New Jersey Court Strikes Punitive Damage Bar in Employment Arbitration Agreement

The New Jersey Appellate Division has reversed a trial court’s determination that barred an employee from pursuing punitive damages in an arbitration proceeding.  While reversing the trial court’s determination concerning the issue of punitive damages, the court affirmed the trial court’s dismissal of the lawsuit by holding that the plaintiff knowingly agreed to arbitrate her sexual harassment claims by waiving her right to a jury trial as set forth in the employment agreement. As a result, the employee will now pursue her sexual harassment claims in a private arbitration, but will be permitted to pursue her claims for punitive damages in the arbitration proceedings.

In the case of Milagros Roman v. Bergen Logistics, LLC,the employee, Ms. Roman, alleges that she experienced sexual harassment during her employment with Bergen Logistics.  Roman began her employment as a human resource generalist in 2015.  In April, 2017, Roman alleges that she was subjected to sexual harassment from her immediate supervisor and was terminated form her employment in retaliation for rebuffing the sexual advances.  Roman subsequently filed a complaint in the Superior Court of New Jersey for claims sexual harassment, retaliation, hostile work environment and intentional infliction of emotional distress.

The employer responded by filing a motion to dismiss and to compel Roman to bring her claims in a private arbitration proceeding based upon an employment agreement that she signed in which she waived her right to a jury trial.  The employment agreement also included a provision that barred Roman from pursuing punitive damages in any action against the employer.  Specifically, the agreement read the employee and the employer agreed not to “file or maintain any lawsuit, action or legal proceeding of any nature with respect to any dispute, controversy or claim within the scope of [the] Agreement,” and that “BY SIGNING [THE] AGREEMENT [PLAINTIFF] AND THE COMPANY ARE WAIVING ANY RIGHT, STATUTORY OR OTHERWISE TO A TRIAL BY JURY.” The trial court granted the employer’s motion and dismissed Roman’s claim and also found that the arbitration agreement’s clause that waived Roman’s right to pursue punitive damages as enforceable.

On appeal, the New Jersey Appellate Court held that by barring an employee from pursuing punitive relief, Bergen Logistics was a violation Ms. Roman’s rights under the New Jersey Law Against Discrimination, that allows her to pursue all possible relief available under the law. Specifically, the Appellate Court argued that the lower court’s holding “eviscerates an essential element of the LAD’s purpose”, which is to deter employers from committing discriminatory acts against their employees.

This holding upholds the importance of the New Jersey Law Against Discrimination in protecting the rights of employees in the state. New Jersey courts continue to prohibit employers from requiring employees to waive rights that are provided to them under the state’s discrimination laws as a condition of employment.  While Courts continue to enforce employment agreements that contain clear and unambiguous waiver of the right to a jury trial, they will not permit clauses that are unconscionable or that are against public policy.

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