Hanlon Niemann Blog | A Freehold, New Jersey Law Firm

By Fredrick P. Niemann, Esq. New Jersey Business Lawyer

What actions can be brought against a management employee and officer of a corporation who secretly forms a competing business while employed by the corporation?

ANSWER
New Jersey courts have found that if a management employee secretly forms a competing corporation, then the management employee may be liable for a breach of duty of loyalty to the employer which can also be imputed to the newly formed competing corporation.

In a recent case, a vice president/director and his wife formed two businesses while still employed at Vibra-Tech. One of these businesses was in direct competition for the same customer base. The other business sold equipment to Vibra-Tech. Vibra-Tech had no knowledge that one of their own executives was competing with the corporation. A suit was brought against the defendants for unfair competition and breach of fiduciary duty. The defendants moved for summary judgment, arguing that there were no fiduciary duties that the two companies owed Vibra-Tech.

The court discussed earlier New Jersey case law on fiduciary duty and stated that “A hallmark of a fiduciary relationship is one party’s placement of “trust and confidence in another.” This relationship is generally one of unequal terms, where one party is dependent on the advice and care of another. This is the duty that management and directors customarily owe their employees. Directors and officers of a corporation also have both a duty of care and/or a duty of loyalty to the best interests of the business entity. Competitors of a business entity contract in their own self interest and have no such fiduciary duty.

The attorney for the defendants argued that the two businesses of the defendant had no fiduciary duty since they had no direct relationship with the plaintiff.

The court agreed that there was no direct fiduciary duty between the businesses, but found that New Jersey courts had in similar cases,” imputed the individual defendants’ conduct to the corporation and held it liable for breach of the fiduciary duty of loyalty.”   Since the proof of a breach of imputed fiduciary duty of loyalty involves an intensive inquiry into the facts, and an inquiry as to whether the individual utilized the corporate veil to facilitate a breach of duties, the court denied summary judgment, since the facts before the court were either missing or disputed.

Contact me personally today to discuss your business law matter.  I am easy to talk to, very approachable and can offer you practical, legal ways to handle your concerns.  You can reach me toll free at (855) 376-5291 or e-mail me at fniemann@hnlawfirm.com.

By Fredrick P. Niemann, Esq. an Employment Law Attorney

Wrongful termination, Wrongful dismissal, Employment Law, Discharge, Wrongful Discharge, Rights of Employee to Private Life, Employer, Employee

 Many employees do not realize that employers in New Jersey may have the right to regulate and prohibit personal lifestyle choices after work and during their private time unless the conduct falls within a clear cut constitutional privacy protection or meets a clear mandate of public policy protecting private lifestyle choices.  Generally, the prohibited conduct relates to extramarital affairs, romantic relationships among co-workers, free speech, smoking bans and other private lifestyle choices.    All employers and employees are cautioned that the scope of the prohibited conduct will be closely reviewed by the Courts in New Jersey.   New Jersey seems to follow (as customary) its own thoughts on permissible versus impermissible conduct. 

In a leading case, the Court has indicated that while an employer is free to discharge an employee at will, the general rule must yield when an employer Aacts contrary to public policy in accordance with the leading New Jersey case of Pierce vs. Ortho@.  
Questions about what may or may not be permissible versus dischargeable private behavior by an employer?  Contact Fredrick P. Niemann a New Jersey Employment lawyer who directs the firm’s employment related issues.  He can be reached toll-free at (888) 800-7442 or by e-mail at fniemann@hnlawfirm.com.

Contact me personally today to discuss your employment matter.  I am easy to talk to, very approachable and can offer you practical, legal ways to handle your concerns.  You can reach me toll free at (855) 376-5291 or e-mail me at fniemann@hnlawfirm.com.

By Fredrick P. Niemann, Esq., a NJ Shareholder Dispute Attorney

 
Shareholder’s agreements should be an essential part of every small corporation’s structure in New Jersey. These agreements outline every aspect of  corporate government and shareholder ties to the business, including ownership and voting rights, control and management of the corporation, methods of resolving disputes, and two key provisions known as the buy-sell agreement and the restrictive covenant.

Buy-sell provisions and restrictive covenants are both integral parts of a quality shareholders agreement, particularly in smaller businesses with fewer shareholders. Smaller corporations often elect to establish ownership via shares in the business. For example, a small corporation with four co-owners elects to establish that each member owns 25 shares out of 100, thus 25% of the business. The shareholders agreement is an agreement between all of the shareholders in the corporation and will serve as the main document that Courts will look to whenever a dispute arises.

Shareholders agreements can be simple or complex and everyone is unique to the corporation it is written for. While many shareholders today are knowledgeable enough to make these agreements, they often are created without the assistance of a New Jersey Shareholders Attorney, thus lacking key components that leave many of the shareholders vulnerable. The buy-sell agreement and restrictive covenant provisions are two of these key components.

A buy-sell agreement dictates what will happen to the shares of a shareholder who wishes to leave the company. Since a shareholder who wishes to leave must sell their shares, a dispute often arises as to who they are selling their shares to and what price they are being sold for. Often the departing shareholder will want to sell shares to the highest bidder. This may be someone that the remaining shareholders do not want to be in business with. Also, if the corporation itself or the remaining shareholders are “buying out” the departing shareholder, the departing shareholder often thinks the shares are worth more than the remaining shareholders do. Fortunately, a typical buy-sell provision settles these disputes beforehand, stating who will buy the shares and the price they will be bought at when a departing member leaves the corporation. If any debate arises as a shareholder is leaving, the Courts will simply enforce the shareholders agreement and the buy-sell provision.

As for restrictive covenants, these are most useful for smaller corporations that licensed professions and professions involving particularized skills, such as doctors, attorneys, scientists, etc. A restrictive covenant lays out an area around the business where a departing member is forbidden from working, whether it is with another rival corporation or in their own practice. As long as they are reasonable in space and time, Courts will uphold restrictive covenants. These are useful to prevent a shareholder from departing and stealing clients from the remaining shareholders.

Shareholder agreements are complicated and should involve many different aspects that the normal shareholder often does not think of. Always consult a shareholders attorney before signing such an agreement. Please contact Fredrick P. Niemann, Esq., a NJ Shareholders attorney, today toll-free at 888-800-7442 or by email at fniemann@hnlawfirm.com.  For further information, go to http://www.youtube.com/user/NJBusinessLaw#p/search/0/pKIalQAdprY to learn more.

By Fredrick P. Niemann, Esq., a NJ Employment Law Attorney

 
Many employees throughout the state of New Jersey are unaware as to what exactly their employment contracts say. When they are hired and given the contract to sign, many individuals simply glance over the document and then sign their name on the dotted line.  Some simply turn to the last page and sign. Either way, many employees today are unaware as to the implications this document can have on their future. It is important to read and understand every single part of your employment contract, since your signature effectively promises that you will abide by all of the terms included throughout it.

For those that are unaware with New Jersey law pertaining to contracts, a contract is considered a legally binding document. This means that the law binds the parties to the terms of the agreement. If there is a dispute between an employer and employee related to an issue that is addressed in the employment contract, the Courts will first look to the contract to see what the parties agreed to. By signing the document, both the employer and employee certify that they agree to the terms contained within. It does not matter if one of the parties did not read the employment contract. If you signed the document, the Courts will hold you to its terms. “I did not read the contract” is NOT a defense that will be considered by the Courts.

As mentioned earlier, employment contracts often have intended results for either an employer or employee who did not read the contract or was not familiar with it’s terms when they signed the contract. In a recent NJ Court case involving a doctor leaving her practice with other doctors, the Court upheld the terms of the employment contract over the objection of the remaining doctors in the practice. The departing doctor wished to no longer work with the other doctors in the practice and wanted to leave the business. However, a dispute arose as to the value of the shares of the departing doctor and whether the remaining doctors would be forced to buy them. The Court looked no further than the employment contract between the parties, which required the remaining partners to buy all departing doctors shares in the business for a specified price and also required the departing doctor not to practice within a certain area of the practice.

Employers know they often have the upper hand when it comes to employment contracts. They create the terms of the contract and employees usually agree to them without any objection, often failing to even read the document. As an employee in New Jersey, you have the right to negotiate parts of an employment contract. Always be sure to read and have your employment contract reviewed by a knowledgeable employment law attorney before you sign it. It can make all the difference.

If you have any questions regarding employment contracts, please contact Fredrick P. Niemann, an experienced NJ Employment Attorney today at 855-376-5291 or email him at fniemann@hnlawfirm.com. He would be happy to discuss your matter with you.

By Fredrick P. Niemann, Esq., a NJ Employment Law Attorney

 
New Jersey has specific laws in place that prevent discrimination by employers against employees. The New Jersey Law Against Discrimination applies to all different types of discrimination practices in the work environment, whether it be due to age, sex, race, or other instances. Just because you work for an employer does not give them the right to terminate or even demote you based on unlawful discrimination. You have rights under the NJ Law Against Discrimination and the New Jersey Courts will make sure the law is followed, even if you work for large companies.

The Courts recently heard a case against United Parcel Service (UPS), in which an employee claimed he was demoted from his managerial position as retaliation for him complaining about certain practices he observed in the work environment. The Employee cited the Law Against Discrimination as protection against his demotion, claiming that it was purely due to discrimination. The jury ruled in favor of the employee and the Court awarded the employee $200,000 for emotional distress and $500,000 in economic damages.

Big businesses often feel that since an employee works for them they are entitled to treat them however they please. Many people are not aware that discrimination involves more actions than simply firing someone. Demotion, skipping over someone for a promotion, and other actions can all be considered a violation of the Law Against Discrimination if discriminatory decisions take place in an employer’s actions. The State of New Jersey and the New Jersey Courts protect you and ensure these laws are followed.

If you have any questions regarding discriminatory practices in the workplace environment or employment law in general, please contact Fredrick P. Niemann, Esq. today. He can be reached at 732-863-9900 or by email at fneimann@hnlawfirm.com. Mr. Niemann would be more than happy to answer any questions you may have.

By: Fredrick P. Niemann, Esq., a New Jersey Employment Law Attorney
         
The case can be made that discriminating against an individual in the workplace because of the person’s gender, race religion, and similar characteristics is something of a behavioral aberration that is not a part of human nature – or at least most people would like to think that is the case.  But what about the scenario in which a manager takes it out on an employee who has sued or threatened to sue the employer (and maybe the manager, too) for some type of discrimination?  Such retaliation may not spring from the most noble of instincts, but it is rooted in common human emotions.

Psychological theorizing aside, the fact is that retaliation claims brought against employers have become the single largest type of claim filed with the federal Equal Employment Opportunity Commission.

Whether grounded in a statue or court-made law, practically any recognized form of employment discrimination is accompanied by a prohibition against any form of retaliation against the person who has complained of the discrimination.  Until recently, the claim for a prohibited form of discrimination typically was the main act, with a retaliation claim sometimes thrown in for good measure, and maybe even as an afterthought.  However, retaliation claims increasingly are taking center stage.

Recent U.S. Supreme Court cases have stimulated the filing of more such claims.  In 2009, the Court broadly construed the anti-retaliation provision in Title VII of the Civil Rights Act of 1964 as protecting workers who answer questions as part of an internal investigation by the employer, even though the statue uses an arguably narrower term in prohibiting retaliation for “opposing” unlawful employer practices.  According to the Court, the verb “oppose” extends beyond active, consistent behavior.  For example, it would be “opposition” if an employee took a stand against an employer’s discriminatory practices not by instigating an action, but by standing pat and refusing to follow a supervisor’s order to fire a subordinate worker for discriminatory reasons.

A prudent employer should take some basic measure to reduce the chances of liability for retaliation.  Adopt a written anti-retaliation policy.  Train managers in how to respond to complaints of discrimination.  Document all investigations of employee complaints clearly and thoroughly.  Finally, keep complaints of prohibited discrimination confidential, not as fair game for water-cooler conversations – a supervisor who does not even know about a complaint of discrimination cannot take action in retaliation for that complaint.

For more information on this and other employment matters, please contact Fredrick P. Niemann, Esq. at (888) 800-7442 or email him at fniemann@hnlawfirm.com.

By Fredrick P. Niemann, Esq., a NJ Employment Law Attorney in Retaliation Cases

The case can be made that discriminating against an individual in the workplace because of the person’s gender, race, religion, and similar characteristics is something of a behavioral aberration that is not a part of human nature—or at least most people would like to think that is the case. But what about the scenario in which a manager takes it out on an employee who has sued or threatened to sue the employer (and maybe the manager, too) for some type of discrimination? Such retaliation may not spring from the most noble of instincts, but it is rooted in common human emotions.

Psychological theorizing aside, the fact is that retaliation claims brought against employers have become the single largest type of claim filed with the federal Equal Employment Opportunity Commission.

Whether grounded in a statute or court-made law, practically any recognized form of employment discrimination is accompanied by a prohibition against any form of retaliation against the person who has complained of the discrimination. Until recently, the claim for a prohibited form of discrimination typically was the main act, with a retaliation claim sometimes thrown in for good measure, and maybe even as an afterthought. However, retaliation claims increasingly are taking center stage.

Recent U.S. Supreme Court cases have stimulated the filing of more such claims. In 2009, the Court broadly construed the anti-retaliation provision in Title VII of the Civil Rights Act of 1964 as protecting workers who answer questions as part of an internal investigation by the employer, even though the statute uses an arguably narrower term in prohibiting retaliation for “opposing” unlawful employer practices. According to the Court, the verb “oppose” extends be-yond active, consistent behavior. For example, it would be “opposition” if an employee took a stand against an employer’s discriminatory practices not by instigating an action, but by standing pat and refusing to follow a supervisor’s order to fire a subordinate worker for discriminatory reasons.

A prudent employer should take some basic measures to reduce the chances of liability for retaliation. Adopt a written anti-retaliation policy. Train managers in how to respond to complaints of discrimination. Document all investigations of employee complaints clearly and thoroughly. Finally, keep complaints of prohibited discrimination confidential, not as fair game for water-cooler conversations—a supervisor who does not even know about a complaint of discrimination cannot take action in retaliation for that complaint.

If you have questions regarding an employment law matter, please contact Fredrick P. Niemann, Esq., at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  He welcomes your inquiries.

Lauren Bercik, Esq., a NJ Employment Law Attorney

On-call employees are turning into a growing liability risk for employers, as some are claiming that companies are restricting their freedom too much, and not paying them for it.

Employment lawyers say that such claims are popping up in larger wage-and-hour class actions, with on-call employees suing for unpaid overtime, alleging that their freedom has gotten so limited that they may as well be hourly employees.

In Gomez v. Lincare Inc., a California appellate court recently revived an overtime class action brought by on-call workers of an in-home respiratory services provider. The employees allege that they deserve compensation for the time spent on call dealing with customer questions by phone, as well as for time spent on call but not handling customer inquiries.

In Sweat v. Battelle Memorial Institute, a group of lab technicians in Utah is suing Battelle Memorial Institute, a science and technology development company, alleging that the company required them to be on call during their lunch break, mandating they be on company premises, in company provided clothing and available for work. The plaintiffs claim they should be compensated for that time.

In Walsh v. Apple Inc., a former network engineer for Apple claims that the computer giant failed to pay network support staff members for on-call time.

“It’s definitely triggering litigation,” employment attorneys agree. “What employers need to do is take a look at what restrictions they place on on-call time.”

The key for employers is to make sure they’re not overly restricting on-call employees’ freedom. The less freedom an employee has while on call, the higher the risk that the on-call time qualifies as paid time. “With the way wage-and-hour class actions are filed over issues everyday, if you’re not looking at this, a plaintiffs’ attorney will be.”

Employers need to revisit their on-call policies and consider relevant factors, including geographic restrictions — whether employees are required to be near the office, at home or near a land line; how quickly employees should respond to calls; and how many calls an employee actually receives while on call.

The trick is to make sure on-call employees have the flexibility to do what they want to do. “If you’re on call, and you’re free to go to a restaurant or go to a movie, or go play golf or tennis, that’s fine.” “But if you’re told, ‘you have to sit in your house and can’t leave,’ then you have to be paid for that time.”

For further information and advice in any employment law matter, do not hesitate to contact me at 732-863-9900, or lbercik@hnlawfirm.com.

There’s Hope in Immunity

Fredrick P. Niemann, Esq., Business Litigation Attorney

Whether an employer-employee relationship ends on good terms or with acrimony, a common final act - the employee’s request for a reference for a new job - is increasingly leading to litigation.

From the former employer’s standpoint, it can be a case of damned if you do and damned if you don’t. A candid, negative response to the request can invite a suit by the former employee. A glowing recommendation that omits some serious shortcomings in the employee’s performance, or that declines to say anything about the employee except perhaps dates of employment, could result in litigation brought by the new employer, who would have preferred to be warned about a subpar employee. The prevalence of such disputes only figures to increase in the current economic downturn.

The growing dilemma is such that some employers are telling their employees from the outset that they will get no job reference - good, bad, or indifferent - when they leave. Under such a policy, inquiring prospective employers would get only the employment equivalent of “name, rank, and serial number.” Other employers are willing to give a reference, but only after they have in their files documents in which an employee consents to having prospective employers find out all there is to know, and waiving their right to sue over anything that is said in the reference.

The good news for businesses is that their exposure to liability to disgruntled former employees who requested references is constrained in most states by statute. These laws gen¬erally provide immunity to the givers of references, so long as their actions were not motivated by malice. Of course, former employees, perhaps hurting while in between jobs and inclined to blame former employers for their predicament, are quick to argue that a negative response to a reference request was malicious.

In one such case, a nurse sued her former supervisor for defamation when the supervisor responded to a request for a job reference by stating on a form, without elaboration, that the nurse had “unacceptable work practice habits.” A court ruled that the statement came within a statutory privilege or immunity for former employers’ communications to prospective employers concerning former employees, because it was information provided about a former employee’s work performance at the request of both the former employee and a placement agency.

Although the nurse made the general argument that the immunity was lost because the statement about her was made with malice, she was unable to back up that contention with factual evidence of ill will or spitefulness directed toward her. She argued, to no avail, that if the former employer considered her work habits to be acceptable enough not to fire her, then it was reasonable to infer that the later negative inference must have been motivated by malice.

For further information and advice in any business matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

Employers in service industries are well advised to pay close attention to their practices and policies affecting customers’ tips for their employees.  There are a variety of ways in which missteps can run afoul of federal or state laws, including the federal Fair Labor Standards Act (FLSA).

Employees might contend, for example, that the employer is effectively reducing their tip income by imposing various fees or other charges on customers.  Or, contrary to a requirement in the FLSA, employees who are paid less than the minimum wage might not be getting enough in tip income to make up the difference between their hourly rate and the minimum wage.

Recent cases in the news involved yet another alleged violation, sometimes taking place on a very large scale, where employees are made to share tip income with fellow employees who supervise them.

In one of the tip-sharing cases, a state court ruled in favor of a class of plaintiffs consisting of baristas, or coffee counter servers, whose tips were required to be shared with their shift supervisors, in violation of state law.

Change left for tips apparently adds up, as the judgment for the tens of thousands of servers, for about an eight-year period, topped $100 million, including interest.

The case was not cut-and-dried, as the supervisors were themselves hourly workers who had customer service duties in addition to the responsibility of scheduling workers and giving directions to the baristas. It was not a case of highly paid bosses dipping into the tip jars filled by customers they never saw in person.

When a shift supervisor hands a customer his latte and muffin, and the customer responds with a tip, the customer may assume that the money, or at least part of it, goes to the supervisor.  Instead, under the ruling, the supervisors must now keep their hands off the tips, and the employers must ensure such an outcome.

In the wake of this case, similar lawsuits have been filed against the same employer, a national chain, and against other employers in other states.

Companies in the restaurant, hotel, gaming, transportation, and delivery businesses face the largest risks for mishandling the treatment of tips.  There is another pending case in which casino dealers have complained that an employer’s new policy illegally requires them to share tips with floor supervisors.

The legal issues surrounding the treatment of tips are murky enough in any one state, but further complicating the matter is the fact that there are variations among the states and between the statutes for a state and for the federal government. This makes it especially risky for national employers to assume that a one-size-fits-all policy on tips will be sufficient for all of their locations.

“Back-room” personnel, shift supervisors, hostesses, greeters, drink servers, and other similar positions could be treated differently depending on what state you are in. Employers should regularly assess their job descriptions and tip-sharing policies against applicable state and federal laws. This kind of audit is useful not only for detecting or avoiding possible violations, but for laying the groundwork for a potential “good-faith” defense under the FLSA if litigation ensues.