A Violation of a Regulation Can be “Knowing” Even if There is No Judicial Decision Saying So at the Time of the Conduct at Issue

Allstate Ins. Co. v. Northfield Medical Center, P.C., ___ N.J. ___ (2017).  After a bench trial, defendants were found to have violated the Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 to -30 (“IFPA”).  The violation arose from defendants’ use of “a practice structure that was designed to circumvent regulatory requirements with respect to the control, ownership, […]

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A Criminal Justice Reform Act Case for the Supreme Court in September

The Supreme Court announced today that it has granted review in State v. Newman.  The question presented, as phrased by the Supreme Court Clerk’s Office, is “Did the trial court err in granting the State’s motion for pretrial detention, pursuant to the Criminal Justice Reform Act, N.J.S.A. 2A:162-15 to -26; and, if so, did the […]

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Read Before You Click: The Enforcement of Web-Based Restrictive Covenants and Arbitration Agreements Against Employees

When was the last time you clicked a box indicating your agreement to terms of service without actually reading, let alone understanding, the terms and conditions of service? The use of “clickwrap” whereby users of web-based applications memorialize their acceptance of legal agreements by clicking something, like a check box, is commonplace in the digital world. In the employment arena, however, the use of such web-based platforms and click-to-accept legal agreements is relatively new. Still, courts have not hesitated to apply traditional principles of contract law to these agreements and enforce them against unsuspecting and often oblivious employees, so long as the clickwrap agreements are conspicuously displayed on the web-based platform and reasonably communicate the employer’s terms to its employees.

For example, in ADP v. Lynch, the Third Circuit affirmed the District Court’s issuance of preliminary injunctive relief and enforcement of web-based “click to accept” restrictive covenants against two former employees of ADP. The former employees had agreed to the restrictive covenants when they clicked a box accepting the terms and conditions of their stock awards, which terms and conditions included noncompete and nonsolicitation agreements. While employed by ADP, the employees had on separate occasions accepted performance-based incentive stock awards offered by the company. To accept the stock awards, the employees were required to open and access a webpage containing the award documents. The webpage provided: “you must select the checkbox to indicate you have read all associated documents before you can proceed.” The webpage included a checkbox next to the statement, “I have read all the documents below.” Also next to that checkbox was a link to open a 19-page PDF document, which included the stock award plan, award agreement, and subject noncompete agreement. The award agreement specifically conditioned the award upon the employee’s acceptance of the noncompete agreement, which included a 12-month prohibition against (i) joining a competitor of ADP, and (ii) soliciting the business of any current or prospective client of ADP. The employees subsequently resigned from ADP and began working for a competitor. ADP filed suit seeking the enforcement of the noncompete agreement through preliminary injunctive relief. The District Court granted the relief (in part) and enjoined the employees from engaging in competition and soliciting the business of ADP clients and certain prospects.

On appeal, among other things, the employees argued that by checking the box, they did not expressly agree to the terms and conditions set forth therein. The employees emphasized they were never required to check a box expressly agreeing to, accepting or acknowledging the terms. Further, the employees argued they did not recall actually reading the terms and therefore should not be bound by them. Neither the United States District Court for the District of New Jersey nor the Third Circuit Court of Appeals found these arguments persuasive. The courts held that the employees checked various boxes indicating their awareness of the terms and conditions of the agreements, and then they clicked the “Accept Grant” button and entered personal passwords in order to consummate the agreement. Given the web-based clickwrap agreement incorporated a hyperlink to the 19-page PDF document, which set forth the entirety of the parties’ agreement, the courts validated the “click to accept” agreement and enforced the noncompete against the employees.

Similarly, in Singh v. Uber Techs. Inc.,  the United States District Court for the District of New Jersey upheld and enforced an arbitration agreement advanced by the employer, Uber, against its employee. Uber argued that Singh, its employee, was bound by an arbitration clause set forth in a web-based Raiser Software License and Online Services Agreement (the “Raiser Agreement”) Singh accepted electronically when he registered as a driver through the use of the Uber smartphone application. When the employee logged on to the Uber App, he was given the opportunity to review the Raiser Agreement by clicking a hyperlink within the software application. To advance past the screen with the hyperlink and actively use the Uber App, the plaintiff had to confirm that he had first reviewed and accepted the Raiser Agreement by clicking “YES, I AGREE.” Then, after clicking “YES, I AGREE,” he was prompted to confirm that he reviewed and accepted the agreement for a second time.

The court’s decision upholding and enforcing the web-based arbitration agreement between employer and employee rested on many key facts, including:

• The employee was permitted to spend as much time as needed to review the Raiser Agreement on his smartphone before accepting it;
• After confirming his acceptance for a second time through the Uber App, the Raiser Agreement was uploaded to the employee’s “driver portal,” where he could access the agreement at his leisure, either online or by printing out a hard copy;
• The arbitration agreement was displayed conspicuously and prominently on the first page of the Raiser Agreement; and
• The agreement encouraged the employee to consult with an attorney before agreeing to its terms and conditions.

Additionally, and importantly, the court held that the Raiser Agreement was not a contract of adhesion because, among other things, the arbitration clause set forth in the Raiser Agreement had an opt-out provision. The employee had 30 days from receipt and acceptance of the Raiser Agreement to opt-out of the arbitration provision. By virtue of this opt-out, the arbitration provision actually was not mandatory, but voluntary, and became mandatory only after the 30-day opt-out window closed.

In its enforcement of the arbitration clause, the Court, citing ADP v. Lynch among other controlling precedent, wrote:

“In the internet era, when agreements are often maintained, delivered and signed in electronic form, a separate document may be incorporated through a hyperlink . . .” But, before binding a party to the terms and conditions of a hyperlinked agreement, courts must first look “to whether users were provided with a ‘reasonably conspicuous notice of the existence of contract terms’ and whether the user registered an ‘unambiguous manifestation of assent to these terms.'” Courts must determine whether an online agreement that incorporates a hyperlinked-agreement by reference “generally provide[s] ‘reasonable notice'” such that the terms and conditions of that agreement apply. If this condition is met, a party will be bound by the hyperlinked-agreement, even if that party did not review the terms and conditions of the hyperlinked agreement before assenting to them. “[T]o hold otherwise would contravene the well settled principle that ‘[a] failure to read a contract will not excuse a party who signs it, nor will the party’s ignorance of its obligation.'”

In short, the court held that the plaintiff-employee received reasonable notice as to the existence of the terms and conditions of the hyperlinked Raiser Agreement, which the employee was required to review and “click to agree” before using the Uber App and becoming an Uber driver.

These two recent cases are exemplary in many respects. First, they signal the advent and enforcement of web-based agreements between employers and their employees. Though employees still can expect the (often painful) obligatory HR meeting their first day on the job (during which most HR forms and agreements are signed), these web-based “click and accept” agreements are becoming far more widely used in employment processes, from web-based employment job applications to the use of an employer’s web-based platform or smartphone user application. That “check and click” is not as insignificant as it seems. Employees should read and understand the fine print before checking the box.

Second, as noted above, in their review of these matters, the courts have outlined certain rules of the road employers should follow to withstand scrutiny and maximize the likelihood that their web-based agreements will be validated and enforced. For example, the terms of important agreements should not be hidden in a small scroll box or in a way that downplays or minimizes their importance to the employee. For the employee to be bound by the terms of a web-based agreement, the terms should be displayed as conspicuously and obviously as possible, with the checkbox agreement presented immediately thereafter. Employers seeking advice on best practices or the review of their web-based terms and conditions should consult with an employment attorney.

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Probating a Copy of a Will

When an Executor named under a Last Will and Testament seeks to probate the Will of the Decedent, the original copy containing the original signatures of the Decedent must be submitted to the Surrogate’s Office. What happens, however, if the original copy with the original signatures cannot be located? Under such circumstances, the only option may be to seek to probate a copy of the original Will.

In general, if the original document cannot be located and all beneficiaries or potential heirs of the Estate agree to probating a copy, the process can be smoothly completed once a proper application is filed. On the other hand, should a named beneficiary or a potential heir of the Estate challenge the copy of the Will being submitted for probate, then in that event, the resolution may become onerous.

In general, if an original of a Will cannot be located there is a presumption that the original was destroyed by the Decedent, and therefore, was revoked. Once a Will has been revoked or destroyed, either the decedent will be deemed to have died without a Will, or possibly a previous Will can be submitted for probate provided an original document with original signatures exists.

Should a party file an action to probate a copy of the purported Last Will and Testament, this party must rebut the presumption that the original was not destroyed and revoked by clear and convincing evidence. This is a very difficult burden of proof to sustain, as the evidence must clearly and convincingly demonstrate that the original was not destroyed, but instead, was lost and that the Court is justified in probating a copy of the Will.

Any person who opposes probating a copy of a Will may seek to present proof that the Will was in fact revoked. As such, a hearing on the merits before the Court is typically required in contested matters. During an evidentiary hearing, the Court would have to determine whether the copy of the Will should be admitted to probate and whether the legal presumption of revocation has been rebutted by clear and convincing evidence by the proponent of the Will.

As discussed above, should the burden of proof not be met by the proponent of the copy of the Will, then in that event, the Decedent will have deemed to have died without a Will. It is possible, however, if a pre-existing Will exists which contains original signatures that this previous Will could be admitted to probate. As such, seeking to probate a copy of a lost Will can be difficult and costly should a party oppose its admission to probate.

For these reasons, it is suggested that a purported Executor consult with an attorney concerning this technical process when faced with these circumstances.

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“Summertime, Summertime, Sum-, Sum-, Summertime” in the Appellate Division

The Appellate Division schedule of Parts for the period June 19 through September 13 was published today and is available here.  As usual, no judge is on duty for more than one two-week period during the summer.  Except for Part P, the summer Parts all consist of two judges, though “[a] third judge will be […]

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Successful Strategies for Preventing and Defending Claims of Sexual Harassment in the Workplace

Despite increased efforts to curb it, sexual harassment in the workplace hasn’t gone away. In fact, news reports of allegations of sexual harassment and lewd behavior lodged against media mogul Bill O’Reilly at Fox News and, separately, against transportation network company Uber, have shined a spotlight on the pervasiveness of sexual harassment in the workplace. As to O’Reilly, several complaints were raised and settled over several years by Fox News before the company asked O’Reilly to leave the network. With respect to Uber, the company allegedly swept “under the rug” several separate claims of sexual harassment made against a particular manager because the manager was a “high performer.” The sad truisms revealed by both the Uber and O’Reilly matters, clearly, are that money talks and rules can be bent (if not broken) for star performers. But there is a silver lining, as important lessons about the correction and prevention of sexual harassment in the workplace can be learned from these two publicly aired situations involving sex discrimination in the workplace.

What should be done when sexual harassment occurs in the workplace? First and foremost, the aggrieved employee (or whistleblower) should bring the improper behavior to the attention of the employer’s upper management, human resources or in-house legal department pursuant to a written grievance procedure. Upon receipt of notice of the claim, the employer should launch an investigation immediately (or as soon as reasonably practicable under the circumstances). Upon completing the investigation, the employer should take appropriate remedial action reasonably calculated to prevent further harassment. This approach serves two important purposes by concomitantly promoting a policy against sex discrimination in the workplace while insulating the employer from liability arising from such claims.

Most courts – at both the state and federal level in New York, New Jersey and Pennsylvania – agree that employers can avert legal exposure, thus creating a safe haven, by “exercising reasonably care to prevent and correct promptly any sexually harassing behavior.” This is accomplished by adopting an effective anti-harassment policy, properly training employees, implementing appropriate grievance procedures for the reporting and handling of claims of misconduct, conducting appropriate investigations, and by employing appropriate remedial measures when a claim of sexual harassment arises.  A general rule has been established that when employers have in place policies and procedures designed to address workplace discrimination and take remedial action in response to a complaint of discrimination, the employer may have protections from vicarious liability for the discriminatory actions of its employees.

In Cavuoti v. New Jersey Transit Corp., the Supreme Court of New Jersey expressed that “[a] company that develops policies reflecting a lack of tolerance for harassment will have less concern about hostile work environment or punitive damages claims if its good-faith attempts include periodic publication to workers of the employer’s anti-harassment policy; an effective and practical grievance process; and training sessions for workers, supervisors, and managers about how to recognize and eradicate unlawful harassment.”  The court went on to say that “a form of safe haven [exists] for employers who promulgate and support an active[] anti-harassment policy.”

This safe harbor protection afforded to employers that implement forceful anti-harassment policies and take prompt objective action in response to complaints of workplace discrimination makes sense. Employers who make a concerted effort to eliminate discrimination and sexual harassment in the workplace should be protected for their efforts, and not punished, particularly when prompt, remedial action is taken by the employer and the inappropriate behavior is mitigated.

This safe harbor, however, is not absolute. As the United States Court of Appeals for the Third Circuit held in Bouton v. BMW of North America, Inc., an employer may avoid liability only if its procedures for investigating and remediating alleged discrimination are sufficiently effective.  The affirmative defense cannot be asserted by employers who fail to implement effective anti-harassment policies (or where the policies exist in name only). In Gaines v. Bellino, the New Jersey Supreme Court held that an employer’s due care is demonstrated through effective grievance procedure, monitoring mechanisms, and through a showing of the employer’s commitment to its policies through consistent practice and implementation. Thus, the employer must engage in appropriate training and monitoring, which are indispensable to the affirmative defense. Additionally, the employer’s investigation must be appropriately conducted and the remedial action reasonably calculated to prevent further harassment. In Vasquez v. Empress Ambulance Service, Inc., the United States Court of Appeals for the Second Circuit reversed the dismissal of the plaintiff employee’s claims against the employer where the employer mishandled the investigation of the plaintiff’s claim of sexual harassment and ultimately terminated the plaintiff’s employment. Even where an employer implements appropriate policies and procedures, follows those procedures in the face of a hostile work environment complaint, promptly investigates and engages in what it believes is appropriate remedial action, as held by the Third Circuit in Knabe v. Boury Corp. – the employer nevertheless may be subject to liability where the investigation is “so flawed that it could not be said that the remedial action was adequate.”  In short, the investigation is not just worth doing, but it is worth doing the right way.

Many of these principles are promulgated by the United States Code of Federal Regulations. Title 29 of the Code of Federal Regulations, Section 1604.11, provides in relevant part:

• “With respect to conduct between fellow employees, an employer is responsible for acts of sexual harassment in the workplace where the employer (or its agents or supervisory employees) knows or should have known of the conduct, unless it can show that it took immediate and appropriate corrective action.”
• “An employer may also be responsible for the acts of non-employees, with respect to sexual harassment of employees in the workplace, where the employer (or its agents or supervisory employees) knows or should have known of the conduct and fails to take immediate and appropriate corrective action.” and
• “Prevention is the best tool for the elimination of sexual harassment. An employer should take all steps necessary to prevent sexual harassment from occurring, such as affirmatively raising the subject, expressing strong disapproval, developing appropriate sanctions, informing employees of their right to raise and how to raise the issue of harassment under title VII, and developing methods to sensitize all concerned.”

In conclusion, an employer seeking to minimize liability arising from claims of sexual harassment in the workplace should: (1) adopt well-publicized anti-discrimination and anti-harassment policies; (2) implement grievance procedures in order to address claims of discrimination made by its employees; (3) regularly and properly educate and train its employees with respect to such policies and procedures; (4) conduct reasonably immediate, full and thorough investigations of any claims of sexual harassment or hostile work environment, regardless of whether the claim comes to light through the formal grievance procedure; and (5) take prompt, reasonable, necessary and appropriate remedial action with respect to each and every claim. By following these steps and appropriately addressing sexual harassment as it arises in the workplace, an employer can prevent future instances of improper workplace behavior and insulate itself from becoming the next Uber, Fox News or other newsworthy headline.

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An Administrative Regulation, “A Linguistic Morass,” is Invalidated as Arbitrary and Capricious

In re N.J.A.C. 12:17-2.1, ___ N.J. Super. ___ (App. Div. 2017).  Given the deferential standard of review of the validity of regulations promulgated by administrative agencies, it is relatively rare that a court finds such a regulation to be arbitrary and capricious, and therefore invalid.  Today’s opinion by Judge Sabatino, however, does just that, regarding […]

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