Last week the New Jersey Supreme Court issued its long-awaited decision in Rodriguez v. Raymours Furniture Co., Inc., ruling that the two-year statute of limitations for filing a lawsuit alleging violations of the New Jersey Law Against Discrimination cannot be contractually shortened by a clause in an employment application or contract. This issue was a matter of first impression for the Court.

In a unanimous opinion written by Justice Jaynee LaVecchia, the Court held that "the contractual shortening of the LAD's two-year limitations period for a private action is contrary to the public policy expressed in the LAD" and cannot be enforced.

The Court’s ruling is limited to claims under the LAD and appears to leave a window open for contracts that shorten the time for filing claims under other statutes and under common law. The Court also reaffirmed that parties may still contractually agree to submit LAD claims to arbitration or other means of alternative dispute resolution.

In light of the Rodriguez decision, employers who operate in New Jersey will want to revise their applications, employment agreements and other employment documents to eliminate any language that would otherwise shorten the LAD’s two-year statute of limitations.

Background

A person alleging discrimination under the LAD can either (1) file a complaint with the New Jersey Division on Civil Rights within six months of the date that the cause of action accrues, or (2) file a direct suit in the Superior Court within two years. Once a party files a complaint in one forum, he or she may not file a complaint in the other forum while the original action is pending. The final determination by the court or the DCR (as applicable) bars other actions based on the same claims. However, at any time before a final determination has been made, the claimant has the right to withdraw a DCR complaint and pursue a claim in Superior Court.

When plaintiff Sergio Rodriguez was hired by Raymours in 2007, he signed an employment application that contained the following language in bold-faced font and capital letters:

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,

and that

I WAIVE ANY STATUTE OF LIMITATIONS TO THE CONTRARY.

Despite the “six-month” language in his employment application, Mr. Rodriguez waited seven months after his termination to file suit for disability discrimination and workers’ compensation retaliation under the LAD.

The trial court dismissed the lawsuit, ruling that it was time-barred because it was filed more than the six months specified in Mr. Rodriguez’s employment application. In June 2014, the New Jersey Appellate Division upheld the dismissal, holding that employers are generally able to shorten a statutory limitations period through an employment contract so long as the language is clear and unambiguous. Both lower courts were swayed by the fact that the language at issue was unambiguous, that the waiver was conspicuous, and that the terminology was clear and uncomplicated. In addition, the six-month limitation was consistent with the time limit for filing a LAD claim with the New Jersey DCR. Therefore, the courts reasoned, contractually shortening the statute of limitations to six months did not preclude a plaintiff from pursuing any remedy offered under the LAD.

The Supreme Court reverses

In a unanimous opinion, the New Jersey Supreme Court disagreed with the lower courts, and held that employers could not contractually reduce the time for filing suit under the LAD. According to the Court, such limitations conflict with the public interest served by the LAD, which is designed to eradicate discrimination from New Jersey workplaces. Writing for the Court, Justice LaVecchia said, "[R]esponsible employers are partners in the public interest work of eradicating discrimination, but such responsible behavior takes time . . .” and that "[a] shortened time frame for initiating legal action or losing that ability hampers enforcement of the public interest."

The Court offered several reasons in support of its decision:

  • Shortening the time period for bringing a LAD action in the Superior Court would undermine the ability of the DCR to effectively investigate, prosecute, and possibly settle discrimination claims through alternative dispute resolution. The Court recognized the need for the dual-enforcement scheme, which gives litigants the right to directly bring suit in court or to file a complaint with the DCR, and noted that “the DCR remedy must remain accessible and vibrant.” A shortened time period for filing lawsuits might cause employees to feel compelled to withdraw their DCR claims too hastily so that they can beat a shortened window of time created by the employer.
  • A limitations period of less than two years for civil lawsuits would effectively eliminate claims, and the two-year period established twenty-three years ago in Montells v. Haynes was purposely designed to impose uniformity and certainty.
  • A shortened limitations period might compel a person to file a LAD action prematurely, whereas a more deliberate investigation might have revealed that the claim had no merit.
  • New Jersey case law has created powerful incentives for employers to receive workplace complaints, investigate them, and respond appropriately to limit their liability, and any shortening of the period would “seriously affect an employer’s ability to protect itself.”

Although 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 result based on the “unconscionability” of the provision. The Court noted that the provision was in a “take-it-or-leave-it” employment application for an entry-level position, that Mr. Rodriguez was not in a position to bargain, and that it was an adhesion contract containing “indicia of procedural unconscionability.”

Lessons for employers

Revise employment documents that seek to limit the LAD’s statute of limitations. Employers with operations in New Jersey should no longer require applicants or employees to sign applications or other employment documents that shorten the statute of limitations under the LAD or otherwise restrict an employee’s substantive rights under the statute.

Agreements to arbitrate LAD claims are still valid – maybe. The Supreme Court opinion confirms that agreements between employers and employees to submit LAD claims to arbitration or some other form of alternative dispute resolution remain legally sound. That said, such agreements still need to be substantively and procedurally appropriate to be considered enforceable. For example, all substantive rights afforded by the statute must be preserved, and the agreement cannot be contained in a handbook that includes a disclaimer stating that it is not a contract.

The Rodriguez decision may result in a spike of LAD claims. The possibility exists that employers may face a temporary increase in claims by employees who previously believed that their claims had been time-barred.

The Rodriguez decision is not necessarily bad for employers. Although employers with operations in New Jersey will no longer be able to shorten the LAD statute of limitations, it is possible that the full statutory period may actually result in fewer LAD suits. As the Supreme Court noted, shortened time periods encourage attorneys to file premature LAD claims to preserve their rights. A longer period to sue could provide time for a thorough investigation, and an ultimate determination by the plaintiff or attorney that the claim lacks merit.

The Rodriguez ruling is limited to LAD claims. As already noted, the Court’s ruling is limited to claims under the LAD. Thus, agreements to shorten the time for filing claims under other statutes, such as the New Jersey Conscientious Employee Protection Act, and common-law claims, may still be enforceable. However, employers should be very careful about how they draft and use such provisions, given the concerns expressed by the Rodriguez court regarding statutory intent, public policy, and contracts of adhesion.