In New York, within every contract is an implied covenant of good faith and fair dealing.  The covenant is breached when a party acts in a manner that deprives the other party of the right to receive benefits under their agreement.  The covenant encompasses any promises which a reasonable person in the position of the promisee would be justified in understanding were included.  See 511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 153, 746 N.Y.S.2d 131, 773 N.E.2d 496 (N.Y. 2002); Dalton v. Educational Testing Serv., 87 N.Y.2d 384, 389, 639 N.Y.S.2d 977, 663 N.E.2d 289 (N.Y. 1995); Frankini v. Landmark Constr. of Yonkers, Inc., 91 A.D.3d 593, 595, 937 N.Y.S.2d 80 (2d Dep’t 2012); Ochal v. Television Tech. Corp., 26 A.D.3d 575, 576, 809 N.Y.S.2d 604; Leon C. Lazer, et al., New York Pattern Jury Instructions – Civil § 4.1 (2d ed. 2006).

Further, in New York, every contract or duty relating to the present or future sale of goods, and every other contract or duty within the New York Uniform Commercial Code, “imposes an obligation of good faith in its performance or enforcement.”  N.Y. U.C.C. § 1-203; see id. §§ 1-105(1), 2-102, 2-106(1).  ” ‘Good faith’ means honesty in fact in the conduct or transaction concerned.”  N.Y. U.C.C. § 1-201(19).

In the case of a merchant engaged in a transaction in goods in New York, ” ‘Good faith’ . . . means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.”  N.Y. U.C.C. § 2-103(1)(b); see id. § 2-104(1) (defining ” ‘[m]erchant’ “); id. § 2-102.

If your company wants to bring, or needs a lawyer to defend it in, business litigation and you are located in the New York City area, call Attorney David S. Rich at (212) 209-3972.

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Effective June 14, 2014, certain unpaid interns in New York City gained the right to sue their employers for discrimination in employment or workplace harassment.  However, the effect of this new statute is quite limited, because most unpaid trainees in New York City fall outside the new statute’s definition of an ” ‘intern.’ ”  As a result, despite the new statute, most unpaid interns in the City continue to lack a right to sue.

On April 15, 2014, New York City Mayor Bill de Blasio signed, into law, Local Law 9 of 2014 (“Local Law 9″ or the “new Law”).  On March 26, 2014, the New York City Council had passed Local Law 9 by a unanimous vote of 50 to 0.

Local Law 9′s legislative history reflects that the New York City Council meant for Local Law 9 to overrule the October 3, 2013 decision of the U.S. District Court for the Southern District of New York (Castel, J.) in Wang v. Phoenix Satellite Television US, Inc., No. 13-cv-00218, 2013 WL 5502803 (S.D.N.Y. Oct. 3, 2013).

In the Wang decision, the Southern District of New York had held that, because “renumeration is a threshold issue in establishing the existence of an employment relationship,” “unpaid interns are not employees within the ambit of” the New York City Human Rights Law (the “NYCHRL”), N.Y. City Admin. Code § 8-107(a)(1).  Wang, No. 13-cv-00218, slip op. at 12, 14.  Consequently, the Wang Court had determined, an unpaid intern may not maintain a claim against an employer under the NYCHRL for firing the unpaid intern, or for discriminating against the intern in compensation or in the terms and conditions of employment, because of the intern’s (actual or perceived) protected characteristic, such as age, race, creed, color, or national origin.

As a result, in Wang, the Southern District of New York had dismissed, for failure to state a claim, the NYCHRL hostile work environment sexual harassment claim brought by the plaintiff female, a 22-year-old, unpaid, graduate intern, against the defendant corporation based on the defendant’s bureau chief’s unwelcome, forceful sexual advances upon the plaintiff.

In response to the Wang opinion, and effective June 14, 2014, Local Law 9 amends the NYCHRL to provide that the NYCHRL’s provisions relating to employees — including N.Y. City Admin. Code § 8-107(a)(1), which confers, on employees, a cause of action against employers for discrimination in employment, including workplace harassment — shall apply to “interns,” without regard to whether the employer pays them a salary or wage.  Local Law 9 of 2014, §§ 1, 2 (2014) (codified at N.Y. City Admin. Code §§ 8-102(28), 8-107(23)).  However, the new Law defines the term ” ‘intern’ ” so narrowly as to exclude most workers whom employers improperly categorize as unpaid trainees.

As my July 31, 2013 blog post and my April 14, 2010 blog post explained, most “interns” or “traineees,” regardless of what the employer calls them, are employees within the meaning of the federal Fair Labor Standards Act, 29 U.S.C. §§ 201-219 (the “FLSA”).  Likewise, most interns or trainees in New York State are employees within the meaning of the New York Labor Law (the “NYLL”).  As a result, in most cases, the FLSA requires that an employer in New York pay its interns or trainees at least the federal minimum wage of $7.25 per hour, and the NYLL requires that an employer in the Empire State pay its interns or trainees at least the State minimum wage of $8.00 per hour.

Specifically, under the regulations and Wage and Hour letter rulings of the U.S. Department of Labor (the “U.S. DOL”), interns or trainees are not employees within the meaning of the FLSA, and thus need not be compensated by an employer, if all of six criteria apply.  The first three of the U.S. DOL’s six criteria (for whether an employer must pay its interns the minimum wage and overtime compensation) are:

  1. The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in an educational environment;
  2. The training is for the benefit of the intern;
  3. The intern does not displaces regular employees, but works under close supervision of existing staff.

Local Law 9′s definition of the term ” ‘intern’ ” closely tracks the U.S. DOL’s first three criteria for whether an employer must pay its trainees.  Specifically, Local Law 9 states that the term ” ‘ intern’ ” means an individual who performs work for an employer on a temporary basis whose work:

  1. Provides training or supplements training given in an educational environment such that the “employability” of the individual performing the work may be enhanced;
  2. Provides experience for the benefit of the individual performing the work; and
  3. Is performed under the close supervision of existing staff.

Local Law 9 of 2014, § 1 (codified at N.Y. City Admin. Code § 8-102(28)).  As a result, the only interns or trainees whom the new law authorizes to sue their employers for employment discrimination or for workplace harassment are those few workers in New York City whose employers (i) properly categorize them, under the FLSA, as unpaid interns and (ii) lawfully decline to pay them the federal minimum wage or overtime compensation.

In contrast, Local Law 9 does not empower most of the numerous workers in New York City whose employers improperly classify them as unpaid trainees and whose employers unlawfully fail to pay them the federal minimum wage or overtime pay to maintain lawsuits, either for employment discrimination or for harassment because of those workers’ protected characteristics, against their employers.

In fact, even if Local Law 9 had been in effect in mid-2013, the new law would not have authorized the two unpaid production interns in the U.S. District Court for the Southern District of New York’s heavily publicized decision in Glatt v. Searchlight Pictures Inc., No. 11 Civ. 6784, 2013 WL 2495140 (S.D.N.Y. June 11, 2013) (Pauley, J.) — the decision analyzed in my July 31, 2013 blog post — to sue the defendant movie studios for employment discrimination or workplace harassment.

This is the case, among other reasons, because, in the Glatt case, the work which the plaintiff production interns performed for the defendant movie studios did not “provide[] training or supplement training given in an educational environment such that the employability of [the production interns] performing the work m[ight] be enhanced.”  Local Law 9 of 2014, § 1; Glatt, No. 11 Civ. 6784, slip op. at 26 (“The benefits [the two production interns] may have received—such as knowledge of how a production or accounting office functions or references for future jobs—are the results of simply having worked as any other employee works, not of internships designed to be uniquely educational to the interns and of little utility to the employer.  They received nothing approximating the education they would receive in an academic setting or vocational school.”).

In sum, because Local Law 9 does not enable most of the numerous workers in New York City whose employers improperly categorize them, under the FLSA, as unpaid interns to maintain lawsuits, either for discrimination in employment or for workplace harassment, against their employers, Local Law 9 makes little change to existing law.

If your company needs assistance or guidance on a labor or employment law issue and your company is located in the New York City area, call Attorney David S. Rich at (212) 209-3972.

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What Are The Elements Of Breach Of Contract In New York?

May 14, 2014

In New York, “The elements of a cause of action for breach of contract are (1) formation of a contract between plaintiff and defendant, (2) performance by plaintiff, (3) defendant’s failure to perform, [and] (4) resulting damage.”  2 Leon C. Lazer, et al., New York Pattern Jury Instructions – Civil § 4.1, at 594 (2d […]

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Newark, New Jersey Enacts Law Mandating Paid Sick Leave For Workers

April 25, 2014

On January 29, 2014, Newark Mayor Luis Quintana signed into law the Newark Sick Leave for Private Employees Ordinance, Ordinance 13-2010 (the “Newark Sick Leave Ordinance,” the “Sick Leave Ordinance,” the “Ordinance,” or the “NSLPEO”).  Effective May 29, 2014, the Sick Leave Ordinance requires employers in Newark, New Jersey which employ 10 or more employees […]

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May My Business In New York Secretly Make A Video Recording Of Its Employees In The Workplace?

April 1, 2014

Can a non-governmental employer in the State of New York lawfully make a video recording of its employees in the workplace without the employees’ knowledge?  The short answer is that a private employer in New York lawfully may engage in secret, video-only surveillance of its employees in certain areas of the workplace, unless the employer […]

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New York City Council Passes Bill Requiring Businesses With Five Or More Workers To Provide Paid Sick Leave

March 17, 2014

On February 26, 2014, the New York City Council, by a vote of 46 to 5, passed a bill, Int. No. 1-A-2014 (the “Bill”), amending the New York City Earned Sick Time Act to provide that effective April 1, 2014, among other revisions, employers in New York City which employ five to 14 employees must […]

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May My Business In New York Lawfully Fire An Employee Who Is Out On Short Term Disability?

March 4, 2014

As this author has previously explained, most workers in New York State are eligible for temporary cash benefits, known as short term disability benefits (“STD benefits”), when they are disabled by injury or sickness that is not work-related.  See N.Y. Workers’ Comp. Law § 201(9)(A)(defining ” ‘Disability’ “).  In particular, most employees in New York […]

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Jersey City, New Jersey Passes Law Mandating Paid Sick Leave For Workers

February 11, 2014

On October 21, 2013, Jersey City Mayor Steve Fulop signed into law the Jersey City Earned Sick Time Ordinance, Ordinance 13.097 (the “Jersey City Earned Sick Time Ordinance,” the “Earned Sick Time Ordinance,” the “Ordinance,” or the “JCESTO”).  Effective January 24, 2014, the Earned Sick Time Ordinance requires employers in Jersey City, New Jersey which […]

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Must My Company In New Jersey Offer Or Provide Health Insurance To Its Employees?

January 21, 2014

Whether a business in New Jersey must offer or provide health insurance to its employees depends on the number of workers that the business employs.  In general: Employers in New Jersey with 50 or more employees must provide “minimum essential” health care coverage for employees who work 30 or more hours per week or must […]

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New Jersey Increases The Minimum Wage To $8.25 Per Hour; Further, The State Minimum Wage Will Increase Annually Based On Inflation

January 6, 2014

On November 5, 2013, New Jersey residents voted, by a tally of 61% to 38%, to approve an amendment to the New Jersey State Constitution (the “New Jersey Constitution” or the “State Constitution”) increasing the State’s minimum wage from $7.25 per hour to $8.25 per hour.  The amendment, which took effect on January 1, 2014, […]

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