Will the New Jersey Supreme Court’s Elimination of an Employment Contract Provision Lead to the Same in other Types of Contracts?
The legislature has passed laws stating how long someone can wait before filing a lawsuit - this is known as the statutes of limitation. For example, for personal injury based upon negligence, (e.g, car accidents, slip-and-fall accidents), it’s two years from the date of the accident. For breach of contract, the statute of limitations is 6 years from the date the contract was breached. However, the Courts have permitted parties to reduce the default period of time under the statute of limitations by provisions in a contract. I wouldn’t be surprised if such provisions are imbedded in the small print in some cell phone contracts and purchase agreements from some merchants.
In Rodriguez v. Raymours Furniture Company, Inc., __ N.J. __ (2016), 2016 N.J. LEXIS 566 (2016), the defendant employer had a provision in its employment application informing anyone applying for a job that any claim against the employer had to be brought within 6 months of the date the claim arose. This meant a normal claim for employment discrimination that had to be brought within 2 years was now reduced to 6 months. The plaintiff-employee worked for the defendant employer for roughly 2 ½ years before getting injured on the job and went out on disability for roughly 6 months. Two days after he returned to work the plaintiff-employee was terminated. The plaintiff-employee asserted that he was let go for discriminatory reasons. The plaintiff-employee filed suit 7 months after he was terminated. The defendant employer successfully moved at the trial court level to have the plaintiff-employee’s discrimination claim thrown out based upon the 6 month provision in the employment application. The Appellate Division, which is New Jersey’s intermediate court, affirmed the trial’s court decision.
On June 15, 2016, the New Jersey Supreme Court reversed the decisions of the lower courts and held that an employer cannot shorten the 2-year statute of limitations for discrimination down to 6 months. The Supreme Court’s decision was particularly motivated by the New Jersey’s Law Against Discrimination (“LAD”), which provides the plaintiff two options: bring a claim through New Jersey’s Division of Civil Rights within 6 months or file a lawsuit within 2 years. The Court noted that going through the Division of Civil Rights is potentially quicker and significantly cheaper than going through formal litigation. However, the Court noted that an employee may later feel that the Division of Civil Rights route had not properly redressed their grievances, and therefore, that person could withdraw that claim and head to the Courts. The Court found that although freedom of contract is a strong belief in NJ, that right must “recede to ‘prevent its abuse, as otherwise it could be used to override all public interests.”’ The Court noted that curtailing discrimination is not only a private interest but a public interest, too. Moreover, the Court felt that 6 months effectively eliminated all claims because it takes time to file a lawsuit and the person may not immediately realize that he or she was a victim of discrimination.
Furthermore the Court felt that this could encourage unmeritorious claims because an attorney would not have sufficient time to investigate the claim. In addition, the Court noted that an investigation by the Division of Civil Rights could take more than 6 months. In short, the Court found that if it permitted the 2-year statute of limitations to be shortened to 6 months, the opportunity to fulfill the public interest in eradicating discrimination is “cut off.”
So where does this leave us? Perhaps the Supreme Court would have looked at this contractual provision more favorably if the time period was shortened to 1 year as opposed to 6 months.
I can foresee disgruntled customers whose claims were foreclosed by a contractual reduction in the statute of limitations relying upon the Rodriguez case to have the provision thrown out by a court of law. However, it appears that in order to defeat a contractual provision reducing the statute of limitations, there has to be a significant public interest involved and/or the contractual period to bring a claim has to be unreasonable. What constitutes unreasonable will likely be any period less than 1 year.
Frank J. Caruso, Esq. is a partner with the firm in its general liability department. Please feel free to contact him at (732) 545-4717 or firstname.lastname@example.org with any questions or issues.
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