Consider this scenario: Your company has struggled with a key employee, and it is determined that the employment should be terminated. Following the advice of counsel, the parties entered into a separation agreement, severance is paid, and the employee signs a release of all claims related to employment with your company. At this point, the parties can now move on without the threat of litigation, right? Not necessarily!
The employee files for unemployment insurance. The company responds by advising that the employee consistently failed to comply with the established standards of conduct in the workplace. You are comfortable that the statement will remain confidential, as statements by the parties in an unemployment claim are not admissible in civil actions (N.J.S.A. 43:21-11(g)). However, the disgruntled ex-employee responds by asserting that the company’s reason for discharge is false and is motivated by retaliation for complaining about potentially discriminatory conduct, which took place during the course of employment.
Thereafter, the employee files a lawsuit, claiming that the company’s actions have violated N.J.L.A.D’s anti-retaliation provisions. Indeed, the alleged discriminatory conduct took place more than two years before the filing of the employee’s new complaint! The company feels satisfied that the former employee would not be allowed to pursue this claim. First, since the original conduct occurred more than two years prior to the filing of the complaint, suit would be barred by the statute of limitations. Second, the employee already executed a release, and received severance, on the assumption that he would be barred from bringing any further employment claims.
In the recent case of Roa v.LAFE, et al, 2008 WL 2627625 (App.Div. 2008) an Appellate Division Court shattered the paid-for peace of the employer, by ruling under a similar fact scenario, that N.J.L.A.D.’s anti-retaliation provisions will apply to the company’s conduct, even after termination of the employment relationship.
One can conjure up many post-employment discoveries, which could put a company in jeopardy, long after it pays for closure of the employment relationship. One example is also treated in the Roa case. An employee may allege that in retaliation for the employee’s asserting a discrimination claim, the employer falsely reported a termination date to a medical insurance carrier, resulting in the denial of benefits while the claim is being investigated. The anti-retaliation provision could be invoked if there is a post-termination denial of benefits, less than satisfactory employment reference, or any other action taken after the employee’s termination.
The Appellate Court reasoned that the retaliation claim is a separate cause of action under the L.A.D. In addition, this activity could be deemed as a “continuing violation” of the L.A.D. If so, an employee could claim that any actions during the prior two-year period could be the subject of a new discrimination claim and could revive a prior claim. In this case, even though the plaintiff filed the lawsuit more than two years after the date of termination, it was filed within two years of the date the plaintiff knew or should have known of facts supporting the retaliation claim.
A second cautionary point in this case involves failure to inform employees of their rights under the L.A.D. through either workplace posters or employee manuals. The Court discussed several cases, which held that failure to post required notices will toll (suspend) the statute of limitations for bringing L.A.D. suits. However, this Court clarified that the statute of limitations will only be tolled until the aggrieved employee seeks out an attorney or requires actual knowledge of his rights. The adoption of “equitable” tolling requires the exercise of reasonable insight and diligence by a person seeking its protection (citations omitted).
What lessons can be learned by the conscientious employer? Certainly, a company should continue to consider entering into termination agreements, with releases of liability, for departing employees. This is particularly true where a company would otherwise offer severance benefits, legal consideration for the employee’s release of claims. This will maximize the company’s benefit for the price paid in severance benefits. The employer’s counsel should attempt to negotiate a strong provision wherein the employee acknowledges that he/she is unaware of any facts, which would support a discrimination claim. This would be stronger than the typical language, wherein the employer states that payment of severance is not an admission of liability for discrimination claims. It would be more difficult for the employee to later assert that post-termination actions on the part of the employer constituted retaliation for workplace discrimination.
Second, a company should not be lulled into complacency, even after a separation agreement and release is executed. Its representatives must still be careful not to conduct themselves in such a way, which will create negative consequences to the former employee, after leaving the employment. This case will reinforce the practice of not providing a post-termination employment reference. In addition, special care must be taken to make sure that the ex-employee is paid all earned wages, accrued vacation and sick time, or other benefits. A company must also make sure that in response to governmental or insurance inquiries, it accurately reports data such as dates of employment, wages paid, insurance-related information, etc.
Finally, the case, again, reinforces an employer’s duty to inform employees of their rights under the L.A.D., either through workplace posters or employee manuals.
This case underscores the necessity of having clear, well-defined employment policies and procedures, which are compliant with New Jersey law. It also demonstrates the necessity to consult counsel when planning to discharge an employee to make sure that termination agreements keep pace with changes in the law.