Walsh Pizzi O'Reilly Falanga LLP

NEWARK, N.J. – M. Trevor Lyons and David D. Cramer recently secured a victory in the Appellate Division on an issue of potential first impression, where the three-judge panel unanimously affirmed the dismissal of contract-based claims brought by a former tenured professor at a private university, who was dismissed for-cause.

After receiving numerous student complaints over the course of eight years, the private university dismissed the plaintiff from tenured employment pursuant to the for-cause dismissal proceedings set forth in the university’s faculty handbook. Importantly, the agreed-upon procedures set forth in the faculty handbook vested the final decision to remove a tenured professor with the university’s Board of Trustees (the “Board”).  The trial court granted the university’s motion for summary judgment, finding that the Board properly followed its own internal procedures, there was sufficient evidence in the record to support the Board’s decision, and given the language of the faculty handbook and that the decision to dismiss for-cause was primarily an academic decision, the Board’s decision was entitled to substantial deference.

On appeal, the plaintiff sought de novo review of the Board’s decision, arguing that the Board did not satisfy the evidentiary standard contemplated by the faculty handbook.  The university countered that, in light of the deference that courts have previously applied to decisions of academic import made by universities, the court should apply the same standard of review applicable to agency decisions—that is, the Board’s decision should be upheld unless it is found to be arbitrary, capricious, or unreasonable.

The appellate panel noted that courts in New Jersey had not addressed the standard of review for internal decisions of private universities and adopted the agency standard of review for such decisions.  Applying that standard to the facts of this case, the Appellate Division affirmed the dismissal of the lawsuit.

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The case is Chee Ng v. Fairleigh Dickinson University, case number A-0089-22.

Walsh Partner Joseph L. Linares has been appointed to a one-year term to the United States District Court Lawyers Advisory Committee for the District of New Jersey by Chief Judge Renée Marie Bumb.

“I am honored to have the opportunity to serve on the Lawyers Advisory Committee,” Linares said. “I am looking forward to working with my fellow committee members to better serve the bench and bar.”

The mission of the Lawyers Advisory Committee is to serve the United States District Court for the District of New Jersey in achieving, dispensing, and administering justice in a fair, impartial, effective and efficient manner. The Lawyers Advisory Committee’s responsibilities include serving as a liaison between the bench, the bar and the public, discussing with the Court matters the Committee believes might improve the administration of justice, undertaking projects and conducting disciplinary investigations as requested by the Court, and reviewing and recommending local rules and procedures to improve court proceedings.

“The Court relies so much on the hard work and contribution of the Lawyers Advisory Committee,” said Walsh Counsel and former Chief Magistrate Judge Mark Falk. “Joe Linares is a superlative addition, who will bring a fresh perspective and foster constructive growth within the Court.”

Congratulations to Joe and all the newly appointed Committee members!

On March 11, 2024, a new version of the U.S. Department of Labor’s (“DOL”) Rule regarding when employers can classify workers as independent contractors under the Fair Labor Standards Act (“FLSA”) will take effect (the “New Rule”).  The New Rule, titled “Employee or Independent Contractor Classification Under the Fair Labor Standards Act,” establishes a six-factor test for determining whether someone is an employee or independent contractor. This rule will rescind the Independent Contractor Status Under the Fair Labor Standards Act rule (the “2021 Rule”) from January 7, 2021.

I. The 2021 Rule
Federal courts throughout the country have relied on the economic reality test in determining whether a worker is an independent contractor or employee under the FLSA.  Prior to the creation of the New Rule, the DOL published the 2021 Rule  which designated two of the five economic reality test factors as “core factors.”  These two factors included the nature and degree of control over the work, and the worker’s opportunity for profit or loss.  The other three factors, which were considered less probative, included the amount of skill required for the work, the degree of permanence of the working relationship between the worker and the employer, and whether the work is part of an integrated unit of production.

II. The New Rule
The New Rule, unlike the 2021 Rule, does not have “core factors,” but it restores the multifactor analysis used by the courts, with no factor being given greater weight. According to the DOL, the New Rule is “[c]onsistent with a totality-of-the-circumstances analysis, no one factor or subset of factors is necessarily dispositive, and the weight to give each factor may depend on the facts and circumstances of the particular relationship.”

The New Rule’s factors are as follows:

1. 1. Opportunity for profit or loss depending on managerial skill. The DOL suggests the following may be relevant considerations for this factor: “whether the worker determines or can meaningfully negotiate the charge or pay for the work provided; whether the worker accepts or declines jobs or chooses the order and/or time in which the jobs are performed; whether the worker engages in marketing, advertising, or other efforts to expand their business or secure more work; and whether the worker makes decisions to hire others, purchase materials and equipment, and/or rent space.”
   2. Investments by the worker and the potential employer. The DOL suggests that for this factor, the focus “should be on comparing the investments to determine whether the worker is making similar types of investments as the potential employer . . . to suggest that the worker is operating independently, which would indicate independent contractor status.”
   3. Degree of permanence of the work relationship. The DOL suggests that this factor weighs in favor of status as an employee when “the work relationship is indefinite in duration, continuous, or exclusive of work for other employers.” In contrast, the DOL suggests that this factor weighs in favor of status as independent contractor when “the work relationship is definite in duration, non-exclusive, project-based, or sporadic based on the worker being in business for themself and marketing their services or labor to multiple entities.”
   4. Nature and degree of control.  The DOL suggests that this factor considers the employer’s control over a worker’s performance as well as the economic aspects of the working relationship, and that facts to be considered include “whether the potential employer sets the worker’s schedule, supervises the performance of the work, [] explicitly limits the worker’s ability to work for others,” “whether the potential employer uses technological means to supervise the performance of the work . . ., reserves the right to supervise or discipline workers, or places demands or restrictions on workers that do not allow them to work for others or work when they choose,” and facts regarding an employer’s control over the economic aspects of the working relationship, such as “control over prices or rates for services and the marketing of the services or products provided by the worker.
   5. The extent to which the work is “integral” to the potential employer’s business. The DOL suggests that this factor weighs in favor of a worker’s status as an employee when “the work they perform is critical, necessary, or central to the potential employer’s principal business.”
   6. The worker’s skill or initiative. The DOL suggests that this factor weighs in favor of status as an employee when “the worker does not use specialized skills in performing the work or where the worker is dependent on training from the potential employer to perform the work.” The DOL emphasized, however, that just because a worker brings specialized skills to a working relationship, is not “itself indicative of independent contractor status.”

Notwithstanding these factors, the DOL provided that “[a]dditional factors may be relevant in determining whether the worker is an employee or independent contractor for purposes of the FLSA, if the factors in some way indicate whether the worker is in business for themself, as opposed to being economically dependent on the potential employer for work.”

III. What Comes Next
The DOL’s New Rule is not binding on courts, but it may be relied upon by federal courts as guidance in determining whether a worker is an independent contractor or an employee under the FLSA. It is also possible that courts look to the New Rule as guidance for assessing a worker’s status under other federal laws, like the Family and Medical Leave Act (“FMLA”), that use the economic reality test.  Therefore, the New Rule may result in increased litigation regarding the classification of workers on the federal level.

Employers should consider reviewing their company policies and practices to determine how the New Rule might affect their classifications of their workers.   In doing so, however, it is important for employers to take into consideration their state laws on this subject, because some states’ tests are more restrictive than the federal economic reality test.  For example, for New Jersey employers, the “ABC” test set forth by the Supreme Court in Hargrove v. Sleepy’s LLC remains in effect.  Accordingly, employers should contact their labor and employment counsel to discuss how each test may affect their business practices.

In the pursuit of a more inclusive legal landscape and reflection on Hispanic Heritage Month, Walsh proudly spotlights two of its distinguished Partners, Hector D. Ruiz and Joseph L. Linares. Beyond their roles at the firm, both Linares and Ruiz are dedicated to fostering diversity in the field of law. Their contributions extend to prominent positions within the Hispanic National Bar Association and the Hispanic Bar Association of New Jersey as well as holding roles within the New Jersey State Bar Association.

Ruiz’s upbringing in New Jersey, with parents hailing from Puerto Rico, shaped his values and work ethic. He credits his parents as his heroes, instilling the significance of education, hard work, and integrity from his earliest memories. Their influence laid the foundation for his esteemed legal career.

Meanwhile, Linares’ family immigrated from Cuba in the late 1960s. Through unwavering determination and a commitment to education, they carved out a place for themselves in the United States in pursuit of the “American Dream.” Linares chose a legal career as a means to leverage his problem-solving skills for the betterment of clients and communities. He reflects, “As lawyers, we have certain skills and tools available to us that may seem foreign to the general population. It’s a privilege to practice law and it’s a privilege to help others.”

Diversity, equity, and inclusion are not just buzzwords, but essential components of a thriving workplace. Ruiz finds encouragement in witnessing the rise of diverse attorneys assuming leadership roles across law firms, in-house positions, universities and on all levels of the bench at both the state and federal levels.

While strides have been made for inclusivity in the past decade, there is still room to both learn and educate within the workplace and communities. The legal profession’s demographic makeup must better align with that of the broader population. “We need to have a continued dialogue and strong mentors,” Linares explained, “The profession has a pipeline issue. With respect to people of color, we need to inspire young adults to pursue the profession, and then champion them once they are practicing. It is all of our responsibility to advocate for a more inclusive profession to better serve both clients and our communities.”

For aspiring Hispanic attorneys and law students, Linares emphasizes the importance of authenticity. He asserts that the profession flourishes when individuals bring their genuine selves to their work, as one’s cultural identity is inseparable from their best contributions.

Ruiz advocates for mentorship as a cornerstone of professional growth. He urges law students to engage with organizations that connect them with experienced peers. Additionally, he encourages opportunities that cultivate practical skills such as participation in Inns of Court, pro bono work, and programs that afford young attorneys courtroom experience and client interaction.

Hector D. Ruiz and Joseph L. Linares exemplify the commitment and passion required to drive diversity, equity, and inclusion in the legal field. Their personal narratives serve as inspiration for future generations of Hispanic attorneys and law students. By embracing their cultural identities and actively seeking mentorship and experiential learning, the path to a more inclusive legal community becomes clearer.