Please, Take Your Time: NJ Supreme Court Voids Contracts That Limit Workers' Time to Sue

On June 15, 2016, the New Jersey Supreme Court issued its long-awaited decision in Sergio Rodriguez v. Raymours Furniture Company, Inc., in which it addressed whether the two-year statute of limitations under the New Jersey Law Against Discrimination (“LAD”), N.J.S.A. 10:5-1 to -49, may be altered pursuant to a private agreement.  The issue was a matter of first impression for New Jersey courts.  In a unanimous opinion authored by Justice Jaynee LaVecchia, the Court held that “a private agreement that frustrates the LAD’s public-purpose imperative by shortening the two-year limitations period for private LAD claims cannot be enforced.”

Plaintiff, Sergio Rodriguez, was hired by defendant, Raymours Furniture Company, Inc., the parent company of furniture retailer Raymour & Flanigan, in September 2007, and sustained an injury to his knee in April 2010.  After having undergone surgery for the injury, along with a brief recovery period, Rodriguez was cleared to resume his work duties in September 2010.  Just two short days after his return to Raymour & Flanigan, Rodriguez was terminated as part of a company-wide reduction in force. Rodriguez instead contended that he was targeted because of his injury and asserted that others with less seniority or distinguishing features were retained. Rodriguez brought a lawsuit in the Superior Court against Raymours in July 2011, seven months after his termination, alleging wrongful termination based on an actual or perceived disability under the LAD, which carries a two-year statute of limitations. However, Raymour & Flanigan’s employment application, which Rodriguez signed, included a provision shortening the period for an employee to file a claim against the company to six months. The provision stated that "I agree that any claim or lawsuit relating to my service with Raymour & Flanigan must be filed no more than six (6) months after the date of the employment action that is the subject of the claim or lawsuit," adding, "I waive any statute of limitations to the contrary." The trial court granted summary judgment in favor of Raymours, upholding the validity of the contractual limitation as clear and unambiguous and neither unreasonable nor against public policy.  On appeal, the Appellate Division also sided with Raymours, holding that employers are generally able to shorten a statutory limitation through an employment contract so long as the provided language is clear and unambiguous.  While pointing out that the language of the provision was acceptable and not misleading, the Appellate Division noted that “[t]he disputed contract provision was not buried in a large volume of documents.  It was contained in a two-page application and set forth very conspicuously in bold oversized print and capital lettering, just above the applicant's signature line. The terminology was clear and uncomplicated.”  Ultimately, the trial court and Appellate Division held that the provision met the aforementioned threshold and by signing the document, Rodriguez waived his rights to access the LAD after the six-month period expired. On appeal to the Supreme Court, the plaintiff made two arguments, generally focusing on principles of contract unenforceability based on unconscionability.  Because this contract was one of adhesion, the plaintiff contended that it was both procedurally and substantively unconscionable and unenforceable due to the inherent imbalance of power in an employment application.  Furthermore, the plaintiff argued that permitting such a contractual shortening of the limitations period would frustrate the remedial scheme of the LAD.  The defendant-employer argued that it is well established under New Jersey law that parties may privately contract to shorten statutes of limitation and that the waiver at issue here was clear and unambiguous. This case drew significant interest from the legal community.  The New Jersey State Bar Association, the New Jersey Association for Justice, the American Civil Liberties Union of New Jersey, and the National Employment Lawyers Association all submitted amicus curiae briefs generally supportive of the plaintiff’s position, focusing on the “singular public-interest importance of the LAD.”  The Academy of New Jersey Management Attorneys filed a brief in support of the defendant, arguing that shortening the limitations period under the LAD did not frustrate public policy and was within private parties’ ability to contract. While recognizing the “strong belief” in the freedom to contract in New Jersey, the Court emphasized the public interest that the LAD serves to protect in trying to eliminate discrimination.  In making its determination, the Court relied heavily on its decision in Montells v. Haynes, 133 N.J. 282 (1993), where the two-year statute of limitations for claims under the LAD was first established.  In addition, the Court looked to the State Legislature’s more than two-decades-long acceptance of that limitations period, noting that the LAD has been amended in other respects during that time period.  The Court offered several reasons in support of its decision:

• Shortening the time period for bringing an LAD action in the Superior Court would undermine the integrated nature of the statutory avenues of relief and election of remedies made available to claimants;

• A limitations period of shorter than two-years would effectively eliminate claims because it takes time for an individual to bring the claim forward and the two-year period established in Montells was purposefully designed to impose uniformity and certainty;

• A shortened limitations period might compel a person to file a premature LAD action where investigation might reveal a lack of a meritorious claim; and

• Case law has incentivized employers to first receive workplace complaints, investigate them, and respond and any shortening of the period would “seriously affect an employer’s ability to protect itself.”

The Court emphasized that its decision was “rooted in the unique importance of our LAD and the necessity for its enforcement.”  The Court further noted that “[r]estricting the ability of citizens to bring LAD claims is antithetical to that societal aspiration and defeats the public policy goal” of the law.  While the Court’s decision was rooted in the public policy importance of the LAD, the Court also noted that it would have reached the same outcome based on the argument of unconscionability, though it did not go into a detailed analysis.  The Court said that if such an analysis were to be performed, it would have struck down the agreement because the provision was located in an employment application, the plaintiff could not bargain, and it was an adhesion contract containing “indicia of procedural unconscionability.” What does this decision mean for employers in New Jersey?  The Court’s decision affirms its longstanding commitment to the public policy goals and remedial nature of the LAD.  Unless and until the State Legislature decides to alter the limitations periods for claims under the LAD, it remains a two-year period and that time frame may not be amended through a private agreement. While it appears that employers can no longer alter the two-year statute of limitations for LAD claims by private agreement, employers need to take action to ensure that they are in the best positon possible when litigation does arise, which can be achieved by:

• Thorough documentation of performance issues;

• Regular Anti-Discrimination and Harassment Training;

• Proper paperwork for all reductions-in-force; and

• Ensuring that prompt and thorough investigations of employee complaints are conducted.

Finally, when terminating an employee, employers may want to consider severance payments in exchange for a release of all claims. Most importantly, employers should consult with counsel to evaluate their arbitration agreements, employment policies and procedures, and ensure conformity with the Court’s ruling.  For more information, please contact John C. Petrella, Esq., Director of the firm’s Employment Litigation Practice Group at jpetrella@genovaburns.com, or Dina M. Mastellone, Esq, Director of the firm’s Human Resources Practices Group, at dmastellone@genovaburns.com, or 973-533-0777.