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Town Has Duty to Defend Former Town Clerk Accused of Sexual Harassment Within the Scope of Employment

The Second Department determined the Town Law required the town to pay for the defense of the former town clerk accused of sexual harassment within the scope of his employment:

The duty to defend is broader than the duty to indemnify …, and it is triggered if the civil complaint includes allegations that the employee was acting within the scope of his or her employment at the time of the alleged wrongdoing … . Here, the underlying federal complaint specifically alleges, among other things, that the petitioner committed sexual harassment while acting in the scope of his employment as the Town Clerk, the Town facilitated a hostile work environment, and the Town failed to prevent workplace harassment. Contrary to the Town’s contention, the Supreme Court correctly determined that the allegations in the federal complaint were sufficient to trigger the Town’s broad duty to defend the petitioner … . Matter of Bonilla v Town of Hempstead, 2015 NY Slip Op 06916, 2nd Dept 9-23-15

 

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The Martin Rule, Which Prohibits Actions Against Unincorporated Associations Unless the Actions Complained of Were Authorized or Ratified, Does Not Prohibit Actions Against Individual Association Members

The Second Department, over a dissent, determined that, although the Martin rule prohibited the “defamation/tortious interference with business relations” actions against the union, the actions against individual union members were not prohibited.  The Martin rule bars suit against unincorporated voluntary membership associations (here the union) unless the actions complained of were authorized or ratified by the union. But the Martin rule does not bar suit against union members in their individual capacities:

… [T]he Martin rule (see Martin v Curran, 303 NY 276…) … bars all actions against an unincorporated voluntary membership association, and bars claims against the officers of such an association in their representative capacities where there is no allegation that the members of the association authorized or ratified the wrongful conduct complained of.

However, neither the Martin rule nor any other authority precludes causes of action from being asserted against individual members of the union defendants in their individual capacities … . In Martin, only the claims asserted against union members in their representative capacities as officers of the union were dismissed. Notably, the Court of Appeals specifically allowed the libel claims in that action to proceed against the same defendant union members, in their individual capacities … . Cablevision Sys. Corp. v Communications Workers of Am. Dist. 1, 2015 NY Slip Op 06873, 2nd Dept 9-23-15

 

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Question of Fact Whether City Liable for Shooting by an Off-Duty Police Officer Under Negligent Hiring, Retention and Supervision Theory—Akin to Negligently Entrusting a Dangerous Instrumentality (Weapon) to Another

The First Department, in a full-fledged opinion by Justice Renwick, determined plaintiff had raised a question of fact whether the city was liable for the death of the police officer’s girlfriend (plaintiff’s decedent) under a negligent hiring/retention/supervision theory. The shooting occurred when the officer, Maselli, was off duty in his home. Plaintiff alleged the city had notice of Maselli’s violent propensities:

In this case, the alleged duty owed to plaintiff stems from New York’s long recognized tort of negligent hiring and retention … . This tort applies equally to municipalities and private employers … . This theory of employer liability should be distinguished from the established legal doctrine of “respondeat superior,” where an employer is held liable for the wrongs or negligence of an employee acting within the scope of the employee’s duties or in furtherance of the employer’s interests … . In contrast, under the theory of negligent hiring and retention, an employer may be liable for the acts of an employee acting outside the scope of his or her employment … .

Thus, in this case, plaintiffs’ negligence claims do not depend on whether Maselli acted within the scope of his employment or whether the City participated in, authorized, or ratified Maselli’s tortious conduct. Rather, the alleged breach of duty stems from the claim that during Maselli’s employment with the City, the City became aware or should have become aware of problems with Maselli that indicated he was unfit (i.e. possessed violent propensities), that the City failed to take further action such as an investigation, discharge, or reassignment, and that plaintiff’s damages were caused by the City’s negligent retention, or supervision of Maselli.

The negligent retention or supervision of a police officer, which results in the employee having possession of a dangerous instrumentality, is similar to if not indistinguishable from the tort of entrusting a dangerous instrumentality to another. The duty analysis should be the same. “One who supplies directly or through a third person a chattel for the use of another whom the supplier knows or has reason to know to be likely because of his youth, inexperience, or otherwise, to use it in a manner involving unreasonable risk of physical harm to himself and others whom the supplier should expect to share in or be endangered by its use, is subject to liability for physical harm resulting to them” … . The duty not to entrust a gun to a dangerous or incompetent police officer thus extends to any person injured as a result of the negligent entrustment. Gonzalez v City of the New York, 2015 NY Slip Op 06869, 1st Dept 9-22-15

 

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“At Will” Employee Stated a Cause of Action Alleging Defendants Fraudulently Induced Him to Take the “At Will” Job

The First Department, in a full-fledged opinion by Justice Acosta, determined plaintiff had stated a cause of action for fraud in the inducement in connection with plaintiff’s acceptance of “at will” employment with defendants. The complaint alleged that defendants induced plaintiff to leave his well-compensated position with J P Morgan by falsely indicating plaintiff was being hired because of defendants’ heavy work load. The complaint further alleged that defendants did not have much work and plaintiff was hired solely to provide defendants with his business contacts. After turning over his business contacts, plaintiff alleged, defendants terminated him, claiming there was not enough work to support his position. The First Department reasoned plaintiff was not seeking damages for wrongful termination, which is not available for an “at will” employee, but rather was seeking damages for defendants’ fraudulently inducing him to give up his lucrative employment with J P Morgan in order to take the “at will” employment. The court further noted that the “general” merger clause in the “at will” employment contract did not preclude the action and the action concerned statements of material existing fact, not (nonactionable) statements of future expectations:

An at-will employee, who has been terminated, can not state a fraudulent inducement claim on the basis of having relied upon the employer’s promise not to terminate the contract … , or upon any representations of future intentions as to the duration or security of his employment … . However, where an at-will employee alleges an injury “separate and distinct from termination of the [his] employment,” he may have a cause of action for fraudulent inducement … . The at-will employee must allege not that his employer wrongly fired him, but that “[he] would not have taken the job in the first place if the true facts had been revealed to [him]” … .

Plaintiff does not allege that defendants wrongfully terminated him. He claims that they misrepresented the nature of the job that they were hiring him to do, that they were only hiring him to gain access to his contacts and that if they had told him this he would not have left his job at J.P. Morgan to work for them. Indeed, plaintiff’s injury preceded his termination.

Nor are plaintiff’s damages speculative, since he alleged that they stem not from his loss of employment with defendants, but from his loss of employment with J.P. Morgan. These damages represent “the sum necessary for restoration to the position occupied before the commission of the fraud” … . Laduzinski v Alvarez & Marsal Taxand LLC, 2015 NY Slip Op 06646, 1st Dept 8-25-15

 

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Arbitrator’s Ruling that, Under the Terms of the Collective Bargaining Agreement, a Bus Driver Could Not Be Disciplined for Sexual Harassment While He Was On Union-Paid “Release Time,” Violated the Public Policy Prohibiting Sexual Harassment in the Workplace

The First Department, in a full-fledged opinion by Justice Renwick, determined the facts of the case presented a rare instance when the arbitrator’s resolution of a matter covered by the collective bargaining agreement (CBA) violated public policy. A bus driver, Aiken, was accused of sexual harassment by a co-worker. Shortly thereafter the union requested of the Transit Authority that Aiken be placed on union-paid “release time” and the Transit Authority did so. The Equal Employment Opportunity Commission (EEOC) found the bus driver had violated the Transit Authority’s sexual harassment policy and recommended corrective action. Aiken did not participate in the disciplinary proceedings (which resulted in Aiken’s termination) on the ground that, under the terms of the CBA, the Transit Authority did not have the authority to impose discipline while he was on union-paid “release time.” An arbitrator ultimately agreed with Aiken and reinstated him. The First Department noted that the arbitrator’s award was supported by the terms of the CBA, but held the award violated the strong public policy prohibiting sexual harassment in the workplace:

The scope of the public policy exception to an arbitrator’s power to resolve disputes is extremely narrow, and courts will only intervene in ” cases in which public policy considerations, embodied in statute or decisional law, prohibit, in an absolute sense, particular matters being decided or certain relief being granted by an arbitrator'” … . In other words, under this analysis, we must focus on the result only, and can vacate the award if it intrudes into areas reserved for others to resolve; or if, because of its reach, the award violates an explicit law of this State. Moreover, “courts must be able to examine an arbitration … award on its face, without engaging in extended fact finding or legal analysis, and conclude that public policy precludes its enforcement” … . * * *

We … find it nececessary to intervene … because the arbitrator construed the CBA and fashioned a remedy in a manner that conflicts with a well-defined and dominant public policy. The public policy against sexual harassment in the workplace is well recognized. Title VII of the Civil Rights Act of 1964 prohibits employment discrimination on the basis of sex (42 USC § 2000e-2[a][1]). The Equal Employment Opportunity Commission (the EEOC), which administers and enforces this provision, has promulgated a guideline that states:

Harassment on the basis of sex is a violation of Sec. 703 of Title VII. Unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature constitute sexual harassment when … such conduct has the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile, or offensive working environment (29 CFR 1604.11[a][3]).

Moreover, Title VII places upon an employer the responsibility to maintain a workplace environment free of sexual harassment. The EEOC Guidelines make employers liable for sexual harassment between fellow employees of which it knew or should have known, “unless it can show that it took immediate and appropriate corrective action” (29 CFR § 1604.11[d]). The EEOC Guidelines indicate that employers should take all reasonable steps to prevent harassment from occurring in the employment setting, such as affirmatively raising the subject, expressing strong disapproval, developing appropriate sanctions, informing employees of their right to raise and how to raise the issue of harassment under Title VII, and developing methods to sensitize all concerned (29 CFR § 1604.11[f]). The EEOC Compliance Manual further provides that employers should create a procedure for resolving sexual harassment complaints that encourages victims of sexual harassment to come forward …  “It should ensure confidentiality as much as possible and provide effective remedies, including protection of victims and witnesses against retaliation” … .

New York has similar legislation and rules … . Furthermore, the protections afforded employees under the New York City Human Rights Law (NYCHRL) are more expansive than those provided under analogous provisions of Title VII of the Civil Rights Act of 1964… . Matter of Phillips v Manhattan & Bronx Surface Tr. Operating Auth., 2015 NY Slip Op 06564, 1st Dept 8-18-15

 

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Sexual Harassment Findings Affirmed

The Third Department affirmed the State Division of Human Rights’ (SDHR’s) determination that respondent corrections officer had been subjected to sexual harassment (creating a hostile work environment) and was entitled to economic and noneconomic damages. The court noted that its review powers were “narrow” and were confined to whether the Commissioner of Human Rights’ rulings were rational in light of the evidence. The court further noted that the Commissioner should not have offset the award based upon past and future workers’ compensation benefits, and the commissioner should have considered respondent’s loss of pension benefits. In explaining its review criteria, the court wrote:

When reviewing a determination made by the Commissioner in a matter such as this one, our purview is “extremely narrow” and must focus not on whether we would have reached the same result as did the Commissioner, but instead on whether the Commissioner’s determination was rational in light of the evidence presented … . Such deference is due given SDHR’s expertise in evaluating discrimination claims … . A violation of Executive Law § 296 based on a hostile work environment must be supported by proof that the “workplace [was so] permeated [by a] discriminatory” atmosphere that it “alter[ed] the conditions of the [complainant’s] employment” … . “Where, as here, there is a finding of a hostile work environment as a result of sexual harassment, the evidence in the record must establish the pertinent elements, including proof that the discriminatory conduct occurred due to the complainant’s gender”… . Matter of Rensselaer County Sheriff’s Dept. v New York State Div. of Human Rights, 2015 NY Slip Op 06551, 3rd Dept 8-13-15

 

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Petitioner-Teacher Never Consented to an “Out of Area” Assignment—Therefore She Was Entitled to Seniority in Her Teaching Area, Despite Her Assignment to Another Area

The Third Department determined Supreme Court correctly annulled the commissioner’s determination terminating petitioner’s employment on the ground that her position was properly eliminated because she had the least seniority. Although petitioner was in the English tenure area, she was assigned to teach computer classes, which she had taught for 11 years. The commissioner determined she had acquired no seniority because she had not taught in her tenure area.  However, the relevant regulations require that a teacher consent to an “out of area” assignment. Because petitioner never consented to an “out of area” assignment, she was entitled to seniority in her English tenure area, despite the fact she was assigned to teach computer classes.  The Third Department noted that the Commissioner’s ruling constituted an artificial or forced construction of the applicable regulations:

Petitioner acknowledges that, although the Board awarded her tenure in the English 7-12 tenure area, she never spent 40% or more of her time teaching English classes. She contends, however, that her seniority is preserved by another provision of the Rules, which states that “[n]o professional educator, whether on tenure or in probationary status, may be assigned to devote a substantial portion of his [or her] time in a tenure area other than that in which he [or she] has acquired tenure or is in probationary status, without his [or her] prior written consent” (8 NYCRR 30-1.9 [c]).

Our review of the evidence reveals that petitioner was a professional educator (see 8 NYCRR 30-1.1 [e]) who was assigned exclusively to teach computer classes, which the Board admits was an assignment outside of her probationary and acquired English 7-12 tenure area. The record is devoid of evidence that petitioner was aware that she was given an out-of-area assignment or that she consented to it in writing. * * * Nowhere in the language of 8 NYCRR 30-1.9 (c) is there a requirement that professional educators must first spend some of their time teaching within their probationary or acquired tenure areas before earning the right to consent to an out-of-area assignment. Inasmuch as the Commissioner’s interpretation reads this nonexistent requirement into the provision, we view it as “an artificial or forced construction” (McKinney’s Cons Laws of NY, Book 1, Statutes § 94).

The Commissioner’s interpretation also runs contrary to the underlying purposes of the Rules governing teacher tenure and seniority credit. As the Court of Appeals has noted, 8 NYCRR former 30.9 (b) (now 8 NYCRR 30-1.9 [c]) “protects teachers from being deprived of credit in a previously appointed tenure area if they unwittingly accept, and serve in, out-of-area assignments” … . The “twofold protective purpose” of 8 NYCRR 30-1.9 (c) — that is, to protect teachers from unknowing, involuntary out-of-area assignments and allow for the accrual of seniority credit in their original tenure area if they should accept such an assignment — is not served if the provision is construed in such a way as “to block a teacher from receiving seniority credit which, absent school district error, would have been received by reason of actual service in an out-of-tenure area”… . Because the Commissioner’s interpretation of 8 NYCRR 30-1.9 (c) has precisely this effect on petitioner, we find that Supreme Court properly annulled the Commissioner’s confirmation of petitioner’s termination. Matter of Cronk v King, 2015 NY Slip Op 06396, 3rd Dept 7-30-15

 

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Verified Statement Demonstrated Site Contractor’s Improper Use of Funds Held in Trust for the Payment of Subcontractors—Plaintiff Subcontractor Entitled to Summary Judgment on Liability Re: Subcontractor’s Mechanic’s Lien

The Third Department affirmed Supreme Court’s grant of summary judgment to plaintiff subcontractor in plaintiff’s action against the site contractor seeking payment for completed work. Plaintiff alleged it was underpaid for its work and filed a mechanic’s lien. The general contractor withheld 1 1/2 times the amount of the lien from its payment to the site contractor.  The plaintiff demanded a verified statement from the site contractor (showing the receipt and disbursement of funds held by the site contractor in trust for subcontractors) pursuant to Lien Law 76. The verified statement submitted by the site contractor indicated a multi-million dollar discrepancy between the amount it received and the amounts paid out. Because of the discrepancy, the site contractor was found to have used the funds it held in trust for subcontractors for purposes other than the trust. Plaintiff was therefore entitled to summary judgment on liability:

Pursuant to Lien Law article 3-A, owners, contractors and subcontractors are required to maintain funds in trust in order to “provide[] protection to certain parties involved in the improvement of real property, ensuring that they will be properly compensated for their services” … . Specifically, and insofar as is relevant here, “[t]he funds received by a contractor or subcontractor. . . shall be a separate trust and the contractor or subcontractor shall be the trustee thereof” (Lien Law § 70 [2]). A trustee, in turn, is required to, among other things, maintain books or records with respect to each trust, detailing the trust assets receivable, trust accounts payable, trust funds received, trust payments made with trust assets and transfers in repayment of or to secure advances made pursuant to a notice of lending … . A beneficiary of such a trust is entitled to, among other things, “receive a verified statement setting forth the entries with respect to the trust contained in such books or records” … . “Any use of the trust funds other than the payment of claims under the contract . . . is an improper diversion of trust assets” …, and the trustee’s failure to keep the statutorily required books and records “shall be presumptive evidence that the trustee has applied or consented to the application of trust funds . . . for purposes other than a purpose of the trust” (Lien Law § 75 [4]). Anthony DeMarco & Sons Nursery, LLC v Maxim Constr. Serv. Corp., 2015 NY Slip Op 06394, 3rd Dept 7-30-15

 

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Bringing a Cause of Action Under the Whistleblower Statute Alleging Retaliation for Reporting Misconduct Does Not Bar Claims Arising from the Misconduct Itself (Here Claims of Sexual Harassment)

The First Department, in a full-fledged opinion by Justice Tom, determined that a cause of action pursuant to Labor Law 740, the whistleblower statute, did not bar the underlying sexual harassment and negligence claims reported by the whistleblowers.  Labor Law 740 prohibits retaliation for blowing the whistle, which is distinct from claims arising from the misconduct which was reported:

In dispute is the scope of Labor Law § 740 (7), which provides:

“Existing rights. Nothing in this section shall be deemed to diminish the rights, privileges, or remedies of any employee under any other law or regulation or under any collective bargaining agreement or employment contract; except that the institution of an action in accordance with this section shall be deemed a waiver of the rights and remedies available under any other contract, collective bargaining agreement, law, rule or regulation or under the common law.”

This provision makes clear that the terminated employee is neither compelled to bring an action under the statute nor limited to the relief it affords but may pursue any other available remedy. However, if the employee chooses to institute an action pursuant to the statute, any alternative means of redress is thereby waived.

Central to the assessment of the scope of this waiver is the purpose of the statute, both with respect to the abuse it is intended to remedy and the relief it provides. It prohibits “retaliatory personnel action” against an employee who undertakes to disclose conduct in violation of any law or regulation, who furnishes information to an investigatory body in regard to such activity or who refuses to participate in such activity (Labor Law § 740 [2]). Notably, statutory relief is confined to wrongful termination; no redress is provided to the victims of the underlying misconduct. The statute specifically addresses the termination of an employee who witnesses and reports misconduct. It is not so broad as to encompass the circumstances at bar, in which plaintiffs were not only terminated for revealing abuse by senior managers but were also targeted and victimized by that abuse. Lee v Woori Bank, 2015 NY Slip Op 06299, 1st Dept 7-28-15

 

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Failure to Pay Wages In Violation of Labor Law 191 (1)(a) is a Class A Misdemeanor—Therefore Defendant Was Properly Sentenced to a Period of Incarceration Followed by a Period of Probation—The Statute Authorizes Incarceration or a Fine—Because the Defendant Was Incarcerated, the Fine Must Be Vacated

The Second Department determined defendant was properly incarcerated for 60 days and sentenced to a period of probation for failure to pay wages in violation of Labor Law 191(1)(a), which in a Class A misdemeanor.  However, the statute allows for incarceration or a fine.  Because defendant had served 60 days, the imposition of the $5000 fine was vacated:

Contrary to the defendant’s contention, the County Court was permitted to sentence him to a period of probation. A conviction of failure to pay wages in violation of Labor Law § 191(1)(a), which is defined as a misdemeanor punishable by a fine or imprisonment, is a class A misdemeanor (Labor Law § 198-a[1]; see Penal Law § 55.10[2][b]) and, therefore, a crime (see Penal Law § 10.00[6]). Thus, a court may sentence a defendant to a period of probation for the crime of failure to pay wages (see Penal Law § 65.00[1][a]), and the imposition of a period of probation in addition to a 60-day term of incarceration was authorized here (see Penal Law § 60.01[2][d]…).

However, the County Court improperly imposed a $5,000 fine on the defendant. By its terms, Labor Law § 198-a(1) provides for punishment by a fine or imprisonment, but not both a fine and imprisonment, for a first conviction. As the defendant has already served his 60-day term of incarceration, the provision of the sentence imposing a $5,000 fine on the defendant must be vacated. People v DiSalvo, 2015 NY Slip Op 06164, 2nd Dept 7-15-15

 

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