N.J. Supreme Court Invalidates Agreements to Shorten the LAD’s Statute of Limitations

On June 15, 2016, the New Jersey Supreme Court, in Rodriguez v. Raymours Furniture Company, Inc., held that an agreement by an employee to bring claims against his employer within six months of the allegedly wrongful employment action was unenforceable insofar as the agreement applied to claims brought under the New Jersey Law Against Discrimination (“the LAD”). In 1993, the Court had held that New Jersey’s general two-year statute of limitations for personal injury actions provides the appropriate limitations period for LAD claims. In Raymours, the Court ruled that the employer’s attempt to reduce this limitations period to six months undermined the LAD’s specific enforcement scheme for the elimination of discrimination and thus, for public policy reasons, could not be judicially sanctioned. In addition, the Court found that the particular agreement at issue, set forth as part of the boilerplate in the employer’s standard employment application form, constituted an unenforceable contract of adhesion.

Background

When plaintiff, Sergio Rodriguez, applied for a job with defendant, Raymour & Flanigan, he was required to complete an employment application form that contained the following provision:

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. I WAIVE ANY STATUTE OF LIMITATIONS TO THE CONTRARY.

After working for Raymour & Flanigan for several years, Rodriguez left work due to a work-related injury. Within a few days after being cleared to return to work, he was terminated, ostensibly as part of a reduction-in force. More than six months after his termination, Rodriguez filed suit in New Jersey Superior Court, alleging that his employment with Raymour & Flanigan was terminated because of his disability or perceived disability in violation of the LAD. Raymour & Flanigan moved for summary judgment, arguing that the LAD claim was barred by the six-month limitations period to which Rodriguez had agreed. The trial court granted the motion, and its decision was affirmed by the Appellate Division. Both courts concluded that: (1) the agreement to limit the limitations period was not unconscionable and (2) the contractual shortening of the limitations period did not violate public policy.

The Supreme Court’s Decision

Overruling the lower courts, the New Jersey Supreme Court (per Justice LaVecchia, writing for a unanimous Court) concluded that the contractual limitations period at issue did, in fact, violate public policy as embodied in the LAD. The Court began its analysis by characterizing the LAD, with its goal of eradicating discrimination, as “occup[ying] a privileged place among statutory enactments in New Jersey.” The Court also noted that in the 23 years since the Court decided that a two-year statute of limitations comported with the goals of the LAD, the Legislature has given tacit approval to that decision, never providing a different statute of limitations, although the LAD has been amended on numerous occasions during that period.

But the Court’s main focus was on the LAD’s unique enforcement mechanisms, which permit an aggrieved party the option of filing for administrative relief with the Division on Civil Rights (‘the DCR”) within six months of the adverse employment action or filing a lawsuit in Superior Court within the above-noted two-year period. Moreover, an employee who first seeks administrative relief with the DCR is free to withdraw his or her claim before a final decision is rendered, and then file a lawsuit in Superior Court.

The Court viewed the DCR’s enforcement function as important because it provides a generally swifter and less expansive mechanism than litigation for resolving disputes and assists the DCR’s direct involvement in eliminating discrimination. The Court noted, however, that “if the DCR process is not moving as swiftly as it would be hoped, the DCR complaint may be withdrawn and thus the aggrieved party can avail himself or herself of more than one forum, and the legislative scheme allows the litigant to potentially utilize both forums when the administrative procedure lags.” In the Court’s view, a shortening of the limitations period would “effectively eviscerate” a plaintiff’s administrative remedy because an aggrieved party will, as a practical matter, no longer view the administrative remedy as a meaningful option. In other words, an aggrieved party would not be willing to run the risk under a shortened limitations period of losing his or her option to file a lawsuit after first filing a claim with the DCR. In addition, the Court believed that a limitations period of six months would be insufficient for aggrieved parties and their attorneys to evaluate whether a potential LAD claim had merit and prepare the lawsuit, thus leading to the premature filing of non-meritorious LAD claims. The Court also expressed concern a shortened limitations period would impede an employer’s ability to protect itself by investigating and responding to workplace complaints. Thus the Court concluded that a limitations period of less than two years “is contrary to the public policy expressed in the LAD.”

Finally, as an alternative basis for its decision, the Court found the six-month limitations period in Raymour & Flanigan’s employment application form to be an unconscionable, and, therefore, unenforceable, contract of adhesion. As one of the factors in determining whether a contract of adhesion is unenforceable is “the public interests affected by the contract,” the Court concluded that this public interest factor “would have led us to the same outcome based on the anti-discrimination concerns expressed in the LAD.”

Conclusion

Agreements to shorten the LAD’s statute of limitations are now unenforceable. Although the Court found Raymour & Flanigan’s employment application to be a contract of adhesion, that finding was not central to the Court’s analysis, as it is clear from the decision that the Court will not enforce even a freely bargained for agreement that purports to shorten the two-year limitations period for LAD claims. Companies with employees in jurisdictions other than New Jersey should ascertain the law in those jurisdictions to determine whether agreements to shorten the limitations period for those employees are enforceable.

For answers to any questions regarding this blog, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

Richard S. Zackin is a Director in the Gibbons Employment & Labor Law Department.
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