Labor & Employment N.Y. ("LENY")

In Ryan v. Kellogg Partners Institutional Services, No. 37 (3/27/2012), the New York Court of Appeals affirmed a decision of the First Department, Appellate Division which affirmed a jury verdict that enforced an oral assurance given by a financial services managing partner to a new employee recruited from a competitor. Plaintiff Ryan, who had been earning approximately $270,000.00 in salary and bonus, was convinced to leave his position and join Defendant Kellogg, a financial industry start-up. Ryan told Kellogg that if he left his current employer he would be leaving his earned bonus (of $175,000) on the table; in response, Kellogg's managing partner assured him "this would not be a problem." Kellogg asked Ryan if he would be willing to split the bonus payment over two years to which Ryan agreed. Shortly after their initial conversation, Ryan signed an employment application with an "employment-at-will" clause and Kellogg claims that it distributed an employment manual with a similar "employment-at-will" provision. Later, when the time for the bonus payment became due, Kellogg asked Ryan if he would agree to accept a bonus payment deferred into the following year. According to the Court, "Ryan replied that he 'wasn't very happy about it,' but would 'take one for the team' and take the guarantee for the 2004 year instead of 2003." Ryan claims to have discussed the bonus situation "many times" with the managing partner and the compliance department, during which he was told to "relax," Kellogg was "going to get [to] the bonuses soon." Unfortunately, "soon" never came for Ryan, who was discharged allegedly for insubordination and disparagement of Kellogg. Ryan refused to sign the Uniform Termination Form U-5 and ended up suing Kellogg for failure to pay wages in violation of Labor Law §§ 190-198 and for breach of contract. The Supreme Court sent the case to a jury which found the oral assurances of a guaranteed bonus were made, that the bonus was not "discretionary," that the employment-at-will reservations were irrelevant to compensation promised to Ryan before he signed the application, and that Ryan was entitled to attorneys' fees under the Labor Law. The jury, however, did not find that Kellogg's refusal to pay the bonus was willful, depriving Ryan of liquidated damages under the Labor Law. The Court, affirming the Appellate Division and lower court, rejected Kellogg's argument that the oral compensation agreement was barred by the statute of frauds included in the General Obligations Law. Further, it distinguished other long-standing New York precedent enforcing employment-at-will provisions to bar an employee's recovery on breach-of-contract claims, zeroing in on the inartfully drafted clauses Kellogg relied on in this case, which lacked any language retaining the employer's discretion over bonus compensation.

On February 29, 2012, the New York State Senate passed Bill S60631-2011, which would eliminate the annual notice requirement under the New York State Wage Theft Prevention Act, which we discussed in a prior post.  The Bill does not add text to the Wage Theft Prevention Act, and keeps intact the notice requirements for new hires, but deletes the language regarding the requirement that such notices be provided "on or before February first of each subsequent year of the employee's employment with the employer...." 

The Bill was introduced by Senator DeFrancisco on January 4, 2012.  The Senate Memo summarizing the Bill explains, as its justification, that the annual notice requirement "imposes a new administrative cost on every private sector employer in the state, with aggregate costs in the millions of dollars, and will do little to improve overall compliance with the state's wage laws. The Department of Labor has conceded that wage compliance is an issue for only a small percentage of New York State employers, despite the universal application of this annual notice requirement. This type of annual notification requirement should be reserved for instances where non-compliance has been an issue, however, as an across the board measure, it will add costs and provide little if any additional benefit.  Moreover, this modification to the WPTA leaves in place its most significant reforms intended to assure payment of all wages earned by employees."

Now that the Bill has passed the Senate, it has been delivered to the Assembly, where an identical bill (A08856) is pending, and if passed by the Assembly, will be presented to the Governor for signature.  New York employers should stay tuned for further developments on this Bill. 

This post was authored by Matt Lampe and Joseph Bernasky of Jones Day.  The views and opinions expressed herein are those of the authors and do not necessarily reflect the views of Jones Day or the New York State Bar Association. 

On March 20, 2012, the U.S. Supreme Court held that States retain their sovereign immunity and cannot be subjected to lawsuits by employees alleging violations of the self-care provision of the Family and Medical Leave Act of 1993 ("FMLA"). The case - Coleman v. Court of Appeals of Maryland (No. 10-1016) - centers around a lawsuit filed by an employee of the Maryland Court of Appeals (an instrumentality of the State of Maryland) who, after requesting time off to take care of his own health issues, was informed that he would be fired if he did not resign.

The FMLA entitles eligible employees to take up to 12 weeks of unpaid, job-protected leave per year for certain specified family and medical reasons. One of those reasons, referred to as the "self-care" provision, permits for the use of such leave when an employee's own serious health condition interferes with the employer's ability to perform at work. Under the FMLA, eligible employees have a private right of action against their employer for violation of their FMLA rights.

The Supreme Court, by a 5 to 4 plurality vote, affirmed the decision of the Fourth Circuit and concluded that the abrogation of State sovereign immunity through the FMLA's self-care provision was not a valid exercise of congressional power under the Fourteenth Amendment. Justice Kennedy, who joined the Court's more conservative bloc of justices and who wrote the Opinion of the Court, concluded: "To abrogate the State's immunity from suits for damages under §5 [of the Fourteenth Amendment], Congress must identify a pattern of constitutional violations and tailor a remedy congruent and proportional to the documented violations. It failed to do so when it allowed employees to sue States for violations of the FMLA's self-care provision."

In its 2003 decision in Nevada Dept. of Human Resources v. Hibbs, the Court held that Congress could subject the States to suit for violations of one of the so-called family-care provisions (which grant leave for reasons related to the care of a family member with "a serious health condition"). But Justice Kennedy distinguished the self-care provision from that family-care provision, explaining that the holding in Hibbs "rested on evidence that States had family-leave policies that differentiated on the basis of sex and that States administered even neutral family-leave policies in ways that discriminated on the basis of sex." Unlike evidence supporting the enactment of the family-care provisions of the FMLA - namely a pattern of state constitutional violations and evidence of sex discrimination or sex stereotyping in the administration of sex leave - the legislative history of the self-care provision "reveals a concern for the economic burdens on the employee and the employee's family resulting from illness-related job loss and a concern for discrimination on the basis of illness, not sex." Thus, since Congress did not pass the self-care provisions to counter sex discrimination in granting leave due to an employee's own illness or incapacitation, the right to sue a state should not extend to violations of the self-care provision.

Justice Ginsburg, who read her dissenting opinion from the bench, argued that the plurality paid little attention to the "overarching aim of the FMLA: to make it feasible for women to work while sustaining family life." Highly critical of plurality's decision, the four dissenting justices maintain "[i]t would make scant sense to provide job-protected leave for a woman to care for a newborn, but not for her recovery from delivery, a miscarriage, or the birth of a stillborn baby."

Despite its critics, Coleman appears to be a fairly narrow decision, applying only to the self-care provision and only with regard to such lawsuits against states. Money damages under the self-care provision are still permitted against private employers.

This post was authored by Seth Greenberg of Greenberg Burzichelli Greenberg P.C.