In-House Counsel Archives

January 24, 2011

Senior Corporate Attorney Position NYC

A Senior Corporate Attorney Position is available, which key responsibilities include:

• General legal affairs. Direct general legal affairs of the company, including public company compliance, risk management, commercial contracts, lease agreements, IP protections, business entity structure, capital financing, employment issues and other matters as needed. Participate in the definition, development of, and ongoing compliance of corporate policies and procedures.
• Business transactions. Serve as legal advisor on all major business transactions, including acquisitions, divestitures joint ventures, routine and non-routine commercial arrangements.
• Privacy. Serve as the company's Chief Privacy Officer. Develop and oversee privacy-related policies, procedures, compliance and disclosures. Establish and maintain an internal framework to ensure adherence to standards of consumer privacy including regulatory, NAI and other industry requirements. Conduct privacy training, prepare appropriate contractual provisions, develop procedures to vet potential partners, apprise senior management of significant industry developments and requirements, etc.
• Litigation. Manage all litigation matters involving the company. Consult with and direct outside counsel on case strategy and tactics. Judge the merits of claims filed against or on behalf of the company. Review and comment on drafts of pleadings, briefs, and other papers. Work with appropriate personnel to define strategic defenses and facilitate settlements where warranted.

Requirements and Qualifications:

• Accomplished attorney with 7-12+ years of progressively responsible experience relevant to the key responsibilities required for this role.
• Background in privacy law, corporate governance, litigation, and complex business matters a must.
• JD degree from national law school and professional license in good standing.
• Very strong knowledge of digital privacy rules and the current regulatory / self-regulatory environment.

If interested, please email Craig Rumberg, Managing Director, at

March 1, 2013

Deputy General Counsel Lincoln Center for the Performing Rights

JOB DESCRIPTION: Reporting to the General Counsel, the Deputy General Counsel provides support for the General Counsel of the world's leading performing arts center in all aspects of the organization's legal affairs.

Candidates MUST have significant Digital and Media experience.

Specific responsibilities include:

• Provide support to the General Counsel as legal advisor on performing arts and education related matters, with a focus on programming/production and digital media matters but also including a wide range of other matters such as facilities, fundraising and operations.

• Draft and review a wide variety of contracts to ensure that the best interests of the organization are served, including contracts involving artists, co-productions, consultants, contractors, licenses and rentals, corporate sponsorships, artistic commissions, concessions, information technology, media production, product development and distribution, and other matters within the core mission and ancillary businesses of the organization. Conduct and/or provide advice and assistance in contract negotiations.

• Serve as resource for non-legal staff on legal matters including contracts, labor and employment matters, company procedures, liability, intellectual property, and other matters.

• Coordinate with Associate General Counsel, the department's Paralegal/Executive Assistant, and a rotating staff of 1-2 in-house legal interns, and help manage a large and highly valued group of outside pro bono counsel, to ensure consistency of information flow, workload and work product.

• Sensitivity and responsiveness within time constraints, practicalities and realistic risks and assessments of issues that are presented and solutions offered.

• JD
• Member of NY State Bar.
• 7+ years of experience directly related to the duties and responsibilities specified.
• Excellent writing skills.
• Ability to communicate and relate legal issues to non-legal staff.
• Experience with non-profits and/or in-house.
• Appreciation for the arts a plus.

TO APPLY: Please send cover letter, resume and salary requirements to:

Lincoln Center is an equal opportunity employer.

December 10, 2013

Holiday Bonuses: The "Gift" that May Keep on Giving

By Kristine A. Sova

With wage-and-hour litigation continuing its growth, employers who provide holiday bonuses should make sure that they don't become proof of the old adage that no good deed goes unpunished by finding themselves on the receiving end of a wage claim. Wage-and-hour laws look to technical compliance, not generosity, and unbeknownst to many employers, there are circumstances when employers are required to include bonuses in the calculation of overtime wages due to non-exempt employees.

In general, the federal Fair Labor Standards Act and New York Labor Law require employers to pay all non-exempt employees overtime at a rate of time-and-a-half their regular rate of pay for all hours worked over 40 in a workweek. The "regular rate of pay" includes all compensation provided to the employee, with a few exceptions.

One of those exceptions is a holiday bonus, but only if certain criteria are met. Specifically, all of the following criteria must be met:

• The bonus must be gift, or in the nature of a gift. If the bonus is in any way measured by or dependent upon the employee's hours worked, production or efficiency, it is not a gift. A bonus will still be considered a gift even if the amounts paid to different employees or groups of employees are dependent on their base compensation and/or length of service.

• The bonus must not be "so substantial" that employees consider it part of the wages for which they work, as opposed to a gift.

• The bonus cannot be paid pursuant to contract or any other kind of agreement. If it is, the employee has a legal right to the payment and it is not in the nature of a gift.

Even if a holiday bonus is paid with such regularity that employees grow to expect it, the bonus is still properly excluded from overtime calculations so long as the above criteria are met. Further, even if a holiday bonus does not meet the criteria above, it may still be excluded from overtime calculations as a "discretionary bonus," a topic to be discussed in a future post.

February 28, 2014

Some of Your Salaried Employees May Be Entitled to Overtime Pay

By Kristine Sova

Many employers mistakenly believe that overtime pay only applies to hourly workers. The reality is that many salaried employees are also entitled to overtime pay.

Generally speaking, unless employees are considered "exempt," the law requires that any hours worked in excess of 40 per workweek be compensated at a rate of not less than time and one-half of their regular rate of pay. This holds true for employees who receive a salary, provided that they do not fall within one of the available exemptions. The exemptions are defined by federal and state law, and while they apply generally to white-collar workers whose primary functions are executive, administrative, professional, or in other narrowly-defined categories, the standards under federal and state law are not always the same, with the latter usually being stricter.

Two of the most relied-upon exemptions are the administrative and executive exemptions. The requirements for these two exemptions, detailed below, include the requirements under both federal and New York state law.

The Executive Exemption

• The employee must be compensated with a salary that is greater than or equal to $600.00 per week;
• The employee's primary duty must be managing the business/organization, or managing a particular department or other subdivision of the business/organization;
• The employee customarily and regularly direct the work of at least two other full-time employees (or the equivalent);
• The employee's suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees have particular weight; and
• The employee customarily and regularly exercises discretionary powers.

The Administrative Exemption

• The employee must be compensated with a salary that is greater than or equal to $600.00 per week;
• The primary duties of the employee must be office or other non-manual work that relates directly to management or business operations, either to the employer or the employer's customers/clients;
• The employee's primary duties include the exercise of discretion and independent judgment to matters that are significant to the operation of the business/organization; and
• The employee regularly and directly assists an employer or an employee employed in a bona fide executive or administrative capacity; or performs, under only general supervision, work along specialized or technical lines requiring special training, experience or knowledge.

Although these two exemptions are two of the most popular exemptions, the requirements present real hurdles to employers looking to claim these exemptions. Employees who are not properly exempt, even when paid a salary, will be entitled to overtime wages for hours worked over 40 in a workweek.

With wage-and-hour litigation and investigations still at a high, employers should confirm that they are correctly classifying (and paying) their salaried employees. This is particularly important when it comes to salaried employees because damage awards have a tendency to skyrocket based on the inherent circumstances of claims involving salaried employees. Any damage award will be based off of the salary and, for that reason, will result in a higher rate of pay. In addition, most employers do not keep a record of hours worked by their (properly or improperly classified) salaried employees. That fact alone won't preclude a damage award. Rather, in the absence of records, it's highly likely that a damage calculation will be based on the employee's typically inflated recollection of hours worked.

March 25, 2014

Three Things to Consider Before Using a Timecard App

By Kristine Sova

There are steps employers can take to reduce the risk that non-exempt employees will assert unpaid wage claims for the time they spend checking and responding to e-mail (and other communications) during what would normally be the employee's personal time ( This post discusses whether a mobile timecard (or timesheet) application is a good way to track the amount of time employees spend on off-site and/or after-hours work communications.

The answer? They can be. Here we highlight three practical and legal considerations for employers thinking about rolling out a timecard app at work.

1. Not All Timecard Apps are Wage-Hour Law Compliant - Federal, state and local laws have different requirements when it comes to hours worked by employees and the recording of those hours of work.

For example, New York Labor Law requires employers to provide certain employees with an uninterrupted meal period at a certain point during their shifts ($$LAB162$$@TXLAB0162+&LIST=LAW+&BROWSER=BROWSER+&TOKEN=19117366+&TARGET=VIEW), and a second meal period to another group of employees. While nothing in the New York Labor Law's general recordkeeping requirements ($$LAB195$$@TXLAB0195+&LIST=LAW+&BROWSER=BROWSER+&TOKEN=19117366+&TARGET=VIEW) states that employers must record the actual time that an employee takes a required meal break, the New York State Department of Labor's opinion ( is that "a contemporaneous record of the meal period would go a long way towards providing that one was given."

If you're a New York employer, then, you'll want to make sure a timecard app records the start and stop of multiple meal periods if you're required to give them. What you're likely to find, though, is that most timecard apps only record the start and stop time of a single meal period.

2. Not All Timecard Apps are Available on Both Android and iPhone - When you're considering an app's features (and whether those features comply with applicable wage-and-hour laws), also keep in mind that many applications are available only for Android, or iPhone, but not both. If you're looking for an app available on both platforms, this means a smaller pool of apps to select from. If you'd be satisfied with different apps for each platform, this means making sure both applications comply with applicable wage-and-hour laws.

3. A Timecard App Isn't a Substitute for Best Practices - Even if you require your employees to record their time with a timecard app, it doesn't mean that they'll do so. Sometimes employees forget. Therefore, even with a timecard app, you'll want to make sure that you follow best practices to minimize the possibility employees are performing off-the-clock work, such as those outlined here (


Yes, You Do Have to Pay Employees for Checking E-Mail Outside of Work:


General recordkeeping requirements:$$LAB195$$@TXLAB0195+&LIST=LAW+&BROWSER=BROWSER+&TOKEN=19117366+&TARGET=VIEW


April 18, 2014

Dos and Don'ts of Comp Time

By Kristine A. Sova

If you're a private employer and you allow employees to take compensatory (or comp) time, you might be making a big mistake.

Comp time is when employers allow employees to bank overtime hours for use as vacation time or other paid time off at a later date instead of immediately paying the employee overtime for hours worked in excess of 40 per workweek. While this may seem like a win-win situation for employers and their employees, more often than not, it's an unlawful practice.

It need not be so, though, and here we offer some tips for private employers in New York looking to offer comp time.

Non-Exempt Employees Must be Paid Overtime

If an employee is non-exempt under either federal or New York law, the employee must be paid overtime wages. The federal Fair Labor Standards Act (FLSA) specifically prohibits the payment of comp time in lieu of overtime wages by private employers to their non-exempt employees. Further, while comp time is not per se unlawful under the New York Labor Law (, New York's requirements regarding the frequency of payment of wages ) have the effect of prohibiting payment of comp time to all non-exempt employees.

Non-Exempt Does Not Mean Hourly

Hourly wages are not synonymous with non-exempt status. As discussed previously in my blog (, some of your salaried employees may be non-exempt and therefore entitled to overtime wages. If you're going to offer comp time to exempt employees, make sure you first review the job duties of your employees to confirm which occupations are actually exempt from overtime pay under federal and state law.

New York Overtime Laws Still Apply to Some Occupations Exempt under the FLSA

Some occupations that are exempt from overtime under the FLSA are still entitled to overtime under the New York Labor Law. While these occupations must be paid overtime, New York Labor Law requires an overtime rate of one-and-a-half times the state minimum wage for their overtime hours, regardless of the amount of their regular rate of pay. This is another reason to review the job duties of the occupations in your business before offering comp time.

New York Does Not Permit Payment of Comp Time to All Exempt Employees

New York's requirements regarding the frequency of payment of wages ( also have the effect of prohibiting payment of comp time to exempt employees who earn less than $900/week. This is a small but important point to remember since the threshold for the salary-basis exemptions under New York Labor Law is actually a lower amount ($600/week at the time of this posting).

Be Thoughtful About Using Comp Time with Exempt Employees

Although the permissibility of comp time is limited, some private employers in New York will still find it useful to reward exempt employees earning over $900/week with extra time for working extra additional hours. Providing hour-for-hour time off may not be advisable, however. If comp time is offered regularly, employees may come to expect it every time they work additional hours. In addition, some employees may take advantage by working additional hours unnecessarily so they can bank extra days off in the future. If you do offer comp time, make sure to outline the rules clearly in a written policy.


Not per se unlawful:

Frequency of payment of wages:

Prior post:

May 9, 2014

Is Your Worker an Independent Contractor or Employee?

By Kristine Sova

Last week, I spoke to a group of arts administrators at a professional development session hosted by ArtsWestchester ( and the EASL Section ( on the distinction between employees and independent contractors. We covered a lot of information during the session, including:

• the hefty financial consequences of misclassification,
• the need to conduct preventative internal audits to make sure you're not misclassifying your workers, and
• the independent contractor tests utilized by various administrative agencies like the Internal Revenue Service and the New York Department of Labor's Unemployment Insurance Division.

Knowing those tests, though, is only so helpful to an organization or business that wants to know if a particular worker is an employee or an independent contractor. This is because how a particular worker should be classified requires a comprehensive fact-and-circumstances inquiry unique to the organization.

How comprehensive, you might ask? Click here for the kinds of questions I would ask and you'll see:

The questions are based on factors that the IRS and NY DOL would consider if either or both of them were to audit your workforce. Use the questions as a starting point for your own internal audit, and consult with an employment attorney once you have gathered your answers for an opinion on whether the worker in question is really an independent contractor.

June 5, 2014

How to Address Sick Leave Abuse

By Kristine Sova

It is summertime, and that means an influx of employees calling in sick on Mondays and Fridays when they're really not sick. Summertime sick time is one example of sick leave abuse, which often translates into administrative headaches and lost dollars for employers.

How can an employer remedy sick leave abuse, whether it's during the summer or throughout the rest of the year?

While it's important to make sure that your organization has a lawful policy and procedure to address sick leave abuse, in many cases, remedying sick leave abuse requires more than simply enforcing an HR policy. Here are some additional tips.

Determine if Abuse Really Exists, and Then Hone in on the Problem

The first step is to determine if sick leave abuse really exists by tracking and evaluating absences, including late arrivals and early departures, possibly in conjunction with an employee survey. Do any trends reveal themselves - such as a higher absenteeism rate in a particular department or under a particular supervisor?

The goal here is to find out why employees are really taking off from work under the guise of being sick. In some cases, employees may need more flexibility or more time off, but in some cases, a department or team may really be burnt out or suffering from low morale because of a problem supervisor.

Craft Solutions to Address Core Issues

Once you've identified the root of any sick leave abuse problems, any solutions under consideration for implementation should address the core issues.

For example, if you find that only workers with limited child care options are taking extra sick leave, the appropriate solution may be to implement an emergency child care or on-site child care program, rather than modify your organization's sick leave policy.

Or, you may discover that workers generally need more flexibility with their time off from work, in which case, use of a single paid time off (PTO) bank - instead of segregated sick, personal and vacation days - may be the appropriate solution. A single PTO bank allows employees more flexibility in how they use their time off, resulting in fewer unplanned absences.

However, it may turn out that you simply have one or more problem employee(s) on your hands. In that case, counseling or disciplinary action may be the way to go, provided such is lawful.

These are only three examples of how sick leave abuse can be managed, but they illustrate that, as is often the case with workplace issues, the solutions are as varied as the sources of the problems. and usually require facts-and-circumstances inquiries. If you have a sick leave abuse problem in your workplace that you would like to address, you may want to consult with an employment attorney.

July 10, 2014

Interview Questions Not to Ask

By Kristine A. Sova

Employers sometimes forget that it's not just employees who can sue them, but applicants as well. With the cost of defending a claim of discrimination at several hundred thousand dollars, and new laws in place ( that provide increased hiring protections for candidates, it is more critical than ever for employers to conduct lawful employment interviews.

As most employers know by now, it is unlawful to discriminate against a person on the basis of a protected characteristic, such as race, color, sex, marital status, religion, creed, national origin, disability, age, and sexual orientation when making employment decisions. This includes hiring decisions, and by extension, the interview, when otherwise seemingly innocent questions like, "Where did you grow up?", can be used to support a claim that a hiring decision was based on a protected characteristic.

There are a number of questions, frankly, that employers should not ask during interviews. Some of them will vary by jurisdiction, but for the most part, they are the same. While not a comprehensive list, below are some examples of questions of which employers should steer clear:

• Is this your maiden name?

• What's your spouse's name?

• Do you wish to be addressed as Miss? Mrs.? Ms.?

• Do you have, or plan to have, kids?

• Are you a U.S. citizen?

• What is your native language?

• How long have you lived here?

• How did you acquire your ability to read, write or speak a foreign language?

• What clubs do you belong to?

• What religion do you practice?

• Which religious holidays do you observe?

• How old are you? What is your birth date?

• What are the ages of your children?

• What year did you graduate?

• Do you have any disabilities?

• Have you had any recent illnesses?

• Have you ever been arrested?

Keep in mind that, while a good start, simply avoiding asking the questions above won't insulate an employer's hiring process from challenge. Not only are there many more forbidden questions, but the hiring process involves much more than just the interview, such as job advertisements, application forms, background checks, and testing materials, each of which is fraught with legal land mines. If you or your hiring managers have been "guilty" of asking the questions above, you should consider consulting with an employment attorney to review your hiring process and to train your hiring managers on the dos and don'ts of that process.

August 25, 2014

Will Telecommuting Be More Costly for Your Business in the Long Run?

By Kristine A. Sova

Telecommuting is increasingly popular among startups and small businesses, and not surprisingly so. Much has been written extoling the benefits of allowing employees to telecommute, and it's very much the norm at companies earning high ranks on "best places to work" lists. Above and beyond the feel-good benefits to employees, telecommuting also provides cost-sensitive startups a means by which they can attract and retain better talent in exchange for an offset in overhead expenses like office space and compensation.

However, to the extent that cost is a compelling factor in a startup's decision to utilize remote workers, I caution them to think again.

One practical problem for an employer based in one state is that it can't entirely prevent a remote worker from suing the employer in the state where the employee is working. Most laws permit employees to file claims where the work is performed. Futher, while an employer can try to limit where suits are filed by including a venue provision in a contract, there's no guarantee the choice-of-venue provision will be enforced. Being hauled into court outside the employer's jurisdiction will add to the fees and costs of defending the suit, such as additional attorneys' fees and costs of travel.

Similarly, choice-of-law clauses in contracts, which specify that the law of the state of the employer's principal place of business will apply, may not always be enforced either. This is especially true when remote workers are involved. This means that employers have to understand the law in all the states where telecommuting employees are working for them, even if just to confirm that a particular law will or will not apply to the employment relationship.

Case in point: A federal court subjected a Virginia company to Pennsylvania's anti-discrimination law, which applies to employers with 4 or more persons in their employ within Pennsylvania, on the basis of a single employee working remotely from Pennsylvania because that employee hired contractors to service the company's clients in Pennsylvania.

The best advice for businesses looking to "save" with telecommuting is to understand the law of each jurisdiction and conduct appropriate due diligence before hiring remote workers to work from those states. Knowing if your business will be subject to the laws of another state will allow you to undertake a more meaningful cost-benefit analysis of a possible telecommuting relationship. Ultimately, you may find that once you factor in costs like ensuring your wage-and-hour and other human resources policies comply with the laws of multiple states that the perceived savings of telecommuting employees is non-existent.

September 24, 2014

Hiring Your First Worker? Read On.

By Kristine Sova

Whether you're working with independent contractors or hiring your first employee, building a business team brings with it a whole new area for compliance: labor and employment law.

Labor and employment laws cover everything from payroll and workers compensation to workplace posters to preventing discrimination and harassment in the workplace.

Unfortunately, there is no single government agency that oversees or enforces labor and employment laws, which in turn means there isn't a central government source for the small or new employer to turn to for purposes of determining which laws do or do not apply to them. Further complicating matters for the small or new employer is the fact that different laws apply to employers of different sizes. The magic number is not the same, and it's not always a "high" number like 15 or 20. Many of the laws, particularly at the state or city level, apply to employers with only a single employee.

While these factors don't make it easy for young businesses to achieve compliance with labor and employment laws, the unfortunate truth is that difficulty is not a defense to a claim that a business violated the law. Here, we offer three early markers to assist young NYC businesses in identifying when they should be active in their labor and employment law compliance efforts.

Marker Number 1: Before you hire your first worker.

Once you've decided to hire your first worker (as either an employee or independent contractor), you should be talking to a labor and employment lawyer. A number of New York State labor laws, predominantly affecting wages, apply to employers with only one employee, as do a number of payroll obligations, such as tax withholding, wage reporting, and unemployment insurance contributions. The federal Immigration Reform and Control Act, which requires employers to verify the eligibility of their employees to work in the U.S., and the NYC Earned Sick Time Act, which mandates providing sick time to employees, also apply to employers with only one employee.
While these same laws and obligations don't apply to independent contractors, too often independent contractors are misclassified and are really employees. A check-in with counsel before hiring any worker can help ensure that a young business wards off the many problems attendant with misclassification, and otherwise assist with compliance with the applicable laws.

Marker Number 2: Before you hire your fourth employee.

NYC employers should talk to a labor and employment lawyer about further compliance measures before they hire their fourth employee. At four employees, more labor and employment laws apply, including the New York State Human Rights Law and the New York City Human Rights Law, both of which prohibit discrimination and harassment in the workplace, and also require accommodation of disabled and pregnant employees.

Marker Number 3: Before you hire your fifteenth employee.

NYC employers should talk to a labor and employment lawyer about additional compliance measures before they hire their fifteenth employee. At fifteen employees, federal anti-discrimination laws such as Title VII and the Americans with Disabilities Act apply. At twenty employees, still more laws will apply, including the federal Age Discrimination in Employment Act and two additional provisions of the New York State Labor Law requiring blood donation leave and bone marrow donation leave.

October 22, 2014

How to Recoup Overpaid Wages from Employees

By Kristine Sova

Many employers logically assume that if they overpay an employee, they should be able to recoup that overpayment by simply adjusting an employee's future paychecks. While that's the case under the federal Fair Labor Standards Act (FLSA), it's not always the case under state law.

Many states have statutes or regulations that permit recoupment under certain conditions, while other states have statutes or regulations that flat out prohibit recoupment through paycheck deductions. In this post, we address New York State law for employers looking to recoup wage overpayments.

Recoupment Allowed Only Under Certain Circumstances

Under New York law, in order for an employer to recover an overpayment made to an employee by way of payroll deduction, the overpayment must be the result of a mathematical or clerical error. Further, the law permits employers to recoup such overpayments only under the following conditions:

•Employers may only recover overpayments made in the 8 weeks prior to the issuance of a Notice of Intent, described below, but may make deductions to recover overpayments for a period of 6 years from the date of the original overpayment.

•Employers are limited to one deduction per wage payment to recover an overpayment.

•If the overpayment is less than or equal to the net wages in the next wage payment, the entire amount may be deducted; otherwise, the overpayment deduction is limited to 12.5% of the employee's gross wages, so long as the deduction does not reduce the employee's wages below the New York State minimum wage (currently, $8.00/hour).

•Employers must provide affected employees with a Notice of Intent in order to commence making deductions to recoup the overpayment. If an employer will be recouping the entire overpayment in the next wage payment, the Notice must be provided at least 3 days before making the deduction. In all other cases, the Notice must be provided at least 3 weeks before the deductions may commence.

•The Notice of Intent must contain: (1) the amount overpaid in total; (2) the amount overpaid per pay period; (3) the total amount to be deducted; and (4) the date of each intended deduction together with the amount of each anticipated deduction. The notice must also inform the employee of his/her right to contest the overpayment, provide the date by which the employee must contest the overpayment, and include the procedure for the employee to contest the overpayment and/or terms of recovery.

Employers Must Establish a Specific Procedure for Challenging Any Planned Recoupment

New York Labor Law is specific as to what the procedure must entail. The procedure must:

•Provide an employee with one week from the date of receipt of the Notice of Intent to challenge the proposed deduction(s).

•Require an employer to respond to the employee within one week of receipt of the employee's response. The employer's response must address the issues raised by the employee and contain a clear statement indicating the employer's position regarding the overpayment (specifically, whether or not the employer agrees with the employee's position, together with a reason why the employer agrees or disagrees).

•Provide the employee written notice of the opportunity to meet with the employer within one week of receiving the employer's response to discuss any disagreements that may remain regarding the anticipated deductions.

•Require the employer to provide the employee with written notice of the employer's final determination regarding the deductions within one week of this meeting. In making a final determination, the employer must consider the agreed-upon wage rate paid to the employee and whether the overpayment appeared to the employee to be a new agreed-upon rate of pay. Further, when making a final determination regarding the amount of the deduction to be made per pay period and the date such deduction(s) will commence, the employer must also consider the issues raised in the employee's request regarding the amount of each deduction.

Where employees avail themselves of this procedure, employers must wait at least 3 weeks after issuing the final determination before commencing deductions.

The procedure is slightly different where the entire overpayment may be recouped in the next wage payment after the overpayment. In those cases, the employee must challenge the proposed deduction within 2 days of receipt of the Notice of Intent. Should the employee challenge the proposed deduction, the employer must postpone the deduction and fully follow procedures outlined above.

The same parameters apply to employers looking to recoup an overpayment, not from a future payroll deduction, but from a separate transaction. In other words, employers cannot circumvent the law's requirements by simply requiring an employee to pay the employer back by writing a check for the overpayment.

Employers who fail to follow the parameters outlined above create the presumption that the contested deduction was impermissible and in violation of the New York Labor Law.

February 3, 2015

The Curious Case of the Unpaid Intern

By Maximilian J.G. Querci

An intern may be classified as a participant in a formal program to obtain practical experience for beginners in an occupation or profession. Some interns are paid, while others are not, but the latter are considered to be taking advantage of unpaid resume boosting experiences. While traditionally an intern's position and tasks are considered to be lurking in a grey area between a volunteer and an employee, it appears the grey area is considerably less so with the arrival of numerous lawsuits against major production companies and film studios.

The first slew of lawsuits that came about were brought against Fox Searchlight during the production of "Black Swan" in 2011, as well as other actions brought against Lionsgate, Warner Music Group, Atlantic Records, and publishing houses Condé Nast and Hearst Corp. Since the onset of such actions, most of these companies have switched to paid internships or ceased their internship programs. Lionsgate, however, argues that if it were to change its policy and make its internship program a paid program, it would be forced to take on a substantially smaller amount of interns per term and would stand to lose approximately $300,000 to $400,000 a year in wage compensation. Id. Lionsgate's most recent turmoil involves a class-action lawsuit brought by unpaid interns who worked on The Wendy Williams Show, and claimed that the work they performed was not in accordance with the United States Department of Labor's criteria of an unpaid internship.

The Fair Labor Standard Act, under enforcement by the Department of Labor, employs a six-element test to establish whether an unpaid intern's work experience and duties classify him/her as an employee. Beyond these six elements, the determination of whether an intern has an employment relationship with his/her employer depends upon all the facts and circumstances of the respective internship program.

Of the six-element test, the two elements that serve as the basis for many of the actions being brought are the requirements that the "internship experience must be for the benefit of the intern" and the intern's duties must "not displace regular employees". Id. Herein lies the problem; when a line cannot be drawn to indicate when tasks performed by interns are no longer for the benefit of the intern vs. the benefit of the employer, it creates issues differentiating between the two.

In the lawsuit filed against Fox Searchlight by its unpaid interns, U.S. District Judge William Pauley in New York ruled last year that "Searchlight received the benefits of the interns' unpaid work, which otherwise would have required paid employees". Fox subsequently appealed Pauley's ruling with a very logical and well-supported argument that interns are not subject to wage protection under the Fair Labor Standard Act if they, and not the employers, are the primary beneficiaries of the internship. Attorneys for the plaintiffs are preparing to go before the Second Circuit Court of Appeals, however no formal date has been set. Such a distinction of who the primary beneficiary is in this type a relationship is murky. Is it the employer who primarily benefits from the services received, or is it the intern who benefits from the experience in performing such service? The question remains unanswered.

Could most unpaid interns be getting carried away with the current trends of these lawsuits and not really see the big picture? There is always a different perspective to take, and many former unpaid interns of Lionsgate concur. What these lawsuits and statistical figures being thrown around by the media don't explain is that many unpaid interns actually derive legitimate education and experience on the respective subject matter with which they are involved, and in many cases such instruction and experience leads to full-time employment. Many previous interns for Lionsgate interviewed by the Los Angeles Times stated that their internship experience proved to be highly beneficial in their professional developments. While several of them did acknowledge they were performing tasks that coincided with the tasks of a full-time employee, they considered such experience far more valuable then sitting idly by and performing minuscule tasks. Id.

Former Lionsgate intern J.P Alanis, who interned at the film studio between 2011 and 2012, disregarded the notion that his internship was in violation of the Department of Labor guidelines. Id. Alanis, who participated in script coverage, a task usually performed by television executives or other full-time employees, saw his tasks as an opportunity to learn. "For me, I would rather stay busy and do coverage than sit around and adhere to the guidelines", said Alanis, whose responsibilities also included administrative tasks and even the occasional picking up lunch for an executive. Id. Like Alanis' circumstances, maybe the focus of unpaid interns should be on the potential for success such an opportunity can bring, rather than focus on what they think they rightfully deserve. The answer subjectively lies with each individual and what he/she seeks to from the internship experience.

While lawsuits with numerous film studios are still ongoing, the class action filed in July 2013 against NBCUniversal for misclassifying hundreds of workers as unpaid interns has reached a settlement. Due to their misclassification, the individuals bringing the suit stated in their complaint that they were "denied the benefits that the law affords to employees, including unemployment, worker's compensation insurance, social security contributions, and, most crucially, the right to earn a fair day's wage for a fair day's work." While settlement terms and figures have not been released yet, the lawsuit estimated damages at approximately $5 million. Id. This may be the commencement of a shift in the trend of unpaid internships, where class-action lawsuits may start arising in various sectors outside of the film industry. With this change in trend, however, companies will start putting more stringent requirements on internship candidates, making it far more challenging for those who wish to gain valuable experience from obtaining it.

February 11, 2015

Three Things to Consider Before Making Employee Loans

By Kristine Sova

If your company is considering developing (or revising) an employee loan policy, or even just making a one-off loan to a stellar employee, read on. Unbeknownst to many employers, there are a number of laws and regulations that impact almost every facet of the loan - from who can receive one to how your company will be repaid.

1. Governance Laws Restrict Who You Can Issue Loans To

For example, the Sarbanes-Oxley Act of 2002, which applies to publicly-traded companies or companies preparing for their initial public offering, places restrictions on which employees may receive personal loans. So, too, do some laws affecting non-profit organizations. For this reason, you'll want to speak to a corporate lawyer with experience in corporate governance and/or a regulatory lawyer with experience in non-profit organizations to review the parameters of any loan policy you may adopt or loan you may make.

2. Employee Loans Have Tax Consequences

Depending on how a loan is structured, it can have adverse tax consequences for an employee. For example, interest-free and below-market loans may result in the spread between the reduced or non-existent rate and the market rate of interest being treated as taxable compensation to the employee. You'll want to speak with an accountant or tax lawyer to navigate this and other tax issues relating to employee loans.

3. Labor Laws Restrict Repayment Methods

The easiest way to collect loan payments is through payroll deductions, but applicable wage-and-hour laws may either restrict your ability to do so, or specify parameters within which those deductions can be made. For example, the New York Labor Law permits employers to make deductions from an employee's wages for repayment of a wage/salary advance, but only if the employer follows certain rules requiring written authorization and adoption of a dispute resolution procedure as well as rules relating to the timing and duration of the deduction. Furthermore, under the New York Labor Law, if payment of interest or loan fees is contemplated, those monies may not be repaid through a wage deduction, or even by a separate transaction.

These are only three, of many, legal issues to consider before making an employee loan. Once you have the legal implications sorted out, and still want to move forward with an employee loan, your company should consider developing a written employee loan policy to ensure consistent treatment of employees. In addition to the issues above, you'll want to consider and address the following in any policy: circumstances for making a loan, employee eligibility, total and individual loan maximums, and length of loans.

March 13, 2015

Who Should Investigate a Harassment Claim?

By Kristine Sova

Most employers know that an investigation needs to be conducted whenever the employer knows or suspects harassment or discrimination is occurring or has occurred in its workplace. Although much has been written by others offering tips and guidelines on how to conduct an effective investigation, less has been written about an equally important issue: that is, who should conduct the investigation.

Handling complaints of harassment and discrimination is difficult for any business, and in all instances, the investigator should be a qualified and disinterested person. This person could be you (the "you" being a founder or manager in a startup or small business) or a human resources representative, but only so long as neither person is the one who has been accused of harassment, is not close friends with the person making the complaint, the harasser, or any of the witnesses, or has some other conflict or bias relating to those involved or the complaint.

Sometimes, though, the complaint is especially sensitive, and special measures should be taken. By sensitive, I mean that the identity of the complainant, the identity of the accused, the nature and sensitivity of the allegations, the volume of complaints, the number of employees involved, the potential financial exposure, or the potential publicity present more of a high-stakes scenario for the employer. These types of cases warrant the hiring of an outside, independent investigator to conduct the investigation.

Why? Unlike you, another company employee or the company's regular legal counsel, an independent investigator has no formal ties to the organization, and is therefore, objective and neutral in a way that a person with ties to the organization or situation could never be. This is important because in harassment lawsuits, a successful defense often turns on the adequacy of the investigation, and the last thing any organization wants in a high-stakes scenario is for the investigation to be considered a sham by virtue of who conducted the investigation.

So where do you find an independent investigator? Employment lawyers, human resources/workplace consultants, and investigation firms usually offer investigative services, but choose carefully, and make sure that the investigator is qualified and experienced.

One final tip: Keep in mind that while your organization's regular legal counsel may play a role in selecting or recommending an independent investigator, if you will want your regular legal counsel to defend your organization in the event of a lawsuit, then your regular legal counsel should not serve as the investigator. As noted above, a successful defense often turns on the adequacy of the investigation, which, in turn, puts the investigation at issue in a lawsuit. If the investigation is at issue and your regular legal counsel is the investigator, then he or she will be conflicted out of representing your organization, because he or she will be witnesses in the litigation.

April 21, 2015

Joint Employers and Overtime Pay

By Kristine Sova

If a non-exempt employee works part time for two separate, but related, employers in the same workweek, such that the employee works 20 hours per week in one company and 25 hours per week in the other company, is the employee legally entitled to overtime pay because he or she is working more than 40 hours per week? It's very possible he or she is.

Here's why: It's the U.S. Department of Labor's position that in order for two employers to disregard all work performed by an employee for another employer and avoid any overtime pay obligations in the scenario above, the employers must be "acting entirely independently of each other and [be] completely disassociated with respect to the employment of a particular employee . . . ." (29 C.F.R. § 791.2(a))

While certainly not an all-inclusive list, some examples of what it means when employment by one employer is not completely disassociated from employment by another employer include situations where:

There is an arrangement between the employers to share the employee's services (for example, to interchange employees); one employer is acting, either directly or indirectly, in the interest of the other employer in relation to the employee; and/or
the employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer. (29 C.F.R. § 791.2(b)) In fact, the U.S. Department of Labor is of the view that in each of the above examples, a joint employment relationship exists. In those cases, overtime pay would be owed to the employee in the hypothetical above for five hours of work.

These joint employment relationships are most common among businesses with multiple locations, such as retail stores/boutiques, bars/restaurants, and fitness studios. If you happen to operate a business that fits this profile, you should take a closer look at your business's pay practices.


It is important to note that "joint employer status" is a complicated topic and the factors outlined above are not appropriate for all legal issues. For example, the issue of subcontractors as joint employers in an outsourced employment relationship typically involve another set of factors under the wage-and-hour laws.

Nor are the factors outlined above appropriate under all laws. The National Labor Relations Act, for example, is the federal law that encourages collective bargaining, and it has its own test for determining joint employer status. The laws also differ from state to state.

EASL Fashion Law Committee Program - Identity Crisis! Legal and PR Aspects of Managing Brand Image in Celebrity Endorsements and Licensing Agreements [Gone Wrong]

Date: Wednesday, April 29, 2015
Time: 5:30 PM - 8:30 PM Eastern Daylight Time

Fashion Institute of Technology's Jay and Patty Baker School of Business and Technology.
Katie Murphy Amphitheatre
7th Ave at W. 21st Street
New York, NY 10001

5:30 p.m. - 6:00 p.m. - Welcoming Reception
6:00 p.m. - 8:05 p.m. - Panel/Q&A
8:05 p.m. - 8:30 p.m. - Networking

This program qualifies for 2.5 MCLE credits in Professional Practice, this program is not transitional so does not qualify for newly admitted attorneys

As you wait in the checkout line at your local supermarket, you are so bored that you grab a gossip mag from the display above the mints. (OK, so it's really because you secretly love the sleaze... but we won't tell.) Flipping through the pages, you are consumed by the latest celebrity news: love, heartbreak and... uh oh... scandal. The top news story recounts a young celebutant's night of partying that ended in her arrest. In the wake of this incident, said starlet has been dropped by the trendy clothing line for which she served as brand ambassador. "How can they do that!?" you think to yourself. "Isn't there a contract they have to honor?" "And what about free speech?"

Recently, such situations have become quite common, resulting in an increased importance placed on contract terms designed to protect a fashion brand's reputation. This need for image control does not stop at celebrity endorsements. A brand's reputation can be at risk if the brand is associated with manufacturers or factories alleged to be in violation of health, safety and labor laws.

NYSBA's Fashion Law Committee, in partnership with the Fashion Institute of Technology's Jay and Patty Baker School of Business and Technology, invites you to attend its annual CLE event for a lively discussion of these issues. Industry attorneys and PR professionals will discuss the ins-and-outs of image protection from a legal and public relations perspective. Hear as they relay best practices in negotiating celebrity endorsement deals, discuss the importance and effectiveness of morality clauses and advise on avoiding reputational damage in the event of a "rogue" brand representative. Panelists will also discuss these issues as they apply to labor and safety standards.

Kathryne E. Badura, Esq., International Trademark Association (INTA)

Marc Beckman, Founder & CEO of Designers Management Agency
Daniel Bellizio, Bellizio & Igel PLLC
Kristin G. Garris, Esq., Associate, Kilpatrick Townsend & Stockton LLP
Guillermo Jimenez, Esq., Professor-International Trade and Fashion Law at the Fashion Institute of Technology of the State University of New York.
Robin Sackin, Chairperson of the Jay and Patty Baker School of Business and Technology's Fashion Merchandise Management Program at the Fashion Institute of Technology of the State University of New York.

Marc Beckman, Founder & CEO of Designers Management Agency

Register Today!
EASL Members: $25.00
NYSBA Members: $50.00
Non-NYSBA Members: $85.00

To register over the phone please call our State Bar Service Center at 1-800-582-2452

For Questions: Beth Gould at

June 10, 2015

Three Things to Consider Before Purchasing Employment Practices Liability Insurance (EPLI)

By Kristine Sova

Employment practices liability insurance (EPLI) is a type of insurance coverage that protects businesses from financial consequences associated with employment-related lawsuits. However, as is the case with most insurance policies, EPLI policies vary wildly in terms of price and breadth of coverage. Below are three things to consider before a company purchases an EPLI policy.

1. Claims and Losses

Most policies restrict coverage to harassment and discrimination claims, and typically exclude coverage for claims involving wage-and-hour laws. In addition, while many policies cover damages like back pay, many disclaim coverage for losses like front pay and punitive damages, both of which are often very high. It's important to make sure that counsel knows what the company is getting when a policy is purchased, and more importantly, that the policy covers losses that post a true risk to the business.

2. Selection of Counsel

Before a business purchases a policy, it will also want to make sure to know what rights to retain insurance-related counsel it has under the policy. Many policies give the insurance company the right to designate counsel of its own choosing. Policies that don't often limit insured employers to selecting defense counsel from a pre-approved list of lawyers. If a business would like a specific lawyer or firm to represent it in the event of an employment lawsuit, one should try negotiating for a choice of counsel before purchasing the policy.

3. Consent to Settle

Many EPLI policies require insured employers to consent to settle any claim by not unreasonably withholding consent. Keep in mind that insurance companies often wish to settle claims, reasoning that they can do so for less than the anticipated defense costs plus potential damages that could be awarded in a lawsuit, whereas insured employers usually do not want to settle claims because they do not want to set a precedent for settlement and open a floodgate of litigation against the business. Naturally, disagreements arise between insurance companies and insured employers over whether a matter should be settled. For this reason, many policies include some form of hammer clause - which essentially renders the insured employer financially responsible should it go against the insurance company's recommendation to settle - to compel insured employers to settle cases.

July 6, 2015

New York Employers Take Note: "Primary Beneficiary Test" to Determine Whether Interns Should Be Paid Under the Fair Labor Standards Act

By Kristine Sova

On July 2, 2015, the Second Circuit Court of Appeals answered the question: "[W]hen is an unpaid intern entitled to compensation under the FLSA?" The question was a matter of first impression in the Circuit, and the decision was a long-awaited one, because it addressed a question left unresolved since 2013 when two New York district court judges applied different tests in similar cases, the result of which were opposite outcomes (Glatt v. Fox Searchlight Pictures Inc., U.S.D.C., S.D.N.Y., Civil Action No. 11 Civ. 6784, and Wang v. The Hearst Corporation, U.S.D.C., S.D.N.Y., Civil Action No. 12 Civ. 0793).

On appeal, the Second Circuit considered whether to apply:

*the U.S. Department of Labor's (DOL) six-factor test for determining whether an internship at a for-profit institution may be unpaid under the Fair Labor Standards Act (FLSA, a variation of which had been applied by the district court judge in the Glatt decision), or

*another test whereby interns will be considered employees whenever the employer receives an immediate advantage from the interns' work, or

*a more nuanced "primary beneficiary test," as suggested by the district court judge in Wang and the employers on appeal, which considers whether the intern or the employer is the primary beneficiary of the relationship.

The panel adopted the primary beneficiary test, noting two salient features. The first is that it focuses on what the intern receives in exchange for his or her work. The second is that it accords courts the flexibility to examine the economic reality as it exists between the intern and the employer.

In adopting this test, the court laid out seven non-exhaustive factors to consider when assessing whether an intern is an employee entitled to compensation under the FLSA:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee--and vice versa.
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The extent to which the internship is tied to the intern's formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern's academic commitments by corresponding to the academic calendar.
5. The extent to which the internship's duration is limited to the period in which the internship provides the intern with beneficial learning.
6.The extent to which the intern's work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The court noted that applying these considerations requires weighing and balancing all of the circumstances, and no one factor is dispositive. Every factor need not point in the same direction for the court to conclude that the intern is not an employee entitled to the minimum wage. In addition, courts applying the "primary beneficiary test" are permitted to consider relevant evidence beyond the specified factors in appropriate cases.

Perhaps most notable about the Second Circuit's decision is that the court declined to follow DOL's six-factor test, which employers had been advised to follow in the absence of explicit guidance out of the Second Circuit. (For an in-depth discussion of the DOL's six-factor test, click here:

The Second Circuit's territory encompasses Connecticut, New York, and Vermont. Employers with operations or workers in those three states should be mindful that the "primary beneficiary test" may apply when determining whether an intern should be paid or unpaid under the federal Fair Labor Standards Act.

August 6, 2015

Which Equal Employment Opportunity Laws Apply to Your Business?

By Kristine Sova

Not all employers are covered by all of the various labor and employment laws that exist. It is important to know which laws apply to which company or organization, because coverage imposes important obligations on employers.

Here are the most common federal, New York state, and NYC equal employment opportunity (EEO) laws, along with a brief description of the law and the thresholds for coverage:

Title VII of the Civil Rights Act of 1964 (Title VII)

This federal law makes it illegal to discriminate against someone on the basis of race, color, religion, national origin, or sex. The law also requires that employers reasonably accommodate applicants' and employees' sincerely held religious practices, unless doing so would impose an undue hardship on the operation of the employer's business.

Covered employers: Generally, employers engaged in an industry affecting commerce that have 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year.

The Pregnancy Discrimination Act (PDA)

This federal law amended Title VII to make it illegal to discriminate against a woman because of pregnancy, childbirth, or a medical condition related to pregnancy or childbirth.

Covered employers: Generally, employers engaged in an industry affecting commerce that have 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year.

The Equal Pay Act of 1963 (EPA)

This federal law makes it illegal to pay different wages to men and women if they perform equal work in the same workplace.

Covered employers: There are two coverage tests, but generally, employers with two or more employees that have an annual dollar volume of sales or business done of at least $500,000.

The Age Discrimination in Employment Act of 1967 (ADEA)

This federal law protects people who are 40 or older from discrimination because of age.

Covered employers: Generally, employers engaged in an industry affecting commerce that have 20 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year.

Title I of the Americans with Disabilities Act of 1990 (ADA)

This federal law makes it illegal to discriminate against a qualified person with a disability. The law also requires that employers reasonably accommodate the known physical or mental limitations of an otherwise qualified individual with a disability who is an applicant or employee, unless doing so would impose an undue hardship on the operation of the employer's business.

Covered employers: Generally, employers engaged in an industry affecting commerce that have 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year.

The Genetic Information Nondiscrimination Act of 2008 (GINA)

This federal law makes it illegal to discriminate against employees or applicants because of genetic information. Genetic information includes information about an individual's genetic tests and the genetic tests of an individual's family members, as well as information about any disease, disorder or condition of an individual's family members (i.e., an individual's family medical history).

Covered employers: Generally, employers engaged in an industry affecting commerce that have 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year.

New York State Human Rights Law

This state law makes it illegal to discriminate against someone on the basis of age, race, creed, color, national origin, sexual orientation, military status, sex, disability, predisposing genetic characteristics, marital status, or domestic violence victim status. The law requires reasonable accommodation of religious practices and disabilities, provided that they do not impose an undue hardship on the operation of the employer's business.

Covered employers: Generally, employers with 4 or more employees.

New York City Human Rights Law

This city law makes it illegal to discriminate against someone on the basis of age, race, religion, creed, color, national origin, gender, gender identity, disability, marital status, partnership status, pregnancy, sexual orientation, alienage or citizenship status, arrest or conviction record, status as a victim of domestic violence, sexual violence, or stalking, unemployment status, and, beginning September 3, 2015, credit history. The law requires reasonable accommodation of religious practices and disabilities, provided that they do not impose an undue hardship on the operation of the employer's business.

Covered employers: Generally, employers with four or more employees.


Each of the above laws also makes it illegal to retaliate against a person because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit.

Keep in mind that the list above does not include all labor and employment laws, such as wage-and-hour laws, leave laws, safety laws, and the like. Also keep in mind that there are a number of other factors that may impact whether or not a law will apply to a particular employer or not, such as whether or not to include a principal as an employee, as well as single employer and joint employer doctrines, which permit courts and administrative agencies to treat nominally separate, but highly integrated companies as a single employer for coverage purposes.

August 20, 2015

New York City Limits Credit History Use Beginning September 3rd

By Kristine Sova

Beginning September 3, 2015, it will be illegal for covered employers in New York City to request or use an employee's or applicant's consumer credit history to make employment decisions.

The Stop Credit Discrimination in Employment Act amends the New York City Human Rights Law, which applies to employers with four or more employees, and prohibits covered employers from requesting or using the consumer credit history of an applicant or employee for employment purposes. The law also prohibits covered employers from discriminating against applicants and employees with regard to hiring, compensation or other terms, conditions or privileges of employment based on the applicant's or employee's consumer credit history.

The new law defines "consumer credit history" as including:

-consumer credit reports (which includes any communication from a credit reporting agency that bears on a consumer's creditworthiness, credit standing, credit capacity or credit history);
credit scores; or
-other information an employer directly obtains from an applicant or employee about credit accounts, including:
*details about credit accounts, including the individual's number of credit accounts, late or missed payments, charged-off
debts, items in collections, credit limit and prior credit report inquiries; or
*bankruptcies, judgments or liens.

The new law allows employers to request consumer credit information from applicants and employee in limited circumstances, including when hiring for:

Positions where an employer is required by state or federal law or regulations or by a self-regulatory organization to use an individual's consumer credit history for employment purposes;
-Police officer or peace officer positions;
-Positions in which employees are required to be bonded under federal, state or city law;
-Positions in which employees are required to possess security clearance under federal or state law;
-Non-clerical positions having regular access to trade secrets, intelligence information or national security information;
-Positions having signatory authority over third party funds or assets valued at $10,000 or more;
-Positions that involve a fiduciary responsibility to the employer with the authority to enter into financial agreements valued at -$10,000 or more on behalf of the employer; and
-Positions with regular duties that allow the employee to modify digital security systems established to prevent the unauthorized use of the employer's or client's network or databases.

Nothing in the new law prohibits employers from requesting or receiving consumer credit history information pursuant to lawful subpoenas, court orders or law enforcement investigations.

September 24, 2015

Three Common Ways Employers Violate Wage-Hour Laws

By Kristine Sova

Employers often run afoul of wage-hour laws in similar ways, three of which are discussed below. Luckily, these errors can often be remedied, in a prospective manner, through a simple change in policy or practice.

Refusing to Pay for Unauthorized Overtime

Many employers require employees to seek approval before working overtime. While that is an acceptable policy to have, employers get in trouble when they refuse to pay for unauthorized overtime.

The idea of having to pay for unauthorized overtime seems at odds with a policy requiring advance approval of overtime hours. However, it's not inconsistent with the wage-and-hour laws requiring payment for that time.

How so? The federal Fair Labor Standards Act (FLSA) defines the term "employ" to include the words "suffer or permit to work," which essentially means that if an employer requires (or even allows) employees to work, the time spent is hours worked for which an employee must be paid. As a result, time spent doing work not requested by the employer, but still allowed, is compensable time.

Treating Salaried Employees as Exempt from Overtime Pay Merely Because They Are Not Paid on an Hourly Basis

Some employers assume that all salaried employees are exempt from overtime. As I have also discussed (, this is not true. Salary ≠ exempt, and an employee must qualify for the applicable FLSA and state law exemptions in order for his/her pay to cover all hours of work in a workweek.

For employers who may have misclassified any positions as exempt from the overtime pay, and had those positions frequently work in excess of 40 in a workweek, the scary truth is that hefty back wages may be due those employees.

Interested in knowing more? Click here ( for a fact sheet from the U.S. Department of Labor on the FLSA exemptions for executive, administrative, professional, computer, outside sales and highly-compensated employees.

Docking Hours of Certain Exempt Employees

Many of the FLSA exemptions require individuals to be paid on a "salary basis." Being paid on a "salary basis" means that an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee's work. This means that, under the FLSA, an exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked, subject to the exceptions below. If an employer makes deductions to an exempt employee's salary outside of these limited circumstances, the employer risks jeopardizing the employee's exempt status.

Deductions from pay are permissible only:

-when an exempt employee is absent from work for one or more full days for personal reasons;
-when an exempt employee is absent from work for one or more full days due to sickness or disability, but only if a formal policy is in place governing paid sick leave;
-when an exempt employee is absent from work for either partial or full days due to Family and Medical Leave Act (FMLA) leave;
-to offset amounts employees receive as jury or witness fees, or for military pay;
-for penalties imposed in good faith for infractions of safety rules of major significance; or
-for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions.

There's one more exception to the requirement that an exempt employee must receive the full salary for any week in which the employee performs any work: employers are not required to pay the full salary in the initial or final week of employment.

December 8, 2015

NYC's Commuter Benefits Law Effective January 1

By Kristine Sova

Beginning January 1, 2016, unless otherwise exempted, NYC employers with 20 or more full-time employees must offer full-time employees the opportunity to use pre-tax income to pay for their commutes. The Department of Consumer Affairs (DCA), the same agency responsible for enforcing the NYC Earned Sick Time Act (Paid Sick Leave Law), has the responsibility for enforcing NYC's Commuter Benefits Law.

Under the new law, a full-time employee is any employee who works an average of 30 or more hours per week in the most recent four weeks, any portion of which was in NYC.

The new law does not apply:

To federal, state or local governmental agencies/employers;
Where a collective bargaining agreement (CBA) exists between an employer and employees, except if the employer has 20 or more full-time employees who are not covered by the CBA, in which case the employer must offer these employees commuter benefits; or
Where the employer is not required by law to pay federal, state or city payroll taxes.

In addition to the exemptions noted above, the DCA also has authority to waive the requirements of the Commuter Benefits Law if an employer presents compelling evidence that complying with the new law would significantly harm the business's finances.

Employers must give their full-time employees a written offer of the opportunity to use pre-tax income to purchase qualified transportation fringe benefits and maintain a record of the offer and employees' responses. Employers may use the sample form available on the DCA website at to document compliance. Records must be kept for two years.

The new law gives employers a six-month grace period (from January 1st to July 1st) to begin offering a commuter benefits program. Employers will not be subject to penalties for violations that take place before July 1. The law also gives employers 90 days to correct a violation before the DCA is authorized to seek penalties.

Employers who do not yet offer commuter benefits programs to their employees should consult their tax advisors to review any tax implications for their businesses and their employees.

January 28, 2016

New York's Increasing Expansion of Member and Shareholder Liability for Unpaid Wages

By Kristine A. Sova

Wage theft prevention remains a priority in New York so much so that, in recent years, the state has incrementally expanded the personal liability of Limited Liability Company (LLC) members and corporate shareholders for the unpaid wages due their organization's employees.

Early last year, Section 609 of New York's LLC Law was amended with the addition of two new subsections that specified that the 10 members of an LLC with the largest percentage ownership interests will be held, jointly and severally, personally liable for any unpaid wages owed to their LLC's employees. These new provisions in New York's LLC Law echoed a similar obligation long embodied in New York's Business Corporation Law, under which employees may recover unpaid wages from the 10 largest shareholders of a domestic corporation. This change took effect on February 25, 2015.

This month, however, the domestic incorporation limitation in Section 630 of New York's Business Corporation Law was removed, in effect rendering the 10 largest shareholders of domestic and foreign corporations, jointly and severally, personally liable for any unpaid wages owed to their corporation's employees so long as the unpaid services were performed in New York. This change took effect on January 19, 2016.

The definition of "wages" is broad under both statutes and includes all compensation and benefits, such as salaries, overtime, vacation, holiday and severance pay; employer contributions to or payments of insurance or welfare benefits; employer contributions to pension or annuity funds; and any other moneys properly due or payable for services rendered by an employee, including any related liquidated damages, penalties, interest, attorneys' fees or costs.

Personal liability, however, is not automatic under New York's LLC Law or Business Corporation Law. Before an employee can charge a member or shareholder for unpaid wages:

The employee must first provide written notice to the member/shareholder that the employee intends to hold the member/shareholder liable for the employee's unpaid wages under the LLC Law or Business Corporation Law. Employees must provide this notice within 180 days after termination of employment. However, if the employee demands and receives the opportunity to examine the corporation's books and records (available only under the Business Corporation Law) during that 180-day time frame, then the notice can be made within 60 days of examination.

The employee must also begin a lawsuit seeking a judgment against the LLC or corporation for unpaid wages, and attempt to execute the judgment. Once an execution is returned unsatisfied, the employee must commence a second lawsuit against the members/shareholders within 90 days.

March 4, 2016

Three Reasons Your Organization Needs Job Descriptions

By Kristine A. Sova

Much like employee handbooks, federal and state laws do not require employers to have job descriptions for their employees. That being said, there are a number of practical and legal benefits to having them, provided they are well-drafted. Here, we'll discuss three good reasons for your organization to have written job descriptions.

Performance Management

Written job descriptions communicate to employees what their work responsibilities and duties are, and as such, provide the basis for employee performance reviews, goal setting, salary increases, and performance bonuses. Conversely, if an employee is not meeting the requirements of the job, the written description can also provide the standard for measuring performance and provides support for any decision to terminate or discipline an employee for performance issues.

Accommodations Issues

A written job description becomes important when dealing with disability and religious accommodation issues in the workplace because it helps to establish the essential functions of a job.

For example, under the Americans with Disabilities Act of 1990 (ADA), a covered employer must provide qualified individuals with a disability with a reasonable accommodation, unless doing so poses an undue hardship on the employer. To be a qualified individual under the ADA, an employee or applicant must (1) possess the skills, experience, education and other job-related requirements necessary for the position, and (2) be able to perform the essential functions of the job with or without a reasonable accommodation. The essential functions of the job are the "fundamental job duties" of the employment position. They do not include the marginal functions of the position.

Evidence of whether a particular function is essential includes a written job description prepared before advertising or interviewing for a job. Further, with a pre-existing written job description, an employer has a starting reference point for what duties are considered essential when engaging in what's known as the "interactive process" in order to determine a potential job accommodation for an applicant or an employee.

Exemption Issues

Written job descriptions can also be evidence in litigation involving claims that employees were misclassified as exempt from the overtime pay requirements and not paid overtime.

Generally speaking, unless an employee is considered "exempt," the law requires that any hours worked in excess of 40 per workweek be compensated at a rate of not less than time and one-half of the employee's regular rate of pay. This holds true for employees who receive a salary, provided that they do not fall within one of the available exemptions. The exemptions are defined by federal and state law, and they generally apply to white-collar workers whose primary functions are executive, administrative, professional, or in other narrowly-defined categories.

For example, under the Fair Labor Standards Act (FLSA) and New York Labor Law, currently an employee will be exempt from overtime under an "administrative exemption" if:

the employee is compensated with a salary that is greater than or equal to $675.00 per week;

the primary duties of the employee are office or other non-manual work that relates directly to management or business operations, either to the employer or the employer's customers/clients;

the employee's primary duties include the exercise of discretion and independent judgment to matters that are significant to the operation of the business/organization; and

the employee regularly and directly assists an employer or an employee employed in a bona fide executive or administrative capacity; or performs, under only general supervision, work along specialized or technical lines requiring special training, experience or knowledge.

An accurate list of job duties can help establish that the employee's job duties qualify that employee under one of the exemptions provided by the FLSA and/or state law - specifically, if it meets the "primary duties" test under the FLSA and/or state law.

April 19, 2016

Investigations and the Faragher-Ellerth Affirmative Defense

By Kristine A. Sova

Although laws like Title VII seek to make persons whole for injuries suffered on account of unlawful harassment, its primary objective is not to provide redress, but to avoid harm. This means that the law gives employers many opportunities to avoid liability for the harassing conduct of their employees and supervisors, most significantly, when employers investigate and take steps to promptly correct any harassing behavior.

Consider harassment allegedly perpetrated by a supervisor. Where the alleged harassment involves a supervisory employee, courts addressing a Title VII claim first look to whether the supervisor's behavior culminated in a tangible employment action against the employee, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits. Burlington Indus. v. Ellerth, 524 U.S. 742, 761, 765, 118 S. Ct. 2257,141 L. Ed. 2d. 633 (1998). If the harassment resulted in an adverse employment action, the employer will be vicariously liable. Id.

When no adverse employment action is taken, however, a defending employer may avoid liability for a supervisor's harassment if the employer can demonstrate that:

it took reasonable steps to prevent and promptly correct sexual harassment in the workplace, and
the aggrieved employee unreasonably failed to take advantage of the employer's preventive or corrective measures.

This principle often is referred to as the "Faragher-Ellerth affirmative defense," a reference to two 1998 United States Supreme Court decisions in which the Court established the defense.

Although there is no reference to investigations under either prong of the defense, investigations are crucial under both prongs if an employer wants to take advantage of the defense.

Under the first prong of the Faragher-Ellerth defense, an employer must establish that it exercised reasonable care in preventing and correcting any sexually harassing behavior. Reasonable care includes training staff and supervisors and establishing reporting procedures. The very presence of the second prong - that the plaintiff employee unreasonably failed to take advantage of any preventative or corrective opportunities provided by the employer or to avoid harm otherwise - means that an employer is not required to prove success in preventing harassing behavior to avoid vicarious liability, nor is it required, in all circumstances, to establish unreasonable conduct on the part of the employee in order to avoid vicarious liability. Cajamarca v. Regal Entm't Group, Civil Action No. 11 Civ. 2780 (BMC), 863 F.Supp.2d 237, 249, 252 (E.D.N.Y. May 31, 2012). However, this means that an employer must take reasonable steps to promptly correct a hostile work environment once the employer has knowledge of its existence. Id. at 252. This includes investigation and issuance of appropriate, corrective remedies if harassment is found.

For example, in Cajamarca, the employer adopted appropriate training and reporting procedures, the plaintiff complied with those procedures for the most part, and the employer remedied the hostile work environment accordingly. As the incentives provided by the Faragher-Ellerth defense worked exactly as they were supposed to, the court saw no reason why the employer should be held vicariously liable for a hostile work environment solely because the employee reported it. Id.

Investigations are equally important under the second prong of the Faragher-Ellerth defense. The second prong requires the employer to show that the employee unreasonably failed to take advantage of the employer's harassment complaint procedures. Ellerth, 524 U.S. at 765. Evidence of "any unreasonable failure [by the employee] to use any complaint procedure provided by the employer . . . will normally suffice to satisfy the employer's burden." Id. (emphasis added). However, an employee's "credible fear that her complaint would not be taken seriously" will overcome the employer's burden. Caridad v. Metro-North Commuter R.R., 191 F.3d 283, 295 (2d Cir. 1999). Such fear can be evidenced by proof that the employer has ignored or resisted similar complaints, see Leopold v. Baccarat, Inc., 239 F.3d 243, 246 (2d Cir. 2001), providing another reason for employers to investigate employee complaints in order to take advantage of the Faragher-Ellerth defense.


One final note: Although the Faragher-Ellerth defense was established in the context of hostile work environment sexual harassment, since the defense was established, it has been applied to defend against claims on the basis of other protected characteristics as well. For this reason, employers should investigate all complaints of harassment, not just those premised on sex.

May 3, 2016

Works for Hire and the No Moonlighting Clause: If You Write and App on the Side, Does Your Boss Own it Anyway?

By Britton Payne

Developers (and coders and programmers) dream of creating the next Facebook, Uber, or Spotify. Yet dreaming doesn't pay the bills, so these developers probably work for someone else in the meantime. When dreaming turns into coding on nights and weekends, things start to get tricky with regards to employment agreements.

Developers are a very smart class of people, and often rely on their own judgment when looking over employment paperwork at a new job. Unfortunately for both employee and employer, this often leads to adversarial consequences. When the programmer wants to leave the job to work on the dream, and the legal meaning of language in a contract doesn't line up with the developer's understanding, both the job and the dream can go up in smoke. This problem doesn't affect just tech companies -- many large companies hire developers in one capacity or another. There are many ways an employment agreement can trip up a dreaming developer and employer, often wrapped up in the No Moonlighting and Work for Hire clauses.

"No Moonlighting" Clauses can Turn "Personal Time Developing" into Breach of Contract

With or without a traditional 9:00 to 5:00 in an office, most developers feel like they have a pretty good understanding of what their jobs are: If you do your assignments for the benefit of the company, you're doing your job. Unfortunately, a developer's obligations to the employer may also include the things they don't do in addition to the things they do. Employment agreements often include limitations on what employees can do with their non-work time -- the "No Moonlighting" clause. The idea is that some jobs want you to put all creativity and effort into helping the employer, and not someone else (including the employee). Sometimes this is limited to work related to the job, but sometimes it is for any work at all. Here are sample No Moonlighting clauses:

-...The Employee shall devote substantially all of his business time and attention to the performance of his duties hereunder...

-You agree that you will not engage in any other business activities or render services of a business or commercial nature on your own behalf or on behalf of any other person, corporation or any other entity, whether for compensation or otherwise, without [Company]'s prior written approval.

A narrow No Moonlighting clause might restrict one from freelance developing on one's own time; a broad No Moonlighting clause might restrict one from even tending bar on personal time.

As you can see, the devil is in the details, and a particular clause may not be that easy to understand without the help of an attorney. A client of mine went to quit his job to work full time on his personal time project, and an amicable employer became suddenly aggressive. His employer claimed that not only did it own his project under the Work for Hire clause, but the (now former) employee was in breach of contract under the No Moonlighting clause. Naturally, he panicked. We got him through it, but he would have been much better able to manage his project, or even change his employment agreement, if he had consulted with an attorney before he signed his employment agreement.

"Work for Hire" Clauses can Easily Capture Personal Time Programming

Even without a No Moonlighting clause, most developers realize that a Work for Hire clause is standard, and that it limits their ability to own the programs and code they create for their employers. Developers generally understand that there is some rule about creating outside programs on work computers, during work time, or at the office. Unfortunately for developers, this could mean the difference between owning the intellectual property in outside work, or having to give it over to the employer. Some sample Work for Hire clauses include:

-I hereby assign to the Company... all my right, title, and interest in and to any and all inventions, original works of authorship... which I may solely or jointly conceive or develop... during the period of time I am in the employ of the Company... except an Invention that (i) I develop outside of the Company's normal working business hours and (ii) does not relate to the Company's business as currently conducted, or as conducted in the future. I further acknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of and during the period of my employment with the Company and which are protectable by copyright are "works made for hire," as that term is defined in the United States Copyright Act.

-You acknowledge and agree that [Company] is the owner of the copyright in any work which it or you produce in connection with your employment...

-All inventions, innovations, improvements, methods, designs, drawings, characters, props, molds and all similar or related information (whether or not patentable) that relate to the Company's or its Affiliates' actual or planned business, research and development or existing or planned products or services and that the Employee conceived, developed, or made while an employee of, or a consultant to, the Company (collectively, the "Work Product") ... consisting of copyrightable subject matter is "work made for hire" as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company.

The terms of these clauses vary, as does the intellectual property they intend to capture. A more narrow clause would only capture personal time programming that is in connection with the "employment." However, a broader clause captures personal time programming that relates to the company's "actual or planned business," whether or not that relates to the developer's particular job. One developer client used a database program at work that he felt was inadequate. On his own time, he built a better database program for the purpose. He hoped to quit his job and have his employer become his first client. He knew that he had a Work for Hire clause, but because his job did not involve making database programs, he thought his project was outside the scope. When the employer got wind of his plan, they disagreed, and it led to some tense and adversarial negotiations that were unfortunate for both sides. A similar case from the pre-Internet era showed a court's thinking on how broadly "scope of employment" can be construed:

Miller's job description did not specifically state that he was to develop computer programs. Miller was not assisted by others in the development of the computer programs. Finally, Miller did not receive any type of additional compensation for the work done on his own time. However, the driving force behind the creation of the computer programs was to benefit CP by making the quality control laboratory more efficient. Furthermore, the development of the computer programs was clearly incidental to the other work performed by Miller. . . . [T]he court concludes that the development of the computer programs by Miller was within the scope of his employment.

Miller v. CP Chemicals, Inc., 808 F. Supp. 1238, 1244 (D.S.C. 1992). Neither side could have been pleased that it was stuck in a lengthy litigation.

Counseling before Signing the Employment Agreement is Good for the Employer and the Employee

Several of my pre-employment counseling clients have been referrals from employers. Developers are generally very smart and quite comfortable acting independently, but employers have seen relationships with developers go bad over the intellectual property terms of their employment agreements, even when both sides initially think that the terms are reasonable. Many employers of developers want to employ the kind of talented and enthusiastic developers who would build apps on their own time, and have no interest in owning or slowing down their truly outside projects. It may be better to have a special employee like that for only two years than a less motivated employee for 10. At the same time, employers (and their contract drafters) have an obligation to nurture and protect their companies' intellectual property. As friendly as an employer and a new employee may be, the employee is at a disadvantage when understanding the meaning and application of No Moonlighting and Work for Hire clauses. In addition, there are several other standard clauses peppered throughout a developer's employment agreement (and even the company policy documents) that might affect a developer's ownership of personal time programming.

Don't Give Up Hope: The Terms are Often Just the Starting Point for Negotiations

No one wants to go to court, no matter how much bluster one side or the other might display, and it may not even be in either side's interest to strictly enforce the No Moonlighting/Work for Hire clauses of an employment agreement. Further, overreaching or poorly written No Moonlighting restrictions or Work for Hire grabs may not be enforceable in court. When employment ends, the terms of the employment agreement may dictate strict adherence. In practice, they often serve as simply the basis for negotiations, especially once the developer leaving the job has representation. One client created a proof of concept app that was unrelated to his assignments, but which would help his employer. When he quit the job to develop it fully, the employer claimed that it owned the app. However, as it was only at an early stage of development, it was practically useless without further development from the ex-employee. The sides came to a negotiated agreement involving joint ownership of the new company formed to develop the app that adequately incentivized the developer, while giving the employer some benefit of the bargain set forth in the employment agreement.

Further Reading,

Mattel, Inc. v. MGA Entm't, Inc., 616 F.3d 904, 912-13 (9th Cir. 2010), as amended on denial of reh'g (Oct. 21, 2010) (exploring the ambiguity of the phrase "at any time during my employment").

Advanced Tech. Servs., Inc. v. KM Docs, LLC, 330 Ga. App. 188, 196, 767 S.E.2d 821, 828 (2014), reconsideration denied (Dec. 4, 2014) (finding a developer employment agreement for personal time programming to be ambiguous).

J & K Computer Sys., Inc. v. Parrish, 642 P.2d 732 (Utah 1982) (finding that elements of computer programs are trade secrets that can be protected from use by former employees, even though a few customers had access)

Jumping Ship: Legal Issues Relating to Employee Mobility in High Technology Industries, 17 Lab. Law. 25, 106 (2001)

The Moonlighting Survival Guide

Do You Need an Employee Moonlighting Policy to Protect Your Business?

June 4, 2016

Options for Compliance with the New Federal Overtime Rule

By Kristine A. Sova

Six months from now, on December 1, 2016, a new federal overtime rule goes into effect. The new overtime rule doubles the annual salary threshold that must be paid to an employee in order for the employee to qualify for an exemption from the overtime pay requirements. The current annual salary is $23,660 and the new annual salary is $47,476.

It's likely that your organization has at least a few white collar employees who satisfy one of the duties tests for exemption and earn between the old salary level and the new salary level. In light of the new rule, employers should evaluate these job categories to determine which employees do and do not work more than 40 hours per workweek.

Ultimately, employers may determine that changes to pay or hours are not necessary because the employee will never work any overtime. If the employee's salary will be kept the same (that is, less than $47,476 a year), the only change to be made is to re-classify the employee as non-exempt (and thus overtime eligible). In addition, employers should keep an accurate record of hours worked by such an employee.

If, after evaluation, an employer determines that there are employees likely to work more than 40 hours in a workweek, there are a few options to consider:

Raise Salaries

Employers may choose to raise the salaries of employees who meet the duties tests and who regularly work over 40 hours per workweek, particularly if their current salaries are close to the new salary level. These employees would remain exempt and no overtime would be due to the employees.

Pay a Salary plus Overtime

In lieu of raising salaries, employers may choose to continue paying employees a salary covering a fixed number of hours of work per workweek, on top of which overtime pay would be due.

One option is to pay employees a salary that covers 40 hours of work per workweek, and then pay overtime at time-and-a-half the employee's regular rate of pay for any hours over 40 in a workweek. This might be a preferred option for employees who work 40 hours per workweek and do not frequently work overtime, or for employees who do not consistently work the same amount of overtime.

A second option is to pay employees a salary for a certain number of hours in excess of 40 hours in a workweek. By doing so, an employer would pay an employee a salary to cover all straight time hours worked, one-half the employee's regular rate of pay for overtime hours included within the salary, and time-and-a-half the employee's regular rate of pay for overtime hours beyond those included in the salary.

For example, let's consider an employee who earns a fixed salary of $41,600 per year for a 50-hour workweek ($800 per workweek). The salary does not include the overtime premium. As the salary is for 50 hours per workweek, the employee's regular rate of pay is $16 ($800/50). In a normal 50-hour workweek, the employer would pay the employee the additional half-time overtime premium for the 10 hours of overtime ($8 per hour). In that normal 50-hour workweek, then, the employee would earn $880. If the employee worked more than 50 hours in a workweek, the employer would also owe overtime compensation at time-and-a-half the employee's regular rate (1.5 x $16 = $24/hour) for hours beyond 50 because the salary does not cover payment for those hours. Therefore, if the employee worked 52 hours in a workweek, the employee would earn $928, which is $880 plus 2 hours of overtime at a rate of $24/hour.

Another option is to pay employees a fixed salary that covers a fluctuating number of hours at straight time. This method permits employers to pay fluctuating workweek employees overtime at the one-half rate, instead of at the time-and-a-half rate. In order to do so, an employer must communicate to the employee that "the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number" and pay the employee a salary large enough to ensure that the employee always earns more than the minimum wage.

Adjust Wages

Another option is for employers to adjust the amount of an employee's earnings to reallocate it between regular wages and overtime, so that the total amount paid to the employee remains largely the same. For example, an employee who satisfies the duties test for the administrative exemption earns a salary of $37,000 per year ($711.54 per week). If the employee regularly works 45 hours per workweek, the employer may choose to instead pay the employee a regular hourly rate of $15 and pay overtime at a rate of time-and-a-half (1.5 x $15 = $22.50) for the 5 overtime hours worked each workweek. By doing so, the employer would pay the employee $712.50 per week.

Reorganize Workloads, Adjust Schedules and Redistribute Work Hours

Last, but certainly not least, employers may consider reorganizing workloads, adjusting employee schedules, and redistributing work hours (which may or may not include hiring new employees) to reduce or eliminate overtime hours.

August 11, 2016

EEOC Task Force Identifies Key Components of Effective Harassment Reporting Systems and Investigations

By Kristine Sova

In June 2016, the U.S. Equal Employment Opportunity Commission released an 88-page report on harassment in the workplace. The report (available here) calls for "a reboot of workplace harassment prevention efforts" in light of the fact that one-third of the approximately 90,000 charges of discrimination received by the EEOC in fiscal year 2015 included an allegation of workplace harassment.

The report found that workplace harassment too often goes unreported, with roughly 3 out of 4 individuals who experienced harassment never even talking to a supervisor, manager or union representative about the harassing conduct. Employees who experience harassment fail to report the harassing behavior or file a complaint because they fear disbelief of their claim, inaction on their claim, blame, or social or professional retaliation.

In an effort to holistically reduce the number of harassment claims, the EEOC Task Force called for employers to institute more effective reporting systems for allegations of harassment. Such reporting systems should be ones that include a means by which individuals who experience harassment can report the harassment and file a complaint, as well as a means by which employees who observe harassment can report that to the employer.

The report noted that "[u]ltimately, how an employee who reports harassment (either directly experienced or observed) fares under the employer's process will depend on how management and its representatives act during the process. If the process does not work well, it can make the overall situation in the workplace worse. If one employee reports harassment and has a bad experience using the system, one can presume that the next employee who experiences harassment will think twice before doing the same. Finally, ensuring . . . the process that commences following a report is fair to an individual accused of harassment contributes to all employees' faith in the system."

So what makes a reporting system effective? The report outlined several elements that make reporting systems work well and provide employees with faith in the system. Notably, a number of the elements identify key components of effective harassment investigations. The elements include:

-Employees who receive harassment complaints must take the complaints seriously.
-The reporting system must provide timely responses and investigations.
-The system must provide a supportive environment where employees feel safe to express their views and do not experience retribution.
-The system must ensure that investigators are well-trained, objective, and neutral, especially where investigators are internal company employees.
-The privacy of both the accuser and the accused should be protected to the greatest extent possible, consistent with legal obligations and conducting a thorough, effective investigation.
-Investigators should document all steps taken from the point of first contact, prepare a written report using guidelines to weigh credibility, and communicate the determination to all relevant parties.

In my experience, many reporting systems contemplate and call for the above elements, oftentimes paying lip service to these elements via a written harassment complaint procedure, but the system quickly fails when a harassment complaint is lodged with an employer. The following are all too common:

-The employees who receive harassment complaints do not take the complaints seriously.
-The complaint (and any related investigation and response) is not addressed in a timely manner.
-Investigators are not well-trained in conducting investigations, nor are they objective or neutral.
-The investigation is not documented.
-A determination regarding the allegation of harassment is never communicated to the relevant parties.

The EEOC report provides a good reminder that employers should not overlook the importance of taking complaints seriously and promptly investigating complaints of harassment. All too often what begins as a small workplace indiscretion turns into an expensive harassment claim when the employer does not respond and investigate in a suitable manner. The EEOC report provides employers with an opportunity to re-assess their reporting systems, and make any adjustments necessary - such as training internal investigators or establishing a shortlist of external investigators - to act in a timely and appropriate manner if and when a complaint of harassment is filed in the future.

September 28, 2016

The Language of Disability: Top 10 Dos and Don'ts

By Kristine A. Sova

On Thursday, September 22, 2016, I had the pleasure of attending a workshop led by Christine Bruno, Disability Advocate, and David Harrell, Disability and Program Associate, from Inclusion in the Arts. A portion of the workshop focused on the language of disability -- particularly dos and don'ts -- and is a useful tool for workplace inclusion and diversity initiatives as well as equal employment opportunity (EEO) compliance. Employers, lawyers, and HR professionals: Please consider using these examples in your next workplace training.

DON'T USE wheelchair-bound/confined to. DO USE wheelchair user/ uses a wheelchair.

DON'T USE suffers from/afflicted with/crippled by/victim of. These terms make assumptions about how the disabled person feels about his/her disability. Use "has" and the name of condition (e.g., has cerebral palsy, has paraplegia, etc.).

DON'T USE the disabled/the blind/the deaf. Always use as an adjective rather than a noun - disabled person, blind filmmaker, deaf man or woman.

DON'T USE retarded (e.g., mentally retarded)/retard. USE intellectual disability; cognitive disability; developmental disability (when using these terms, however, it is important to understand the distinction among them).

DON'T USE handicapped (handicap). In general: If you're not writing about sports, don't use it! Use disability, disabled person, person with a disability. Similarly, DON'T USE handicapped parking, restroom, etc. USE accessible parking, restroom, etc.

DON'T USE midget/dwarf. DO USE little person. (Dwarf is acceptable only if the person actually has dwarfism.) Keep in mind: Anyone with dwarfism is a little person, but every little person is not a dwarf.

DON'T USE deaf-mute/deaf and dumb/hearing-impaired. DO USE deaf or hard of hearing.

DON'T USE physically challenged/differently abled. Avoid outdated or saccharine terms and euphemisms. Use disabled as an adjective (e.g., disabled sportscaster) or person-first language (e.g., person with a disability).

DON'T USE overcoming/inspiring/brave/courageous. Avoid patronizing and condescending descriptives - describe the person's accomplishments without value judgment or interpretation.

DON'T USE special/special needs. Do not use when referring to disabled people.

October 26, 2016

What Belongs in a Personnel File?

By Kristine A. Sova

It's a good practice to maintain a general personnel file documenting an employee's employment history, but did you know that not every document pertaining to an employee belongs in the general personnel file? The better practice is to maintain more than one type of file on an employee, such as a medical file, an I-9 file, a payroll file, a benefits file, investigation files, and legal files, among others, in addition to the general personnel file.

So what can you include in an employee's general personnel file? The following documents are all appropriate and should be included:

-Employee contact and emergency contact information
-Employment application
-Letters of reference
-Offer letter
-Employment contract
-Compensation information
-Signed acknowledgement of receipt of employee handbook or other policies and procedures, as well as any periodic acknowledgements of new or amended handbooks or policies and procedures
-Job description
-Other signed agreements with an employee (such as confidentiality agreements), as well as any new agreements or amendments to existing agreements
-Performance reviews
-Documentation of employee discipline
-Documents reflecting changes in an employee's contact information
-Documents reflecting changes in an employee's compensation (including bonuses and raises)
-Documents reflecting changes in an employee's title or job
-Records of completed training or certifications
-Time and attendance records (if not tracked and maintained separately)
-Documents tracking time-off accrual and usage (if not tracked and maintained separately)
-Letter of resignation, if a voluntary departure
-Notice of termination, if an involuntary termination or layoff
-Documentation of reasons for termination or layoff
-Exit interview notes, if any
-COBRA notices, if applicable
-Notice of the employee's right to file for unemployment benefits, as well as date of termination of benefits (often required under state law)

As for documents that should be maintained separately from the general personnel file, those include:

-Medical Records - Employee medical records, which include reports from medical examinations required as a condition of employment as well as other medical information gathered in connection with leave requests, certifications of an employee's fitness for return to work after leave, requests for disability accommodation, and workers' compensation claims, should be maintained separately because they often contain information protected from disclosure under the anti-discrimination laws (specifically, the Americans with Disabilities Act (ADA) and state and local laws or the Genetic Information Nondiscrimination Act (GINA)). Medical records files should be maintained for each employee. Accompanying leave requests, accommodations requests, and workers' compensation claims may be maintained with the medical records, or in separate files.

-Form I-9s - The Form I-9, which demonstrates an employee's right to work in the U.S. under the Immigration Reform and Control Act of 1986 (IRCA) should be maintained separately from an employee's general personnel file because it makes it easier to collate the forms in the event of an audit. In addition, maintaining these forms separately helps an employer to avoid potential discrimination charges due to the age or national origin information contained on the forms. Form I-9s for all employees can be kept in one file.

-Payroll File - Employers should maintain IRS Form W-4 and other withholding forms, payroll deduction authorization forms, direct deposit authorizations, and wage garnishment information in a separate file. Maintain one file for each employee.

-Benefits File - Employers should also maintain benefits-related documentation separately from the general personnel file. These documents include enrollment forms, coverage waiver forms, flexible spending account forms, retirement forms, beneficiary designation forms, and COBRA paperwork (if applicable). Maintain one file per employee.

-Investigation Files & Legal Files - Documentation of an investigation, such as investigation of a complaint or misconduct, should be maintained separately from a general personnel file. Relevant disciplinary action or counseling may be placed in an employee's personnel file. Similarly, documents relating to any claim or lawsuit by an employee should also be maintained in a file separate from the general personnel file, as well as from any related underlying investigation file.

December 10, 2016

NYC's Freelance Isn't Free Act Protects Independent Contractors

By Kristine Sova

Last month, NYC Mayor Bill de Blasio signed the Freelance Isn't Free Act (the Act) into law. The Act will be effective beginning May 15, 2017.

The Act extends significant protections to freelance workers, who are defined as "any natural person or any organization composed of no more than one natural person, whether or not incorporated or employing a trade name, that is hired or retained as an independent contractor by a hiring party to provide services in exchange for compensation." Excluded from this definition are commissioned salespersons, lawyers engaging in the practice of law, and licensed medical professionals.

Under the Act, a party who retains a freelance worker to provide any service where the contract has a value of $800 or more must enter into a written contract with the freelance worker. (The $800 threshold includes the aggregate value of all the contracts between the parties during the preceding 120 days.)

At a minimum, the contract must include the following information:

Names and mailing addresses of both parties,

Itemization of services to be provided by the freelancer, the value of those services, and the rate and method of compensation, and

The date on which the compensation is due or the method by which that date will be determined.

In the case where the date of payment or method of determining such date was not set forth in the contract, the Act makes it unlawful for the hiring party to pay the freelance worker more than 30 days after the completion of services. The Act also prohibits the hiring party from requiring, as a condition of timely payment, that the freelance worker accept less compensation than the contracted amount.

A freelance worker can bring an administrative claim with the NYC Office of Labor Standards or a legal claim in civil court against a hiring party who violates the Act. Such claims must be filed within 2 years of the alleged violations. Prevailing freelance workers will be awarded $250 in damages for prevailing on a claim based on a hiring party's failure to execute a contract or include all terms required in a contract. In addition, a freelance worker who prevails on this claim and any other claims for violations of the Act (including a retaliation claim for exercising his/her rights under the Act) will be awarded statutory damages equal to the value of the underlying contract. Double damages, injunctive remedies and other appropriate remedies may be awarded for prevailing on a claim based on unlawful payment practices, such as failure to pay or making late payments.

Hiring parties who are found to engage in a pattern or practice of violating the Act face a civil penalty of up to $25,000.

March 30, 2017

Scam Targets NY Payroll and HR Professionals

By Kristine Sova

On March 24, 2017, the New York State Department of State (DOS) distributed an alert about a scam targeting payroll and HR professionals. According to the DOS, cybercriminals posing as company executives are emailing payroll and HR professionals to request lists of employees and their personal information. These emails may appear legitimate because they contain the name of the company's chief executive officer. If a General Counsel receives such an email, one should not include any payroll data, such as W-2 forms and Social Security numbers, in a response, or better yet, should not respond at all.

The New York State Tax Department is aware of at least 37 businesses with New York employees that have fallen for this scam and believes more than 5,000 Social Security numbers may have been compromised.

May 10, 2017

NYC Mayor Signs Law Barring Inquiries into an Applicant's Salary History

By Kristine A. Sova

On May 4, 2017, Mayor Bill de Blasio signed into law an amendment to the New York City Human Rights Law that now restricts employers in New York City, with four or more employees, from inquiring into a prospective employee's salary history during the interview and hiring process. The restriction is part of a growing trend across jurisdictions to reduce the likelihood that women will be prejudiced by prior compensation levels and help break the cycle of gender pay inequity. The restriction takes effect on October 31, 2017.

Specifically, the law makes it an unlawful discriminatory practice for an employer to inquire about the salary history of a job applicant, or to rely on a job applicant's salary history in determining the salary, benefits, or other compensation to be offered to a job applicant. Employers are also prohibited from making salary inquiries to an applicant's current or prior employer (as well as their present or former employees or agents) for the purpose of obtaining the applicant's salary history, and from conducting a search of publicly available records or reports for the purpose of obtaining an applicant's salary history.

"Salary history" includes not only an applicant's current or prior compensation, but also benefits and any other form of compensation that he or she may have received.

The law contains a few exceptions, namely:

Without inquiring about salary history, employers may engage in discussion with the applicant about their expectations with respect to salary, benefits, and other compensation including, but not limited to, unvested equity or deferred compensation that an applicant would forfeit or have cancelled as a result of the applicant resigning from his or her current employer.

If an applicant voluntarily and without prompting discloses salary history to an employer, then the employer may consider such salary history in determining salary, benefits, and other compensation to be offered to the applicant. Further, the employer may verify the salary history.

The law does not apply to applicants for internal transfer or promotion with an employer.

The law also does not prohibit employers from verifying an applicant's non-salary related information or from conducting a background check. However, if in doing so, an employer inadvertently learns about the applicant's salary history, the employer cannot rely on that information for purposes of determining salary, benefits, or other compensation to be offered to the applicant.

August 10, 2017

New York Paid Family Leave: What Employers Need to Know Now and for January 2018

By Kristine Sova

New York's Paid Family Leave Benefits Law (PFL) will provide New York employees with up to 12 weeks of job-protected paid family leave to bond with a new child, care for a family member with a serious health condition, or address a qualifying exigency relating to the active military duty of a spouse, domestic partner, child, or parent. PFL benefits will be fully funded from employee contributions deducted from payroll. When fully implemented, qualifying employees will be entitled to income replacement of up to two-thirds of the employee's average weekly wage or up to two-thirds of the New York State average weekly salary, whichever is less.

The PFL is effective January 1, 2018, and benefits will increase annually until January 1, 2021. However, employers are permitted to begin making payroll deductions to fund PFL benefits as early as this month (July 2017).

Below are some answers to FAQs about the new law.

Which employees are eligible for PFL benefits?

PFL covers employees whose regular employment schedule is at least 20 hours per week and have worked at least 26 consecutive weeks before the first full day of PFL begins.

Part-time employees whose regular employment schedule is less than 20 hours per week will be eligible for PFL benefits after the employee has worked for 175 days for the employer. The 175 days are actual days worked, not calendar days.

Does an employee need to qualify for leave under the federal Family and Medical Leave Act (FMLA) in order to be eligible for PFL benefits?

No. Employees may be entitled to the benefits associated with PFL even if they do not qualify for leave under the FMLA.

What are the reasons that an employee may take PFL leave?

Eligible employees are entitled to a paid leave of absence from work in three situations:
1. PFL is available for an employee to bond with his/her newborn child during the first year of the child's life, or, in the case of adoption or foster placement, for the first year after the placement of a child with the employee.
2. PFL is available for an employee to care for a family member with a serious health condition. Both "family member" and "serious health condition" are defined in the PFL.
3. PFL is available to address a qualifying exigency relating to the active military duty (or an impending call or order to active military duty) of a spouse, domestic partner, child, or parent.

What paid benefits are provided under the PFL?

Paid benefits will be phased in over a period of 4 years as follows:
Effective January 1, 2018 - 8 weeks of paid leave in a 52-week period at 50% of the employee's average weekly wage, or 50% of the New York State average weekly salary, whichever is less
Effective January 1, 2019 - 10 weeks of paid leave in a 52-week period at 55% of the employee's average weekly wage, or 55% of the New York State average weekly salary, whichever is less
Effective January 1, 2020 - 10 weeks of paid leave in a 52-week period at 60% of the employee's average weekly wage, or 60% of the New York State average weekly salary, whichever is less
Effective January 1, 2021 - 12 weeks of paid leave in a 52-week period at 67% of the employee's average weekly wage, or 67% of the New York State average weekly salary, whichever is less

Are tips included when determining an employee's average weekly wage?


Can an employee supplement PFL paid benefits with accrued vacation, sick, personal, or other paid time off?

Yes. Employers and employees can agree to allow the employee to supplement PFL benefits up to their full wages with accrued vacation, sick, personal, or other paid time off. Employers who do so may request reimbursement from the insurance carrier that provides PFL benefits to their employees.

What other benefits are associated with PFL?

PFL offers employees the following additional benefits:
• Job protection - An employee who has received PFL benefits must be reinstated to his/her prior position of employment, or to a comparable position with comparable pay, benefits, and other terms and conditions of employment, upon the conclusion of PFL leave.
• Benefits protection - An employee who receives health insurance through his/her employer is entitled to continued coverage during PFL on the same terms as if the employee had continued to work during the period of PFL.

Is PFL only available "as blocks of time"?

No. Employees may take PFL leave in minimum full-day increments, either in blocks of time or intermittently. If an employee takes leave in daily increments, he/she may only take a maximum of 60 days of PFL in a 52-week period if he/she works 5 or more days per week.

What impact does PFL have on other types of leave, such as FMLA?

If an employee qualifies for leave under both the PFL and the FMLA, the leave under both laws will run concurrently. Employers are obligated to provide employees with any requisite FMLA notices of same.

Employees receiving PFL benefits may not receive New York State disability benefits during the same time period. Employees who are eligible for disability benefits may only receive a combined amount of 26 weeks of disability and PFL benefits in a 52-consecutive calendar week period.

How are PFL benefits funded?

PFL benefits are intended to be fully funded by employees. The maximum employee contribution will be a small deduction from each employee's paycheck. Beginning January 1, 2018, the contribution will be 0.126% of the employee's weekly wage, up to and not to exceed the statewide average weekly wage. The amount is subject to change on September 1 each year.

All insurance carriers who provide short-term disability benefits must provide PFL benefits.

May an employer self-insure for PFL?

Yes, but only those employers who self-insure for statutory short-term disability benefits may do so and only if they elect to do so before September 30, 2017.

What notices and forms are associated with PFL?

Employers are required to provide employees with written guidance concerning their rights and obligations under the PFL, including how to file a claim for PFL. If an employer maintains an employee handbook or written policies regarding benefits and/or leave, then information concerning PFL must be included within the handbook or policies.

Employers must also display or post, in plain view, a notice concerning PFL in a form prescribed by the New York Workers' Compensation Board.

Employers must provide employees with the option to sign a waiver if their regular work schedule will never achieve the period required to become eligible for PFL benefits (see "Which employees are eligible for PFL benefits?" above.) The New York Workers' Compensation Board will develop a waiver form for employers to use.

What should employers do now to prepare for the PFL?

• Employers should determine how they will obtain PFL coverage. If you self-insure short-term disability benefits and would like to self-insure PFL benefits, you must elect to do so by September 30. Otherwise, contact your disability benefits insurance carrier to find out more about adding PFL coverage.
• Begin taking payroll deductions for PFL, or prepare to start doing so by January 1.
• Draft a PFL policy and determine how it will integrate with your business's current leave practices. Train HR and management professionals accordingly.
• Prepare for extended leave requests from employees. Not only are many more employees eligible for leave under the PFL than under the FMLA, but the paid aspect of PFL will likely result in more employees taking PFL than other forms of leave.

September 7, 2017

Employers Must Use Updated I-9 Form No Later than September 18, 2017

By Kristine A. Sova

In July, United States Citizenship and Immigration Services (USCIS) published a revised Form I-9 for employers to use. Employers must use the new form beginning no later than September 18, 2017.

Among the more notable changes to the form is the addition of Form FS-240 (Consular Report of Birth Abroad) to List C of acceptable documents.

The revised form does not change an employer's obligation to collect or retain I-9 Forms from every employee. Specifically:

Employers must complete the form to document verification of the identity and employment authorization of every new employee (both citizen and noncitizen) hired after November 6, 1986 to work in the United States.
The form must be completed and documents presented and verified within 3 business days of a new employee starting work for pay. However, if the employee is hired to work for less than 3 business days, then the form must be completed and documents presented and verified no later than the first day of employment.
Once an individual's employment ends, employers must retain the I-9 Form and any photocopies of documentation presented by the employee that may have been made for either 3 years after the date of hire (i.e., first day of work for pay) or 1 year after the date of employment ended, whichever is later.

The updated I-9 form (revision date July 17, 2017) may be downloaded at i-9-paper-version (1).pdf.

January 16, 2018

Drafting a Lactation Break Policy to Accommodate Nursing Mothers

By Kristine A. Sova

Federal and New York law both require covered employers to provide reasonable unpaid break time to nursing mothers to express breast milk. Federal law mandates that the breaks be provided for one year following child birth, and New York law mandates that the breaks be provided for three years following child birth.

These requirements beg the question: How much lactation break time is sufficient to be considered reasonable and actually accommodate a nursing mother?

Under New York law, breaks must be a minimum of 20 minutes in duration, or a minimum of 30 minutes when the lactation room is not in close proximity to the employee's work area. However, the number and frequency of breaks needed to express milk as well as the duration of each break will vary depending on the amount of time the employee is separated from the nursing infant and the mother's physical needs.

In most circumstances, it would be reasonable for an employer to provide unpaid break time at least once every three hours if requested by the employee. With a very young infant, though, the mother may need to express milk more frequently.

Further, since the break time includes not only the time actually spent expressing milk, but also set up, clean up and storage of milk, employers should be amenable to providing breaks longer than 20 minutes (or 30 minutes, as the case may be) if the mother's needs necessitate it. For example, mothers who must spend 20 minutes expressing milk may not have sufficient time to do so with a 30-minute break once one factors in the time needed to set up, clean up and store breast milk. The total length of the break will depend on additional factors, such as:

-How long it takes for the employee to express breast milk;
-How long it takes the employee to walk to and from the lactation space and whether she needs to wait to use the space;
-Whether the employee needs to get her pump and other supplies from another location (such as a locker room);
-Whether the employee needs time to set up her pump and how long the set up takes;
-The efficiency of the pump used;
-How long it takes the employee to clean the pump and other supplies and the location of the sink she can use for this purpose; and
-How long it takes the employee to walk to and from the location where she can store her expressed milk.

April 21, 2018

New York Employers Must Conduct Sexual Harassment Training On or Before October 9th

By Kristine A. Sova

A new law requires all New York employers to conduct mandatory sexual harassment training beginning October 9, 2018.

The law requires employers to provide sexual harassment training every year. At a minimum, the training program must:

Be interactive
Explain what constitutes sexual harassment
Provide examples of conduct constituting unlawful sexual harassment
Provide information on remedies available to victims under federal and state laws concerning sexual harassment
Provide information on employees' rights and all available forums for adjudicating sexual harassment complaints
By the October 9th deadline, employers must also implement a policy on sexual harassment, which must meet certain minimum requirements outlined in the new law.

The law also contains several other measures to combat sexual harassment, including:

Effective immediately, expanding the New York State Human Rights Law ("NYSHRL") to provide for employer liability for sexual harassment of non-employees, such as contractors, subcontractors, vendors, consultants or other individuals providing services under a contract in the workplace. This is a significant expansion of the NYSHRL, which previously protected only employees.

Effective July 11, 2018, prohibiting nondisclosure or confidentiality provisions in agreements that seek to settle claims relating to sexual harassment, unless it is the complaining party who seeks confidentiality and provided that the complaining party has 21 days to consider the nondisclosure provision and 7 days to revoke his/her acceptance of the nondisclosure provision.

Effective July 11, 2018, prohibiting mandatory arbitration for sexual harassment claims, unless such arbitration clauses are contained in collective bargaining agreements.

New York employers who operate in New York City are also expected to comply with the Stop Sexual Harassment in New York City Act, which was passed by the New York City Council on April 11, 2018 and is expected to be signed by Mayor de Blasio. The law contains its own training requirements aimed at sexual harassment prevention and applies to employers with at least 15 employees.

May 10, 2018

New Jersey Employers Must Provide Paid Sick Leave Beginning October 29th

By Kristine A. Sova

A new state law in New Jersey requires employers to provide paid sick leave to their employees. The new law goes into effect on October 29, 2018.

Under the new law, employers must provide employees with up to 40 hours of paid sick leave each benefit year. Employees will be able to accrue one hour of paid sick leave for every 30 hours worked, up to a maximum of 40 hours of sick leave time during the benefit year. Further, employees will be able to use their leave time for their own physical or mental condition, to care for a family member's physical or mental condition, to attend a school-related conference or meeting for the employee's child, to obtain services if the employee or a family member is a victim of domestic or sexual abuse, or for official workplace, school or childcare closures caused by a public health concern.

All employers must comply with the new law. There is no exception for small employers, regardless of the number of workers employed. However, the new law exempts the following specific categories of workers: per diem health care workers, construction workers covered by a collective bargaining agreement, and public employees who are already provided with sick leave with full pay.

The new law preempts all existing municipal and county sick leave laws. Employers with paid sick leave policies with terms more favorable to employees than those set forth in the new law will be in compliance with the new law.

The new law also addresses carry over of unused paid sick leave, notice requirements for an employee's use of leave, payout of unused paid sick leave on termination of employment, and recordkeeping requirements, among other requirements.

June 5, 2018

NYC Employees Permitted to Make Temporary Scheduling Changes Beginning July 18

By Kristine A. Sova

A new law requires New York City employers to allow employees to make two temporary scheduling changes per year for certain personal events. The new law is effective July 18, 2018.

Personal events which trigger the right to a temporary schedule change include:

-To provide care to a minor child or to a person with a disability who lives in the employee's household and who relies on the employee for medical care or the needs of daily living;
-To attend a legal proceeding or hearing for subsistence benefits to which the employee, a family member or the employee's care recipient is a party; or
-To attend to any circumstance that would constitute a basis for permissible use of safe time or sick time under the New York City Earned Safe and Sick Time Act.

Under the new law, temporary changes include "a limited alteration in the hours or times that or locations where an employee is expected to work, including, but not limited to, using paid time off, working remotely, swapping or shifting work hours and using short-term unpaid leave."

The new law addresses: when and how an employee must notify his/her employer of the need for temporary scheduling changes; when and how an employer must respond to the employee's request; the frequency and length of the scheduling changes; the circumstances under which an employer may deny a request; and the new law's interaction with the New York City Earned Safe and Sick Time Act.

The new law exempts certain categories of workers from its requirements. Specifically exempted are employees:

-Who have been employed by the employer for fewer than 120 days;
-Who work fewer than 80 hours in NYC in a calendar year;
-Covered by a valid collective bargaining agreement that waives the provisions of the new law and addresses temporary changes to work schedules; and
-Employed by an employer whose primary business for which those employees work is the development, creation or distribution of theatrical motion pictures, televised motion pictures, television programs or live entertainment presentations, except for "an employee whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers and except for an employee whose primary duty is performing routine mental, manual, mechanical or physical work in connection with the care and maintenance of an existing building or location used by the employer."

July 13, 2018

Should You Require Your Employees to Sign Arbitration Agreements with Class Waivers?

By Kristine A. Sova

In late May, the Supreme Court upheld the lawfulness of class action waivers in arbitration agreements (Epic Systems Corp. v. Lewis, 584 U.S. ____ (2018)). This means that employers are free to not only require employees to sign an agreement mandating that all of their employment disputes go to binding, private arbitration rather than courts, but also that employers can include waivers where employees lose their right to bring claims collectively as a class.

The decision in Epic has been touted as a victory for employers. Now that employers can have an arbitration agreement with a class action waiver (under federal law, at least), does it mean all employers should? Arbitration has its pros, the most notable being a private forum for the resolution of claims, but arbitration has its cons as well. Moreover, a pro for one employer might be considered a con for another. Consider the following pros and cons.

Pros of arbitration

-Private / confidential process
-No juries (juries tend to be employee-friendly, overly generous, and unpredictable)
-Less expensive than litigation in court, but not always the case once arbitrator fees are factored in
-Faster than litigation in court
-Less formal process
-More finality (avenues for appeal are very limited so this could be a con as well)
-Ability to select arbitrator (or arbitrators, as the case may be)

Cons of arbitration

-No formal rules of evidence and arbitrators may end up considering evidence that a judge would not consider
-Arbitrators have a tendency to "split the baby" and may issue an award to give the employee "something" rather than dismiss the case
-Arbitrator fees can be significant (this can add up if there is a class waiver and an employer has to deal with a multitude of individual claims

Class action waivers might not be a pro either when one considers the cost of defending individual claims. The considerations are complex. -
Therefore, if you're considering having your employees sign arbitration agreements with, or even without, class action waivers, you should definitely consult with counsel before doing so.

August 23, 2018

NYC Employers Must Post Sexual Harassment Poster and Provide Fact Sheet to New Hires by September 6th

By Kristine A. Sova

Earlier this year, the Stop Sexual Harassment in New York City Act went into effect. One of the law's requirements is that NYC employers must post and display a sexual harassment rights and responsibilities poster and provide a fact sheet to new hires by September 6, 2018. This month, the New York City Commission on Human Rights published both the model poster and fact sheet. The model poster is available at, and the fact sheet is available

September 26, 2018

By October 9, New York State Employers Must Revise Their Sexual Harassment Policies

By Kristine A. Sova

By October 9, every employer in New York State is required to adopt a sexual harassment prevention policy that meets or exceeds certain minimum standards. Specifically, the policy must:

-prohibit sexual harassment consistent with guidance issued by the New York State Department of Labor in consultation with the New York State Division of Human Rights;
-provide examples of prohibited conduct that would constitute unlawful sexual harassment;
include information concerning the federal and state statutory provisions concerning sexual harassment, remedies available to victims of sexual harassment, and a statement that there may be applicable local laws;
-include a complaint form;
-include a procedure for the timely and confidential investigation of complaints that ensures due process for all parties;
-inform employees of their rights of redress and all available forums for adjudicating sexual harassment complaints administratively and judicially;
-clearly state that sexual harassment is considered a form of employee misconduct and that sanctions will be enforced against individuals engaging in sexual harassment and against supervisory and managerial personnel who knowingly allow such behavior to continue; and
-clearly state that retaliation against individuals who complain of sexual harassment or who testify or assist in any investigation or proceeding involving sexual harassment is unlawful.

It's important to note that these requirements go above and beyond language typically found in even the most robust "best practice" type sexual harassment policies. Therefore, all employers will want to review their policies for compliance.

Last month, the state issued a proposed model sexual harassment policy. A copy of the proposed policy is available at Employers have the option of adopting the final model policy in its entirety, or revising their policies to meet or exceed the new state standards (which may include adopting portions of the final model policy). The final policy is expected to be issued soon, but it is possible it may not be issued before the October 9 deadline.

February 17, 2020

Joint Venture Between Jennifer Lopez and DSW to Boost Sales of Shoes and Bags

By David Raymond P. Leys

Designer Brands Inc. (DSW), American footwear retailer of designer and name brand shoes and fashion accessories, announced its partnership with renowned Jennifer Lopez (JLO).

JLO will have her own line of footwear and bags with DSW. She will design shoes and bags that will be exclusively sold at DSW stores and website. JLO explained that she is attracted by the high-quality products and accessible pricing of DSW.

DSW aims at improving its profitability and increase its market share by boosting its online presence. Last year, the stocks of DWS decreased by 36%. This bad result was due to tariffs on footwear and massive promotions on shoe brands in the U.S. This joint venture enhances the chances of DSW to attract new customers who are unfamiliar with the brand, especially as JLO has more than 200 million followers on social media.

This partnership demonstrates how celebrities can reinvent their businesses beyond typical licensing deals.

DSW and JLO have not shared more information about the content of their agreement. We can assume that both parties took all precautions to avoid any litigation in the future.

First, the formation of a joint venture requires to determine the type of structure. It can either be a corporation, a limited liability company or a contractual relationship. Parties choose the type of structure according to tax treatment and goals of the business. In this case, it seems that the partnership is an ongoing process and not a one-shot deal. DSW and JLO may have formed a limited liability company so they are flexible regarding ownership, profit/loss distributions, voting, and management.

The joint venture between DSW and JLO allows the production and sale of shoes and bags under JLO's name/brand and with JLO's endorsement. It makes sense that they hold their ownership interests through another entity instead of personally. It is essential for the protection of the assets of both DSW and JLO.

Potential tension may exist between DSW and JLO about control. It is understandable that JLO wants to keep significant control over the protection of her name, image, and brand. She will be involved in design and marketing, whereas DSW will run most of the operations of the business, such as sourcing, manufacturing, selling, and distributing the products.

In addition, the parties must agree on additional corporate issues: if it is indeed an LLC, then the issues would include veto power, admission of new members, adoption of the budget, and material changes to accounting policies.

DSW and JLO must also deal with intellectual property issues, namely the celebrity's name and likeness, the brand name of the product line, the product designs and formulas, and social networking accounts and domain names. On the one hand, DSW and JLO will probably each license their intellectual property to the joint venture, for the use and benefit of the venture. On the other hand, JLO will most certainly license her name and likeness and the manufacturer may license an existing brand name. In this context, DSW will likely require that JLO refrains from marketing any competitive goods. This is essential for the goodwill associated with JLO's name. Both parties must identify industry specific details as early as possible to avoid misunderstandings. They must also determine what happens if the relationship ends.

To sum up, the joint venture between DSW and JLO seems to be a win-win situation. Nonetheless, this first impression needs to be supported by solid legal provisions ensuring a clear understanding of the roles and responsibilities of both parties. Any potential conflict must be spotted before they arise in practice. This will ensure the viability of the joint venture between DSW and JLO on the long-term.

March 13, 2020

SHOP SAFE Act of 2020: A Crackdown on Counterfeits and Accountability for e-Commerce Companies

By Christine-Marie Lauture

Imagine purchasing a thoroughly-bidded collector's item on eBay, only to receive a forged replica. Or buying an advertised version of an item by a seller hosted on Shopify, only to discover that it is an infringing counterfeit of an original. As it currently stands, e-commerce companies are not liable for the sale of those counterfeit goods by third-parties on their platforms. However, a new proposal may effectively change the online marketplace landscape.

On March 2nd, a bipartisan House unveiled a proposed bill that would create trademark liability for e-commerce companies for selling counterfeit goods sold on their platforms. The bill, the SHOP SAFE Act of 2020 (which stands for Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce), outlines a series of steps that e-commerce platforms, such as Amazon, eBay, and Shopify, must take to prevent knockoff sales by third-party sellers.

The SHOP SAFE Act has three paramount objectives, to:

-Establish trademark liability for online marketplace platforms when a third-party sells counterfeit products that pose a risk to consumer health or safety;
-Incentivize online platforms to establish improved standards, such as: vetting sellers to ensure their legitimacy, removing counterfeit listings, and banning demonstrated bad actors; and
-Require online marketplaces to take steps necessary to prevent the continued sale of counterfeits by the third-party seller or be subject to contributory liability.

The House issued a press release, in which New York congressman Rep. Jerrold Nadler stated:

American consumers increasingly turn to the internet to shop. Counterfeiters have followed consumers, and it is clear more must be done to combat the rising trend in online sales of counterfeit products. Consumers should be able to trust that what they see and purchase online is what they will get, but counterfeiters continue to join platforms with ease and masquerade as reliable sellers in order to infect American households with dangerous and unsafe products. The SHOP SAFE Act proposes a set of commonsense measures to tackle the gaps in these platforms' systems and stop counterfeit sales. (

The second section of the bill would amend §32 of the Trademark Act of 1946 (15 U.S.C. § 1114), which outlines what online retailers and e-commerce platforms need to adopt in order to evade liability.

The 10 "best practices" mandated by the bill are:
-Verifying the third-party seller's identity, location, and contact information;
-Requiring the third-party seller to verify and attest to the authenticity of its goods;
-Requiring that the third-party sellers agree not to sell counterfeit goods on the platform and consent to the jurisdiction of U.S. courts;
-Displaying the third-party seller's identity, location, and contact information; location of the origin of the goods and shipment of the goods;
-Requiring third-party sellers to use images that accurately depict the actual goods offered for sale, that they own or have permission to use;
-Using technology to screen goods for counterfeit ones prior to product placement on platforms;
-Implementing a timely takedown process for the removal of counterfeit listings;
-Terminating third-party sellers that have engaged in at least three instances of counterfeit sales or advertising;
-Screening third-party sellers to prevent terminated third-party sellers from rejoining or remining on the platform under a different identity or alias; and
-Sharing an infringing third-party seller's information with law enforcement and, upon request, the owner of the registered trademark. (

The American Apparel & Footwear Association and the Toy Association are among quite a few industries that praise the bill.

While the SHOP SAFE Act's proposals provide some solution to the counterfeit combat, it raises a few concerns. One issue is that smaller e-commerce platforms do not have the requisite resources to perform extensive anti-counterfeiting practices. Proactive vetting and monitoring of third-party seller activities can very easily become costly. Another issue is the risk of terminating a credible seller who is wrongly accused of selling counterfeits. Alongside the proposed "best practices" should be proposed penalties for false claims of counterfeits (perhaps similar to the current relative Digital Millennium Copyright Act notice and takedown claim framework). As there are many active suits alleging false counterfeit claims, this new regulation would call for an increase in illegitimate claims. It will be critical who bears the responsibility of policing the platforms for counterfeits.

In a time where online marketplaces are incessantly growing, the need for increased regulation to combat bad actors is imperative. Many can relate to the disappointment and hardships created from purchasing anticipated authentic goods, only to be deceived and instead receive fake ones. This is the type of circumstance from which the SHOP SAFE Act aims to protect consumers, and it appears to be an overall step in the right direction.

April 24, 2020

SCOTUS Rules Proving 'Willfulness' is Not Required for Plaintiffs to be Awarded Defendant's Trademark Profits

By Christine-Marie Lauture, Esq.

Resolving one of the most anticipated trademark rulings this year, on Thursday, April 23, 2020, the United States Supreme Court ruled that a trademark owner does not need to prove that a defendant's infringement was willful under federal trademark law in order to recover the infringer's profits. Full Opinion:

In 2002, Romag Fastners, Inc., a company that sells magnetic snap fasteners for wallets, handbags, and other leather goods, entered into an agreement with Fossil Inc., the massive Texas-based company that designs, markets, and distributes fashion accessories, to use their magnetic fasteners on handbags Fossil had manufactured in China. In 2010, Romag brought suit in the District of Connecticut against Fossil (as well as other retailers) for trademark and patent infringement, alleging that factories in China were making Fossil goods and other products using counterfeit Romag fasteners. In 2014, a jury found Fossil liable for both claims, and in relation to the trademark claim, made an advisory award of $90,759.36 of Fossil's profits in actual damages, and $6.7 Million of Fossil's profits under a deterrence theory. Importantly, the jury found that Fossil's infringement was not willful, rather "in callous disregard" of Romag's rights. As such, the district court concluded that Romag was not entitled to an award of profits. Romag appealed to the Federal Circuit, and in 2016, it affirmed the lower court's decision. While Romag won on liability and actual damages, it was refused the $6.7 million it sought of Fossil's profits by the Federal Circuit, because it did not show proof that Fossil acted "willfully". After further proceedings, the Federal Circuit refused to allow Romag the award of Fossil's profits, and the Supreme Court granted cert.

In a unanimous decision, Justice Neil M. Gorsuch wrote for the Court.

Lanham Act at Issue: §43(a), 15 U.S.C. §1125, and §35, 15 U.S.C. §1117(a)

Lanham Act §43(a), 15 U.S.C. §1125, provides, in relevant part, as follows:
(a) Civil action
(1) Any person who, or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which -
(A) Is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
(B) In commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities,
shall be liable in a civil action by any person who believes that he or she is likely to be damaged by such act...

(c) Dilution by blurring; dilution by tarnishment
(1) Injunctive relief
Subject to the principles of equity, the owner of a famous mark that is distinctive, inherently or through acquired distinctiveness, shall be entitled to an injunction against another person who, at any time after the owner's mark has become famous, commences use of a mark or trade name in commerce that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark, regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury.

(d) Cyberpiracy prevention
(A) A person shall be liable in a civil action by the owner of a mark, including a personal name which is protected as a mark under this section, if, without regard to the goods or services of the parties, that person -
(i) has a bad faith intent to profit from that mark, including a personal name which is protected as a mark under this section; and
(ii) registers, traffics, in, or uses a domain name that -
(I) in the case of a mark that is distinctive at the time of registration of the domain name, is identical or confusingly similar to the mark;
(II) in the case of a famous mark that is famous at the time of registration of the domain name, is identical or confusingly similar to or dilutive of that mark; or
(III) is trademark, word, or name protected by reason or section 706 of title 18 or section 220506 of title 36.

The section of the Lanham Act at issue in Romag, which sets forth remedies for violation of §43, provides in relevant part: "When...a violation under section 1125(a) or (d) of this title, or a willful violation under sections 1125(c) of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled...subject to the principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.

Previous Circuit Split on Willfulness Requirement

There has been a long-standing circuit split on whether willfulness is a required element of proof to recover disgorgement of an infringer's profits in a trademark infringement action. From one side, the Second, Eighth, Ninth, Tenth, and D.C. Circuits require plaintiffs to prove of willfulness to recover an award of an infringer's profits under §35 for violating of §43(a). Similarly, the First Circuit requires plaintiffs to prove willfulness, but only where the subject parties are not direct competitors. From the other side, the Third, Fourth, Fifth, Sixth, Seventh, and Eleventh Circuits do not require proof of willfulness in order for a plaintiff to recover under §35 for violating of §43(a). The infringer's intent, in these circuits, is only one of the factors considered in weighing for an award of profits.


Disagreeing with the Federal Circuit, the Supreme Court reversed its decision and ruled that "mens rea" is only a consideration for an award of the infringer's profits and "[t]he absence of any such standard in the provision before us, thus, seems all the more telling." Pointing to the language of the Statute, as amended in 1999, there is a showing of willfulness as "a precondition to a profits award when the plaintiff proceeds under §1125(c)...but Romag alleged and proved a violation of §1125(a), a provision establishing a cause of action for the false or misleading use of trademarks." Justice Gorsuch added, "in cases like that, the statutory language has never required a showing of willfulness to win a defendant's profits." He further advised that the Supreme Court does not "usually read into statutes words that aren't there. It's a temptation we are doubly careful to avoid when Congress has (as here) included the term in question elsewhere in the very same statutory provision."

While a showing of willfulness is not required to recover an infringer's profits, Justice Gorsuch added that it is still an important factor for courts to consider when weighing an award for profits: "...we do not doubt that a trademark defendant's mental state is a highly important consideration in determining whether an award of profits is appropriate. But acknowledging that much is a far cry from insisting on the inflexible precondition to recovery Fossil advances." The Court does not find that the mindset of an infringer should be an "inflexible precondition." Sticking to a close reading of the statutory language of 15 U.S.C. §1117(a), the Court could not support the weight of a willfulness prerequisite.


Justices Alito (joined by Justices Breyer and Kagan) concurred in agreeing that the lower court's decision, holding that willfulness is a prerequisite to an award for profits under 15 U. S. C. §1117(a), is incorrect. Willfulness is "a highly important consideration...but not an absolute precondition."

Justice Sotomayor, concurring with the majority only in the judgment and not in the opinion, distinguishes the award of profits by pointing to the principles in courts of equity as they relate to "innocent infringement." Sotomayor found the majority "agnostic about awarding profits for both 'willful' and innocent infringers," leading her to not join in the opinion.

What This Means Going Forward

For circuits that have had a high-bar standard of "willfulness" in reverse confusion trademark cases, such as the Second and Ninth Circuits, today's ruling very well may extend to those standards. Further, Justice Sotomayor's concurrence seems to leave open the issue of disgorgement of profits for "innocent infringers."

For brand owners, this decision may certainly serve as a sigh of relief. As willfulness typically is a difficult element to prove, this no longer being a requirement means, from Romag's perspective, obtaining an infringer's profits may bring a more meaningful monetary relief that trademark owners can secure.

As far as preventative measures between business partners involving suppliers, it is imperative, now more than before SCOTUS's ruling, to have thorough agreements in place that address how to deal with and remedy issues with counterfeit goods. Specifically, there should be a specified limitation of liability clause for the supplier that addresses the issue of counterfeit goods. Such a limiting clause would put the duty of inspecting final products on the contracting company to ensure that its goods are not counterfeit, prior to product placement and sale.

May 25, 2020

Immigrant Artists and Their Employers: The Impact of "New York on PAUSE" on Visas

By Michael Cataliotti

The impact of COVID-19 on everyone has been significant, but it has potentially unexpected consequences for immigrant artists.

For example, in the case of nearly all visa categories --- but most notably for our purposes, O, P, and H -- when a visa holder no longer has work available to him/her/them, the artist will have 60 days to find a new employer and file for an extension of stay. Without doing so, that now-out-of-work individual will have to depart from the U.S. on or before the expiration of that 60-day period.

The impact on employers, too, is quite significant, but more so if the international-artist employee holds an H-1B visa. In that instance, and assuming an employer wants to retain the artist, the employer must be mindful not to decrease the artist's hours or pay below the prevailing wage and/or rate indicated on the labor condition application (LCA) and petition for a nonimmigrant worker (Form I-129). This is true, even if the employer reduces the number of hours and pay across-the-board, for all employees. Doing so could trigger the need for the employer to file a new LCA with the Department of Labor and an amended petition -- due to a "material change" -- with the United States Citizenship and Immigration Services (USCIS). Should the employer not do these things, it could face fines, sanctions, and the suspension of its authorization to petition for non-U.S. citizen workers across all classifications for one to three years. It is important to note here that for an H-1B, there is clear guidance about what constitutes a "material change", and so it is a bit easier to see when a new LCA and/or amended filing may be necessary.

In the event that the employee holds an O or P visa, the situation becomes a bit more complicated: Many O or P visas are issued to agents who are individuals or entities who/that simply hold the visa status, while the international artist works for multiple employers. There is little-to-no guidance regarding the potential ramifications in these instances, however, because most international artists do not hold an O or P visa tied to one employer, for which they receive a steady paycheck and a W-2, an amended filing may not be necessary. After all, "petitioner may add additional performances or engagements for an O-1 artist or entertainer during the validity period of the petition without filing an amended petition", so rescheduling those performances should also be appropriate. Nonetheless, it is important to keep these points in mind: (1) Safe practice would be for an agent to file an amended petition if an international-artist employee has a reduction in hours from employment for which he/she/they receive(s) a steady paycheck and W-2; and (2) The O and P visas do not involve LCAs, nor are they typically bound to one employer or a particular performance or production. As a result, evaluate on a case-by-case basis whether there is a need to file an amended petition, asking, "Has there been a material change in the terms and conditions of the employment or the beneficiary's eligibility?"

In the case where an international artist's work is terminated, another set of obligations hinge on whether the petitioner, i.e. the individual or entity who/that signed the paperwork for the international artist to receive a visa, is also the employer. If yes, then the petitioner-employer will need to: (1) withdraw the terminated employee's LCA from the DOL; (2) notify USCIS of the termination, thereby withdrawing the petition; and (3) pay for the terminated employee's transportation back to his/her/their home country. If no, then the petitioner-agent will need to evaluate, at a minimum, whether the artist has other employers indicated within or ancillary to the approved petition, and/or if there is a continuation of events that were described in the approved petition.

While the guidelines are clear for employers and international artists holding H-1B visas, they are more amorphous for agents, employers, and international artists under O and P visas. The result: This is new territory and without much guidance, we can only make reasoned decisions.

Do your best and stay safe.

September 23, 2020

Exit for a Better Start--How to Break a Commercial Lease

By Tin-Fu (Tiffany) Tsai

When entering into a contract, it seems counterintuitive to picture how it will end. It is important to prepare for this possibility in the negotiation process. Every contract not carefully thought out is a litigation waiting to happen, and the current COVID-19 pandemic is just one of the many uncertainties complicating the deal. For example, it is not uncommon for a commercial lease to expand from a few years to decades. As a result, thinking beforehand about how a lease may end is crucial, because the terms of the lease may no longer match one's business strategy down the road.

The once the designated luxury shopping districts in New York City, Midtown East and the Upper East Side of Manhattan, have become war zones as many high-end brands are litigating against their landlords to exit their leases. Valentino, the Italian fashion brand, and Venus over Manhattan gallery, once known as the "Grand Central Terminal of the art world", are just a few of the well-known tenants that resorted to litigation. However, litigation is not the only way to end a lease. Although an exit strategy should be customized for any lease, this article hopes to provide an overview of alternatives for tenants to consider prior either to entering into commercial leases and/or before resorting to litigation.

Repurpose the Premises

Though not an actual exit of a lease, repurposing the premises is a way for a tenant to align the lease with its current needs. While the overall demand for brick-and-mortar stores has decreased, there has been a growing need for warehouse space due to growth of e-commerce. Repurposing the premises may not be allowed when there is a narrowly defined use provision under the lease. For example, if a lease specifies that the premises can only be used as a store front, it will be a breach of the lease for other uses. Furthermore, a tenant should be mindful of the zoning law requirements to ensure compliance.


The lease assignment is when a tenant transfers the entire lease or a portion of it to a new tenant. Most jurisdictions favor free alienability and permit the tenant to assign if the lease is silent about assignments. If not specified, New York courts allow the landlord to withhold the consent unreasonably or even without any reason at all.
Generally, the lease articulates the logistics of the right of assignment where a landlord's consent is required. The financial qualification of the new tenant is a common requirement to show the reasonableness of a landlord's consent.


Another option that relieves a tenant's financial burden is to sublet the premises to a subtenant. Essentially, subletting a lease will not release the tenant's obligations since the tenant remains on the lease and is liable for the subtenant's default. Similar to lease assignments, consent from the landlord is usually required, which could be withheld unreasonably if not specified under the lease.

Termination Right

A termination right, which is usually granted to a tenant with more leverage power, enables a tenant to exit the lease early without paying for the remainder of the term. It is not free of charge, as the tenant needs to satisfy certain conditions first, such as a minimum lease period, a triggering event, a prior notice, and recoupment of unamortized costs. Certain unamortized costs include free rent, brokerage commissions, legal costs, and buildout costs. Further, the termination right often results in higher rent as compensation to the landlord for early termination. Despite still having strings attached, a tenant may find the termination right a worthy avenue in which to retain a level of flexibility in response to future changes.

Lease Buyout

A lease buyout literally enables a tenant to buy an early way out. Often an expensive option, the price for a lease buyout depends heavily on the rental market. In a soft market, a tenant may be able to walk away without emptying its pockets, as the landlord is more optimistic in re-letting the premises. Generally, the "break-up fee" would reflect the landlord's cost of re-letting, the estimated vacancy period, the unamortized costs, and the remaining lease term. A landlord's development plan of the premises also plays a crucial role in the dynamic of the buyout negotiation. If the buyout matches a landlord's plan at the time, such as one to repurpose the premises, it is more likely to be settled at a lower price.

Force Majeure and Similar Common Law Doctrines

In an extreme situation, such as the COVID-19 pandemic, a tenant may have other options to excuse its lease obligations. Force majeure, a clause that had not attracted much attention until recently, has become a focal point as a result of the global pandemic. If written in a contract, the force majeure clause exempts a party's contractual obligation when it is disturbed by a triggering event that is neither foreseeable nor within the party's control. That said, whether a tenant can assert the force majeure clause to its advantage depends on the specific contractual language, which is narrowly construed by New York courts. If a certain type of triggering event is not included in the clause, New York courts usually conclude that it is intentionally excluded by the parties. Often, even when the clause is in place, it benefits the landlord and not the tenant.

If no force majeure clause is available under a lease, a tenant can still resort to other common law principles to relieve its contractual obligations, such as impossibility and frustration of purpose. A tenant should look out for provisions that waive common law defenses before raising those defenses against the landlord. For the impossibility to apply, the party's performance will only be excused if it is rendered objectively impossible by an unforeseeable triggering event. For example, if a lease requires a tenant to operate continuously, such tenant may argue for impossibility due to government orders limiting the operation hours. Frustration of purpose applies when an unforeseeable triggering event frustrates the basis of the contract and makes it pointless. For example, when a lease ties rent payments to the tenant's profits, a reduction of business caused by governmental restrictions may warrant a frustration of purpose defense. Again, New York courts interpret these doctrines narrowly and the asserted party bears the burden of proof. Still, many tenants, such as Valentino, are using them with hopes of terminating the lease or to reduce the rent payments. It may be too early to predict how those lawsuits will play out, but it is safe to say that the COVID-19 pandemic is likely to change how the courts view the issues.

The Landlord's Default

If a landlord has promised to have a certain type or percentage of occupancy threshold in a lease, commonly known as the co-tenancy provision, a tenant may have a way out upon the landlord's violation of such provision. Often, a demonstration of economic harm is a prerequisite before a tenant can terminate its lease. An exclusive use provision can also be helpful for a tenant when its landlord leases other spaces on the premises to the tenant's competitors. In addition, a tenant has a right of quiet enjoyment, which guarantees an undisturbed possession of the premises, and he or she can invoke a constructive eviction claim and further exempts contractual obligations when the landlord violates such right. For example, if a tenant is denied access to the premises, tenants may have a claim of constructive eviction.

Tenants may want to break the leases, but not the relationships or their bank accounts. Amongst all the uncertainties that are outside of one's control, the best policy is to read the fine print and understand what options a tenant may have to excuse or to reduce its contractual obligations. While repurposing the premises, subletting, and lease assignment keep the current lease in place, there are restrictions associated with these arrangements. The termination right and the lease buyout could be useful when the former is built into the lease and the latter is applied under a landlord's market. In rare cases, the tenants are better off if the conditions are met under force majeure, other common law doctrines, and landlords' defaults. In sum, different alternatives come with different price tags. With a good road map, one can find peace of mind.

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