Barry M. Capp

New Guidance Makes Clear That the Use of AI in Hiring and Employment Can Lead to Violations of New Jersey’s Law Against Discrimination

Ansell Grimm April 23, 2025

Sifting through a mountainous stack of resumes and cover letters, conducting tedious and time-consuming screening interviews, and then more rounds of interviews – such is the life of a company’s hiring manager and anyone else charged with finding the right candidate for an open position. It is, therefore, unsurprising that employers and third-party staffing services have rapidly adopted artificial intelligence (AI) to streamline the search and hiring process and make it more likely to lead to the right hire.

But just because an algorithm or other automated decision-making technology, rather than a human, evaluates candidates, it does not mean employers have a “get out of discrimination free” card. Discriminatory impacts and outcomes arising from using AI can run afoul of federal, state, and local laws that prohibit discrimination in hiring and employment practices.

Proliferation of State Legislation Governing Use of AI Hiring Technologies

Concerns that AI tools and the algorithmic decision-making at their core can lead to discriminatory impacts and outcomes have led to a proliferation of laws, regulations, and ordinances focused specifically on establishing new anti-discrimination protections or applying existing ones to employers’ use of AI in hiring and employment decisions.

Illinois, Colorado, and Utah are among the jurisdictions that followed New York City’s lead in imposing new requirements and limitations on employers’ use of AI. The City’s Local Law 144 was also the model for two bills that have been proposed in New Jersey and one in New York State that establishes rules for using certain automated employment decision tools. Those bills, similar to ones introduced in 2023, have yet to become law.

New Jersey’s Law Against Discrimination Applies to Use of AI in Hiring Practices

While the Garden State has yet to adopt legislation specifically addressing the use of AI in hiring, the state’s attorney general and Division of Civil Rights (DCR) have made it clear that the New Jersey Law Against Discrimination (LAD) prohibits “algorithmic discrimination” arising from the use of automated decision-making tools “in the same way it has long applied to other discriminatory conduct.”

In their “Guidance on Algorithmic Discrimination and the New Jersey Law Against Discrimination,” released on January 9, 2025, the attorney general and DCR cite multiple studies and discuss several ways the use of automated decision-making tools “can create classes of individuals who will be either advantaged or disadvantaged in ways that may exclude or burden them based on their protected characteristics.”

Notably, the guidance emphasizes, “[a] covered entity can violate the LAD even if it has no intent to discriminate, and even if a third-party was responsible for developing the automated decision-making tool.” Discriminatory outcomes, rather than intent, are all that matters: “When employers… use automated decision-making tools, they may violate the LAD if those tools result in disparate treatment based on a protected characteristic or if those tools have a disparate impact based on a protected characteristic.”

Similarly, according to the guidance, “LAD also prohibits algorithmic discrimination when it precludes or impedes the provision of reasonable accommodations, or of modifications to policies, procedures, or physical structures to ensure accessibility for people based on their disability, religion, pregnancy, or breastfeeding status.”

How AI Can Lead To Unlawful Employment Discrimination

As the guidance discusses, several AI touchpoints – design, training, and deployment – can lead to prohibited discriminatory impacts or outcomes in hiring:

Bias in Design

When designing an automated decision-making tool, a developer may make decisions that can either intentionally or inadvertently skew the tool and lead to prohibited biases. Choices regarding the tool’s output, the model or algorithms it uses, and the inputs it evaluates can introduce bias into the automated decision-making tool. If the historical data used by an algorithm contains biases, the AI will replicate and perpetuate them.

Bias in Training

Once designed, an AI tool needs to be “trained” before it can be deployed. Training involves exposing the tool to training data from which the tool learns correlations or rules. A developer can either create a new dataset to train an automated decision-making tool or refine and reformat a pre-existing dataset. The guidance explains, “[t]he training data may reflect the developer’s own biases, or it may reflect institutional and systemic inequities. The tool can become biased if the training data is skewed or unrepresentative, lacks diversity, reflects historical bias, is disconnected from the context the tool will be deployed in, is artificially generated by another automated decision-making tool, or contains errors.

Discrimination in AI Deployment

Once deployed, an AI tool can make decisions that constitute algorithmic discrimination for many reasons. It can be used to purposefully discriminate, “for example, if the tool is used to assess members of one protected class but not another.” If an AI tool makes decisions it was not designed to assess, its deployment may amplify any bias and reflect systemic inequities that exist outside of the tool. In some instances, deployment may expose biases that were not apparent during design and testing.

What’s Next for Employers That Use AI in Hiring

As often happens with rapid technological advances, the law governing AI’s use in hiring is playing catch-up, and employers must navigate a patchwork of evolving rules of the road that creates a host of compliance and operational challenges. The guidance strongly advises employers to take affirmative steps to protect themselves, applicants, and employees from discriminatory outcomes. Specifically:

“It is critical that employers, housing providers, places of public accommodation, and other covered entities—as well as the developers and vendors of automated decision-making tools used by these entities—carefully consider and evaluate the design and testing of automated decision-making tools before they are deployed, and carefully analyze and evaluate those tools on an ongoing basis after they are deployed. Doing so is necessary to decrease the risk of discriminatory outcomes and thereby decrease the risk of possible liability under the LAD.”

If you have questions or concerns about your company’s use of AI in hiring and employment practices, please contact Barry Capp at Ansell.Law.

Commissions Are Wages Subject to Wage Payment Law Protections, New Jersey Supreme Court Says

Ansell Grimm March 27, 2025

By Barry M. Capp and Layne A. Feldman

In a unanimous March 17, 2025, opinion, the New Jersey Supreme Court held that earned commissions are “wages,” not “supplementary incentives,” and are therefore covered by the rights and remedies of the state’s Wage Payment Law (WPL). The decision in Musker v. Suuchi means that New Jersey employers who withhold or fail to pay commissions expose themselves to significant liability under the WPL, which allows an aggrieved worker to recover not only their unpaid wages but also liquidated damages in an amount of up to two times the unpaid wages as well as attorneys’ fees and costs.

In Musker, the plaintiff was a salesperson for the defendant Suuchi, which sold software subscriptions to apparel manufacturers. The plaintiff was paid a base salary and a commission on her sales. When the COVID-19 pandemic hit, Suuchi began selling personal protective equipment (PPE) and offered its salespeople 4% commissions on those sales. The plaintiff sold $32 million worth of PPE and, as such, claimed she was entitled to $1.3 million in commissions. When Suuchi refused to pay the commissions, the plaintiff sued, alleging violations of the WPL.

The trial court dismissed the WPL claims, holding that the plaintiff’s commissions were not “wages” and, therefore, outside the WPL’s scope. The Appellate Division affirmed.

The state’s high court came to a different conclusion, reversing the appellate court and holding that “commissions” are, in fact, “wages” as defined in the WPL. The Court noted that the WPL defines “wages” as “direct monetary compensation for labor or services rendered by an employee, where the amount is determined on a time, task, piece, or commission basis.”

“Under that definition,” the Court wrote, “compensating an employee by paying a ‘commission’ for ‘labor or services’ always constitutes a wage under the WPL.”

The Court rejected the argument that the plaintiff’s commissions constituted “supplementary incentives” that are expressly excluded from the WPL. Though the WPL does not define that term, the Court found that the ordinary meaning of a “supplementary incentive” is “compensation that motivates employees to do something above and beyond their ‘labor or services.'” Thus, under the WPL, “a ‘supplementary incentive’ is not payment for ‘labor or services’ and a ‘commission’ earned ‘for labor or services rendered by an employee’ can never be a ‘supplementary incentive.'”

This definitive ruling makes it clear that withholding commissions is as much of a WPL violation as withholding wages and can be the basis of substantial liability for employers and significant recoveries for employees. If you have questions about this case or the WPL generally, please contact Barry Capp or Layne Feldman at Ansell Grimm & Aaron.

Ansell.Law Announces Three New Practice Group Leaders

Ansell Grimm January 15, 2025

Ansell.Law is pleased to announce the appointment of three new Practice Group leaders effective immediately. Partner Barry M. Capp leads the Labor & Employment group, Shareholder Anthony J. D’Artiglio heads the Bankruptcy group, and Associate Kelsey M. Barber assumes leadership of the Controlled Substances and Regulatory Law group.

As client demand for these practice areas has continued to grow, the Firm selected three leaders with significant capabilities and experience. These new roles further enhance the Firm’s commitment to nurturing talent from within.

Capp, a skilled litigator with over 25 years of experience, devotes his practice to labor, employment, construction, and complex commercial matters. Licensed in New York, New Jersey, and the District of Columbia, he has extensive experience in state and federal courts. Several published decisions Capp achieved throughout his career involve novel and noteworthy legal issues.

D’Artiglio has served as Litigation Team Leader for North New Jersey since 2023 and became a Shareholder on January 1, 2025. Licensed in New York and New Jersey, his practice encompasses bankruptcy, commercial litigation, controlled substances and regulatory law, and labor and employment. D’Artiglio assumes the group’s leadership from James Aaron, who led the practice successfully for many years and is now a Shareholder Emeritus.

Barber developed a deep understanding of the complexities surrounding the production, sale, use, regulation, and legalization of controlled substances as demand grew in this emerging area of law. She routinely helps clients understand their rights and opportunities and helps them navigate the complex regulations governing these substances to secure cannabis licenses in New Jersey and New York. Barber also enjoys a diverse practice, including civil and business litigation, contract law, and appellate matters.

Ansell Grimm & Aaron 2021 Litigation Roundup

Ansell Grimm January 20, 2022

As the world continues to struggle with the coronavirus pandemic, and millions of small and mid-sized businesses continue to be confronted with unprecedented challenges, the attorneys in Ansell Grimm & Aaron’s Litigation Department assisted the Firm’s clients in protecting their businesses and livelihoods. Led by co-chairs Lawrence Shapiro and Joshua Bauchner, and assisted by attorneys Barry Capp, Anthony D’Artiglio, Stefan Erwin, Rahool Patel, Seth Rosenstein, and Ashley Whitney, the Department is pleased to share its numerous successes.

Bankruptcy Litigation & Debtor/Creditor Matters

Ansell Grimm & Aaron successfully compelled conversion of a meritless Chapter 11 Bankruptcy to a Chapter 7 and convinced the Court to vacate an extension of the automatic stay to principal’s of the Debtor company. Debtor filed a Chapter 11 petition in the District of New Jersey just before it and its principals were scheduled to face trial in the Western District of Missouri on multi-million dollar fraudulent scheme related to the sale of a business. Led by Joshua S Bauchner and Anthony J. D’Artiglio, the firm successfully convinced the Court to vacate an extension of the automatic stay to the principals of Debtor who sought to utilize the Bankruptcy to shield themselves from liability. Furthermore, we vigorously opposed confirmation of a meritless Plan of Reorganization, culminating in Debtor voluntarily converting its Chapter 11 reorganization to a Chapter 7 liquidation requiring the appointment of a Trustee to pursue our client’s and other creditors’ interests. As a result, the adversary complaint and related Bankruptcy matters were dismissed in New Jersey permitting the action to proceed to trial in Missouri.

Breach of Contract Litigation

The Ansell Grimm & Aaron team continued its efforts to recover sums owed to its clients in connection with finance agreements and contracts for the provision of certain services. We doggedly pursued our clients’ counterparties who absconded with loaned funds and enjoyed the benefit of services rendered, resulting in substantial recoveries and settlements for our dedicated and hard-working clients. By way of example, in one action brought on behalf of a trucking insurance agency that guaranteed payments for its client, the insured failed to make millions of dollars in payments under its finance agreement and created a new entity to hide its property and assets from collection. We aggressively tracked down the fraudulently transferred assets, brought the insured’s owner and his new entity into the action, and secured a favorable settlement prior to trial.

Partnership Dispute Litigation

The firm successfully obtained temporary restraints enacted to avoid continued irreparable harm to our client in a derivative action asserting claims against our client’s former business partners for, inter alia, unfair competition, fraud, and breach of fiduciary duty, based on their acts of engaging in direct competition with their shared business and allowing their family members to use the company’s proprietary information to siphon clients and profits from the business. The temporary restraints prevented all competition with our client’s business and provided the leverage necessary to negotiate a dissolution of the business which allowed our client to extricate himself and pursue independent ventures.

Real Estate Litigation

The firm works closely with real estate professionals across the region to protect their rights and put practices in place to minimize potential liability. In an action filed earlier this year on behalf of a Hudson County-based real estate broker, the Firm sued a national real estate developer after the failure to pay a referral fee offered under the developer’s agreement with local brokers. These efforts resulted in our client recovering a substantial portion of the referral fee owed to it, and the same broker subsequently engaged our team to revise their agreements used with clients — and to speak with the broker’s team of agents about mitigating risk and general best practices.

FINRA Matters

In addition to serving as a Financial Industry Resolution Authority (FINRA) Dispute Resolution Services arbitrator, associate Seth Rosenstein also practices before FINRA arbitration panels. In an arbitration filed against a national broker-dealer, the Firm sought an award requiring removal of incorrect and misleading information set forth on the broker-dealer’s Form U5 issued for our client, and for the expungement and removal of the information from FINRA’s Central Registration Depository and BrokerCheck system. Our efforts resulted in the broker-dealer issuing an amended Form U5 that removed the incorrect and misleading information, correcting an injustice that falsely besmirched our client’s reputation.

Police Benevolent Association Matters

Earlier this year, Attorney Ashley V. Whitney filed an appeal with the New Jersey Supreme Court challenging an opinion from the Appellate Division which upheld the termination of a police officer with no prior discipline for alleged violations of the Criminal Justice Information System through his use of full-disclosure vehicle registration searches despite the police department’s failure to identify a single full-disclosure search conducted without justification. The Appellate Division’s decision may have a lasting impact upon the law enforcement community as the performance of searches by police has not been significantly addressed by New Jersey Courts since the decision in State v. Donis, 157 N.J. 44 (1998). The decision is especially pertinent to the issues facing police as it comes on the heels of the Supreme Court’s decision in the matter of In re AG Law Enf’t Directive Nos. 2020-5 & 2020-6, 2021 N.J. LEXIS 486 (June 7, 2021), which upheld the New Jersey Attorney General’s Directives requiring the release of the names of police officers who receive major discipline.

Ms. Whitney continued her prior practice of the representation of police officers as a member of the PBA Legal Protection Plan at the Firm’s Woodland Park office, which included the defense of a high-ranking correctional police officer served with inflated disciplinary charges seeking termination. Following a departmental hearing and the presentation of favorable witness testimony, the employer decreased the proposed penalty from termination to suspension and we are awaiting a final decision.

Class Action Litigation

Ansell Grimm & Aaron successfully obtained dismissal of a nationwide class action in the District of New Jersey for lack of subject matter jurisdiction. Plaintiff brought claims against related to beauty products against the seller, shipper, and a host of individuals and entities. We filed a Motion to Dismiss pursuant to Federal Rule 12(b)(1) asserting the Court lacks subject matter jurisdiction as a result of a pre-litigation, full refund offer by our client to the aggrieved consumer. The Court agreed that the full refund offer made in the ordinary course of business operated to moot Plaintiff’s claims, and dismissed the entire action.

Public Entity Litigation

Ansell Grimm & Aaron successfully secured summary against Plaintiff on a multi-million dollar claim against the City of Bayonne, wherein Plaintiff alleged that Bayonne discriminated against him when it condemned and subsequently demolished a rental property he owned because it was unsafe. We successfully convinced the Court that the claims were barred by the statute of limitations, that the demolition did not constitute a taking within the meaning of 11 U.S.C. 1983, and that Plaintiff’s tort claims could not be asserted against a municipality as a matter of law, leading to dismissal of the entire case.

Ansell Grimm & Aaron Welcomes Lateral Hire to Woodland Park Office

We are pleased to announce Stefan J. Erwin, Esq. has joined Ansell Grimm & Aaron. Mr. Erwin is a Trial Attorney who came to Ansell from an established Newark practice where he represented the largest cities in New Jersey. Mr. Erwin brings nearly a decade of experience to the firm specializing in complex commercial litigation, criminal defense, appellate practice, labor and employment law, public entity, and civil rights. Mr. Erwin graduated from Rutgers University with dual degrees in Political Science and Criminal Justice, and then attended Rutgers Law School where he interned for the Honorable Noel Hillman in the United States District Court for the District of New Jersey. After law school, he clerked for the Honorable James Hely, J.S.C. of the Superior Court Law Division in Union County. He has taught public school children a course in Constitutional Law, founded a local community garden, and sat on the board of a charter school. Mr. Erwin has received several favorable jury verdicts for his clients in the Public Defender’s Office where he litigated cases from inception through appeal.

Best of the Best

It is with great pleasure that Ansell Grimm & Aaron, PC has been named “Best of the Best” Law Firm in the 2021 Official Community Choice Awards published by the Asbury Park Press. This recognition is greatly appreciated as it was not determined by the Bar or another professional organization, but rather by the community we serve on a daily basis.

Quarterly Litigation Department Roundup: April 2021

Ansell Grimm April 6, 2021

As the world continues to face the coronavirus pandemic, and millions of small businesses remain confronted with unprecedented challenges, the attorneys in Ansell Grimm & Aaron’s Litigation Department assisted dozens of clients in protecting their businesses and livelihoods. Led by co-chairs Lawrence Shapiro and Joshua Bauchner, and assisted by attorneys Barry Capp, Anthony D’Artiglio, Rahool Patel, Seth Rosenstein, Ashley Whitney, and, our newest member, Courtney Dunn, the Department is pleased to share its numerous successes.

Real Estate Litigation

In a recent matter before the Honorable Henry P. Butehorn in Monmouth County, Lawrence Shapiro and Seth Rosenstein were successful in securing summary judgment in favor of their clients as to all claims prior to trial. Plaintiffs asserted causes of action sounding in common law fraud, violations of the New Jersey Consumer Fraud Act, Unjust Enrichment, Negligence, Breach of Contract, and Equitable Servitude in connection with their purchase of real property in Ocean Grove, New Jersey. The sellers, who own the property sold to Plaintiffs as well as an adjoining property, prohibited the buyers from utilizing a walkway on sellers’ adjoining property to access the rear entrance to buyers’ home. The buyers asserted that representations were made by sellers as to their ability to utilize sellers’ walkway, and that they overpaid for their property if there was no access through the rear entrance.

Judge Butehorn’s Order found that there was no basis upon which to establish claims for common law fraud or Consumer Fraud against the defendants. Specifically, the Court agreed with AGA’s argument that any representation as to walkway access on adjacent property was not part of the transaction at issue and thus could not serve as a basis for a claim of fraud or consumer fraud.

Plaintiffs subsequently filed a motion for reconsideration of the Court’s summary judgment order, which was denied, confirming the victory for our client.

Appellate Litigation

Barry Capp succeeded before the Appellate Division in upholding the validity of the City of Asbury Park’s short-term rental (Air BnB) ordinance, which permitted and established procedures for the short-term rental of residential properties. The plaintiff filed a complaint in the Law Division, Monmouth County, alleging that the ordinance was adopted improperly and that Ordinance itself was facially invalid.

The Ordinance defines those classifications of properties where short-term rentals are both permitted and prohibited. It further establishes a permitting process for property owners who wish to utilize their properties as short-term rentals. Plaintiff asserted a challenge to the manner in which the Ordinance was adopted, claiming that it creates a “new” use of residential property that is a non-permitted and, therefore, was required to be adopted as a zoning ordinance pursuant to the procedures contained in the Municipal Land Use Law (MLUL). Plaintiff further claimed that the use of residential property for short-term rentals violates the City of Asbury Park’s zoning ordinance and therefore was required to be invalidated.

In a thirteen (13) page unanimous decision, and a major victory for the City of Asbury Park, the Appellate Division upheld the City’s actions in adopting the Ordinance and its validity pursuant to its municipal police powers. In so doing, the Appellate Division affirmed the right of owners of certain classifications of property to use their properties as short-term rentals pursuant to procedures established by the City of Asbury Park and its governing body.

Bankruptcy Litigation

Joshua Bauchner and Anthony D’Artiglio are pursuing a multi-million dollar cure dispute in Southern District of New York Bankruptcy Court, seeking to compel a retail Debtor who operated a chain of grocery stores to pay for numerous, needed repairs to a large production and distribution facility. The Debtor failed to maintain the property in the condition required by the Lease, leading to large scale deterioration. The case presents interesting legal questions at the intersection of commercial landlord-tenant law and Bankruptcy law, particularly in light of the new tenant’s assumption of the Lease “as is” as part of the Bankruptcy proceedings.

Class Action Litigation

Joshua Bauchner and Rahool Patel continue the defense of multiple class actions filed against New Jersey Retrofitness gym franchises. This now seven-year old litigation is on remand from the Appellate Division, where the firm successfully secured the dismissal of seven of the eight claims, dramatically narrowing the scope of the litigation. As a result of numerous procedural challenges encountered by plaintiffs, the matter is back at the pleading stage ensuring our already strapped gym clients are not at risk of liability anytime soon.

COVID-19 Litigation

Department attorneys continue to represent national retail and restaurant tenants in numerous COVID-19 Pandemic-related litigations, securing temporary restraints and preliminary injunctive relief to prevent self-help lockouts, restore utilities, permit outdoor dining, and stay eviction actions. As pandemic law remains largely unsettled, the Firm presented novel legal arguments to secure favorable decisions and settlements on behalf of many clients, and are preparing for what is understood to be the first trial in the State addressing the impact of Governor Murphy’s Executive Orders restricting operations.

Policeman Benevolent Association Litigation

Ashley Whitney is waiting on a decision from the Appellate Division involving the termination of a police officer with no prior discipline for alleged Criminal Justice Information Systems violations under State v. Donis, through his use of full-disclosure searches despite the police department’s failure to identify a single full-disclosure search conducted without justification. The Appellate Division’s decision could have lasting implications for police officers as there is little case law addressing the application of Donis in this context.

Ms. Whitney also is continuing her prior practice of the representation of police officers as a member of the PBA Legal Protection Plan at the Firm’s Woodland Park office and is currently defending a high-ranking correctional police officer served with inflated disciplinary charges.

Personnel Successes

Courtney Dunn joined as an associate with the Firm. Prior to joining Ansell Grimm & Aaron, Ms. Dunn practiced commercial litigation along with sports and entertainment law, labor and employment law, and toxic tort law at a firm in New York City. Ms. Dunn received her juris doctor, cum laude, from the Elisabeth Haub School of Law at Pace University where she was a Pro Bono Scholar and worked as a research assistant to Professor Donald L. Doernberg. During law school, Ms. Dunn interned for Justice Terry J. Ruderman, J.S.C. of the Supreme Court of New York. She also served as an Articles Editor on the Pace International Law Review and was a member of the Moot Court Honors Board.

Following law school, Ms. Dunn served as a law clerk to The Honorable Judge Craig L. Wellerson, the Presiding Civil Division Judge of the Ocean Vicinage of the Superior Court of New Jersey. Ms. Dunn is admitted to practice in New Jersey and New York as well as the Southern District of New York and the Eastern District of New York

Anthony D’Artiglio was named as “One To Watch” by Best Lawyers Magazine, for commercial litigation. We congratulate Mr. D’Artiglio on this remarkable achievement.

Client Alert: The Enforceability of Waivers From Automatic Bankruptcy Stays

Ansell Grimm June 16, 2020

In light of the COVID-19 pandemic, the risk of commercial tenants filing for bankruptcy protection has risen substantially. A concern for many commercial landlords is whether avenues exist for protecting their ability to initiate an action against tenants when they default on their lease obligations and file for bankruptcy protection.

Below is a syllabus of the lightly-developed case law addressing whether waivers from automatic bankruptcy stays are enforceable, and the means by which landlords and their tenants can enter into such agreements. It is important to note, however, that the courts have not ruled on many cases during the pandemic and applicable case law may be in flux.

Enforceability of Bankruptcy Stay Waivers Contained in Forbearance Agreements

Pursuant to an Executive Order issued by New York Governor Cuomo, a statewide eviction moratorium on residential and commercial evictions has been extended to August 20, 2020, for tenants who qualify for unemployment benefits or who are experiencing a “financial hardship” as a result of COVID-19. Landlords may serve rent demands, but cannot commence litigation against tenants, such as eviction actions. Similarly, New Jersey Governor Murphy issued an Executive Order setting a moratorium on residential evictions and foreclosures in New Jersey — though the New Jersey Executive Order contains language clarifying that commercial tenants are not subject to the moratorium. The New Jersey moratorium will last until two months after Governor Murphy declares an end to the COVID-19 health crisis, unless the Governor issues another Executive Order to end the moratorium sooner.

In light of the present circumstances, it may be advisable for commercial landlords to work with their tenants to enter into forbearance agreements (as opposed to lease amendments) containing a waiver from the automatic bankruptcy stay. The agreements should make clear that the tenant is in default, that the agreement is being entered into as a result of the default, and that the landlord is deferring/forgiving rent, and forbearing from eviction (or whatever the consideration may be) in exchange for a waiver of the automatic stay.

While the case can be made that pre-bankruptcy agreements with tenants via a lease amendment may be enforceable, the more secure means to accomplish this is in the form of a forbearance agreement. In In re Velez, the court rejected landlord’s attempt to enforce a general waiver to escape the automatic stay, distinguishing general waiver language in a lease amendment from a forbearance agreement “whereby the debtor specifically waived future protections of the automatic stay.” In re Valez, 601 B.R. 351, 364 (Bankr. M.D. Pa. 2019).

In In re Frye, 320 B.R. 786 (Bankr. D. Vt. 2005), the court set forth certain factors to be utilized in deciding whether relief from the stay should be granted. The court also noted that it considered additional factors in making the determination that a waiver is enforceable, including: (1) the sophistication of the parties; (2) the presence of counsel; (3) consideration for the waiver; (4) the length of waiver period; (5) the risks and concessions assumed by lender/landlord; (6) the effect on other stakeholders in the Bankruptcy; (7) any defenses to the waiver, such as mistake or fraud; (8) the impact of the waiver on the feasibility of Debtors’ plan; (9) whether enforcement of the waiver would promote public policy of out of court settlements; (10) prejudice to landlord/lender for non-enforcement; (11) the time gap and change in circumstances between date of waiver and bankruptcy filing; and (12) whether the landlord/lender would otherwise be entitled to relief from the automatic stay.

Conclusion

As many courts are closed and this is new territory, we expect the case law may evolve as litigations progress on this novel issue. Arguments for the enforcement of waivers from automatic bankruptcy stays may be successful, depending on new rulings as they are issued and the specific language in the forbearance agreement executed by landlords and tenants. Landlords and tenants alike are advised to consult with an attorney experienced in this area to determine viability of such plans and to protect their interests.

Client Alert: Legislative Changes to the Family Leave Act and the WARN Act

Ansell Grimm May 4, 2020

Earlier this month, the New Jersey Legislature made further changes to the state’s labor and employment laws in light of the COVID-19 pandemic. In particular, the Legislature amended the Family Leave Act and the Millville Dallas Airmotive Plant Job Loss Notification Act (commonly known as the “NJ WARN Act”). These changes directly impact the rights of both employers and employees throughout the state. A brief summary is provided below:

Family Leave Act

On April 14, 2020, Governor Phil Murphy signed Senate Bill S2374 (“S2374”) into law. Among other things, S2374 amended the New Jersey Family Leave Act to provide job-protected leave when the Governor has declared a state of emergency. In these circumstances, an employee who needs to care for a family member because of (1) an epidemic of a communicable disease, (2) a known or suspected exposure to a communicable disease, or (3) efforts to prevent the spread of a communicable disease to other members of the community is entitled to twelve (12) weeks of job-protected leave.

The Family Leave Act defines a “family member” to mean “a child, parent, parent-in-law, sibling, grandparent, grandchild, spouse, domestic partner, or one partner in a civil union couple, or any other individual related by blood to the employee, and any other individual that the employee shows to have a close association with the employee which is the equivalent of a family relationship.”

While the Family Leave Act normally allows an employer to deny leave to the highest-paid 5% of its employees, or the seven highest paid employees (whichever is greater), subject to certain conditions being met, this exemption is suspended when the Governor declares a state of emergency and the leave requested is for one of the three reasons set forth above. In addition, an employee may take intermittent leave for epidemic-related reasons without the employer’s consent so long as the employee (1) provides prior notice to the employer as soon as practicable and (2) makes a reasonable effort to not unduly disrupt the employer’s business operations.

The amendments to the New Jersey Family Leave Act contained within S2374 went into effect immediately and are retroactive to March 25, 2020.

NJ WARN Act

In 2019, the Legislature amended the NJ Warn Act to require that covered employers pay severance to employees that are terminated in connection with a covered event (the “2019 Amendment”). The 2019 Amendment was scheduled to become effective on July 19, 2020.

In light of the pandemic, the Governor signed S2353 into law on April 14, 2020. S2353 delays the effective date of the 2019 Amendment from July 19, 2020, until ninety (90) days following the termination of Executive Order 103 of 2020, wherein the Governor declared a state of emergency and a public health emergency. At the time of publication, the Governor has indicated Executive Order 103 will not be terminated before May 15, 2020 and, therefore, the 2019 Amendment to the NJ WARN Act will not go into effect until August 15, 2020, at the earliest.

S2353 also amended the definition of a “mass layoff” to exclude layoffs “made necessary because of a fire, natural disaster, national emergency, act of war, civil disorder[,] or industrial sabotage[.]” The definitional change is retroactive to March 9, 2020.

Trade Group Calls on Ansell.Law to Address Legal Concerns Relating to COVID-19

Ansell Grimm April 27, 2020

The unprecedented events and dynamic changes necessitated as a response to COVID-19 have left many businesses grasping for a way to get a handle on the current situation. The Alliance of Automotive Service Providers of New Jersey (AASP/NJ) turned to Ansell Grimm & Aaron PC’s Joshua Bauchner and Rahool Patel to get some guidance.

The attorneys conducted a virtual discussion with the trade group addressing various issues and responding to members’ inquiries regarding the CARES Act, the Paycheck Protection Program (PPP), and insurance and landlord/tenant concerns.

The effort was well received and recently written up in the latest issue of Body Shop Business, the industry’s trade journal.

“Because of the many complicated requirements that must be met on the applications, I strongly recommend that members obtain the assistance of professionals like the people from Ansell Grimm & Aaron, PC rather than deal with it on their own,” AASP/NJ Executive Director Charles Bryant, told the publication.

The Ansell Grimm & Aaron COVID-19 Task Force will be conducting a free small business webinar on Thursday, April 30 at 11 a.m.

Topics will include:

New and pending legislation
PPP program
Lease obligations
Insurance claims
Employee concerns

To join the meeting via Zoom:

Meeting ID: 953 0659 1428

Password: 020438

Client Alert: The CARE Act – Paycheck Protection Plan Updates

Ansell Grimm April 24, 2020

On April 3, 2020, the federal government unveiled the Paycheck Protection Plan (PPP), an undertaking intended to assist small businesses through the COVID-19 pandemic by providing them loans, and at the same time, incentivizing keeping employees on the payroll.

What Businesses Qualify for Loans?

The loans are available from existing SBA lenders to businesses with 500 or fewer employees starting April 3, 2020, although businesses with more than 500 employees in particular industries are potentially eligible if they meet the SBA’s size standards for those industries. Included are sole proprietorships, independent contractors, self-employed individuals (although they only can apply for loans beginning April 10, 2020), and private non-profit organizations or 501(c)(19) veterans organizations affected by COVID-19. Additionally, small businesses in the hospitality and food industry with multiple locations also might be eligible if their individual locations employ less than 500 employees.

Loan Terms and Forgiveness

The PPP loans are on a first-come, first-served basis in an amount up to two months of the average monthly payroll costs for 2019 with a $10 million cap. The interest rate is fixed at 1% for a two year term with all loan payments deferred for 6 month, though interest will continue to accrue over this period. There is no collateral or personal guarantees required and neither the government nor the lenders will charge small businesses any fees. Other terms and conditions of loans continue to be worked out between lenders and the government so it is recommended that employers continue to follow updates. So long as employees remain on the payroll for eight (8) weeks and the loan proceeds are used for payroll, rent, mortgage interest, or utilities, the SBA will forgive the loans. However, due to the likelihood of high subscription, at least 75% of the forgiven amount must have been used for payroll. If employers decrease the number of full-time employees, or decrease salaries and wages by over 25% for any employee making less than $100,000 annually in 2019, the amount of loan forgiveness will be reduced.

Basically, there is no real downside to receiving a loan through this program, but employers should be diligent in keeping accurate records of how loan proceeds are being spent over the term of the loan; specifically, the amount of the loan being used for the various payroll costs.

What Records Should Employers Collect to Apply for a Loan?

In order to seek a loan, employers should obtain records of: (i) their complete 2019 payroll; (ii) their 2019 independent contractor costs; (iii) their payroll report as of February 15, 2019 or closest date thereafter; (iv) four 2019 quarterly 941 payroll returns; (v) twelve monthly payroll summaries by employee and company totals for April 2019 through March 2020; (vi) proof of health insurance premiums and retirement plan contributions paid by the company from April 2019 through March 2020; and (vii) a fully initialed and signed federal PPP loan application.

_________________________________
The information provided in this alert was up-to-date at the time of publication, is provided for general purposes only and does not constitute legal advice, and the transmission and receipt of this information does not create or constitute an attorney-client relationship.

Client Alert: Coronavirus (COVID-19) and Business Interruption Claims

Ansell Grimm April 13, 2020

Numerous companies are facing dramatic and unprecedented circumstances as a result of the COVID-19 pandemic. To stay afloat, businesses are being forced to reduce their staffing at varying levels, decrease employee hours and salaries, and unfortunately, in many instances, eliminate staff altogether. In fact, in many states, including New Jersey, businesses deemed “non-essential” have been shut down, inevitably resulting in loss of income to affected businesses. This has led to businesses exploring all avenues to recover losses, including business interruption insurance coverage under their commercial insurance policies.

What is Business Interruption Insurance?

Business interruption insurance, also referred to as business income insurance, is a type of insurance that assists in covering lost income due to the disruption of business operations. Common disruptions covered by business interruption coverage include events such as fire, hurricanes, broken water pipes, wind, lightning and earthquakes. Under certain circumstances, business interruption insurance may provide coverage for suspended operations of a business based on an order of or determination by a civil authority resulting in access to the insurance holder’s premises. Lost income is generally defined as the income a business would have realized through its normal operations but for the business being disrupted, including operating expenses and payroll.

Does Business Interruption Insurance Provide Coverage Due to Loss of Business Income Due to COVID-19?

Business Interruption Insurance coverage is based on the language contained in commercial insurance policies, which can vary from one policy to the next, as well as the law governing the interpretation of the applicable policy provisions. Those perils specifically enumerated in the policy for which coverage is afforded will provide the basis for any such determination. In order to determine whether business interruption coverage is available under the employer’s policy for COVID-19, particular attention should be paid to such issues as whether the business voluntarily imposed restrictions resulting in income loss, whether the business was closed due to local, state or federal order or whether the business was permitted to remain in operation on a limited basis subject to restrictions. The policy might also contain a virus exclusion provision, so it is important to review the policy for any such provision to determine how it might affect coverage determinations.

What Steps Should Employers Take to Determine Whether They Have Coverage for Business Interruption?

Since coverage will be guided by the company’s commercial insurance policy, it is essential to carefully review the policy, and it is highly recommended that the companies consult with legal counsel in order to determine whether filing a claim for business interruption is an option.

_________________________________________

The information provided in this alert was up-to-date at the time of publication, is provided for general purposes only and does not constitute legal advice, and the transmission and receipt of this information does not create or constitute an attorney-client relationship.

Barry M. Capp

Family Leave Act

NJ WARN Act

What Businesses Qualify for Loans?

Loan Terms and Forgiveness

Recent Posts