The New Jersey Supreme Court’s decision forbids employers from contractually shortening the two-year limitations period under the state’s Law Against Discrimination.

In a decision issued on June 15 that reversed two lower courts, the Supreme Court of New Jersey held that private agreements cannot shorten the two-year statute of limitations under the state’s Law Against Discrimination (LAD). In Rodriguez v. Raymours Furniture Company, Inc., No. A-27-14, 074603 (N.J. June 15, 2016), the court found that a provision in an employment application (in which the employee agreed to bring any employment-related cause of action against the company within six months of the challenged employment action) could not be relied on to shorten the LAD’s two-year statute of limitations. The court reasoned that enforcement of the provision as to claims under the LAD violated New Jersey public policy. The court’s ruling is limited to claims under the LAD and appears to leave a window open for contracts that abbreviate common law claims and, possibly, other statutory claims. The court also reaffirmed that parties still may contractually agree to submit statutory LAD claims to arbitration or other means of alternative dispute resolution.

Background

In August 2007, Sergio Rodriguez applied for a position with Raymour & Flanigan (Raymour). The last page of Raymour’s application included a section that read “I agree that any claim or lawsuit relating to my service with [Raymour] 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. I waive any statute of limitations to the contrary.” Rodriguez signed the application and was hired in September 2007. On October 1, 2010, Raymour terminated Rodriguez as part of a companywide reduction in force. On July 5, 2011, seven months after his termination from employment, Rodriguez sued Raymour, alleging, in part, that his termination was because of illegal discrimination based on his actual or perceived disability in violation of the LAD.

The trial court granted summary judgment finding the six-month limitation clear and unambiguous and that the contractual shortening of the limitations period was neither unreasonable nor against public policy. The Appellate Division affirmed the trial court decision in 2014. Rodriguez appealed.

The Supreme Court of New Jersey’s Decision

The Supreme Court of New Jersey first held that the Appellate Division did not sufficiently assess the LAD’s public purpose—to eradicate discrimination against all New Jersey inhabitants—and the legislature’s creation of the New Jersey Division on Civil Rights (DCR) as a forum, in addition to court, to pursue LAD claims. Claims brought before the DCR must be filed within six months. Although the LAD only permits a claimant to elect one of these remedies, the court observed that the LAD effectively allows a claimant to use both forums by permitting the withdrawal of a DCR complaint and filing of a lawsuit, should the administrative process stall. Because the DCR often takes more than six months to investigate a claim and a claimant’s lawyer often needs significant time to investigate a claim, the court concluded that, by shortening the statute of limitations to six months, Raymour’s agreement effectively deprived claimants of a substantive right under the LAD to first go to the DCR and then, later, to go to court after withdrawing the DCR complaint. The court also expressed concern that employees and their lawyers may not be aware of the shortened statute of limitations contained, as here, in an employment application and, further, by so shortening the limitations period, plaintiff-side lawyers might be compelled to prematurely file LAD actions prior to adequate investigation.

The court noted that its decision was based on the unique importance of the LAD and New Jersey’s public policy against abrogating such substantive rights by contract. Thus, while recognizing that an employee may contractually agree to submit a LAD claim to arbitration, the court found that a contract provision shortening the limitations period under the LAD was void. Finally, although not predicating its decision on this point, the court further observed that it had significant concerns that the manner in which Raymour procured the agreement (i.e., in a non-negotiable employment application) created procedural unconscionability questions that also would have resulted in the nonenforcement of the provision shortening the statute of limitations.

Implications for New Jersey Employers

Companies should review any employment applications or other agreements that purport to shorten the LAD’s statute of limitations or otherwise restrict an employee’s substantive rights under the statute. That is not to suggest that employers should abandon all provisions that shorten statutes of limitations. In this regard, the court’s reasoning leaves open the possibility that employers can implement contractual provisions that shorten the statute of limitations for common-law claims and other statutory claims, potentially even including New Jersey’s Conscientious Employee Protection Act. If an employer wishes to avail itself of such a provision, however, it should carefully consider how to roll it out, given the court’s concern that the Raymour provision was included in a non-negotiable employment application, which the court described as a “contract of adhesion.”