Is It Time to Limit Your Exposure to Employment Lawsuits?

The New Jersey Judiciary reported that approximately 40% of lawsuits filed with the courts involve claims by employees against their current or former employers. In this current litigious landscape, are there actions employers can take to protect against potential employment lawsuits? As a result of a recent decision from a New Jersey appellate court, the answer is a resounding “Yes.” Under that decision, employers and employees are permitted to enter into agreements that significantly shorten the statutory time period in which employees can file suit against the employer. Employees who fail to file suit within the agreed-upon time period will be barred from pursuing their claims, notwithstanding the fact that the statutory limitations period has not run.

Statutes of limitation are time periods established by law in which lawsuits must be initiated. The statutes of limitation vary depending upon the causes of action being asserted. For example, breach of contract claims can be filed up to six years after the alleged breach; suits alleging violations of the New Jersey Law Against Discrimination (“LAD”) and the New Jersey Wage & Hour Law must generally be filed within two years of the accrual of the claim; and whistleblower lawsuits under the Conscientious Employee Protection Act must be filed within one year of the accrual of the claim.

In its recently rendered decision in (“Raymours”), the Appellate Division of the Superior Court of New Jersey affirmed that an employer can require its employees to enter into agreements to shorten the statutory time period in which lawsuits can be filed against the employer, provided that the agreed-upon time period is reasonable.

The Facts: On October 1, 2010, Sergio Rodriguez was terminated as part of a reduction in force implemented by Raymours. Nine months later Rodriguez filed suit against the company alleging that he was terminated in retaliation for filing a workers compensation claim earlier in that year and because of his disability, in violation of the LAD. Although these claims were clearly within the two-year limitations period applicable to LAD claims, the trial court pointed to the fact that prior to accepting employment with Raymours, Rodriguez signed a statement in his employment application agreeing to limit the time period to file suit against Raymours to not more than six months after the adverse employment action. The court found that the provision was clear in its terms, was conspicuously placed in the application form, was reasonable and not contrary to any public policy, and thus was enforceable. Rodriguez appealed.

The Ruling: The Appellate Division concluded that shortening the time in which claims can be brought against an employer is a valid and legitimate subject to be included in an employment contract. Rejecting Rodriguez’s argument that the shortened limitations provision was an unconscionable contract of adhesion, the Court observed that while an employer might be in a superior bargaining position, it does not hold a monopoly on jobs. Therefore, employees are under no compulsion to pursue the employment if they are dissatisfied with any of the terms of employment being offered. Finally, the Court held that the public policy of the State of New Jersey was not harmed by the shortening of the statute of limitations for bringing claims against an employer.

The Takeaway: In light of the decision, New Jersey employers should consider whether it is time to take more aggressive steps to protect against litigation by requiring employees, particularly newly hired employees, to agree to a shortened time period in which to initiate work-related lawsuits. Employers wishing to implement such measures should consult with employment counsel to craft appropriate language for inclusion in employment applications, employment contracts or other documents that will pass muster if challenged in the courts.