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Herten, Burstein, Sheridan, Cevasco,
Bottinelli, Litt, Toskos & Harz, LLC
REPORT FROM COUNSEL
WINTER 2007 ISSUE
NEWS FROM HERTENBURSTEIN.COM
- On October 14, 2006 the Firm celebrated its 19th year at the annual
founder's day dinner. This year, everyone enjoyed a night on the water. Sailing
from Chelsea Piers in Manhattan, the firm boarded for a boat trip around
Manhattan Island on the Bateaux, an all glass boat that provided spectacular
views of the city.
- Steven B. Harz and Jodi L. Campbell have published another article. As
members of the firm's Labor and Employment Law Group, in the October 30, 2006
issue of the New Jersey Lawyer, Steven and Jodi have written an article
detailing the reshaping of New Jersey's Conscientious Employee Protection Act
(whistleblower act) based upon recent decisions by the New Jersey Courts.
- The Appellate Division recently upheld Judge Rachel Davidson's decision and
judgment on behalf of one of the firm's clients against a major developer in New
Jersey. Andrew T. Fede successfully argued on the appeal that the developer
wrongfully converted two trailers that were on the developer's property, but
were owned by the firm's client. The Court affirmed the order that the developer
pay the client for the full value of the trailers.
- Chris Karounos, a former summer law clerk of the firm and current Law Clerk
to the Honorable Menelaos W. Toskos J.S.C., received the Myron Harkvay Award
from Rutgers Law School. The Myron Harkvay award is awarded to the Most
Outstanding Trial Lawyer of the Graduating Class.
- Andrew T. Fede was successful in the Appellate Division in overturning a
trial Court Judge's decision regarding development approvals granted to the
firm's client by a local land use board. Although the land use board granted
extensions to the variance permitting the client to commence construction, the
client was denied building permits by the Construction Code official on the
grounds the extensions were ultra vires. The trial court dismissed the case,
however, the Appellate Division reversed, finding the municipality was estopped.
The Appellate Court directed the construction code official to review the
clients' plans and issue the buildings permits. Richard Jon Contant of the firm,
presented the initial application to the Board.
- Former summer law clerk, Robert Spiotti, after graduating from Wake Forest
Law School, came back to New Jersey and accepted a job with the New Jersey
Superior Court, Tax Division Judge Peter D. Pizzuto. Rob will be assisting Judge
Pizzuto in deciding the plethora of tax appeals filed by property owners in
Bergen County.
- Andrew T. Fede was successful in the Appellate Division, which affirmed
variances that were obtained by Richard Jon Contant on behalf of one of the
firm's clients who is a developer. The property is located in the New Jersey
Meadowlands Commission's District. The Commission's Resolution granting the
variances were affirmed by the Appellate Court's decision that rejected all the
arguments advanced on appeal by an objector seeking to overturn the approvals.
The developer is now permitted to go forth with his approvals that permit a
multi-family housing development.
COMMERCIAL LANDLORD SUED FOR UNSAFE
CONDITIONS
A silkscreen printing company with one employee rented a building from a
commercial landlord. The employee suffered permanent injuries after falling from
the stairs leading to the basement of the building. In the ensuing lawsuit
against the landlord, the employee alleged that the fall happened because the
stairs were wobbly, had no handrail, and had low ceiling clearance. The court
found that the landlord had no liability.
Bearing in mind that there was no direct contractual relationship between the
employee and the landlord, there could be a duty of care running from the
landlord to a third party (such as the employee) only in one of two
circumstances: if the landlord bound itself by contract (i.e., in the lease) to
make repairs and then did so negligently, or if the dangerous defect was in an
area over which the landlord retained control, such as a common area. The case
before the court presented neither of these circumstances.
The fall occurred in an area clearly leased and controlled by the tenant. In
unambiguous language, the lease provided that the tenant would have exclusive
control of the premises and that the tenant had the obligation to maintain the
building at its own expense. It was necessary under the terms of the lease for
the landlord to approve of repairs made by the tenant, and the landlord reserved
the right to come onto the premises to make repairs that were "compatible with
the lessee's use of the premises." Nonetheless, the result of the negotiations
between the landlord and tenant, which were small entities with equal bargaining
power, was that the responsibility for maintaining the building in a safe
condition fell to the tenant, not the landlord. The employee's remedies for his
injuries were effectively limited to workers' compensation benefits, for which
he was qualified and which he had begun to receive.
It made all the difference to the outcome that the lease was commercial,
rather than residential. A commercial lease is essentially a business
transaction, a contract for possession of property, and the "ancient" common-law
rule is still observed, in keeping with the maxim "let the buyer (tenant)
beware." In such a case, the terms of the agreement are most important.
By contrast, with regard to residential leases, the law has evolved more
favorably for tenants, for various public policy reasons, including disparity in
bargaining power between the parties. A duty of care for residential landlords
need not be found in the fine print of a lease. Rather, a residential landlord
is bound to act as a reasonable person would under all of the surrounding
circumstances, including the likelihood of injuries, the probable seriousness of
such injuries, and the burden of reducing or avoiding that risk. In short, the
employee would have fared better in court if the stairs from which he fell had
been in a rented apartment.
COMPUTER FRAUD AND ABUSE ACT
Since 1994, the federal Computer Fraud and Abuse Act (CFAA) has provided
civil remedies to complement the original criminal sanctions for the theft and
destruction of computer data, fraudulent use of passwords, and various means of
committing fraud by unauthorized access to computers. For a typical claim under
the CFAA brought against a defendant who violates the statute in an attempt to
gain a competitive advantage over the plaintiff, there must be a financial loss
of at least $5,000 in order to maintain a civil cause of action.
The ability to obtain injunctive relief under the CFAA is at least as
valuable to an injured party as the recovery of damages. To win an injunction,
however, the plaintiff must be in a position to prove not just the unauthorized
intrusion into the plaintiff's computers, but also specifics as to what
information was taken by the defendant and how it was used to harm the
plaintiff.
In a recent case, a former officer and an employee of a party supply store
were alleged to have gathered information from their former employer's computer
without authorization, so as to get a leg up on the plaintiff in their new,
competing business. The elements for the claim were in place, except for the
critical proof as to what data records of the plaintiff's were accessed and
whether such records had been downloaded, copied, or printed by the defendants.
The plaintiff business was denied an injunction in federal court because of this
gap in its proof.
The case of the competing party-supply businesses offers object lessons for
how businesses can best put themselves in a position to take full advantage of
the Act if they have been victimized. One advisable technical step is to include
an auditing function in a computer system that automatically records what
documents have been accessed and what happens to the documents when they are
accessed. The resulting "audit trail" can be a valuable piece of evidence in an
action under the CFAA. When employees are allowed to work at home on their
computers, employers should have policies allowing them to inspect those
computers when the employment ends and to retrieve any of their data.
Although technical measures and policies on computer technology are
important, simple use of imagination can also produce relevant noncomputer
evidence for a CFAA claim. The court in the unsuccessful action by the
party-supply store observed that the plaintiff could have presented evidence
that the defendants had taken particular actions to the competitive disadvantage
of the plaintiff very soon after their unauthorized access to the plaintiff's
computers. This would have allowed an inference that secrets had been taken
from, and then used against, the plaintiff.
EMPLOYEE OR INDEPENDENT CONTRACTOR?
The legal distinction between an employee and an independent contractor may
seem like a subject suitable only for a law school exam, but it has real-life
significance for both employers and employees.
Considering just federal taxes, for example, if a worker is an employee, the
employer must withhold income tax and the employee's part of Social Security and
Medicare taxes. The employer also is responsible for paying Social Security,
Medicare, and unemployment taxes on wages. An employee can deduct unreimbursed
business expenses if the employee itemizes deductions and the expenses are more
than 2% of the adjusted gross income.
If the worker has independent contractor status, however, there is no
withholding, and the contractor is responsible for paying the income tax and
self-employment tax. In that situation, it also may be necessary to make
estimated tax payments during the year. An independent contractor can deduct
business expenses, but on a different schedule of the tax return than is used by
an employee.
So how do you tell the difference between an employee and an independent
contractor? There is no single, quick answer. The particular facts of each case
must be examined. However, relevant facts can be grouped into three general
categories: behavioral control; financial control; and relationship of the
parties.
Behavioral Control
The focus here is on who has the right to control how a worker does the work,
rather than simply on the end result of the work. If a business has that right,
the worker is an employee; if the worker retains that right, he is an
independent contractor. The more that a worker gets instructions or training on
how the work is to be done--such as determining what equipment to use, hiring
assistants, or deciding where to get supplies--the more likely it is that the
worker is an employee.
Financial Control
Apart from the actual performance of work, there is the question of a right
to control the dollars-and-cents part of the work. Rather than having a direct
financial stake in the business, an employee essentially works for a paycheck
and maybe some reimbursed expenses. Some factors pointing more toward an
independent contractor status include a worker's significant investment in the
work, his or her lack of a right to reimbursement of even high business
expenses, and his or her potential to realize a profit or suffer a loss.
Relationship of the Parties
This factor considers how the parties themselves perceive their relationship.
While an independent contractor, as the term suggests, is on his own concerning
benefits, a worker who is provided insurance, retirement benefits, or paid leave
is probably an employee. Sometimes the clearest picture of a worker's status is
to be found in a written contract. The parties' intent, as shown in a contract,
can be decisive, especially if the other factors do not lead to a conclusive
answer.
EMPLOYMENT DISCRIMINATION AND RETALIATION BY
EMPLOYERS
For as long as federal law has prohibited discrimination in the workplace, it
also has separately prohibited punishing, or "retaliating against," an employee
who opposes the prohibited discrimination. Employment discrimination can occur
on the basis of factors such as race, sex, and religion. Usually, there is an
anti-retaliation provision found in the same laws that prohibit the underlying
discrimination.
There are dozens of federal statutes with anti-retaliation provisions. The
policy of protecting those who object to what they perceive as unlawful
discrimination is so ingrained in federal civil rights law that it has even been
read into laws by implication, even though it was not there in black and white.
In 2005, the United States Supreme Court ruled that Title IX, which prohibits
sex discrimination in educational programs or activities receiving federal
financial assistance, also implicitly prohibits retaliation against individuals
who oppose conduct that allegedly violates Title IX.
Court Expands Retaliation Claims
In the 2006 term, the Court took the additional step of articulating an
expansive standard for determining what types of employer conduct, when
accompanied by a retaliatory motive, can support a cause of action for
retaliation. The underlying case concerned a claim of sexual harassment, but the
ruling has ramifications for all claims based on retaliation for opposing civil
rights violations. As the 2006 case itself demonstrated, with the right set of
facts it is possible for a plaintiff to be successful on a claim of retaliation,
even though the underlying claim of discrimination has failed. The two types of
wrongful conduct are independent of one another.
In this case, the plaintiff was the only woman working in the track
maintenance department of a railroad. She asserted that she was subjected to
sexual harassment by her supervisor, in the form of insulting and inappropriate
remarks. Because the employer took prompt corrective action, including
punishment of the harassing supervisor, it had no liability for the harassment
claim itself.
However, even as the employer took its corrective action, it also reassigned
the plaintiff from her job as a forklift operator to a harder, dirtier, and
generally less desirable job. Later, the railroad also suspended the plaintiff
for over a month without pay for alleged insubordination, although, in time, the
railroad's own grievance committee found no insubordination and awarded her back
pay for the period of the suspension.
In a unanimous decision, the Court rejected requirements that some lower
courts had imposed for showing prohibited retaliatory conduct, and allowed a
jury verdict for the plaintiff on her retaliation claim to stand. Under the
now-abandoned tests, the conduct either had to amount to failing to hire,
failing to promote, or termination, or it at least had to materially change the
"terms and conditions" of employment. Instead, the Court adopted a rule by which
any adverse retaliatory action may support a retaliation claim, as long
as it is reasonably likely to dissuade employees from engaging in protected
conduct.
Context Is Significant
As the Court put it succinctly, in determining when an employer action
constitutes prohibited retaliation, "context matters." In a hypothetical example
mentioned by the Court, while a change in the schedule of many employees may
have little impact, such a change as a form of retaliation may be so significant
to the mother of school-age children that it would deter her from complaining
about discrimination at work. Similarly, an employer's failure to invite an
employee to lunch is normally not the stuff of retaliation, unless it was a
weekly lunch meeting that was important to any employee's advancement in the
company.
A petty slight or minor annoyance is still not enough to support a claim for
retaliation. That said, the risk of confusing such behavior with more
significant adverse action is significant enough that employers are now well
advised to give their managers the following straightforward direction: Do not
do anything to punish someone for having opposed an employer practice that is
alleged to be discriminatory.
DID YOU KNOW?
The IRS recently began a pilot project that uses private debt-collection
agencies to collect back taxes. The controversial program will employ three
private collection agencies to target 40,000 delinquent accounts of taxpayers
who are in the red to Uncle Sam for $25,000 or less. The agencies get to keep up
to 25% of what they collect.
Criticism of the program includes the fear that tax delinquents will be
harassed illegally, even though the agencies will be subject to fair debt
collection laws. There is also concern about turning over sensitive personal and
financial information to private companies.
If you are one of the 40,000 accounts targeted, the IRS must inform you in
writing. However, you will be allowed to opt out at that time and deal directly
with the IRS.
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