Court: Supreme Court of New Jersey; December 11, 2017; New Jersey; State Supreme Court
Justice Patterson addressed an appeal regarding the enforceability of an employee's waiver of third-party claims against his employer's customers, specifically in the context of workplace injuries. Philip Vitale, employed as a security guard by Allied Barton Security Services, signed a 'Worker’s Comp Disclaimer' upon his hiring, wherein he agreed to waive any rights to claim against customers for injuries covered by Workers’ Compensation statutes. Assigned to Schering-Plough Corporation, Vitale sustained significant injuries during an incident on their premises. After receiving Workers' Compensation benefits, he filed a negligence claim against Schering-Plough, alleging inadequate maintenance of the facility. Schering-Plough sought summary judgment based on the Disclaimer, but the trial court ruled it void for public policy reasons, allowing the case to proceed to trial, where a jury awarded Vitale damages.
The Appellate Division upheld the trial court's ruling but reversed the decision to prevent the jury from considering Vitale's negligence and remanded for a new trial focused on liability. The Supreme Court ultimately found the Disclaimer unenforceable, citing two provisions of the Workers’ Compensation Act: N.J.S.A. 34:15-40, which ensures an employee's right to pursue third-party claims despite receiving Workers’ Compensation, and N.J.S.A. 34:15-39, which prohibits pre-accident agreements waiving such claims. Consequently, the Court affirmed the Appellate Division's judgment with modifications and ordered a new trial on liability. The facts outlined also detailed a Master Vendor Agreement between Allied Barton and Schering-Plough, establishing the employment relationship and duties of security personnel at Schering-Plough facilities.
In August or September 2005, Allied Barton employed Vitale as a security officer, and on September 27, 2005, he signed a Disclaimer acknowledging that state Workers’ Compensation statutes cover work-related injuries. The Disclaimer required him to immediately notify his manager of any job-related injuries and waived his rights to pursue claims against Allied Security’s customers for injuries covered under Workers’ Compensation. Vitale worked at Schering-Plough’s Kenilworth facility until 2008 when he was promoted to field manager, responsible for training and supervising security officers. Uniforms for the officers were stored in the guardhouse basement, and Vitale retrieved them ten to fifteen times by descending the stairs. On August 31, 2009, he fell down the stairs, sustaining injuries attributed to the cluttered condition of the entrance. Vitale filed a Workers’ Compensation claim, settling with Allied Barton in March 2011 for benefits and disability awards but did not return to work. He subsequently sued Schering-Plough, claiming negligence in maintaining the premises. Schering-Plough sought summary judgment based on the Disclaimer, but the trial court denied the motion, citing public policy concerns. At trial, the court granted Vitale a directed verdict on comparative negligence, preventing the jury from considering his potential fault. The jury found Schering-Plough negligent and awarded Vitale $900,000 in damages, and the trial court denied Schering-Plough's motion for a new trial.
Schering-Plough's appeal led to a mixed ruling from the Appellate Division, which upheld the trial court's denial of Schering-Plough's summary judgment motion while reversing part of the judgment. The panel affirmed that the Workers’ Compensation Act recognized the relationship between the plaintiff, defendant, and Allied Barton under the 'joint employer' or 'special employee' doctrine. It deemed the Disclaimer a contract of adhesion, finding it substantively unconscionable and in violation of public policy as an exculpatory contract. The panel also ruled that the trial court erred by not instructing the jury to assess whether Vitale's negligence contributed to his accident, leading to a partial reversal and remand for a new trial on liability. Schering-Plough's petition for certification focused solely on the validity of the Disclaimer for summary judgment. In contrast, Vitale's cross-petition challenged the new trial ruling. Schering-Plough argued that the Disclaimer, which limits employee rights, should be enforced as it does not harm public interest and aligns with the Workers’ Compensation Act's intent. Vitale countered that the Disclaimer is a contract of adhesion and exculpatory in nature, violating public policy and tort law principles. Allied Barton, as amicus curiae, defended the Disclaimer's purpose in protecting clients from litigation, asserting it does not affect Vitale’s workers’ compensation rights. The New Jersey Civil Justice Institute emphasized that the Disclaimer balances interests without disincentivizing workplace safety, while other amici contended that Vitale lacked valid consideration for signing the Disclaimer.
The Disclaimer is challenged as void due to public policy, lacking a benefit for the employee's loss of third-party claims and diminishing the client company's motivation to ensure workplace safety. The New Jersey Association for Justice argues that the Workers’ Compensation Act is intended to be liberally interpreted as remedial legislation, asserting the Disclaimer promotes poor health and safety practices and gives Allied Barton an unfair competitive edge over compliant companies. The trial court denied Schering-Plough’s summary judgment motion, deeming the Disclaimer unenforceable based on public policy.
The central agreement is a private contract, where parties generally have the freedom to contract, but this freedom is not absolute and must not override public interests. Vitale argues that the Disclaimer is both an unconscionable adhesion contract and an exculpatory agreement against public policy. Adhesion contracts are presented on a non-negotiable basis and may be unenforceable if deemed unconscionable. Courts evaluate unconscionability through four factors related to the contract's subject matter, the parties' bargaining positions, economic pressure on the adhering party, and the public interests involved. Vitale does not claim procedural unconscionability but argues substantive unconscionability based on public policy concerns. The decision on the enforceability of the Disclaimer hinges on its alignment with public policy.
Exculpatory agreements are viewed as undermining the principles of tort law, specifically the deterrence of negligence and the compensation of victims. Such agreements undergo rigorous judicial examination and must demonstrate a clear, voluntary, and informed waiver of legal rights by the party relinquishing those rights. While there is no blanket prohibition against enforcing exculpatory agreements merely due to the existence of common law duties related to premises liability, courts assess whether enforcing such agreements would violate public policy.
Case law illustrates this principle: in *Steinberg v. Sahara Sam’s Oasis, LLC*, a pre-injury release absolving a business from liability for statutory violations or gross negligence was deemed contrary to public policy and unenforceable. Similarly, in *Hojnowski v. Vans Skate Park*, a waiver signed by parents on behalf of their child was not enforced due to public policy considerations.
When evaluating contracts of adhesion, which often require scrutiny for public interest implications, the analysis aligns with that applied to exculpatory agreements. In the context of a legal appeal challenging a contract of adhesion on public policy grounds, the focal issue is whether the agreement contravenes public policy.
In *Stelluti v. R & L Enterprises, LLC*, the court upheld an exculpatory clause in a health club membership agreement that waived the right to sue for personal injuries linked to the club's negligence, asserting that public policy does not necessitate liability for ordinary negligence in this context. Conversely, in *Rodriguez v. Raymours Furniture Company, Inc.*, an agreement limiting the time frame for filing discrimination claims was ruled unenforceable as it would undermine statutory protections afforded under the Law Against Discrimination, which allows for a longer filing period.
The appellate court reversed the Appellate Division's affirmation of the trial court's dismissal of an employee's action, which was based on a six-month limitations period in the employment agreement. The court found this limitations period incompatible with the New Jersey Law Against Discrimination (LAD), which aims to ensure broader access to remedies. Consequently, the court deemed the limitations provision unenforceable as it violated public policy under the LAD.
Additionally, the Workers’ Compensation Act (WCA) provides employees with medical treatment and limited compensation for workplace injuries without regard to employer negligence, granting employers immunity from common-law suits unless an intentional wrong is proven. The exclusivity of the WCA can be challenged under specific statutory exceptions. The WCA's provisions automatically apply to employment contracts unless explicitly rejected, and its design promotes readily accessible benefits for injured workers through a straightforward process. Furthermore, Section 40 of the WCA allows employees to pursue tort claims against third parties without affecting their compensation claims against their employers or insurance carriers, though it does not inherently favor recovery of damages in such tort claims. The legislative intention was to regulate the rights and responsibilities in cases where a worker is injured due to third-party fault while employed.
In U.S. Cas. Co. v. Hercules Powder Co., the New Jersey Supreme Court affirmed the principle that under Section 40 of the Workers' Compensation Act, a workers’ compensation insurance carrier is entitled to seek reimbursement for benefits paid to an employee when a third party, not the employer, is responsible for the injury. The Act allows the carrier to impose a lien if the employee's recovery from the third party equals or exceeds the employer's liability. This framework enables injured workers to receive compensation while also pursuing claims against third-party tortfeasors, thus balancing the interests of workers and employers.
Section 39 of the Act establishes a public policy against pre-accident agreements that waive workers’ compensation rights, rendering such agreements invalid. This provision has been part of the Act since its 1913 amendment and has been upheld in multiple court rulings, which have consistently invalidated any contractual terms that attempt to waive the right to benefits under the Act. Notably, courts have ruled that even a signed release does not prevent an employee from pursuing a valid claim for compensation, affirming that releases hold no legal weight in the context of workers' compensation claims.
Pre-accident employer-employee agreements that waive workers' compensation benefits are deemed contrary to public policy unless specifically authorized by N.J.S.A. 34:15-7. The Legislature intentionally used broad language in section 39, which prohibits any pre-accident agreement, including those waiving common-law claims for damages arising from workplace accidents, from barring claims for damages. Judicial interpretations emphasize that additional qualifications cannot be imposed beyond what the Legislature specifically included. Historical case law, such as Delaware, Lackawanna, Western Railroad Co. v. Smyth, supports the invalidation of similar pre-accident agreements as against public policy. Sections 39 and 40 of the Workers’ Compensation Act aim to maintain a balance between the interests of employees, employers, and third parties, with section 40 allowing common-law claims against third parties while placing a lien on the recovery for the employer’s benefit. Consequently, any pre-accident disclaimer, like the one executed by Vitale that waives claims covered by workers' compensation statutes, is considered void for being contrary to the public policy established in these sections.
The Disclaimer in question is deemed unenforceable as it is not authorized by N.J.S.A. 34:15-7 and violates public policy as defined by the Legislature. Enforcing the Disclaimer would undermine the intent of section 40 of the Workers’ Compensation Act by preventing Vitale from pursuing a common-law action against a third party, while also nullifying Allied Barton’s workers’ compensation carrier’s lien on any damages awarded in such an action. This disruption contravenes the balance of interests that the Legislature intended to maintain. The trial court's ruling against the Disclaimer is upheld, and Schering-Plough's motion for summary judgment is denied. The judgment of the Appellate Division is affirmed with modifications, and a new trial is mandated on liability. The interpretation of section 39 differs from Pennsylvania's Bowman decision, where the dissenting opinion stressed that any agreement barring claims is void as against public policy. Additionally, the reliance on the 'joint employer' or 'special employee' doctrine to challenge the Disclaimer is invalid, as no party claimed that Schering-Plough was Vitale's joint employer in this case.
