Employment Law Attorneys
CONTRACTS AND COVID-19  What Businesses, Employers and Employees Need to Know NOW

CONTRACTS AND COVID-19 What Businesses, Employers and Employees Need to Know NOW

By Jill Halper

In light of the imminent widespread COVID-19 outbreak across the U.S., parties to contracts, both in business and employment scenarios need to carefully review their existing agreements in order to determine how these recent events might impact their contractual obligations. For example, in the likely scenario that a party to a contract is presently unable to perform under the contract due to having to self-isolate, due to an office, workplace or business closing, due to having the virus or any other related reason, can that party be relieved of their contractual obligations without exposure for breach? The answer is IT DEPENDS.

An Act of God May Void a Contract

Generally, as employment attorneys, we handle the drafting, review and negotiation of contracts for employers and employees as well as for asset purchase, merger, partnership, buy out and other business transactions. While the purpose of a contract is to bind the parties, there are certain instances, where parties are excused from performance because a contract is found to be void and no longer enforceable under law. With a voided contract, the parties are no longer bound by the contractual duties set forth in the agreement. Circumstances that might render a contract void by operation of law include a lack of capacity to perform by one or both of the signors, mistake, breach, signing under duress or coercion, and impossibility of performance. Regarding this last circumstance, an act of God may be interpreted as something that makes the performance of the contract impossible or impractical. In this instance, and absent express language voiding the contract for an act of God or the rule of impossibility, one would attempt to argue that because of unforeseen occurrences which were unavoidable and would result in extreme delay or expense, the contract is void and as such, the promise to perform is discharged.

The Impact of COVID-19 and Act of God Provision in Contracts

It is no doubt already clear to you how all of this fits into the current state of affairs regarding the COVID-19 outbreak. If you are currently a party to a contract and are unable to fulfill your duties under that contract because of these unforeseen events, you might be able to declare the contract void and thus discharge you from your contractual obligations. The first step is to determine whether your contract contains an act of God clause, otherwise known as a force majeure clause. These clauses, often used in insurance contracts in order to remove or limit liability for injury and losses caused by acts of God, also find their way into other important transactional instruments. If your contract does not include an act of God or force majeure clause, generally speaking, one will not be implied. If your contract does contain a force majeure clause, the specific language used will determine the scope and applicability of the clause.  The fact that a contract contains a force majeure clause does not automatically mean that you have the right to breach or seek relief as a result of impacts to your business from COVID-19. Because these are unchartered waters, it is highly unlikely that your current contract terms reference this virus as an act of God covered by this clause. Absent such express language, you will need to determine whether an event of force majeure under your contract has occurred. This is a matter of both a strict reading of the contract language and contract interpretation.

An Employment Attorney Can Provide Guidance

With this in mind, it is important that you seek legal advice and examine any contract where you are experiencing challenges in fulfilling your contractual duties or receiving the benefits of the bargain under the contract, because of the COVID-19 situation. In the absence of express language, we will need to analyze and interpret the language in order to counsel you as to your rights and liabilities. It is not as easy as one might think to get out of a contract and avoid a breach as the standard for demonstrating “impossibility of performance” is a hard one to meet. A disruption that merely impacts the profitability of a contract may not be sufficient for a force majeure claim, nor would an economic downturn or other ordinary adverse business conditions likely be sufficient. Therefore, it is always advisable to expressly include (or to intentionally not include) a customized force majeure clause, depending on which side of the agreement you are on. This is something we discuss with our clients when drafting and reviewing agreements or will help our clients negotiate depending on what their objectives are. Needless to say, such language in your agreements could be a much needed life-line for your business or job, especially during the current crisis.

What is a Usual Force Majeure Clause

In examining your agreements for the relevant and controlling language, a contractual term which states only that the “usual force majeure clause” applies or that uses boiler plate language has been held void for uncertainty. A force majeure clause operates as an exclusion clause, excusing a party from performing its contractual obligations. It is therefore subject to the reasonableness test under the Unfair Contract Terms Act 1977 or the fairness and transparency requirements of the Consumer Rights Act 2015. A force majeure clause that is too broadly drafted maybe considered to be unreasonable and declared void, providing no effective protection to a party and leaving them exposed to a claim for damages. What we are now so keenly aware of is that a force majeure clause that references acts of God may encompasses much more than natural disasters and weather events. As such, the language will ideally reference not just acts of God, but also might include particular events such as pandemics, outbreaks and epidemics. One might even want to include trigger events such as quarantines, social distancing mandates, government imposed lockdowns, shutdowns, shortfalls, supply chain obstacles and the like in these clauses These are events that we might not have previously contemplated, but given what we know now, they should be discussed and considered so as to make your force majeure clause as clear and comprehensive as possible. Courts in this Circuit have held that force majeure clauses should be interpreted by reference to the express words used and not by the parties’ general intention. An optimal force majeure clause will typically seek to exclude liability or excuse non-performance in certain circumstances described with a high degree of specificity AND be followed by a catch-all phrase. It might also include language that requires the invoking party to demonstrate that the event could not have been mitigated by preventive action.

Sample Force Majeure Clause

As such, in light of recent events, the below sample language might be contemplated when advising our clients in their current and future contract matters:

“Neither party hereto shall be liable except under the indemnities provided herein and for the payment of monies due hereunder for failure to perform the terms of the Agreement when performance is hindered or prevented by strikes (except contractor induced strikes by contractor’s personnel) or lockout, riot, war (declared or undeclared), act of God, pandemics, epidemics, insurrection, civil disturbances, fire, interference by any Government Authority, including but not limited to government shut downs of business operations, mandated quarantines or curfews, mandated social distancing, or other cause beyond the reasonable control of such party and unable to be reasonably prevented.”

With regard to Asset purchase agreements and other corporate transactional contracts, these agreements might include what is known as a material adverse change clause (also known as a MAC or material adverse event (MAE) provision) in place of or in addition to an act of God or force majeure clause. A MAC clause, for example, might give the buyer in an asset purchase agreement the right to terminate if the target business being acquired is materially and adversely affected by certain events occurring in a specific time period. Once again, in this context the recent coronavirus outbreak might be interpreted to be such an event and the parties will therefore need to be properly advised as to the enforceability of their asset purchase agreement terms.

If you are considering declaring and enforcing a force majeure event in order to be released from an agreement (asset purchase, employment, business or any other contract), because of the coronavirus outbreak or if any party is attempting to invoke a force majeure clause against you in an existing contract because of the coronavirus outbreak, you should carefully review your agreement and consult with legal counsel as soon as possible. Just as importantly, if you are creating or entering into any new contracts, or wish to draft addendums or modify any existing contracts, you should seek legal advice. A proper force majeure clause might be the most important language in your agreement and be a matter of economic life or death in these trying times, presently and in the months to come.

If you have questions or concerns about this article, please contact one of our employment attorneys at Carey & Associates, P.C. at 203-255-4150 or by email at info@capclaw.com.

Employer Tactics Revealed: How Employers Use Age to Terminate Employees

Employer Tactics Revealed: How Employers Use Age to Terminate Employees

Very often, someone will come to our office having just been fired, feeling that the reason given by their employer just doesn’t make sense.  For example, a seasoned marketing executive loses his job shortly after his company brings in a team of young consultants. When the marketing department turns its focus exclusively upon social media, his role and responsibilities are gradually minimized.  Eventually, he is terminated and replaced by several of his own former trainees.

In another instance, a Senior Benefits Administrator with 30 plus years of stellar performance is suddenly criticized by her new manager as, “incompetent” and “not a forward thinker”. She is placed on a performance improvement plan (PIP) and her workload is increased so much that she can no longer keep up. Meanwhile, the company posts a job ad for an entry level Benefits Administrator.  After the new hire has shadowed her for a few weeks, her manager fires her for failing the PIP.

In yet another instance, a Strategy Analyst is abruptly demoted after over a decade in his supervisory position. He is assigned to “project work” as his role in the firm is slowly marginalized. The firm’s turns its employee recruitment efforts on finding “young”, “energetic”, “enthusiastic” new graduates.  His compensation is drastically reduced when the firm decides to allocate the lion’s share of the annual bonus pool to its new hires. When he complains, he is warned that he could easily be replaced by a kid right out of school for a fraction of his salary.

Age discrimination occurs when an employer treats an individual who is qualified for their job differently because of their age. The federal Age Discrimination in Employment Act (ADEA) protects job applicants and employees 40 years of age and older from discrimination on the basis of age.  Many states, including Connecticut, have similar laws protecting older individuals.

You may be a victim of age discrimination if:

Your performance reviews start going down as you get older;

Your employer makes frequent age-related comments;

You are disciplined for behavior that younger employees are not disciplined for;

You are passed over for promotions in favor of younger employees;

You are reassigned to unwanted or unpleasant tasks while younger employees get better assignments;

You are passed over for hire in favor of a younger job candidate or replaced by younger worker.

But proving that you were demoted or fired because of your age can be a difficult task.  First, direct evidence of discrimination, such as your boss telling you he is firing you because you are too old, is very rare.  Most employers will try protect themselves by carefully documenting a narrative explaining why your firing had nothing to do with age.

In each of the real-life examples above, the employer set up a pretext of poor performance to cover up its true discriminatory motives.  If you are suddenly and inexplicably given a poor performance review or placed on a PIP, your employer may be building a pretext to pave the way for your termination.  Knowing that your performance has remained consistent, you are blindsided by your supervisor’s sudden and inexplicable criticism.  Attempting in vain to save your job, you then try to to work even harder.   By the time you are terminated, you feel somehow responsible for failing at your job. It’s not your fault, it’s your age!

In addition to prohibiting employers from treating older workers differently than their younger counterparts, the law also prohibits policies and practices that have a “disparate impact” on older workers. This particularly insidious type of age discrimination occurs when an employer’s seemingly neutral policies have a disproportionately adverse impact upon older workers.  For example, a company announces that it will be laying off all employees above a certain salary level. This policy has a disproportionately adverse impact on older workers who generally earn larger paychecks.

But courts are reluctant to second guess a company’s layoff policy, where the employer can show that it is a “business necessity”, in this case, cost-saving.  In order to win a disparate impact claim, an employee would then need to bring forth evidence of an equally effective, but non-discriminatory way for the company to achieve the same goal. The cost-saving “business necessity” excuse makes disparate impact claims particularly hard to prove.  Older workers tend to earn higher wages than younger workers by virtue of their added years of experience.  Making the situation even murkier is that the impact of these “cost saving” layoffs tends to fall specifically on older workers in middle to upper middle management positions.  In a case like this, the company’s officers, also over the age of 40, decide to get rid of its long-term managers and replace them with younger workers at lower salaries.

If any of these scenarios sound familiar and/or you just received a severance package, you should consult our employment lawyers. Please call (203) 255-4150 or email Jill Saluck at JSaluck@update-capclaw.mystagingwebsite.com.

 

Employees, Not Independent Contractors: Closing a Loophole to Fair Benefits and Protections for Workers

Employees, Not Independent Contractors: Closing a Loophole to Fair Benefits and Protections for Workers

California’s just passed a bill that, once signed by Governor Gavin Newsom, will require gig economy workers to be reclassified as employees.  The bill codified a recent decision by the California Supreme Court, Dynamex Operations West v. Superior Court of Los Angeles County, which laid out a new standard for when workers should be classified as employees rather than independent contractors for purposes of California’s wage order rules. Under the new California bill, workers are classified as employees if the company directs their tasks and their work is part of the company’s main business.

Unlike contractors, employees are entitled to a number of benefits and protections under both federal and state laws. Restricting the standards for classifying workers as independent contractors will make it harder for gig economy companies to prove that their workers aren’t staff, while ensuring key benefits and protections, like minimum wage, insurance and overtime pay.

Other states have adopted legislation extending benefits such as unemployment insurance and workers’ compensation to independent contractors, but California’s bill is the strongest and most comprehensive to date.  Similar bills aimed at protecting workers have been drafted in other states such as New York, Oregon and Washington.

Governor Newsom is still engaged in negotiations with Uber, Lyft and other gig economy companies about possible exceptions or caveats to the bill. According to Uber, the work of its drivers falls outside the scope of the company’s usual course of business: serving as a technology platform. It remains to be seen whether this argument will allow the company, and those with a similar business model, to keep its drivers from being classified as employees.

Reactions to the bill are split.  Some argue that that the new classification framework will force employers to cut back on hiring in the face of rising costs. Some Uber and Lyft drivers worry that that it will curtail their work schedule flexibility. California contractors in remote-based fields have expressed concern that if other states do not follow suit, they will be unable to find work when companies opt for workers from other states who can be classified as independent contractors without needing to be added to the payroll.

But the bill could affect not only gig workers at companies like Uber, Lyft, DoorDash, Postmates and Instacart, it could change the employment status of more than a million low-wage workers in California, including nail salon workers, janitors and construction workers who are not covered by labor laws.

If you would like more information about your independent contractor situation, please contact us and speak with one of our employment attorneys.

Hidden Arbitration Clauses: What You Don’t Know CAN Hurt You

Hidden Arbitration Clauses: What You Don’t Know CAN Hurt You

Employers are opting increasingly for forced arbitration as a tool to prevent their employees from seeking justice against them in court. A form of private dispute resolution, an effective arbitration agreement forces the parties to submit their dispute to a professional arbitrator (usually chosen by the employer), who will decide the result. The arbitrator’s decision is final: It is legally binding and cannot be appealed in court.

The Problem with Forced Arbitration

Forced arbitration comes at a tremendous cost to employees, who will no longer have their day in court.  As a result, their right to fair treatment on the job is inevitably compromised.  Even a favorable monetary arbitration award can feel like a hollow victory for an employee who has suffered years of discrimination at the hands of their employer.  For a large company in particular, even a high six-figure payout is effectively nothing but a slap on the wrist. A license to continue their unfair employment practices.
An employee’s real bargaining power comes from the public nature of the court system. By signing mandatory arbitration contracts, employees are waiving their fundamental, constitutional right to a trial by a jury.
According to a recent study, nearly 52% of employees are subject to mandatory arbitration procedures. “Extrapolating to the overall workforce, this means that 60.1 million American workers no longer have access to the courts to protect their legal employment rights and instead must go to arbitration.” Alexander J.S. Colvin, Economic Policy Institute, EPI.org.

Workers’ Rights Put at Risk

Just a few weeks ago, the Supreme Court ruled 5-4 in NLRB v. Murphy, that employers can include employment contract clauses forcing employees to arbitrate their disputes individually, and waiving the right to resolve those disputes through joint legal proceedings.  In a rambling, logically incoherent majority opinion, Justice Gorsuch asserted, “[t]he policy may be debatable but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written.”
This decision paves the way for companies to strip workers of the right to pursue class action suits in cases of widespread discrimination. In her written dissent, Justice Ginsberg cautioned, “[t]he inevitable result of today’s decision will be the underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers.”
Savvy employers are well aware of the advantages provided to them by private arbitration.  They are becoming ever more creative in finding places to bury mandatory employment arbitration clauses to ensure that their employees are bound by them.
The Supreme Court’s decision in the Murphy case left unanswered, the question of what constitutes valid “notice” to an employee.
Consider the case of an employer who sends an arbitration agreement through a company-wide email, requiring any employee who does not agree to be bound by mandatory arbitration to opt out proactively.  Are all employees who have not opted out of the agreement still bound by its terms, even if they never opened the employer’s email?
In another case, the employing company placed a mandatory arbitration clause within the text of the legal disclaimers included in its employment application.  In order even to be considered for a position, a potential employee is required to find and agree to mandatory arbitration.

Fighting Workplace Discrimination

The Supreme Court’s decision in NLRB v. Murphy will have significant consequences for the ability of employees to fight back against discrimination on the job.  Despite the unequal bargaining power inherent in employer-employee agreements, the decision marks a victory for companies seeking to avoid liability for the mistreatment of their employees.
It remains to be seen how the court will handle the issue of hidden arbitration clauses, whether long-standing contract principles requiring notice to both parties will become a thing of the past as well.
The following companies use forced arbitration clauses: Morgan Stanley, Hooters, Forever 21, Nordstrom, Neiman Marcus, Macy’s, Yahoo, Dillard’s, Manpower, Carrols, Papa John’s Pizza, Xerox, Amazon, Ford, GE, Coca-Cola, CVS, ExxonMobil, Bridgewater Associates, Glencore, RBS, Barclays, Tradeweb, Boehringer Ingelheim Pharmaceuticals.
Have employment questions? Need help with a case? The employment lawyers at Carey & Associates, P.C. handle each and every aspect of employment litigation and appellate work and act as the story tellers of our client’s personalized narrative to the company, the court and the jury.  Contact us today!

Pregnancy Discrimination: Going Beyond Nine Months

Pregnancy Discrimination: Going Beyond Nine Months

Reports have shown that pregnant women and new mothers are suffering increasing levels of unfair treatment at work, including cuts to their work hours, zero-hour contracts or even undergoing forced removal from their jobs.

Laws Protecting Pregnant Employees

The Pregnancy Discrimination Act of 1978 ensures that pregnant employees or “women affected by childbirth,” are treated the same as childless workers. In addition to federal laws protecting pregnant employees from discrimination and ensuring that they receive family leave benefits, many states and localities also have passed laws giving additional protections and rights to pregnant employees.
Most states have passed laws requiring employers to provide reasonable accommodations to pregnant workers.  The Connecticut Fair Employment Practices Act was recently amended, making it unlawful for an employer to refuse reasonable accommodations for an employee due to her pregnancy or to limit, segregate, or classify her in a way that would deprive her of employment opportunities due to pregnancy.  The law also expands the definition of “pregnancy” to include related post-pregnancy conditions, such as lactation (PA 17-118).

What is Pregnancy Discrimination

The term, “pregnancy discrimination” is deceptive. Courts are only just beginning to define the parameters of what can be considered “on the basis of pregnancy.” Although a pregnancy itself is limited in time to a discrete period, the discrimination faced by a pregnant woman often continues long after the birth of her baby.
Federal law and the antidiscrimination laws of most states consider pregnancy and pregnancy-related conditions, such as lactation, to be protected. But the definition becomes more blurred, for example, in the context of a mother returning to work from maternity leave, only to find out that she has been demoted or placed in a new position.
Sometimes an employer’s discriminatory action won’t take place for months, or even years, following an employee’s pregnancy.  Years after her pregnancy, a female employee will notice that she is repeatedly passed over for promotions.  Despite her hard work and positive performance, her male and childless coworkers are given opportunities that she is not.
This phenomenon has been dubbed, the “motherhood penalty,” and is extremely common in today’s workplace.  According to recent studies, about three quarters of working mothers say they have experienced discrimination in the workplace.
Research shows that mothers are significantly less likely than either childless women, or fathers with identical qualifications, to get interviews. In addition, regardless of whether women work less after having children, employers pay them significantly less over time, assuming they will be less committed.  When mothers do cut back their work hours, their pay is disproportionately reduced.
Consider two specific examples of discrimination on the basis of motherhood responsibilities;
New Supervisor Syndrome – A working mother performs well and has no significant problems at work until her supervisor changes. The new supervisor cancels her flexible work arrangement, changes her shifts, or imposes new productivity requirements. On occasion, the new supervisors will even make comments indicating that these actions have been taken specifically to push mothers out. In other instances, a working mother may be targeted for termination under the biased belief that she is not as committed to her job or as productive as other employees who are not female and do not have childcare responsibilities.
Second Child Bias  Some mothers have reported experiencing little discrimination until they become pregnant with their second child. After informing her employer of her second pregnancy, a working mother is suddenly faced with questions about whether she intends to return to work after maternity leave and how she can continue working with two children. Some supervisors openly counsel women who are pregnant with their second child to stay at home, deny promotions or other opportunities, treat them rudely or ignore them, or make the work vs. home decision for them by terminating them. The assumption behind these actions appears to be that a mother can handle one child and work, but two is too much.  www.worklifelaw.org/pubs/FRDupdate2016.pdf

Defining Motherhood Discrimination

Not neatly categorized as pregnancy or gender discrimination, motherhood discrimination occurs when an employee suffers an adverse employment action based on unexamined biases about how female workers with childcare responsibilities will or should act, without regard to her actual performance or preferences.
Discrimination based motherhood often occurs in the context of failure to hire or to promote, demotion, transfer to dead-end jobs, removal of sales territory or responsibility, increase or strict enforcement of goals for mothers but not others, discipline for actions that do not result in discipline for non-mothers, humiliation or harassment, selection for layoff despite seniority and strong performance and termination for reasons that are not accurate or legitimate.
No federal or Connecticut statute expressly prohibits employment discrimination or retaliation based on motherhood responsibilities. In many situations, a court will rely on laws regarding pregnancy discrimination in analyzing a claim more aptly categorized as, “motherhood responsibilities discrimination.” A working mother may prevail by showing, for example, that because of her pregnancy, she was treated differently from employees who had not been pregnant.  Sometimes, the difference in treatment occurs after she returns from maternity leave, based on her employer’s assumption that because her childcare responsibilities will impact her work.
Gender discrimination laws have also been used in analyzing claims of motherhood discrimination.  Title VII does not prohibit discrimination on the basis of family responsibilities alone, but rather “gender plus” an additional status, in this case, childcare giver.
“Sex plus” or “gender plus” discrimination, involves a policy or practice by which an employer classifies employees on the basis of sex plus another characteristic.  It is actionable under Title VII, state law, and the Equal Protection Clause, which forbids sex discrimination regardless of how it is labeled, as long as there is evidence of purposefully sex-discriminatory acts. Back v. Hastings On Hudson Union Free Sch. Dist., 365 F.3d 107 (2d Cir. 2004).
The “sex plus” framework was used to analyze a female employee’s claim that her employer failed to promote her because of a sex-based stereotype that women who are mothers neglect their jobs in favor of their presumed child care responsibilities. Chadwick v. WellPoint, Inc., 561 F.3d 38 (1st Cir. 2009)
Such cases rest on the presumption that, “unlawful sex discrimination occurs when an employer takes an adverse job action on the assumption that a woman, because she is a woman, will neglect her job responsibilities in favor of her presumed childcare responsibilities.” Id at 44–45.
In accordance with Title VII, women have, “the right to prove their mettle in the work arena without the burden of stereotypes regarding whether they can fulfill their responsibilities.” Gingras v. Milwaukee County, 127 F. Supp. 3d 964, 975 (E.D. Wis. 2015).

If you feel that as a working mother, you have been the victim of discrimination by your employer, an employment attorney can help you determine what recourse may be available.

Get in touch today!
Carey & Associates, P.C., employment attorneys, can be reached at (203) 255-4150.