering the argument that the United States Supreme Court should rule on the issue.

On its face, Title VII prohibits discrimination “because of such individual’s race, color, religion, sex, or national origin.”  Notably missing from the text of Title VII is discrimination based upon “sexual orientation.” The absence of sexual orientation within the text has resulted in extensive disputes on the issue, with the vast majority of courts determining that discrimination on this basis is not prohibited.  The Second Circuit’s ruling, however, highlights a growing trend that sexual orientation is a subset of “sex” and should be a protected characteristic under federal law.

In Zarda, the plaintiff, an openly gay skydiving instructor, brought suit against his employer alleging he was terminated on the basis of his sexual orientation.  In short, the plaintiff asserts that he was terminated after his employer discovered his sexual orientation and believed that such termination was based on his failure to adhere to the traditional “straight male macho stereotype.”   The claim was originally dismissed under the guise that Title VII does not protect against discrimination based upon sexual orientation.

Relying heavily on the Seventh Circuit decision in Hively, which found that Indiana educator Kimberly Hively stated a claim for sexual orientation discrimination under Title VII, the Second Circuit in Zarda ruled that “[i]n the context of Title VII, the statutory prohibition extends to all discrimination ‘because of…sex’ and sexual orientation discrimination is an actionable subset of sex discrimination.”  In coming to this conclusion, the Court noted that “[a]lthough sexual orientation is assuredly not the principal evil that Congress was concerned with when it enacted Title VII, statutory prohibitions often go beyond the principal evil to cover reasonable comparable evils.”  Sexual orientation is one “comparable evil.”

To bolster its decision, the Zarda Court relied on three separate and distinct reasons for finding sexual orientation was protected, each of which the Court stated was enough on its own to bar this type of discrimination.  First, the Court found that sexual orientation is an inherent function of sex.  Put simply, the Court reasoned that “[b]ecause one cannot fully define a person’s sexual orientation without identifying his or her sex, sexual orientation is a function of sex….Logically, because sexual orientation is a function of sex and sex is a protected characteristic under Title VII, it follows that sexual orientation is also protected.”  Therefore, the Court concluded sexual orientation is a subset of sex, making discrimination on this basis impermissible.

Next, the Court determined that discriminating on the basis of sexual orientation is a form of gender stereotyping, which is further prohibited under Title VII.  In this regard, the Court explained that discrimination based on sexual orientation is “rooted” in gender stereotyping because it is based upon the idea that an individual is not conforming to the traditional forms of gender- i.e., men should be attracted to women, and women should be attracted to men.  By discriminating for failing to conform to these stereotypes, the Second Circuit reasoned that the employer was engaging in a form of sex discrimination.

Finally, the Court strengthened its holding by finding that sexual orientation discrimination is also “associational discrimination.” Relying on the Supreme Court decision in Loving v. Virginia, which found a law prohibiting interracial marriage to be unconstitutional, the Second Circuit explained that an employee should be able to have romantic associations without fear of reprisal.  By permitting an employer to discriminate on this basis, the Court reasoned that it was allowing decisions to be made solely on who the employee associated with.  Such a determination would permit employers to impermissibly force the employee to conform to what the employer deemed appropriate within the employee’s personal life.

While it is too early to know whether the Supreme Court will take up the issue raised in Zarda and other cases, it is clear that the Zarda decision bolsters an employee’s argument that Title VII protects against sexual orientation discrimination. The Second Circuit’s well-structured three-reasoned approach attacked each argument raised by the employer, setting the framework for employees who wish to bring such claims going forward.

Employers with questions about the impact of the Second Circuit’s ruling should consult with counsel to ensure compliance with Title VII.

The new Tax Cuts and Jobs Act (the “Act”) makes many changes to federal tax law, but one provision of the Act should be of interest to employers and claimants settling claims of sexual harassment and abuse.

In the wake of the Harvey Weinstein scandal, some have argued that the use of nondisclosure agreements in harassment and abuse cases may lead to continued abuse by perpetrators.  In an effort to discourage the use of nondisclosure agreements, New Jersey Senator Robert Menendez introduced a provision that penalizes perpetrators by taking away the tax incentive for their businesses to pay their legal fees and settlements in such cases.

New section 162(q) in the Tax Code provides as follows:

(q) Payments Related to Sexual Harassment and Sexual Abuse—No deduction shall be allowed under this chapter for—

(1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or

(2) attorney’s fees related to such a settlement or payment.

(emphasis added).

This provision has been widely criticized as hastily enacted and, as a result, overbroad and even unclear.  Many have noted the provision’s unintended adverse effects.

First, often the business’ reputation and the victim’s privacy are deemed to be more valuable than the tax deduction, so the provision may not in fact deter companies and victims from entering into nondisclosure agreements.  Moreover, it should be noted that the provision does not apply to the government (e.g., members of Congress) and tax-exempt entities (e.g., Catholic Church), because they are not “taxpayers.”

Another important criticism is that the provision says “under this chapter,” which applies to all income tax, both business and personal.  As a result, the provision may hurt the victim as well, who will be unable to deduct legal fees from the settlement amount received.  Currently, the tax law provides an above-the-line (dollar-for-dollar) deduction for legal fees in employment cases, resulting in tax to the claimants on net recoveries, not the gross settlement amount.

In addition, the reference to claims “related to” sexual harassment makes it difficult to know how to treat a settlement payment, and related legal fees, where numerous claims are asserted, only some of which relate to sexual harassment.  This provision will encourage the claimant and the employer to agree on an express allocation of some portion of the settlement amount to sexual harassment claims.

Finally, Section 13307(b) of the Act states that the new provision applies “to amounts paid or incurred after the date of the enactment.”  This means that it applies to settlements entered into before the enactment date, if part of the settlement has not yet been paid.  Thus, it could potentially force victims to seek renegotiation and/or revocation of existing nondisclosure agreements.

Nondisclosure agreements are a mainstay of sexual harassment settlements and often the key provision for which employers are bargaining, even if they deny the allegations, as there is significant value in keeping their reputation and eliminating “me too” suits.  Accordingly, it is unlikely that the new tax law provision will deter employers from requiring nondisclosure agreements, although it may affect the amounts for which these cases settle in order to account for the extra cost to all parties.

The new tax provision eliminating the deduction for payments related to sexual harassment and abuse cases raises many issues, some of which are not easily resolvable.  In addressing such claims and negotiating settlements, employers and claimants are well-advised to consider the impact of this new law and its far reaching implications.

While sexual and other unlawful harassment issues have been present in the workplace for decades, the current news cycle has made the term a household name.  One cannot turn on the television, open a newspaper or surf the web without being inundated with daily reports of sexual harassment.  Politicians, news reporters, entertainers, and others are accused of sexual harassment and sometimes sexual assault, on a daily basis.

Harassment (both sexual harassment and harassment based on national origin, religion, LGBTQ status, etc.) is toxic in the workplace and can lead to a loss of talent, poor morale, negative publicity and, in the case of legal action, monetary damages and legal fees.  Still, many employers overlook the importance of developing and communicating effective anti-harassment policies and procedures and conducting anti-harassment training, often relegating this “compliance” issue to the bottom of the corporate “to do” list.  The current environment presents an opportune time to remind employers of the importance of addressing these issues and ensuring that they are providing a workplace that is free of sexual and other unlawful harassment.  In addition to helping to prevent harassment incidents in the first place, comprehensive anti-harassment policies and training also provide employers with an affirmative defense to any legal claims of harassment under both state and federal law.

The message to employers is clear – ignore these issues at your own peril!  Although the law in this area has been clear for some time, many employers do not appreciate the importance of addressing these issues proactively.  Employers are well served to review their anti-harassment policies and practices in light of the current social climate.

New York City Mayor Bill de Blasio recently signed into law an amendment to the New York City Human Rights Law (the “NYCHRL”) prohibiting discrimination on the basis of uniformed service.  The amendment takes effect on November 19, 2017.

The term “uniformed service” is defined in the amendment to mean current or prior service in:

The United States Army, Navy, Air Force, Marine Corps, Coast Guard, the Commissioned Corps of the National Oceanic and Atmospheric Administration, the Commissioned Corps of the United States Public Health Services, Army National Guard, or the Air National Guard;

The organized militia of the State of New York;

Any other service designed as part of the “uniformed services” pursuant to the Uniformed Services Employment and Reemployment Rights Act;

Membership in any reserve component of the United States Army, Navy, Air Force, Marine Corps, or Coast Guard; or

Being listed on the state reserve list or the state retired list as described in certain military laws or the state equivalent.

The amendment gives both veterans and active military personnel all protections afforded under the NYCHRL, including safeguarding against employment discrimination.  Specifically, these protections include representing that a position is not available when it actually is, refusing to hire or employ, or to bar or discharge from employment, someone in the uniformed services, or to discriminate against uniformed service members in the compensation, terms, and conditions of their employment.  Likewise, the amendment prevents employers from discriminating against uniformed service members in matters of public accommodation, housing, real estate, and lending.  The Chair of the New York City Commission on Human Rights, Carmelyn P. Malalis, cogently stated that: “Veterans and active military and other uniformed personnel routinely put their lives on the line for people in this country.  The least we can do is guarantee them the same freedom, respect and opportunities as everyone else. This law will give veterans and active military and other uniformed personnel direct protection under the New York City Human Rights law.”  Please click here to view the full article.

New York based employers are encouraged to review their human resources and hiring policies to ensure compliance with the amendment to the NYCHRL prior to its November 19, 2017 effective date.