New Jersey Court Limits Employer Ability to Contract

New Jersey Court Limits Employer Ability to Contract

The New Jersey Supreme Court says no, or rather not so short. The Court unanimously held that employers cannot contractually shorten the two-year statute of limitations period for private claims under the New Jersey Law Against Discrimination (“LAD”).

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In 1945, the New Jersey Legislature adopted the LAD to prevent and eliminate the practices of discrimination based on race, creed, color, national origin or ancestry. Since its enactment, the Legislature has amended the law to strengthen the LAD, adding more protections and more classes of protected individuals.  To date, the Legislature has added armed forces, age, marital status, sex, disability, affectional or sexual orientation, familial status, genetic information, domestic partner/civil union status, gender identity or expression, and pregnancy status to the list of protected classes.  The Legislature recognized that the LAD is necessary “for the protection of the public safety, health and morals,” to promote the general welfare and guarantee civil rights.  The Legislature reasoned that the LAD was necessary because discrimination threatens not only the rights and privileges of the State’s citizens but subjects the State to a grievous harm.  The Court’s decision in Rodriguez v. Raymours Furniture Co. (June 15, 2016) 2016 N.J. LEXIS 566, No. 074603, reinforces the LAD’s purpose to eradicate discrimination and the State’s strong public interest in safeguarding a discrimination-free workplace.

The LAD created an enforcement agency, now known as the Division on Civil Rights (DCR) to prevent and eliminate discrimination.  To pursue relief under the LAD, a person alleging discrimination can file a complaint with the DCR within six months of the cause of action or file a direct suit in the Superior Court.  Almost twenty-three years ago, the New Jersey Supreme Court in Montells v. Haynes (1993) 133 N.J. 282, interpreted the LAD to have a two-year statute of limitations for filing a direct suit in Superior Court.  Since that time, despite the multitude of opportunities for amendment, the New Jersey Legislature has failed to disavow the two-year statute of limitations.  Effectively, the Legislature has given the court’s interpretation its seal of approval by staying silent.

History

In Rodriguez, the plaintiff Sergio Rodriguez applied for a job with defendant, Raymours Furniture Company, Inc., t/a Raymour & Flanigan.  The employment application included a provision requiring the applicant, if hired, to agree to bring any employment-related cause of action against the employer within six months of the challenged employment action and waive any statute of limitations to the contrary. Several years later, Rodriguez was injured in a work-related accident and underwent surgery and physical therapy.  After he returned to work, he was terminated.  His supervisor informed him he was laid off as part of a company-wide reduction in force.  Almost seven months after being terminated, Rodriguez filed a complaint in Superior Court alleging illegal employment discrimination based on an actual or perceived disability, in violation of the LAD, and retaliation for obtaining worker’s compensation benefits, in violation of the Workers’ Compensation Act.

Defendant filed a motion for summary judgment, arguing that plaintiff had agreed, pursuant to the waiver provision in defendant’s employment application, to limit to six months the statute of limitations for any employment-related claims against defendant.  The trial court granted summary judgment to defendant.

Supreme Court’s Decision – Shortened LAD Statute of Limitations Not Enforceable

The Court reversed the judgment of the Appellate Division.  The Court held that the employment application provision requiring Rodriguez, if hired, to agree to bring any employment-related cause of action against the employer within six months of the challenged employment action and waive any statute of limitations to the contrary frustrates the LAD’s public-purpose imperative by shortening the two-year limitations period for private LAD claims and cannot be enforced.

The Court reasoned that the LAD was designed for public and private purposes.  The Court holds that restricting the ability of employees to bring claims is adverse to the societal aspiration to eradicate the “cancer of discrimination” and defeats the public policy goal of the statutory scheme.  The Court chastised the appellate panel for failing to give the LAD a closer look and to consider the LAD’s public-interest purpose.

Although the Court acknowledged that there is a strong belief in New Jersey and elsewhere in the freedom to contract, that Court demonstrated that freedom is not absolute.  The Court recognized that the right is limited to “prevent its abuse, as otherwise it could be used to override all public interests.”

The Court ruled that agreements between employers and employees shortening the LAD statute of limitations period are unenforceable because:

  • Shortening the limitations period works as “an effective divestiture of the right for an employee to pursue an administrative remedy” because the employee would have an inadequate amount of time to determine if the DCR can vindicate the employee’s rights;
  • Shortening the limitations periods may effectively eliminate meritorious claims because the employee may either not release that he or she is the victim of discrimination or release that he or she agreed to waive the two-year limitations period;
  • Allowing a private agreement to shorten the statute of limitations would eliminate the uniformity and certainty that was intended to be gained from the two-year period established in Montells;
  • Shortening the limitations period may unnecessarily also add to the judicial system’s case load, because an attorney may be compelled to file an LAD action without a thorough investigation to avoid the claim being barred. The Court acknowledged that the investigatory process may take many months and that shortening the statute of limitations may inequitably require an attorney curtail its investigation to bring the complaint within the shortened limitations period; and
  • Shortening the statute of limitations period would also limit an employer’s ability to protect itself and limits its liability because employees would need to file claims before the employer was able to fully investigate and respond to the complaint.

Take-Away

Private agreements shortening the statute of limitations for an LAD claim to less than two years are not enforceable.  New Jersey employers should evaluate their applications, employment agreements and policies to ensure the materials properly reflect an employer’s ability to restrict the statute of limitations for these claims.  Employers should contact their labor and employment attorney to discuss the risks and benefits of limiting the statute of limitations for other types of claims.

Contributor:  Jessica A. Schoendienst, Attorney at Law | Weintraub Tobin