Category: Business Law

Supreme Court Overturns Physical Presence Rule and Requires Out-of-State Retailers to Collect and Remit Sales Tax

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In a 5-4 decision, the Supreme Court in South Dakota v. Wayfair, Inc. overturned a longstanding precedent requiring businesses to maintain a physical presence in the state before being required to collect and remit sales tax. Under the physical presence requirement, only out-of-state retailers with an actual physical presence in the state were required to collect sales tax. This precedent allowed for retailers that solely participated in shipping goods into the state, upon the request of a consumer via a catalog or online, to bypass the sales tax requirement.  The physical presence doctrine has been the subject of heavy criticism since its inception in 1992, and due to the recent technological advancements in the past twenty years, these complaints have become even more glaring. Due to the rise of the online retail market, it is estimated that the physical presence doctrine has cost states an estimated $8 – $33 billion every year.

In an attempt to mitigate the effects of the physical presence requirement and secure critical funding for essential public services, South Dakota enacted a law requiring out-of-state retailers who deliver more than $100,000 of goods or services in the state or engage in 200 or more separate transactions for delivery to the state to collect and remit sales tax.  The South Dakota Legislature found that due to the State’s inability to collect sales tax and the dramatic revenue loss associated with such regulation, the State has been unable to support its basic services effectively and has declared an emergency.

Justice Kennedy was unsympathetic to the corporate respondents and their request to remain exempt. Kennedy referred to the precedent as “artificial, not just at its edges, but in its entirety.” Furthermore, Kennedy was adamant that the physical presence requirement was inherently flawed and as technology became more and more advanced, the physical presence requirement became “further removed from economic reality.” Kennedy stated that Wayfair, Inc. was requesting the Court to “retain a rule that allows their customers to escape payment of sales taxes. . .” Kennedy further labeled Wayfair’s marketing slogan “one of the best things about buying through Wayfair is that we do not have to charge sales tax” as simply a “subtle offer to assist in tax evasion.” Additionally, while Wayfair specializes in helping their customers build their “dream home” Kennedy reminded them that it is the very state taxes that Wayfair objects to paying that “fund the police and fire departments that protect the home containing their customers’ furniture.”

For more information, contact the Philadelphia business lawyers at the Law Office of Sidkoff, Pincus & Green at 215-574-0600 or contact us online.

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Eastern District of PA Upholds Employment Claim Release in Severance Agreement

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On May 9, 2018 the Eastern District of Pennsylvania granted summary judgment against an employee who brought race and age discrimination claims against her former employer after she signed a release of claims in her severance agreement. Warren v. Mastery Charter Sch., No. CV 17-4782, 2018 WL 2129505, at *1 (E.D. Pa. May 9, 2018). Plaintiff was a social worker in her forties with a master’s degree who worked for Mastery Charter Schools from 2011 through 2016. Her contracts with her employer were year to year and were typically renewed at the end of each year. In spite of consistently positive performance reviews over her first several years working for her employer, at the end of the 2016 school year Mastery chose not to renew Plaintiff’s contract based on allegations of poor performance and communication issues. The day before Plaintiff’s final day of work, Mastery offered her a severance agreement which also contained a release and waiver of any and all employment claims for her to review. The agreement offered significant benefits—including four weeks of additional pay—that it would otherwise not have been available to Plaintiff. Further Plaintiff was offered twenty one days to review and consider the offer, as well as the opportunity to revoke the agreement within seven days if she so chose. The agreement suggested in three different locations that Plaintiff consult with an attorney about the terms and frequently used bold lettering to indicate that the agreement should be carefully read.

Plaintiff alleged that her deteriorating relationship with Mastery had caused her significant stress, depression, and anxiety. Plaintiff alleged that her growing emotional distress caused her to fear if she did not accept the agreement that Mastery would seek to interfere and prevent her future employment elsewhere. Plaintiff signed the agreement on the twenty first day, claiming she felt she had no choice but to sign. Plaintiff then filed a complaint against Mastery for employment discrimination based on age and race on October 25, 2017.

The Court relied on the rule that an employee may release employment discrimination claims against an employer so long as the release is made “knowingly and willfully.” Coventry v. U.S. Steel Corp., 856 F.2d 514, 522 (3d Cir. 1988). The Court relied on precedent to establish that although the Plaintiff may have been undergoing stress it did not negate her knowing and willful agreement to the release and waiver. Further the Court found that the agreement itself was written in a manner calculated to be understood and was sufficiently clear for the Plaintiff to understand what she was agreeing to in signing the release. The Court held that the presence of some legal jargon and long sentences was not sufficient basis to claim the release was not in a manner calculated to be understood. The Court therefore granted summary judgment in favor of Mastery and upheld the validity of the release.

For more information, call our Philadelphia employment lawyers at the Law Offices of Sidkoff, Pincus & Green at 215-574-0600 or submit an online inquiry.

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Third Circuit Affirms Denial of Injunction Blocking Transgender Bathroom Policy

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The Third Circuit Court of Appeals affirmed the denial of a preliminary injunction that would prohibit a school district from continuing its practice of allowing transgender students to use the bathroom and locker rooms of the sex by which they identify. Doe by & through Doe v. Boyertown Area Sch. Dist., No. 17-3113, 2018 WL 2355999, at *1 (3d Cir. May 24, 2018). The claim was brought by parents of several cisgender students who claimed that such policy of the Boyertown Area School District violated their Fourteenth Amendment right to privacy, their right to access to educational opportunities, programs, and benefits, and their Pennsylvania common law right to privacy preventing intrusion while using bathrooms and locker rooms. Doe by & through Doe v. Boyertown Area Sch. Dist., 276 F. Supp. 3d 324 (E.D. Pa. 2017), aff’d, No. 17-3113, 2018 WL 2355999 (3d Cir. May 24, 2018). The policy had been implemented since the beginning of the 2016-17 academic year, the plaintiffs sought the school district return to the prior policy requiring students to use any private facilities associated with their biological sex assigned at birth.

After reviewing the testimony of the students whose parents brought the complaint, testimony from a transgender student at the Boyertown Area Senior High School, and testimony from Dr. Scott Leibowitz, an expert in gender dysphoria and gender identity issues in children and adolescents, the trial court denied the motion for preliminary injunction. The court concluded that the plaintiff students “did not have a constitutional right not to share restrooms or locker rooms with transgender students whose sex assigned at birth is different than theirs.” Much of the emphasis by the court was predicated on the fact that the plaintiffs, if they were uncomfortable sharing private facilities under the policy, could have used private stalls or an alternative facility like the nurse’s office.

The plaintiffs failed to meet the “particularly heavy burden” of showing they were entitled to the preliminary injunction as they did not seek a return to the status quo but a change in a policy that stood for a year.  Further the plaintiffs had not sufficiently shown that they were likely to suffer “irreparable injury” if the injunction was not issued as the policy had been around for almost a year when they filed their complaint. The Third Circuit affirmed the denial of the preliminary injunction “for the reasons that the Court explained in its exceptionally well reasoned Opinion”. Doe by & through Doe v. Boyertown Area Sch. Dist., No. 17-3113, 2018 WL 2355999, at *1 (3d Cir. May 24, 2018).

For more information, call our employment lawyers in Philadelphia at Sidkoff, Pincus & Green at 215-574-0600 or contact us online.

PA Supreme Court Upholds Non-Economic Damages for Whistleblowers

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Recently, the Pennsylvania Supreme Court held that wrongfully terminated whistleblowers can recover non-economic damages. Bailets v. Pa. Tpk. Comm’n., 2018 Pa. LEXIS 1498 (2018). Bailets centered around a whistleblower claim made by a manager of the Pennsylvania Turnpike Commission (PTC) alleging that they fired him in retaliation for reporting wrongdoings and waste to his supervisors. The lower court found in Plaintiff’s favor and awarded economic and noneconomic damages totaling over $3 million. The Pennsylvania Supreme Court affirmed the lower court’s decision and award of economic and non-economic damages.

This issue centered on whether the term “actual damages” in Section 125 of the Whistleblower Law should be narrowly or broadly interpreted to include non-economic damages. PTC argued that actual damages refer solely to economic damages because allowance of non-economic damages would be analogous to punitive damages. PTC also argued that exceptions to the Commonwealth’s immunity should be narrowly interpreted and thus non-economic damages should not be read into “actual damages.” The employee argued that actual damages include non-economic damages because the law’s purpose is remedial and serves to compel government compliance to the law. In addition, the employee argued that there is a long precedent in Pennsylvania that actual damages are equivalent to economic and non-economic damages. Furthermore, the employee argues that not awarding non-economic damages “would undermine the very purpose of the law to protect and encourage employee reporters of waste and wrongdoing.”

The Court approached this as an issue of statutory interpretation and held that the law must be liberally construed to allow non-economic damages, thus fulfilling the remedial purpose of the Whistleblower Law. Furthermore, the Court found that reading “actual damages” as solely economic damages would be superfluous considering the statute’s inclusion of different types of economic damages under the allowed types of recovery. The Court agreed with the employee that Pennsylvania’s precedence historically supports the finding that actual damages includes non-economic damages. The Court stressed that the state must allow recovery for non-economic harms such as humiliation, embarrassment, and mental anguish in order to make Plaintiff whole. Going forward, Bailets is significant in that it will open the door for more claims under the Whistleblower Law and allow for a greater recovery for successful claimants.

For more information, please call our Philadelphia whistleblower lawyers at Sidkoff Pincus & Green at 215-574-0600 or submit an online inquiry.

Third Circuit Upholds FLSA Standards 

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In a recent case before the Third Circuit, the Court upheld the willfulness standard necessary to extend the limitations period for FLSA claims while allowing a good faith standard for awarding liquidated damages. Souryavong v. Lackawanna Cty., 872 F.3d 122 (3d Cir. 2017). Plaintiffs filed suit against Defendant, Lackawanna County, for failing to pay overtime wages in violation of the FLSA. The employee Plaintiffs each worked two part time jobs for Defendant, who tracked the hours worked for each Plaintiffs’ jobs individually but neglected to aggregate the hours between the jobs resulting in a failure to pay overtime wages. Plaintiffs appealed from a lower court decision finding that Defendant did not willfully violate the FLSA but still awarded liquidated damages due to Defendant’s lack of good faith attempts of compliance to the FLSA.

The Court upheld the lower court’s decision that Defendant did not willfully violate the FLSA. Finding a willful violation is important for an FLSA claim because it extends the limitations period from two years to three years thereby enabling the plaintiff to recover an additional year of lost pay. To show willfulness, plaintiff cannot just show that defendant had a general awareness of the FLSA, but plaintiff must show actual awareness of the specific FLSA violation. Here, the Court upheld the lower court’s finding that Defendant did not meet the willfulness standard, and thus Plaintiffs were not eligible for an extension of the FLSA limitations period.

While the Court found that Defendant did not willfully violate the FLSA, they upheld that Defendant was liable for liquidated damages under a good faith standard. In the lower court, Plaintiffs argued that Defendant was liable for liquidated damages because they willfully violated the FLSA. To the contrary, Defendant argued that they were not liable for liquidated damages because they acted in good faith and the FLSA violations were unintentional. The lower court found that Plaintiffs were entitled to liquidated damages; however, their ruling was based on Defendant’s failure to prove good faith rather than Plaintiff’s willfulness argument. In this case, Plaintiffs argued that the lower court’s finding in favor of liquidated damages reaffirmed their assertion that Defendant was willful and thereby entitled them to the extended limitations period in addition to liquidated damages. However, the Third Circuit held that the lower court’s ruling had no bearing on the extension of the limitations period because it was based merely on Defendant’s lack of evidence of good faith attempts at FLSA compliance and not on their willfulness.

Overall, the Third Circuit reaffirmed the need to show willfulness to extend the limitations period for overtime violations claims under the FLSA. However, if an employer cannot provide sufficient evidence of good faith attempts at FLSA compliance, then employees are entitled to liquidated damages.

For more information, call our Philadelphia employment lawyers for Fair Labor Standards Act in Philadelphia and South Jersey at Sidkoff, Pincus & Green at 215-574-0600 or contact us online.

 

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US Supreme Court Enforces Individual Arbitration Agreements

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In May 2018, the Supreme Court in Epic System Corp. v. Lewis ruled in favor of employers in a matter involving the enforcement of individualized arbitration agreements. 2018 WL 2292444. In this case, the plaintiffs were all workers who had signed arbitration agreements which required them to pursue their grievances through individualized arbitration. Plaintiffs instead attempted to sue under two central claims. First, the plaintiffs insisted that the arbitration agreements should not be enforced because of  the “saving clause” of the Federal Arbitration Act (“FAA”) which allows courts to refuse to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract” in combination with the National Labor Relations Act (“NLRA”) which governs workers’ rights to “bargain collectively . . . and to engage in other concerted activities for the purpose of collective bargaining.” Secondly, the plaintiffs argue that even if the “saving clause” of the FAA does not protect their claim, Congress intended for the NLRA and not the FAA to be the controlling regulation.

When faced with determining the merits of the plaintiffs’ first argument, the Court relied primarily on the text of the regulation to determine the meaning and implications of the “saving clause.” When analyzing the clause, the Court focused on the inclusion of the term “any contract.” Id. at 6. The Court believed that this language instructs the courts to treat all contracts, including arbitration agreements, equally. The reason the interpretation of an equal treatment requirement is significant is that under general contract law, the court may only choose to invalidate a contract under the general defenses of fraud, duress, or unconscionability. Id. at 6. The majority held that the illegality claim was not a claim of unconscionability, but instead narrowly interpreted the argument to be no more than stating a contract should not be enforced “because it requires bilateral arbitration.” Therefore, the majority denied plaintiffs’ first claim because they found that the defense was not founded in the traditional defense to contracts, and thus not covered under the “saving clause” of the FAA.

Similar to its denial of the first argument, the majority focused primarily on the text of the NLRA in determining Congress intention regarding NLRA. Plaintiffs’ argument rests on the language in §7 of the NLRA which guarantees workers the right “to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining.” Plaintiffs’ claim that the language of this act prevents the enforcement of agreements which inhibit the workers right to engage in class action suits. The Court in this matter did not find that the language provided in §7 provided a clear congressional command to displace the Arbitration Act. In making its decision the majority focused on the direct language of the act and refused to read into the meaning of “concerted action for the purpose of collective bargaining.” The Court held that not only did this language fail to amount to a clear congressional command to overrule the FAA, but it also failed to establish any relation to class action lawsuits. The Court found that since Congress is well aware of how to explicitly state that one act is overruling another and chose not to do so in the NLRA, Congress did not intend for this act to override the FAA. Since the language was placed along with actions involving the forming and joining of labor organizations and collective bargaining, it was intended to mean concerted action in furtherance of those actions, not workers’ involvement in class action suits.

For more information, call our business lawyers in Philadelphia at Sidkoff, Pincus & Green at 215-574-0600 or contact us online.

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PA Superior Court Strikes Down Non-Hire Clause

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In the recent case of Pittsburgh Logistics Systems, Inc. v. BeeMac Trucking, LLC, No. 134 WDA 2017 (Pa. Super. Ct. 2018), the Pennsylvania Superior Court voided a non-hire clause contracted between two companies. The non-hire clause stated that the contracting companies could not hire each other’s employees. The non-hire clause put the burden of employment on the employers as opposed to a traditional non-competition agreement, which is a contract between an employer and its employee.

In this case, Pittsburgh Logistics Systems contracted with BeeMac, a competitor, an agreement with the following language:

“CARRIER agrees that, during the term of this Contract and for a period of two years after the termination of this Contract, neither CARRIER nor any of its employees, agents, independent contractors or other persons performing services for or on behalf of CARRIER in connection with CARRIER’s obligations under this Contract will, directly or indirectly, hire, solicit for employment, induce or attempt to induce any employees of PLS or any of its Affiliates to leave their employment with PLS or Affiliate for any reason.”

The Court gave several reasons why the non-hire clause was unenforceable, including: (1) the companies’ employees are put under hiring restrictions they never agreed to, (2) the employees received no consideration for being part of such a non-hire clause, which is usually required by a non-compete, and (3) the scope of the non-hire clause was not reasonable and necessary to protect the legitimate business interests of the company.

For more information, call Sidkoff, Pincus & Green at 215-574-0600 or contact us online. Our Philadelphia employment lawyers represent clients in Pennsylvania and New Jersey.

PA Superior Court Requires High Burden of Proof When Challenging Nursing Home Arbitration Agreement Provisions

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A recent Pennsylvania Superior Court ruling found that nursing home patients who challenge the validity of arbitration agreements due to mental incapacity have a high burden to prove their case. In Cardinal v. Kindred Health Care, No. 1547 MDA 2014 (Pa Super. 2017), the plaintiff, Bret Cardinal (“Cardinal”) brought suit on behalf of the estate of the decedent Carmen Cardinal against the defendant, Kindred Nursing Centers (“Kindred”). The decedent was admitted as a patient to a Kindred facility on June 21, 2012.They then signed a contract the next day agreeing that any disputes related to their admission at the facility would be resolved through arbitration. The plaintiff brought suit alleging claims of negligence, custodial neglect and wrongful death of the decedent, and challenged the arbitration agreement due to the decedent’s lack of mental capacity to enter into the agreement at the time of signing it. The plaintiff alleged that on the day of the decedent’s admission to the Kindred facility, medical records indicate the decedent was lethargic and disoriented. Furthermore, the following day when the agreement was signed, records also show that the decedent had trouble signing the agreement. The plaintiff argued that the facts taken collectively make it clear the decedent was not of sound mental capacity to comprehend the agreement and thus wasn’t able to enter into the agreement knowingly and voluntarily.

The court disagreed; it ruled that Pennsylvania law requires the patient challenging the agreement to prove by “clear, precise and convincing” evidence the patient’s mental incapacity, and “mere weakness of intellect resulting from sickness is not legally sufficient grounds to set aside an executed contract if sufficient intelligence remains to comprehend the nature and character of the transaction.”

For more information, call our business lawyers in Philadelphia at 215-574-0600 or contact us online. The legal team at Sidkoff, Pincus & Green represents clients in Pennsylvania and New Jersey.

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Supreme Court to Rule on Legality of “Fair-Share Fees”

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On February 26th, the Supreme Court heard arguments in Janus v. American Federation of State, County, and Municipal Employees, Council 31, 851 F.3d 746 (7th Cir. 2017). Although the Court will not circulate a decision until summer of 2018, commentators are speculating that Janus will succeed in overturning the precedent set in Abood v. Detroit Board of Education, 431 U.S. 209 (1977).

In Abood, the Supreme Court allowed a public employer to require its non-union member employees to pay a fee because they benefitted from the unions collective bargaining agreement with the employer. The fees were not permitted to cover any political funding whatsoever, only the proportionate costs incurred during contracting.

In this case, Mark Janus, a public employee, is challenging an Illinois state law that requires non-union members to pay a “fair share” fee to the union that negotiated on the non-members’ behalf. The “fair share” fee was enacted to cover a proportionate share of the costs the union accrued in negotiating the contract. The fee combats against “free-riding”, whereby a non-union member enjoys the benefits of the contractual work performed by a union without having to pay a fee for those benefits. Janus contends that the fee violates his First Amendment rights because the fees are a form of compelled speech and association which should be reviewed under heightened scrutiny.

The Supreme Court’s ruling could prove costly for unions in America. Invalidating the “fair share” fee could drastically reduce union funding and membership.

For more information, call our Philadelphia business lawyers at Sidkoff, Pincus & Green at 215-574-0600 or submit an online inquiry.

Philadelphia Court Refuses to Enforce Arbitration Provision

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On April 3, 2017, the Philadelphia Court of Common Pleas refused to uphold an arbitration provision in a Responsible Person Agreement (“RPA”) signed by a nursing home resident’s daughter, but not signed by the resident herself. Clementson v. Evangelical Manor, Civil Action No. 160601775 (C.P. Philadelphia 2017). On September 17, 2014, Plaintiff, Elsie Clementson, was a resident of Defendant Evangelical Manor’s nursing home when she suffered a serious fall, resulting in a tibia fracture. When Plaintiff was admitted to the nursing home in 2012, Plaintiff’s daughter signed an RPA, which stated that the person signing the agreement may be “the Guardian, the Agent under a Power of Attorney, or any person authorized by the Resident to serve as Resident’s Responsible Person.” The RPA also contained a mandatory arbitration provision. At the time the RPA was signed, Plaintiff’s daughter did not have power of attorney over her mother, nor was she authorized by her mother to serve as her mother’s “Responsible Person.”

Plaintiff filed her Complaint on June 17, 2016. On November 3, 2016, Defendant filed a Petition to Compel Arbitration. On December 19, 2016, the Court denied Defendant’s Petition, which it timely appealed. On appeal, the Court upheld the decision to deny Defendant’s Petition, as Pennsylvania law does not allow an agent, by his own words, to invest himself with apparent authority, as such authority has to derive from the action of the principal, not the agent. The Court ruled that Defendant failed to provide any evidence that Plaintiff was present at the time that her daughter signed the RPA, or that her daughter could sign for her. Defendant also failed to offer any evidence of actions taken by Plaintiff that would create an agency relationship.

For more information, call our business lawyers in Philadelphia at Sidkoff, Pincus & Green at 215-574-0600 or submit an online inquiry.