EMPLOYMENT CORNER

Recently, in a big win for fast food workers in the state of New York, a federal district court held that New York’s Wrongful Discharge Law (the “Law”) was not preempted by the National Relations Act (“NLRA”).

In the case at issue, the restaurant industry groups (the “Groups”) challenged the Law, alleging it was preempted by the NLRA. The Law was enacted to protect fast food employees from arbitrary employment terminations, reduction in workhours, and provided employees with the option to resort to arbitration. NLRA, on the other hand, sought to safeguard the collective bargaining rights of employees against their employers. Courts have interpreted NLRA to serve as a limit on state’s ability to preempt or, interfere with the collective bargaining rights of workers. Yet, courts have also clarified that the so-called “police powers” of the state remained in effect if they could co-exist with NLRA. This interpretation allowed states to regulate substantive labor standards and, for instance, set a minimum wage law compatible with NLRA standards.

According to the court, the Law challenged by the Groups was a similar floor-setting law not preempted by NLRA because it did not regulate collective bargaining processes. Instead, the Law provided minimum protections to fast food workers to regulate the substance of labor negotiations, rather than its process. In support of its holding and consistent with prior decisions, the court reasoned that the Law’s minimum labor standards were compatible with the NLRA’s purpose to restore the equality of bargaining power.

In a recent decision, an appellate court upheld the state’s statutory deadline for payment of arbitration fees. As a result, an employer (“the Employer”) lost its right to arbitrate claims made by its former employee (“the Employee”). 

The Employee alleged multiple claims of sexual harassment and assault against the Employer, who successfully asked the court to compel arbitration. Pursuant to the relevant state statue, the Employer was required to pay its arbitration fees by a specific deadline. Although the Employer sent a check relatively timely, one day before the deadline to pay the fees, the arbitrator received payment from the Employer two-days after the statutory deadline passed. So, the court vacated its previous order which allowed the Employer to arbitrate. 

In its analysis, the court strictly enforced the statutory deadline imposed upon the Employer by the state and allowed the Employee to avoid arbitration. Specifically, in its decision the court relied on the state’s arbitration (“the Act”), which provided “that arbitrator fees must be “paid within 30 days after the due date.” Within the meaning of the Act, the court held that “paid” meant actual receipt of the payment by the arbitrator and not the date on which payment was sent. 

Even though the Employer sent the check timely, it was not received until the deadline had passed; therefore, the payment of fees was late. The court added, “[w]e do not find that the proverbial check in the mail constitutes payment.” As a result of the late fees, the court ruled in favor of the Employee and the Employer lost its right to arbitrate the Employee’s assault and harassment claims. 

In a recent decision, the Second Circuit Court of Appeals affirmed a district court’s decision to dismiss a case brought by a company’s employee against the company’s insurer for its coverage denial. The court held that the coverage sought by the insured company’s employee (the “Employee”) was barred by the insured v. insured provision in the insured company’s Directors and Officers Liability (“D&O”) policy.

The Employee was alleged to have used his position within the insured’s company to defraud multiple entities affiliated with the company. In the insured company’s lawsuit against the Employee, the Company requested that the insurer cover his defense costs. However, the insurer refused to issue coverage based on the policy’s exclusion of coverage for “suits involving one insured person against another insured person” (the “Exclusion”). According to the insurer, because insured individuals were the ones bringing claims against the insured-Employee, coverage was excluded by the “insured versus insured” exclusion.

In their rebuttal to the insurer’s denial, the Employee relied heavily on the Allocation Clause of the policy, arguing that it required the insurer to allocate coverage between covered and uncovered portions of this matter. The Employee noted that one of the individuals in the suit was neither insured nor a security holder of the company. The court rejected this argument and explained that the Exclusion specifically referenced claims brought by insured persons against other insureds “controls over the allocation clause, which only generally reference[s] [c]laims with ‘covered and uncovered matters’.” The court relied heavily on state contract law and held that the Exclusion barred coverage for the entire litigation and not only a portion of the suit for which the Employee sought defense costs coverage.