Which State Law Applies?: Multijurisdictional Conduct and State Employment Law Statutes (Update)

In our May 28, 2010 blog entitled “Which State Law Applies?:  Multijurisdictional Conduct and State Employment Law Statutes”, we took a look at how courts apply state employment law statues when an employment-related decision or activity occurs in one state, the effects of which are only felt in another state.  We have two updates to that posting—a decision from the Federal District Court of Massachusetts and a decision from the New York State Court of Appeals.

First, in Gonyou v. Tri-Wire Engineering Solutions, 2010 U.S. Dist. LEXIS 51379 (D. Mass. May 25, 2010), Judge Nathaniel Groton found that Massachusetts’ overtime law applies to employees who work outside the state. 

In Gonyou, the plaintiff-employee, a Massachusetts citizen who alleged that he was owed some 350 hours of overtime pay, worked for the defendant-Massachusetts corporation in Connecticut.  The defendant moved to dismiss on the grounds that:  “1) statutes are presumed not to apply extraterritorially and 2) in deciding which state’s law to apply, the place of employment is the critical factor.”  The court denied each of these arguments, as follows. 

Regarding the defendant’s “presumption against extraterritoriality” argument, the court found that (i) Massachusetts has no such clearly pronounced policy (cf. Hadfield v. A.W. Chesterton Co., 2009 Mass. Super. LEXIS 230 (Mass. Super. Ct. Sept 15, 2009), and that in fact (ii) Massachusetts has “applied its statutory law to conduct outside its borders if sufficient contacts with the Commonwealth exists, as they do here” (see O’Connell v. Chasdi, 511 N.E.2d 345, 351 n.3 (Mass. 1987).  The court found the latter especially persuasive given that the plaintiff was a Massachusetts resident during all relevant times. 

The court also turned to the language of the state’s overtime statute, which provides:  “no employer in the commonwealth shall employ any of his employees in an occupation . . . for a work week longer than forty hours, unless such employee receives compensation for his employment in excess of forty hours at a rate not less than one and one half times the regular rate at which he is employed.”  Upon this language, the court found that the phrase “employer [not “employee”] in the commonwealth” is most reasonably “interpreted in this case as encompassing a Massachusetts corporation that operates in the Commonwealth and elsewhere, such as [defendant]”; basically, the question does not merely turn on the employee’s “place of employment.”  And again, the court found this especially persuasive given that the plaintiff lived in Massachusetts.   

Thanks to the Wage and Hour Counsel Law Blog for bringing this decision to our attention. 

Second, in Hoffman v. Parade Publ’ns, 2010 N.Y. LEXIS 1346 (N.Y. July 1, 2010), rev’g, 2009 N.Y. App. LEXIS 3559 (N.Y. App. Div. May 7, 2009), the Court of Appeals of New York in a 4-3 decision, overturned the decision of the Supreme Court, Appellate Division, adopting the so-called “impact” test.  The Court of Appeals stated:

The Appellate Division’s rule that a plaintiff need only plead and prove that the employer’s decision to terminate was made in the City is impractical, would lead to inconsistent and arbitrary results, and expands NYCHRL protections to nonresidents who have, at most, tangential contacts with the City.  Indeed, the permutations of such a rule are endless, and, although the locus of the decision to terminate may be a factor to consider, the success or failure of an NYCHRL claim should not be solely dependent on something as arbitrary as where the termination decision was made.  In contrast, the impact requirement is relatively simple for courts to apply and litigants to follow, leads to predictable results, and confines the protections of the NYCHRL to those who are meant to be protected—those who work in the City.

Id. at *7 (citing Administrative Code of City of N.Y. § 2-201 (defining the territory of the City as constituting the five boroughs, and declaring that the ‘jurisdictions and powers of the city are for all purposes of local administration and government . . . co-extensive with the territory . . . described”)).

The Court of Appeals also overturned the Appellate Division’s decision under the NYSHRL, finding that the intent of the statute is to “protect ‘inhabitants’ and persons ‘within’ the State, meaning that those who work in New York fall within the class of person who may bring discrimination claims in New York.”  Id. at *8.

The Court of Appeals concluded that under both the NYSHRL and NYCHRL, a non-resident must “plead and prove that the alleged discriminatory conduct had an impact” within the State of New York or New York City, respectively.  Id. (citing Pearce v. Manhattan Ensemble Theater, Inc., 582 F. Supp. 2d 175, 185 (S.D.N.Y. 2007); Lucas v. Pathfinder’s Personnel, Inc., 2002 U.S. Dist. LEXIS 8529, at *2 (S.D.N.Y. May 13, 2002); Duffy v. Drake Beam Morin, Harcourt Gen., Inc., 1998 U.S. Dist. LEXIS 7215, at *12 (S.D.N.Y. May 19, 1998)).    

Tip of the hat to the Adjunct Law Prof Blog for bringing this decision to our attention.

Please be sure to visit our website at http://RobertBFitzpatrick.com

3rd Circuit Affirms Workplace Head Scarf Ban

On August 2nd, the Third Circuit, in EEOC v. GEO Group, Inc., No. 09-3093 (3d Cir. Aug. 2, 2010) (available here), held that a private contractor running a Pennsylvania prison could ban khimars, head coverings worn by some of its female Muslim employees.

According to the company, the ban on khimars, was necessitated by safety and security concerns including the ability to smuggle items into the prison under the khimar, the possibility that a khimar could be used to strangle the employee wearing it, and the possibility of misidentification of the person wearing the khimar.

The employees argued that GEO’s stated reasons for banning the khimar were meritless; GEO did not offer reasonable alternatives for accommodating khimar-wearers; and that there is no legitimate safety concern due to employees’ wearing khimars within the secure perimeter of the prison.

In affirming the district court’s granting of summary judgment to the defendant employer, the Third Circuit held that, even though the khimars presented only a small safety risk, they did “present a threat which is something that GEO is entitled to attempt to prevent.”

The dissent, by Judge A. Wallace Tashima (visiting from the Ninth Circuit), focuses on several areas of material fact that made summary judgment inappropriate and argues that the majority’s legal analysis allows an employer to engage in religious discrimination so long as it can come up with a post-hoc safety rationale for its decision not to accommodate its employees’ religious practices.

The issues of khimar’s in the workplace was also considered by the Seventh Circuit in EEOC v. Kelly Services, Inc., 598 F.3d 1022 (8th Cir. Mar. 25, 2010) (available here). In that case, the EEOC filed suit against an employment agency for failing to refer a khimar-wearing employee to an employer printing company that had a policy banning loose fitting clothing because of safety concerns involving the heavy, rotating equipment employees used at the job site. The Seventh Circuit ruled in favor of the defendant holding that there was no evidence of discrimination by the employment agency because the printing company’s policy was a valid, non-discriminatory reason for not referring the employee to that company.

The GEO Group court cited to the Kelly case when it discussed what exactly a “khimar” is. "The EEOC never introduced a khimar into evidence. Although khimars may come in different shapes and sizes we note the description adopted by a sister circuit that stated 'A khimar is a traditional garment worn by Muslim women that covers the forehead, sides of the head, neck shoulders, chest and sometimes their waist,' EEOC v. Kelly Servs., 598 F.3d 1022, 1023 n.1 (8th Cir. 2010) (quotation and citation omitted), a description similar to that provided in the EEOC's complaint.”

Although this case stands for the principle that safety concerns can outweigh an employer’s duty to provide religious accommodations, tip of the hat to Philip Miles at Lawffice Space for pointing out that since most workplaces are significantly different than prisons, employers should not consider this a “green light” to ban head scarves. Also, a tip of the hat to As Paul Mollica at Daily Developments in EEO Law points for his post on this case.

Please be sure to visit our website at http://RobertBFitzpatrick.com

Third Circuit Finds Law Firm Shareholder Not Employee Under Federal and State Anti-Discrimination Laws

In Kirleis v. Dickie, McCamey & Chilcote, P.C., 2010 U.S. App. LEXIS 14530 (3d Cir. July 15, 2010), Judge Jane Roth, writing for a panel of the Third Circuit, held that the plaintiff, a “Class A Shareholder-Director” of Pittsburgh-based law firm DMC, was an “employer”—not an employee—under Title VII, the Equal Pay Act, and the Pennsylvania Human Rights Act; and thus she “was outside the protection of the employment discrimination laws.”

In so holding, the court examined the plaintiff’s shareholder-director status in light of Clackamas Gastroenterology Assocs., P.C. v. Wells, 538 U.S. 440 (2003).  In Clackamas, the Court adopted the following six-factor test, to determine whether one is an employer or an employee entitled to invoke the antidiscrimination laws:

1.      Whether the organization can hire or fire the individual or set the rules and regulations of the individual’s work;

2.      Whether and, if so, to what extent the organization supervises the individual’s work;

3.      Whether the individual reports to someone higher in the organization;

4.      Whether and, if so, to what extent the individual is able to influence the organization;

5.      Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts; and

6.      Whether the individual shares in the profits, losses, and liabilities of the organization.

Id. at 449-50 (quoting 2 Equal Employment Opportunity Commission Compliance Manual § 605.0009 (2000)).  The Clackamas Court noted further that the touchstone of the inquiry is control, which “depends on ‘all of the incidents of the relationship . . . with no one factor being decisive.’”  Id. at 449, 451 (quoting Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 324 (1992)).

In applying the above factors, in Kirleis, the court found that the plaintiff was not a “mere employee of DMC,” but rather an employer, as she “has the ability to participate in DMC’s governance, the right not to be terminated without a 3/4 vote of the Board of Directors for cause, and the entitlement to a percentage of DMC’s profits, losses, and liabilities.”  Kirleis, 2010 U.S. App. LEXIS, at *4 (citing Solon v. Kaplan, 398 F.3d 629, 633 (7th Cir. 2005) (termination only by 2/3 vote of general partners, access to financial information, participation in firm governance, and a share in profits and losses distinguished a law firm partner from associates and rendered him an employer); Schmidt v. Ottawa Med. Ctr., P.C., 322 F.3d 461, 467-68 (7th Cir. 2003) (a shareholder in a professional corporation who possesses the right to vote on matters put before the board and the opportunity to share in profits is an employer for the purposes of the anti-discrimination laws).

Tip of the hat to the New Jersey Employment Law Blog and the Lawffice Space blog for calling this decision to our attention.

Please be sure to visit our website at http://RobertBFitzpatrick.com

Third Circuit Preliminarily Enjoins Company Vice President from Working For Competitor Based on Concerns Regarding Disclosure of Trade Secrets

 In Bimbo Bakeries USA, Inc. v. Botticella, No. 10-1510, 2010 U.S. App. LEXIS 15314 (3rd Cir. July 27, 2010) (copy available here) Bimbo Bakeries sued Chris Botticella, Bimbo's former vice president of operations, after Botticella accepted a job offer with Hostess, a competitor.  Bimbo sought to preliminarily enjoin Botticella under the Pennsylvania Uniform Trade Secrets Act (PUTSA) from starting work for Hostess, on the grounds that there was a high likelihood that Botticella would disclose Bimbo's trade secrets to Hostess.  The U.S. District Court for the Eastern District of Pennsylvania (Judge R. Barclay Surrick) granted the preliminary injunction, and on appeal, a panel of the Third Circuit (Judges Smith, Fisher, and Greenberg) affirmed.

The Third Circuit's opinion was based in part on the holding that Botticella's new employment would likely result in the disclosure of Bimbo's trade secrets.  Under the PUTSA, the relevant consideration in determining whether to grant such an injunction is whether there is a sufficient likelihood or substantial threat of disclosure of trade secrets.  The Court held that there were sufficient facts for the District Court to have found that this standard was met.  For example, during the time period between when Botticella accepted Hostess' job offer and when he ceased working for Bimbo, he continued to have executive-level access to Bimbo's confidential and proprietary information, and in fact accessed a number of highly sensitive files during his final days at Bimbo.

Mr. Botticella attempted unsuccessfully to argue that Bimbo had to meet a higher standard of proof in order to be entitled to such an injunction.  In particular, rather than only having to show a sufficient likelihood or substantial threat of disclosure of trade secrets, Botticella argued that Bimbo should have to show that disclosure of trade secrets would be inevitable - i.e., that it would be "virtually impossible" for him to do his job for Hostess without disclosing Bimbo's trade secrets.  The Third Circuit rejected this argument and held that the "sufficient likelihood or substantial threat" test was the proper standard under the PUTSA.

The Court further rejected Botticella's attempt to distinguish between the disclosure of technical vs. non-technical trade secrets, and held that trade secrets do not have to be technical in nature in order to be covered by the PUTSA.

A tip of the hat to the following authors & firms for their insightful articles on this case:

• Morgan Lewis, Third Circuit Clarifies Availability of Preliminary Injunction to Prevent Former Employee from Working for a Competitor, Labor and Employment Lawflash, July 30, 2010 (available here).

• Andy Arnold, A Bimbo By Any Other Name: Third Circuit Upholds "Inevitable Disclosure" Injunction, Beat Your Non-Compete Blog, August 2, 2010 (available here).

• James McNairy, Bimbo Bakeries v. Boticella: Man vs. Muffin, Muffin Wins Injunction, Trading Secrets Blog, August 3, 2010 (available here).

Please be sure to visit our website at http://RobertBFitzpatrick.com