Employment Litigation Roundup: February 2024

February 29, 2024

February 2024

Former HR Executive Sues Financial Services Company for Equal Pay Violations in New Jersey Federal Court

A former head of human resources sued a financial services company for allegedly underpaying her relative to her male colleagues and then terminating her employment for complaining about the pay disparity.  The former executive alleges that she and her other female colleagues were the lowest paid among the company’s leadership team and that this was confirmed by a pay equity audit the company commissioned.  She further alleges that she complained about the issue multiple times and was ultimately terminated a few days after her most recent complaint.

S&K Take: This complaint, though it comprises only unproven allegations, highlights the complex issues involved when a company decides to conduct pay equity audits, particularly if the data implicates the compensation of personnel—including executives and human resources personnel—who have access to audit results.  Pay equity audits can be extremely valuable to an organization, but they carry risk as well.  Among other things, if they uncover inequities—especially inequities the employer does not then remediate—they can be used as evidence in subsequent litigation.  It is crucial before conducting an audit to (1) lay a proper foundation (purpose, goals, scope, key participants, whether done under privilege, etc.), (2) determine whether and to what extent results will be shared and (3) decide whether and to what extent an employer will commit to remediate disparities.

Connecticut State Court Grants Prejudgment Remedy Despite Ongoing FINRA Arbitration

In October 2022, a financial services company filed a FINRA arbitration against a former employee for allegedly breaching his restrictive covenants.  In August 2023, the same employer filed a separate application against the same employee, in Connecticut state court, under the state’s unique prejudgment attachment statute, which allows a plaintiff to attach a defendant’s assets to ensure the defendant has funds available to pay a subsequent judgment should the plaintiff prevail in its lawsuit.

The defendant-employee sought to dismiss the company’s prejudgment remedy application, arguing that parties’ agreement to submit all disputes to FINRA precluded the Connecticut court from asserting jurisdiction over the application.  The court disagreed, holding that prejudgment attachment is available to ensure that a FINRA arbitration award, if granted, is paid.

S&K Take: Connecticut’s prejudgment attachment remedy is a unique and powerful tool for Connecticut litigants.  This holding is particularly noteworthy for FINRA-regulated entities in that it permits FINRA claimants to seek the Connecticut remedy in court while the underlying dispute is being arbitrated before FINRA.

Massachusetts Court Enjoins California-Based Executive from Using Confidential Information or Soliciting Customers for Competitor  

A former vice president at DraftKings Inc., a Massachusetts-based sports betting company, moved to California to join DraftKings’ competitor, Fanatics, and simultaneously filed suit in California state court to declare his noncompete and nonsolicit unenforceable under California state law.  Days later, DraftKings responded with its own suit in Massachusetts federal court, alleging the former executive misappropriated its trade secrets and breached his contract by accessing documents containing DraftKings’ plans for entertaining key business partners and other business development information in the days leading up to his departure.  The executive argued that the Massachusetts court did not have jurisdiction because he filed his California action first.

The Massachusetts court not only accepted jurisdiction, but also granted DraftKings a temporary restraining order against the former executive, barring him from using DraftKings’ confidential information or trade secrets or from soliciting any of its customers.  In rejecting the executive’s “first-to-file” argument, the court (a) cited the parties’ confidentiality agreement and noncompetition covenant, which provided for Massachusetts governing law and jurisdiction, and (b) held that the cases, while similar, were not entirely overlapping because the Massachusetts case involved a claim for misappropriation of trade secrets in violation of the Defend Trade Secrets Act, a claim not present in the California action.

S&K Take: This is not the first case we have covered where an employee is alleged to have opportunistically relocated to California to avoid their noncompete or nonsolicit obligations.  But this case is particularly noteworthy because the Massachusetts court gave credence to the forum chosen by the parties in their contract and ultimately issued injunctive relief to enforce the customer nonsolicit—relief that likely would not have been available in California.

Regulatory Enforcement Actions Define Scope of NYC Job Posting Salary Transparency Law

The New York City Commission on Human Rights (the “Commission”), tasked with enforcing the City’s 2022 salary transparency law, brought more than 30 complaints since October 2023 alleging violations of the law’s mandate that employers disclose good faith pay ranges in all job advertisements.  Fifteen of these complaints were issued concurrently on December 4, 2023.  Most complaints allege a failure to post salaries altogether, but some challenge posted pay ranges as overly broad.  The complaints suggest that the Commission views pay ranges with a 40% difference in posted minimum and maximum pay to be in violation of the law.

S&K Take:  While the law provides financial penalties for noncompliance, the Commission does not appear to be seeking such remedies currently.  Rather, the Commission is demanding prospective compliance.  Approximately one third of the complaints filed at the end of 2023 have already been dismissed without financial penalties or damages.  Nevertheless, the increased frequency of these complaints is a reminder that while posting wide pay ranges offers flexibility and may help attract a wider range of candidates, employers should ensure those ranges are supported by a compelling, good faith rationale.