Employment Law Alerts

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1 Employment Law Alerts May 1998 Recent New Jersey Supreme Court Decision on Workplace Harassment Lowenstein Sandler s Employment Law Practice Group has prepared this series of Employment Alerts to advise you of a recent decision by the New Jersey Supreme Court affecting New Jersey employers, and to provide clarity respecting the proper use of credit reports in making employment decisions. Recent New Jersey Supreme Court Decision on Workplace Harassment The New Jersey Supreme Court recently decided that in violation of New Jersey s Law Against Discrimination (LAD), a hostile work environment could exist in a workplace as the result of one single derogatory racial comment made by one employee to another (Taylor v. Metzger, No. A-9 SEPT. TERM 1997, N.J. N.J. filed Feb. 18, 1998). Moreover, depending on the facts of the case, an injured employee could also maintain a cause of action for the intentional infliction of emotional distress. In Taylor, the Supreme Court was faced with the appeal of an order of summary judgment which was granted in favor of the defendant by the trial court and affirmed by the Appellate Division. The defendant asserted to the trial court that a single slur in the workplace could not constitute workplace harassment in violation of the LAD or give rise to a claim sufficient to establish intentional infliction of emotional distress. Therefore, since there was no dispute of material fact, the defendant was entitled to have the case dismissed as a matter of law. Although both the trial and appellate courts agreed, the Supreme Court reversed. Federal Credit Reporting Act Commentary According to the Supreme Court, a hostile workplace may exist, and an employer may therefore be liable for a hostile work environment under the LAD, based upon one single racially derogatory comment. The Court held that a...a hostile work environment could exist in a workplace as the result of one single derogatory racial comment... rational factfinder could find the racially offensive remark to satisfy the criteria of an earlier decision, Lehmann v. Toys R Us, Inc., 132 N.J. 587, (1993), in which the Court established the severe or pervasive standard. According to Lehmann, a hostile workplace may exist if the harassing conduct is severe or pervasive. Given the nature of the racial comment (the employee was called a jungle bunny ), and the fact that the term was uttered by the employee s boss, the Sheriff of Burlington County, the Court deemed the severity of the remark to be exacerbated. In the Court s words: A supervisor has a unique role in shaping the work environment. Part of a supervisor s responsibilities is the duty to prevent, avoid and rectify invidious harassment in the workplace. The Court determined that the severity of the defendant s remark was further intensified by the fact that the defendant did more than merely allow racial harassment to occur at the workplace, he perpetrated it. In addition, the offensive remark was made in the presence of another supervising officer, and when the plaintiff told her co-workers about the remark, they laughed. This document is published by Lowenstein Sandler PC to keep clients and friends informed about current issues. It is intended to provide general information only. L 65 Livingston Avenue Roseland, New Jersey Telephone Fax

2 As to plaintiff s claim for intentional infliction of emotional distress, the Court noted that the power dynamics of the workplace contribute to the extremity and the outrageousness of defendant s conduct. Because the case before the Court involved an appeal from an order granting summary judgment, the Court did not actually find the existence of the elements of an intentional infliction of emotional distress claim. Rather, the Court determined that a rational factfinder could make such a finding and therefore remanded the matter for trial. In Taylor, the defendant was the plaintiff employee s supervisor, the Sheriff of Burlington County, and the decision suggests that he was sued in his official capacity. Although the sheriff s employer, the County of Burlington, was not a defendant in the case before the Supreme Court, the Court s holding does not limit liability to the person who made the derogatory remark (in this case Sheriff Metzger). Accordingly, if an employee is able to establish a hostile workplace, the employee may have a valid claim against the employer. In her dissenting opinion, Justice Garibaldi argued that the one racial slur uttered in this case could not constitute severe or pervasive conduct, and thus the workplace was not hostile. Justice Garibaldi observed that the plaintiff did not experience any adverse consequences in the terms of her employment, her working conditions and employment status were not altered, and her salary was not reduced. Nor did Justice Garibaldi deem the comment sufficient to establish the intentional infliction of emotional distress. However, the six other Justices disagreed. As an employer, this recent decision concerns you. You should be aware that harassing or derogatory comments or actions by employees in your workforce, to the extent they are severe or pervasive, may create a hostile workplace. Taylor illustrates that one derogatory comment may be sufficient, as a matter of law, to create a hostile workplace. The law in the area of harassment is constantly emerging. Recently you may have read of the United States Supreme Court s decision, Oncale v. Sundowner Offshore Services, Inc., No , 1998 U.S. Lexis 1599 (U.S., Mar. 4, 1998), in which the Court held that same-sex sexual harassment is actionable under Title VII of the Civil Rights Act of There are additional sexual harassment cases now pending before the United States Supreme Court. If you have any further questions about these cases or decisions, how they may impact your workplace, or any other employment practices or workplace compliance issues, please call Martha L. Lester, Chair, or Julie Levinson Werner, of the Employment Law Practice Group at (973) Fair Credit Reporting Act Commentary Many of you have expressed concern about compliance with the Fair Credit Reporting Act ( FCRA ) as you use credit information about your employees or potential employees in your employment decisions. In particular, you have sought assistance in the preparation and content of separate An employer s improper use of a consumer s credit report could result in civil penalties and the assessment of damages. acknowledgements to be signed by prospective candidates and existing employees consenting to your use of credit reports. Recently, the Federal Trade Commission ( FTC ) promulgated a Commentary regarding an employer s obligation of disclosure when it relies upon credit information when evaluating employment decisions such as hiring, promotion, reassignment, and retention.

3 Before you can use a consumer report in making employment decisions, you must notify the employee or employee candidate (referred in FCRA as a consumer ) in writing that you plan to use a credit report. In addition, you must obtain that individual s written authorization before you request a copy of the credit report from a consumer reporting agency ( CRA ). Once you have obtained a copy of the report, and before you take any adverse action based upon the report, you must provide the consumer with a pre-adverse action disclosure that includes a copy of the credit report and a summary of consumer rights under FCRA. Although the FCRA is silent as to the period of time that you must wait after...disclosure regarding use of the credit report must be provided to the consumer both before and after the adverse action is taken, despite the apparent duplication. supplying the required information to the consumer before taking adverse action, an FTC opinion letter indicates that allowing five days between the time the consumer is notified that the credit report is being used and the time the adverse action is taken is reasonable. In addition, after adverse action is taken based upon the credit report, you must notify the consumer that the credit report was used and must further disclose: the name, address and phone number of the CRA that furnished the report; a statement that the CRA was not responsible for the decision to take the adverse action and is therefore unable to provide the consumer with specific reasons for the action; a notice of the consumer s rights to obtain a free copy of the report from the CRA within sixty (60) days; and a notice of the consumer s right to dispute the accuracy or completeness of any information in a consumer report. We recommend that you provide all information to employees or employee candidates in a standard form of adverse action notice. However, no matter what form you use, it is now clear that disclosure regarding use of the credit report must be provided to the consumer both before and after the adverse action is taken, despite the apparent duplication. If an intermediary is used to merge consumer reports from the three largest credit repositories into one consumer report which removes duplicative information, you must advise the consumer of the intermediary s use as it will be a CRA for purposes of compliance with FCRA. In that case, you must provide the consumer with the following information: a notice of the adverse action; the name, address and telephone number of the intermediary that created the merged and purged consumer report (including a toll-free number for the intermediary if it maintains files on consumers on a nationwide basis); a statement that the intermediary did not make the decision to take the adverse action; a notice that the consumer has the right to obtain a free copy of the consumer report from the intermediary; and a notice that the consumer has the right to dispute the accuracy or completeness of any information in the consumer report.

4 Again, we recommend that you use a standardized form of written notice. An employer s improper use of a consumer s credit report could result in civil penalties and the assessment of damages, including punitive damages. If you wish to make use of credit information in making your employment decisions and you are unsure of FCRA disclosure requirements, please call Martha L. Lester, Chair, or Julie Levinson Werner of the Employment Law Practice Group, at (973) We would also be pleased to provide you with advice respecting your other employment practices and workplace compliance issues.

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