Blog: News & Legal Articles from Our Team

October 1, 2015

NJ COURT HOLDS THAT MANDATORY ARBITRATION PROVISION IN EMPLOYEE HANDBOOK NOT BINDING ON EMPLOYEE

On September 18, 2015 the New Jersey Appellate Court issued a decision that should make all employers review their employee handbooks if it contains a mandatory arbitration provision. In the beginning of almost every employee handbook there is a disclaimer provision that says something along the lines that the employment relationship is at-will and that the “provisions of this handbook is not intended to create a contract between the Company and the employee with regard to the matter set forth in the handbook”.

In this case, the New Jersey Appellate Court refused to enforce the mandatory arbitration provision in the employee handbook and stated in part, “the plain language in the handbook the defendant drafted shows, with unmistakable clarity, that Employer did not intend the handbook to create a binding agreement”. The Court went on to state “The employee handbook cannot be a binding agreement with respect to the arbitration provision, and an unenforceable document merely containing “management guidelines” for the rest of its provisions.” Click here to read a copy of this opinion.

In addition to the wording of the handbook being one of the main reasons the Court refused to enforce the arbitration provision, the Court also set forth other “problems” with the handbook that should serve as a guide to HR and in-house legal departments so their handbooks don’t suffer the same fate.

September 29, 2015

BREACH OF CONTRACT •ACT OF GOD• THE POPE

by H. Adam Shapiro

I was driving into work this morning and I heard on the radio a caller complaining that the secret service cancelled her wedding just 8 days short of the big day because of the Pope. So I started thinking, what happened to all the deposit money? Did she lose it all-the money-not her mind. What about the caterer or the photographer? Did she owe more than just the deposit money? And then I thought-is this the ultimate Act of God defense?

In contract law, when party fails to perform according to the terms of the agreement it is viewed as a breach of contract. However, sometimes there are justifiable reasons that will allow or excuse a party from performing according to the terms of their agreement. For example, when Hurricane Sandy destroyed most of the hotels along the Jersey Shore, these hotels were excused from liability based upon their failure to provide accommodations or being able to host wedding receptions. In essence, an act of God may be interpreted as a defense for failure to perform based upon impossibility or impracticality. So I ponder, is the Pope being in Philly the ultimate Act of God defense.

If you have any questions regarding your legal obligations under a contract you are a party to or any other issue affecting your business, please feel free to contact us at Danziger Shapiro.

September 24, 2015

CLIENT ALERT: EMV COMPLIANCE DEADLINE OCTOBER 1, 2015 – CREDIT CARD FRAUD LIABILITY SHIFTS

by H. Adam Shapiro

EMV stands for EuroPay, Mastercard and Visa and starting next week, it will be important for business owners to consider how they employ this payment method. On October 1, 2015 the liability for credit card fraud will shift to the business entity that employs the least effective security technology. In other words, in disputes between the merchant (store front owner) and the credit card issuer (for example a Citizens Bank Visa), the party that uses non-compliant EMV technology will assume the liability for credit card fraud if the other party uses EMV technology. If both parties do not use EMV technology then the liability issues remains unchanged.

So what is EMV technology and how does it work? Have you ever noticed on your new credit card that there is shiny silver square? This is a computer chip and it produces a code that EMV compliant credit card terminals must receive in order to authorize the trasaction. You will no longer “swipe” your card but rather insert it into the terminal. The code will be constantly changing making fraud much harder to occur. In addition, some issuers will also require a PIN to confirm the transaction as well. If either your credit card or the merchant’s terminal is not EMV compliant, the card, for now, will work as before by the swipe method. The only thing that has changed is the potential shift of liability. This is not new technology. Europe has been using this technology for years. For more information on EMV technology, click here.

While it makes sense for brick and mortar stores to switch to EMV compliant terminals it is less clear for on-line retailers. Right now major credit card companies are using two different systems for EMV online technology. MasterCard uses its “Chip Authentication Program” or CAP and Visa offers its “Dynamic Passcode Authentication” or DPA. It is very similar to the choice between VHS and Betamax all over again. Which technology will prevail is anyone’s guess at this point. In the meantime, it’s best to understand what’s out there and make an informed decision for your business’ individual needs.

September 22, 2015

PENNSYLVANIA’S NEW ENTITY TRANSACTION LAW MAKES IT EASIER TO CONVERT A LLC TO A CORPORATION

by H. Adam Shapiro

On July 1, 2015, Pennsylvania’s new Entity Transaction Law went into effect and made it easier, faster, and cheaper for business entities to engage in “fundamental transactions” with another business entity. Examples of fundamental changes include a merger of one company into another, an amendment of a company’s articles of incorporation or converting your existing “corporate form” into another business entity. Previously, this took a lot of time and was costly. Now this can be done quickly and cheaply.

The new Entity Transaction Law sets forth five (5) fundamental business transactions that may now take place irrespective of the form of either business entity involved:

Merger of one entity with or into another business entity;

August 4, 2015

DEPARTMENT OF JUSTICE PUBLISHES BEST PRACTICE TIPS TO DEAL WITH CYBER INTRUSION

by H. Adam Shapiro

Every business owner, large or small, should take time to read the Department of Justice’s Best Practices for Victim Response and Reporting of Cyber Incidents. In today’s cyber world, it seems we cannot go a day without reading about another cyber security incident and its ramifications. For example, the Seventh Circuit Court of Appeals just last week certified a class action based upon mere allegations of future harm as a result from the Neiman Marcus data breach. In addition, the DOJ recently disclosed its successful involvement in the largest coordinated enforcement of on line organized cyber crime. This international investigation targeted a group known as Darkode where online cyber hackers shared and sold secrets to hack into other organizations’ computers. Against this backdrop, reviewing the DOJ’s suggestions regarding preventing cyber intrusion would be well worth your time as would be a quick review of my earlier blog post on an employer’s responsibility if you are hacked under the Pennsylvania Breach of Personal Information Act.

Key elements of the DOJ’s suggested response plan prior to intrusion include:

Having a well-established actionable plan;

July 28, 2015

DEPARTMENT OF LABOR PROVIDES GUIDANCE ON CLASSIFICATION OF WORKERS AS EMPLOYEES OR INDEPENDENT CONTRACTORS

by H. Adam Shapiro

The United States Department of Labor provided further guidance earlier this month on how it interprets the tests it uses to determine whether a worker should be classified as either an employee or independent contractor. While in some circumstances it may be appropriate to classify a worker as an independent contractor, to do this only as a means to decrease operating costs is illegal and harms not only the worker but also the government. For example, when an employer wrongly classifies an employee as an independent contractor, the worker does not receive common workplace protections such as minimum wage, overtime, workers’ compensation, or unemployment insurance. In addition, the government also loses out on tax revenue.

The DOL will look closely at the “economic realities” of the working relationship to determine whether an employer-employee relationship exists rather than what any written agreement states to the contrary. Are the “economic realities” such that the worker is economically dependent on the employer or in business for him or herself? The economic realities test typically includes the following factors: (a) the extent to which the work performed is an integral part of the employer’s business; (b) the worker’s opportunity for profit or loss depending on his or her managerial skill; (c) the extent of the relative investments of the employer and the worker; (d) whether the work performed requires special skills and initiative; (e) the permanency of the relationship; and (f) the degree of control exercised or retained by the employer. Click here for the DOL memo.

My take away after reading the Administrator’s Interpretation is that the DOL, as its starting point, considers most workers to be employees under the Fair Labor Standards Act. Click here for a post earlier this year where I informed you that the New Jersey Supreme Court ruled the same way. Against the DOL’s new crusade, combined with recent decisions by the Courts, employers would be wise to review all independent contractor relationships anew. The consequences for being wrong are high and include legal fees, back taxes, penalties and back wages which may include overtime. If you have any questions regarding this or any other aspect affecting your business, please feel free to contact us at Danziger Shapiro.

July 16, 2015

RECENT PENNSYLVANIA APPELLATE COURT OPINION SHOWS IMPORTANCE OF PROPERLY DOCUMENTING BOARD MEETINGS AND HOW TO INVOKE ATTORNEY CLIENT PRIVILEGE

by H. Adam Shapiro

It is not uncommon for a company to have a board meeting and have its attorney present to render legal advice. What happens though when in litigation the other side requests production of the minutes for this meeting? Can you successfully claim the attorney client privilege? What if an attorney was present but only in his capacity as a board member? These issues were raised again in a recent opinion authored by our appellate court.

The Pennsylvania Superior Court was faced with a hospital appealing the order of the trial court to produce minutes of a board meeting where there was a discussion of the malpractice claim that was the subject of the lawsuit. The hospital claimed that its lawyer was present to render legal advice. However, in its response to the production requests, the hospital failed to provide information sufficient to establish if the attorneys were there merely as board members or as legal advisors. Based on this, the trial court ordered production of the minutes. The appellate court reversed the trial court’s decision and gave the hospital another chance to properly invoke privilege for each document it claimed was privileged. The Court specifically stated that it was necessary to identify the attorney by name so that a determination could be made relative to whether the attorney was there as a board member or attorney. If an attorney is there only in the capacity as a board member then the privilege does not apply.

The take away from this case is that when attorneys are present at board meetings it is critical that the minutes document the capacity in which the lawyers are present. Minutes should specifically identify attorneys who are present for the purpose of rendering legal advice. The minutes should also identify when information is being conveyed to obtain legal advice. In this way, even if the entirety of the minutes cannot be claimed as privileged, then a portion of the minutes can still be redacted.

April 7, 2015

SEC TARGETS EMPLOYMENT CONFIDENTIALITY AGREEMENTS THAT INTERFERE WITH WHISTLEBLOWER INVESTIGATIONS

by H. Adam Shapiro

The Securities and Exchange Commission reported its first enforcement action earlier this month against a company that inserted restrictive language in an employee confidentiality agreement to impede the whistleblower reporting process. In this action, the SEC charged that engineering firm KBR, Inc. violated whistleblower protection rule 21F-17 under the Dodd-Frank Act. (Click here for Order).

The SEC uncovered certain employees who were subject to the internal investigation process were required to sign confidentiality agreements. Among other things, the agreements included language that required the employee to first discuss what they were going to say to the SEC with in-house counsel and that violation of the confidentiality agreement could result in termination of employment.

As a result of this agreement, the SEC imposed a relatively modest fine of only $130,000. The Director of Enforcement for the SEC stated that, “By requiring its employees and former employees to sign confidentiality agreements imposing pre-notification requirements before contacting the SEC, KBR potentially discouraged employees from reporting securities violations to us. SEC rules prohibit employers from taking measures through confidentiality, employment, severance, or other type of agreements that may silence potential whistleblowers before they can reach out to the SEC. We will vigorously enforce this provision.”
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February 26, 2015

NEW JERSEY’S BAN THE BOX EFFECTIVE MARCH 1, 2015

by H. Adam Shapiro

New Jersey’s “Ban the Box” law goes into effect next week on March 1, 2015. Employers in New Jersey may no longer have an employment application that contains either a box that must be marked or a question asked that relate to an applicant’s criminal record or lack thereof. Employers also cannot ask about an applicant’s criminal history or even run a criminal background check at the early stages of the employment process. A more thorough analysis of this new law can be found by clicking here to see a previous blog post.
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February 13, 2015

CLIENT ALERT: PHILADELPHIA BUSINESSES MUST OFFER PAID SICK LEAVE TO EMPLOYEES

by H. Adam Shapiro

On Thursday City Council in Philadelphia passed a paid sick day bill which Mayor Nutter immediately signed into law. In essence, an employee will accrue 1 hour of paid sick leave for every 40 hours worked which works out to be about 5 days of paid sick leave per year. Employers with less than 10 employees are exempt and need not provide paid sick time. Philadelphia is the 17th city in the country to require paid sick leave. Mayor Nutter previously vetoed this bill twice but stated that since the economy is doing much better it was the appropriate time to sign this bill into law. The law will take effect in 90 days.
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