The New Jersey Supreme Court recently ruled that jury instruction must require the involvement of upper management in egregious conduct for an employer to be liable for punitive damages in cases under the New Jersey Conscientious Employee Protection Act.

In Longo v. Pleasure Productions, Inc. et al., plaintiff filed a CEPA claim, alleging that she was discharged after reporting a complaint of sexual harassment to her supervisor. The jury found her employer and one supervisor were liable for economic loss and emotional distress damages. The court bifurcated the issue of punitive damages.

At the punitive damages phase of the trial, plaintiff’s counsel argued to the jury that the conduct of any employee could be the basis for a punitive damages award.

In the jury instruction, the judge explained that punitive damages are awarded to “punish defendants who have acted in an especially egregious or outrageous manner and to discourage the defendants from engaging in similar misconduct in the future.” While the judge noted it is plaintiff’s burden to prove this by a clear and convincing standard, the judge failed to instruct the jury that they must conclude that upper management was involved in the egregious conduct under this standard. The instructions similarly failed to define upper management.

Despite the employer’s objections, the judge refused to reinstruct the jury. The jury awarded plaintiff $500,000 in punitive damages, which was upheld by the Appellate Division.

The Supreme Court, however, found the instruction to be fundamentally flawed, which could “only be cured by a new trial.” At the new trial the jury instruction must provide an upper management charge and must stress that findings must be made under a clear and convincing standard.

This is a positive ruling for employers as the case emphasized the high standard plaintiffs must meet to be awarded punitive damages.