Employment Litigation Roundup: March 2024

April 1, 2024

March 2024

New York State and New York City Human Rights Laws May Protect Out-of-State Applicants

On March 14, the New York Court of Appeals held that out-of-state applicants who seek employment within the State or the City can assert claims under the New York State and New York City Human Rights Laws (“NYSHRL” and “NYCHRL,” respectively). The plaintiff, a reporter in Bloomberg’s Washington, D.C. office, brought claims for sex and race discrimination after she was rejected for a job at Bloomberg’s NY office.

Whether an out-of-NY litigant can sue under the NYSHRL or NYCHRL is governed by the “impact test,” which asks whether the alleged discriminatory conduct had an “impact” in New York State or City. This decision clarifies how the “impact test” governs “failure to hire or promote” cases. In finding that the NYSHRL’s and NYCHRL’s protections extend to nonresident applicants, the Court held that “[t]he prospective employee personally feels the impact of a discriminatory refusal to promote or hire in New York City or State, because that is where the person wished to work (and perhaps relocate) and where they were denied the chance to do so.”

S&K Take: The Court’s decision could increase exposure under NY law for NY employers who fail to hire or promote out-of-state candidates. However, the Court emphasized that its decision is limited to positions that require the employee to work physically within the applicable territory. The decision leaves unaddressed whether it extends to jobs that are performed only partially in NY or to applicants or employees who have the option to work either remotely or in NY.

Executive Cannot Establish SOX Whistleblower Claim Based on Employer’s Alleged Internal Policy Violation 

The whistleblower provisions of the Sarbanes-Oxley Act (“SOX”) protect employees from retaliation when they complain about what they reasonably believe is their employer’s violation of a securities law, rule or regulation. It is well-settled that for a belief to be “reasonable” under SOX, it must be both subjectively and objectively reasonable.

In La Belle v. Barclays, a former executive asserted that his employer violated SOX by terminating his employment after he reported alleged violations of the firm’s mandatory block leave program, which was designed to expose fraud and embezzlement by requiring certain employees to take consecutive weeks off from work without access to firm systems. On March 1, the Second Circuit held that while the executive may have subjectively believed that the program was a regulatory requirement, his belief was not objectively reasonable because the block leave program was an internal firm policy, not a regulatory mandate. Accordingly, the executive’s complaint did not constitute SOX-protected activity.

S&K Take: This is welcome news for employers, particularly given how liberally SOX’s whistleblower provisions are often interpreted. That said, employers should still act cautiously when taking adverse employment actions against employees who complain internally about perceived violations of law. Even if a complaint is not SOX-covered, other whistleblower protections may apply. New York employers should be particularly mindful of New York’s expansive whistleblower statute, Labor Law § 740, which protects employees from retaliation for disclosing conduct that the employee “reasonably believes” is in violation not just of law, rule or regulation, but also judicial or administrative decisions, rules or orders.

NLRB General Counsel Challenges Confidentiality and Non-Disparagement Clauses in Severance Agreement

The General Counsel of the National Labor Relations Board (“NLRB”) recently issued a complaint against SpaceX, claiming that it violated the National Labor Relations Act (“NLRA”) by presenting employees with severance agreements containing confidentiality and non-disparagement clauses that it alleges improperly restricted workers from discussing employment terms or filing charges with the NLRB. According to the complaint, the offending provisions required employees “not to disclose the terms of [the severance agreement] to any current or former Company employee,” “not to disparage the Company…[or] make any oral or written derogatory or negative comments about the Company concerning your employment with the Company or separation of employment,” and “not to provide assistance to any current, former, or future SpaceX employee with respect to any complaints, concerns, claims, or litigation of any kind against the Company…unless compelled to do so by a valid subpoena or court order.” The complaint also challenges SpaceX’s policy of requiring employees to enter arbitration and class action waiver agreements “as a condition of employment,” which prohibited employees from obtaining monetary relief or recovery from filing a charge or complaint with any government or administrative agency.

S&K Take: This is one of numerous efforts by the NLRB General Counsel to challenge terms that are often standard in employment-relate agreements. For example, as previously covered, the NLRB’s General Counsel has taken the position that simply proffering, maintaining or enforcing non-competes may unlawfully interfere with employees’ NLRA rights. While the agency attorney’s positions and priorities notoriously change with administrations, employers who wish to limit NLRA exposure should carefully evaluate their agreements and policies.

Illinois Court Upholds Attorney-Client Privilege Over Workplace Investigation Documents

In Guster-Hines et al. v. McDonald’s USA, LLC et al., a judge in the Northern District of Illinois denied, in part, the plaintiffs’ motion to override privilege assertions by the defendants in connection with an outside attorney hired to conduct workplace investigations into complaints about the plaintiffs.

The factual and procedural background of the dispute is lengthy but concerns the extent to which investigation-related and information generated by outside counsel were privileged. Some records were produced, but others were not, causing a dispute as to the existence and scope of any privilege waiver by the employer.

Ultimately, the Court sided with the employer but permitted a second deposition of outside counsel and an in camera review of counsel’s notes.

S&K Take: The court’s decision is highly fact specific, and we do not attempt here to get into great detail. That said, this case reminds of the importance of carefully crafting the goals and scope of workplace investigations, including the extent to which employers wish to claim—and are prepared to waive—the attorney-client privilege. This is particularly important given the view in some jurisdictions—for example, North Carolina—that workplace investigations “are ordinary business activities and, accordingly, the communications made in such investigations are not necessarily made in the course of giving or seeking legal advice for a proper purpose.”