Trends in New Jersey Employment Law - August 2014

LAD Roundup

In recent weeks, New Jersey's primary employment discrimination statute—the Law Against Discrimination (LAD)—has been the focus of judicial scrutiny.

• In Smith v. Millville Rescue Squad, No. A-1717-12T3, 2014 WL 2894924 (App. Div. June 27, 2014), New Jersey's Appellate Division for the first time defined the scope of "marital status" protection under LAD to encompass the "state of being divorced."
• In Vargas v. INX International, Inc., No. A-3993-12T3, 2014 WL 3407245 (App. Div. July 15, 2014), the Appellate Division required the plaintiff to arbitrate his LAD claims against his former employer pursuant to a mandatory arbitration agreement, but refused to compel arbitration of the same claims brought against an "intertwined" entity who was not a signatory to the agreement.
• In State v. Saavedra, 217 N.J. 289 (2014), the New Jersey Supreme Court granted certification on the issue of whether employees who steal confidential documents from their employers to support discrimination suits under the LAD can face criminal indictment.

This newsletter summarizes these three cases and examines their implications for New Jersey employers.

Smith v. Millville Rescue Squad

Facts

The plaintiff, Robert Smith, worked for the defendant, Millville Rescue Squad (MRS), for nearly two decades, first as a certified emergency medical technician and later as director of operations. The plaintiff's wife also was a long-term employee at MRS. In January of 2006, the plaintiff and his wife separated after eight years of marriage shortly after she discovered her husband's alleged extramarital affair.

Allegedly, MRS' executive director informed the plaintiff that the company terminated his employment "because he and his wife were going to go through an ugly divorce." MRS denied these allegations, countering that the plaintiff was terminated for performance reasons.

The plaintiff ultimately filed suit in state court alleging that his termination constituted discrimination based on marital status and gender under LAD. After the trial court granted MRS' motion for dismissal, the Appellate Division reversed as to plaintiff's marital status discrimination claim.

Holding

The LAD does not expressly define the term marital status. "In the absence of a narrow definition," the Appellate Division "accorded LAD a liberal reading in view of its remedial purpose" and, thus, "interpret[ed] 'marital status' to encompass the state of being divorced." Although recognizing that the "LAD does not bar an employer from taking employment action against a divorcing employee who actually demonstrates antagonism, incivility, or lack of professionalism," here the Appellate Division held that MRS unlawfully terminated the plaintiff "because of stereotypes about divorcing persons" (i.e., "to avoid the feared impact of an 'ugly divorce' on the workplace"). As such, the court held that the plaintiff had established a prima facie case of discrimination based on marital status.

It is worth nothing that the court affirmed the dismissal of the plaintiff's gender-based discrimination claim on the grounds that his duties were reassigned to a man as well as a woman, his wife.

Takeaway

Subject to an appeal before the New Jersey Supreme Court, the Appellate Division's ruling should prompt employers to interpret the term "marital status" in their anti-discrimination policies to include the "state of being divorced." Employers should note, however, that, as the Appellate Division recognized, enforcing an equally-applied anti-nepotism policy, for instance, "do[es] not run afoul of LAD's proscription against marital-status-based discrimination." As the court stressed, "an employer may terminate an employee because of a family relationship to another employee," so long as the "employer [does] not disparately treat employees who engage in the same behavior."

Vargas v. INX International, Inc.

Facts

Plaintiff Angel Vargas was hired to work for defendant INX International, Inc. ("INX") after INX had contracted with defendant DG3 Diversified Global Graphics ("DG3") to provide it with ink and printing services. The plaintiff claimed that he was employed by both INX and DG3.

Among the documents that INX included in the plaintiff's new hire package was a four-page "Mutual Agreement to Arbitrate Claims," which stated in relevant part:

The Company and I mutually consent to the resolution by arbitration of all claims or controversies ("claims"), whether or not arising out of my employment (or its termination), that the Company may have against me or that I may have against the Company or against its officers, directors, employees or agents in their capacity as such or otherwise. The claims covered by this Agreement include, but are not limited to . . . claims for discrimination. . . .

The agreement defined the Company to include INX and its "officers, directors, employees and agents, its parent companies, all subsidiary and affiliated entities . . . and all successors and assigns of any of them."

The plaintiff signed the agreement, acknowledged that he read it carefully, and returned it to INX. About three months later, INX terminated the plaintiff for poor performance and attitude. Nearly a year and a half following his termination, the plaintiff filed suit against INX and DG3 in New Jersey state court under LAD.

INX filed a motion to dismiss and to compel arbitration, which DG3 joined. The plaintiff opposed, arguing that he had not received all four pages of the arbitration agreement. After conducting a hearing on the issue, the Court determined that the plaintiff had received the entire agreement and accordingly granted INX's and DG3's motions. The Appellate Division affirmed the trial court's decision to compel arbitration of the claims against INX, but reversed as to DG3.

Holding

Even though the arbitration agreement expressly covered all "affiliated entities" of INX, the Appellate Division concluded that the agreement did not apply to non-signatory DG3 based on the New Jersey Supreme Court decision—Hirsch v. Amper Financial Services, LLC, 215 N.J. 174 (2013). According to the Appellate Division, "although plaintiff allege[d] that he was employed by both parties DG3 and INX, and his claims against both entities may be intertwined, Hirsch makes clear this is not a sufficient basis to compel arbitration of the claims against DG3." The Court stressed that the "plaintiff never agreed in writing to submit his claims against DG3 to arbitration." It also emphasized that DG3 could not avail itself of the doctrine of equitable estoppel, as the "plaintiff never orally agreed to arbitrate his claims against DG3 and there is no claim that DG3 detrimentally relied upon such an agreement by plaintiff to arbitrate his claims."

Yet, as to INX, the Court stressed that the agreement was "clear and unmistakable" and "prominently set forth in a separate document." The Court rejected the plaintiff's argument that the agreement needed to "explicitly state that he is waiving his right to a jury trial or specifically mention the NJLAD." The Court also dismissed the notion that the plaintiff did not "knowingly and voluntarily" execute the agreement.

Takeaway

Subject to an appeal before the New Jersey Supreme Court, the Appellate Division's decision should serve as a warning that employers may not be covered by the mandatory arbitration agreements of employers with whom they have contractual or other relationships, if they are not expressly covered by the agreement. As such, employers who seek to avoid litigation in court (including as to LAD claims) should consider becoming signatories to (or otherwise covered by) the arbitration agreements prepared by employers with whom they have contractual or other relationships, or, in the alternative, consider crafting their own agreements.

State v. Saavedra

In State v. Saavedra, 433 N.J. Super. 501 (App. Div. 2013), the Appellate Division affirmed that a public employee could be indicted for stealing confidential documents from her employer, despite the New Jersey Supreme Court's holding in Quinlan v. Curtiss-Wright Corp., 204 N.J. 239 (2010), which allowed the employee in that case to use confidential documents that she had taken from her employer to support her discrimination and whistleblower claims under the LAD and Conscientious Employee Protection Act (CEPA). Stay tuned for the Supreme Court's decision on this significant matter (for more on Saavedra see our prior newsletter).