Vacating an arbitration award based on allegations the award violated public policy

Vacating an arbitration award based on allegations the award violated public policy

Civil Serv. Empls. Assn., A.F.S.C.M.E. Local 1000, A.F.L.-C.I.O. v County of Nassau, 2016 NY Slip Op 06211, Appellate Division, Second Department

In New York City Tr. Auth. v Transport Workers Union of Am., Local 100, AFL-CIO, 99 NY2d 1, the Court of Appeals ruled that "judicial intervention [in a challenge to an arbitration award] on public policy grounds constitutes a narrow exception to the otherwise broad power of parties to agree to arbitrate all of the disputes arising out of their juridical relationships, and the correlative, expansive power of arbitrators to fashion fair determinations of the parties' rights and remedies." The court further explained that the pubic policy exception applies only 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.”

When an individual’s employment with the Nassau County Sheriff's Department was terminated he filed a grievance pursuant to the disciplinary procedures of the relevant collective bargaining agreement. The arbitrator designated to hear and determine the matter sustained the grievance and reinstated the individual to his former position with back pay.

The Civil Service Employees Association filed a petition pursuant to CPLR Article 75 on behalf of the individual seeking a court order confirming the arbitration award. Supreme Court granted the petition and Nassau Countyappealed the ruling in an effort to have the award judicially vacated.

The Appellate Division affirmed the lower court’s decision, explaining that upon timely application, an arbitration award should be confirmed unless the award is vacated or modified upon a ground specified in CPLR 7511, i.e.,

“(i) corruption, fraud or misconduct in procuring the award; or

“(ii) partiality of an arbitrator appointed as a neutral, except where the award was by confession; or

“(iii) an arbitrator, or agency or person making the award exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made; or

“(iv) failure to follow the procedure of this article [75], unless the party applying to vacate the award continued with the arbitration with notice of the defect and without objection.”

The court then noted the two “judicially determined” exceptions set out in Board of Educ. of Arlington Cent. School Dist. v Arlington Teachers Assn., 78 NY2d 33, whereby an arbitration award may not be vacated “unless it violates a strong public policy” or it “is irrational.”

In this instance, said the Appellate Division, the public policy considerations invoked by the Nassau Countyfail to meet the strict standards for overturning arbitration awards on public policy grounds.

Addressing Nassau County’s argument that the arbitrator’s award should be vacated on the ground of fraud or other misconduct, the court said the contention was “without merit.”

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_06211.htm

Owners of for-profit school network to pay $4.3 million to resolve claims of overcharging State and failing to pay taxes

Owners of for-profit school network to pay $4.3 million to resolve claims of overcharging State and failing to pay taxes 

[Internet links highlighted in color]

On October 19, 2016, Comptroller Thomas P. DiNapoli, Attorney General Eric T. Schneiderman  and Acting Tax Commissioner Nonie Manion announced a settlement with K3 Learning, Inc. (f/k/a Metropolitan Preschools, Inc.) and its president and owner Michael C. Koffler, together with his sons, Brian and Daniel Koffler, and his special education preschool, Sunshine Development School (“SDS”), for overcharging the State of New York for services rendered by SDS and for failing to pay millions in personal and corporate income tax.  

Following a coordinated investigation with the Department of Taxation and Finance and an auditand investigation by the Office of the State Comptroller, Koffler and the other parties have agreed to pay the State over $4.3 million to resolve the investigation.

An investigation by the Attorney General’s and Comptroller’s office revealed a complicated leasing arrangement created by Michael Koffler and SDS with the purpose and effect of inflating claims for rent reimbursement to the State of New York.

Specifically, Bridan Realty III, LLC, an entity created and controlled by Michael Koffler, entered into a lease for space for the special education preschool SDS, and then subleased the space to SDS at a substantial mark up.  The investigation revealed no legitimate reason for the mark-up and found that Bridan performed no services for SDS.  Instead, the company was merely a pass-through entity controlled by the Kofflers and used to pay the Kofflers, their credit card bills, their boat expenses, and even partial tuition for Brian’s law school.  Indeed, the sham entity’s name derives from the Koffler sons, Brian and Daniel.

In addition, an auditand investigation by the Office of the State Comptroller found over a million dollars in an additional overcharges stemming from unreasonable high executive compensation for Michael Koffler, unrecoverable expenses – such as lobbying and legal fees –and accounting errors, among other erroneous charges.  As part of the agreement, SDS has agreed to any reimbursement rate adjustments required to fully compensate the State Education Department and the New York City Department of Education for these past overcharges.

The Attorney General, with the help of the Department of Taxation and Finance, found that each of Michael, Brian, and Daniel Koffler, as well as SDS, underreported taxable income on their tax returns.  In the largest tax avoidance finding, Michael Koffler reported millions in losses from various entities on his personal income tax return even though he lacked supportable basis to do so.  Additionally, he failed to report as income various personal and living expenses that were paid by entities under his control. These included payments from an “Executive Account” for rent for his New York City apartment, personal credit cards, various utility and maintenance bills for the Koffler’s vacation home in Westhampton and expenses incurred in Saint Barth’s and Westhampton.

The Comptroller’s examination was conducted by the Division of State Government Accountability and the Division of Investigations.  

Attorney General Schneiderman expresses his thanks to the staff of the New York State Department of Taxation and Finance, especially Stephanie Lane, Tax Auditor II in the Office of Counsel, for identifying the tax issues in the matter and for their important assistance in bringing this investigation to resolution. The Attorney General also thanked the Office of the State Comptroller for its work on the auditof SDS’s re-imbursement overcharges.  

The Attorney General’s investigation was conducted by Special Counsel Nicholas Suplina under the auspices of the Taxpayer Protection Bureau, which is overseen by Bureau Chief Thomas Teige Carroll and Deputy Bureau Chief Scott Spiegelman.  The Taxpayer Protection Bureau, which enforces the New York State False Claims Act including tax claims made thereunder, is a bureau in the Criminal Division, which is overseen by Chief Deputy Attorney General Jason Brown. 

Since taking office in 2007, DiNapoli has committed to fighting public corruption and encourages the public to help fight fraud and abuse.  Individuals can report allegations of fraud involving public funds by calling the toll-free Fraud Hotline at 1-888-672-4555, by transmitting an e-mail to investigations@osc.state.ny.us, by filing a complaint online athttp://osc.state.ny.us/investigations/complaintform2.htm or by mailing a complaint to Office of the State Comptroller, Division of Investigations, 14th Floor, 110 State St., Albany, NY 12236.

Decision Squibs for the week ending October 21, 2016

Decision Squibs for the week ending October 21, 2016

Places of Public Accommodation: The Delaware Supreme Court overturned a Delaware Human Relations Commission’s award of damages, attorney’s fees, and costs holding that for the purpose of Delware’s Equal Accommodations Law a prison was not a place of "public accommodation." Ovens v Danberg,  Delaware Supreme Court, Docket #123, 2016, posted on the Internet at:
 http://courts.delaware.gov/Opinions/Download.aspx?id=247660

Employer-Employee: In CalPortland Company v Federal Mine Safety and Health Review Commission, USCA, District of Columbia, Docket #16-1094 held that the Commission could not order  a mine owner to temporarily reinstate an individual who has never been employed by that owner or operator pending a final order on the individual’s underlying discrimination complaint that was then pending before the Commission. The decision is posted on the Internet at: 
http://law.justia.com/cases/federal/appellate-courts/cadc/16-1094/16-1094-2016-10-20.html 

Lack of Mutual Assent: Marjorie Johnson, J.D., writing in Employment Law Daily, reports that although two employees continued working after they received a new Alternate Dispute Resolution policy which required that employment disputes be resolved through binding arbitration, there was no showing of mutual assent as they voiced their objections to the ADR policy and amended their previously filed EEOC charges to allege that the new policy was retaliatory. In an unpublished opinion labeled “Not Precedential”, the Third Circuit vacated a district court’s orders of dismissals of their separately filed discrimination claims and remanded for further proceedings. Scott v Education Management Corp., USCA, Third Circuit, No. 15-2177. Posted on the Internet at: http://www2.ca3.uscourts.gov/opinarch/152177np.pdf

Appealing Supreme Court’s denial of a party’s motion

Appealing Supreme Court’s denial of a party’s motion

Hamilton v Alley, 2016 NY Slip Op 06564, Appellate Division, Fourth Department

William E. Hamilton challenged his termination as a tenured school district administrator by bringing a CPLR Article 78 in Supreme Court. Supreme Court denied Hamilton’s motion to amended his petition. He appealed the Supreme Court’s action and the Appellate Division modified the Supreme Court order denying his amended petition in part by granting Hamilton’s motion to amend the petition in part.*

Hamilton next asked Supreme Court “for leave to renew his amended petition.” Supreme Court denied Hamilton’s motion explaining that he had failed to offer new facts “that were unavailable” when the court initially denied the amended petition.

Hamilton then challenged the Supreme Court’s denial of his subsequent motion for leave to renew the amended petition but in this instance the Appellate Division dismissed his appeal.

The Appellate Division explained that Hamilton’s motion, “purportedly seeking leave to renew,” was actually a motion seeking “leave to reargue.” However, said the court, “no appeal lies from an order denying leave to reargue," citing Hill v Milan, 89 AD3d 1458.

* See Matter of Hamilton v Alley, 137 AD3d 1564

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_06564.htm

An employer may seek summary judgment in human rights action by offering a legitimate, nondiscriminatory reason rebutting allegations of unlawful discrimination

An employer may seek summary judgment in human rights action by offering a legitimate, nondiscriminatory reason rebutting allegations of unlawful discrimination  

Tibbetts v Pelham Union Free School Dist., 2016 NY Slip Op 06699, Appellate Division, Second Department

§296(1)(a) of the New York State Human Rights Law provides that "[i]t shall be an unlawful discriminatory practice . . . [f]or an employer . . . because of an individual's . . . disability . . . to discharge from employment such individual."

To establish a prima facieviolation of §296(1)(a), a plaintiff must show that (1) he or she is a member of a protected class; (2) he or she was qualified to hold the position; (3) he or she was terminated from employment or suffered another adverse employment action; and (4) the discharge or other adverse action occurred under circumstances giving rise to an inference of discrimination.

Jennifer Tibbetts sued the Pelham Union Free School District to recover damages for alleged employment discrimination on the basis of disability in violation of Executive Law §296. Tibbetts, a probationary music teacher, alleged that she was injured in a slip-and-fall accident and was unable to work for approximately a week while she recovered from her injuries. She alleged that the accident left her disabled, and approximately two weeks after she returned to work, she was terminated because of her disability.

Supreme Court, Westchester County granted Pelham’s motion for summary judgment, dismissing Tibbetts’ complaint. Tibbetts appealed the Supreme Court’s ruling.

Sustaining the lower court’s decision, the Appellate Division said that Pelham had submitted evidence that it terminated Tibbetts’ employment “due to an unusually large number of documented complaints from parents about her interactions with students,” which began shortly after she was appointed to her position and continued throughout the course of her employment. Pelham also submitted evidence that it had no notice of Tibbetts’ alleged disability at the time that she was terminated.

Considering Supreme Court’s granting Pelham’s motion for summary judgment, the Appellate Division explained that “… a defendant, upon offering legitimate, nondiscriminatory reasons for the challenged action, is also required to demonstrate the absence of a triable issue of fact as to whether its explanation for its termination of the plaintiff's employment was pretextual.” In the court’s opinion Pelham had satisfied both requirements.

The Appellate Division found that Pelham had met its burden on its motion for summary judgment of offering legitimate, nonpretextual reasons for terminating Tibbetts’ employment. Rejecting Tibbetts’ contention that “the temporal proximity between the alleged onset of her disability and her discharge” supports an inference of discrimination in this action, the court said that Pelham had demonstrated that it had no knowledge of her alleged disability at the time that she was dismissed from her position.

As Tibbetts failed to raise a triable issue of fact as to whether Pelham’s explanation for her termination "was false, misleading, or incomplete" and her affidavit “was based on speculation and presented what appear to be feigned issues of fact designed to avoid the consequences of her earlier deposition testimony,” the Appellate Division concluded that “Supreme Court properly granted [Pelham’s] motion for summary judgment dismissing the amended complaint insofar as asserted against it.”

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_06699.htm

Employee organization leave

Employee organization leave
§46 of Chapter 283 of the Laws of 1972

Providing employees of the State with Employee Organization Leave to participate in "union activities" as an elected or appointed officer of an employee organization certified or recognized for the purposes of collective bargaining has been an issue since the adoption of the Taylor Law.

In response to demands that State employees elected to a leadership position of an employee organization representing state employees be provided with "paid organization leave," the State agreed to provide for “Employee Organization Leave” and enacted §46 of Chapter 283 of the Laws of 1972 to this end.

This law provides that a State employee organization may obtain approval for paid full or part-time leaves of absence of its representatives provided it agrees to fully reimburse the State for the salary and other compensation paid to the individual and, in addition, reimburse the State for all employer contributions for fringe benefits made by the State on behalf of the individual, while he or she is on Employee Organization Leave. The individual would be continued as a State employee, on the State’s payroll, during this time. 

A "leaves for union activities" article set out in a Taylor Agreement typically provides  that  in the event an employees is  granted a leave of absence with full salary from his or her regular position for certain employee organization purposes, the employee organization shall reimburse the State the employee's salary and the employer's contributions for employee benefits while he or she is on such leave "consistent with provisions promulgated by the Department of Audit and Control and in accordance with the provisions of Section 46 of Chapter 283 of the Laws of 1972."

Another element affecting State employees on Employee Organization Leave: The State Ethics Commission has advised that “State employees on Employee Organization Leave or State employees on leave without pay who serve as employee organization representatives for CSEA … who have terminated their State service and are now employed by CSEA are subject to the "revolving door" provisions of the Public Officers Law and the corresponding restrictions on post-employment activities” [see Advisory Opinion #90-a ]. Presumably this opinion would be applied with respect to State employees on employee organization leave serving with other employee organizations.

Failure to honor a known policy of the employer can constitute disqualifying misconduct for the purpose eligibility for unemployment insurance benefits

Failure to honor a known policy of the employer can constitute disqualifying misconduct for the purpose eligibility for unemployment insurance benefits

New York City Dept. of Citywide Admin. Servs. (Commissioner of Labor), 2016 NY Slip Op 06526, Appellate Division, Third Department

The New York City Taxi and Limousine Commission [TLC] had a “limited-use policy”  permitting its employees limited personal use of TLC's office and technology resources as long as such use does not interfere with official duties and responsibilities.

TLC received an anonymous complaint that an individual [Employee] was using TLC's resources to conduct his campaign for election to the City Council. TLC requested the New York City Department of Investigation [DOI] to investigate Employee’s campaign-related activities during his employment. Employee then advised TLC that he was taking a leave of absence from his position pursuant to a directive requiring him to do so upon, among other things, publicly declaring his intent to seek elected public office.

Upon completing its investigation, DOI concluded that Employee had misused TLC's resources prior to taking a leave of absence and so advised TLC. TLC terminated Employee, prompting him to apply for unemployment insurance benefits.

The Department of Labor subsequently determined that Employee was disqualified from receiving benefits because his employment was terminated for misconduct and found that Employee had made a willful misrepresentation on his application for benefits insofar as he claimed that he had been discharged for lack of work. The Department charged Employee with an overpayment of $4,050 in benefits, reduced his right to receive future benefits by eight effective days and imposed a civil penalty of $607.50.

Ultimately, the Unemployment Insurance Appeal Board upheld the Department's initial determination and penalties imposed pursuant to that determination. Employee appealed the Board’s decision.

The Appellate Division affirmed the Appeal Board’s decision, explaining "Whether a claimant has engaged in disqualifying misconduct is a factual question for the Board to resolve and its determination will not be disturbed if supported by substantial evidence," noting that “It is well settled that failure to abide by a known policy of the employer can constitute disqualifying misconduct.”

The court’s decision noted that evidence in the record, including the report detailing the findings of DOI's investigation, established the Employee’s use of TLC's resources, such as his work computer and telephone, to further his political campaign efforts “was extensive” and  telephone calls made from his office telephone were unrelated to Employee's employment.

Although Employee denied that he used his work computer and the telephone at TLC to pursue his campaign efforts, including soliciting contributions for his campaign, at the hearing, the Appellate Division observed that this “presented issues of credibility within the exclusive province of the Board” to resolve and the Board was entitled to credit the competing evidence presented at the hearing and reject Employee's exculpatory claims.

In addition, noted the court, Employee inaccurately represented that he was unemployed due to a lack of work when applying for unemployment insurance benefits although he had previously been made aware of DOI's investigation of him.

Accordingly, the Appellate Division said that it found “no reason to disturb the Board's imposition of a recoverable overpayment or forfeiture penalty based upon the [Employee’s] willful misrepresentations.”

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_06526.htm

Medical Marijuana in the workplace: what an employer in New York State needs to know

Medical Marijuana in the workplace: what an employer in New York State needs to know

Source: NYMUNIBlOG, Kyle Sturgess

New York’s Compassionate Care Act, Chapter 90 of the Laws of 2014, provided for the use of medical marijuana in New York State.

Harris Beach, PLLCattorneys Roy Galewski and Jim Beyer will conduct a webinar focusing on “Medical Marijuana in the New York Workplace” and addressing “Common Disability Accommodation Issues” on October 27, 2016 at 8:00 a.m.

Harris Beach invites interested readers to click on https://www.harrisbeach.com/wp-content/uploads/2016/07/LaborSeriesInvite2016.pdfto register for this webinar.

Challenging the termination of a probationary teacher

Challenging the termination of a probationary teacher

Lewandowski v Clyde-Savannah Cent. Sch. Dist. Bd. of Educ., 2016 NY Slip Op 06594, Appellate Division, Fourth Department

A probationary teacher [Teacher] commenced an Article 78 proceeding seeking a court order annulling the Clyde-Savannah Central School District Board of Education's [Board] decision to discontinue her probationary appointment on the grounds that the Board’s decision was arbitrary and capricious, and an abuse of discretion. Teacher also asked the court to direct the Board to reinstate her to her probationary teaching position with back pay.

The Board moved to dismiss Teacher’s petition on the ground that she had failed to serve a notice of claim as mandated by §3813.1 of the Education Law. §3813.1 required that Teacher serve the notice of claim within three months after the claim arose. Supreme Court granted the Board’s motion to dismiss and Teacher appealed.

The Appellate Division sustained the lower court’s ruling, explaining that the service of a notice of claim is a "condition precedent to bringing an action against a school district or a board of education" and such service was required here. Further, said the court, Teacher had not commenced a special proceeding in the nature of mandamus seeking to vindicate a judicially enforceable right conferred on her by the law and thus her cause of action “is not exempt from the notice of claim requirement.”

Significantly, Lewandowski, a probationary employee, had not attained tenure in her position.  In contrast, the Appellate Division, in Sephton v Board of Education of the City of New York, 99 AD2d 509, held that “the ‘tenure rights’ of teachers are ... considered a matter in the public interest and therefore Section 3813 is not applicable to cases seeking to enforce such rights.”

Further, New York courts have distinguished between proceedings “which on the one hand seek only enforcement of private rights and duties and those on the other in which it is sought to vindicate a public interest; the provisions of subdivision 1 of section 3813 are applicable as to the former but not as to the latter” (see Union Free School Dist. No. 6 of Towns of Islip and; Smithtown v New York State Div. of Human Rights Appeal Bd., 35 NY2d 371, rearg denied 36 NY2d 807).

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_06594.htm

The employer and individual employees of the employer may be named defendants in an action alleging unlawful discrimination under a "condonation theory"

The employer and individual employees of the employer may be named defendants in an action alleging unlawful discrimination under a "condonation theory"

Emengo v State of New York, 2016 NY Slip Op 06734, Appellate Division, First Department

Benedict O. Emengo filed a  CPLR Article 78 petition in Supreme Court alleging that he was adversely treated by his employer, the New York State Insurance Fund and certain NYSIF administrator* [NYSIF] because his color, national origin and that although he was well-qualified for promotion to positions he sought, was refused promotion to these positions.

Supreme Court granted NYSIF’s motion to dismiss Emengo’s petition but the Appellate Division unanimously modified, on the law, certain of Emengo’s causes of action dismissed by the lower court.

The Appellate Division said the Emengo’s allegations that one administrator told him that “he was an ‘immigrant’ who ‘should be content’ with his current job title, ‘since, as an immigrant, he would never be promoted beyond’ his current title” and that another administrator “was previously found to have discriminated against black NYSIF** employees” constitute sufficient evidence of discriminatory animus.

The court also held that Emengo had “sufficiently alleges that each individual defendant was an ‘employer’ for purposes of his claims, broadly asserting that each individual defendant was a high-ranking manager with, at least inferentially, supervisory powers, including the power to promote, discipline and terminate employees.”

The Appellate Division also noted that Emengo had alleged that “there was a long-standing policy of refusing to promote black NYSIF employees above the title of Supervising Insurance Field Investigator, that all of the individual defendants were at least aware of this policy, that all of the individual defendants were aware that [Emengo] was being refused promotions in accordance with this policy, and that none of the defendants took any action in response to this conduct.” Citing State Div. of Human Rights v St. Elizabeth's Hosp., 66 NY2d 684, and Patrowich v Chemical Bank, 63 NY2d 541, the court ruled that Emengo had “adequately pleaded employer liability as to all of the individual defendants, under a condonation theory”***within the meaning of Executive Law §296[1][a].

NYSIF agreed that Emengo’s claims against the State of New York and NYSIF "rise or fall with his claims against the six individual defendants," his claims against the State and NYSIF under the State’s Human Rights Law, including his causes of action for retaliation and for aiding and abetting discrimination, should be reinstated.

Emengo has also asked the Appellate Division to reinstate his claims under the New York City Human Rights Law [City HRL]. Supreme Court had dismissed his City HRL claims on the independent ground of sovereign immunity. Emengo, said the Appellate Division, was required on the independent ground of sovereign immunity, whether or not the failed to address this aspect of the Supreme Court’s decision and deemed him to have abandoned his appeal with respect to Supreme Court’s dismissal of his City HRL claims.

* The NYSIF administrators are denominated “John and Jane Doe” in the caption of the decision.

** The decision notes that Emengo “was a black man of Nigerian national origin.”

*** An essential ingredient of condonation is knowledge of the infraction alleged to have been condoned. In Matter of State Div. of Human Rights v St. Elizabeth's Hosp., 66 NY2d 684, the court held that “An employer will be liable for ‘an employee's discriminatory act [where] the employer became a party to it by encouraging, condoning, or approving it.’” Further, said the court, “the term condonation includes … ‘[a]n employer's calculated inaction in response to discriminatory conduct.’”

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_06734.htm