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Provision in Employment Contract Limiting Employee’s Ability to Sue Third Party Found Unenforceable by NJ Court

By on August 25, 2016 in Coverage with 0 Comments

Plaintiff Philip Vitale was injured while working as a security guard for Allied Barton Security Services, LLC (“Allied Barton”), which contracted with defendant Schering-Plough Corporation to provide security services to its facilities. Plaintiff had signed a disclaimer, waiving his right to sue any of Allied Barton’s customers to which he may be assigned. In the published decision of Vitale v. Schering-Plough Corp., 2016 N.J. Super. LEXIS 114 (App. Div. Aug. 22, 2016), the Appellate Division held that this waiver was unenforceable.

Plaintiff had been working as a security guard with Allied Barton for 4 years before the accident. While he was assigned to many of defendant’s work sites, he was never directly employed by defendant Schering-Plough, which had its own in-house security employees. He had been promoted to the position of field manager, supervising Allied Barton’s security guards who worked at defendant’s sites.

This accident occurred when plaintiff was going down the stairs of the guardhouse basement. Apparently, he tripped over a bag of ice melt and fell down the stairs. Plaintiff claimed to have suffered injuries to his neck, shoulder, and lower back, as well as cognitive difficulties.

The matter was tried before a jury, which awarded $900,000 in damages. Defendant appealed on the basis that the court erred in refusing to grant it summary judgment based upon the contractual waiver to sue signed by the plaintiff at the inception of his employment. The defendant argued that this waiver was valid and enforceable.

When plaintiff began his employment with Allied Barton, he signed a “Worker’s Comp Disclaimer.” Per this disclaimer, the plaintiff acknowledged that state Workers’ Compensation statutes covered his work-related injuries. Further, he agreed that, as a result, and in consideration of Allied Barton offering him employment, he would waive and release any and all rights to make a claim or commence a lawsuit from or against any customer of Allied Barton to which he may be assigned, “arising from or related to injuries which are covered under the Workers’ Compensation statutes.”

The Appellate Division found that enforcement of this waiver would be against public policy, as well as not “congruent” with the intent of the Workers’ Compensation Act for several reasons. First, the plaintiff would have been unaware of the risks he was taking because, when he signed the disclaimer, he did not know the identity of Allied Barton’s clients. Thus, he could not know the working conditions he might encounter while working at the facilities of Allied Barton’s clients

Second, this disclaimer created a disincentive for the defendant Schering-Plough to maintain a safe working condition for contractors working on its premises. Because the defendant would now be insulated from liability due to this disclaimer, it had a reduced incentive to maintain a safe work place for its contractors.

Third, to the extent this waiver would be waiving the plaintiff’s rights to recover for reckless or intentional conduct, the disclaimer is against public policy. The defendant argued that this disclaimer only waived claims covered by the Workers’ Compensation Act (“the Act”) and claims of reckless and intentional misconduct are not covered by the Act. However, the Appellate Division stated that it did not view the Act’s “intentional wrong” exception as broadly as the defendant suggested. Conduct that could be viewed as reckless or intentional under general tort law could result in injuries covered by the Act and, hence, unlawfully waived by the disclaimer.

Last, the Appellate Division pointed out that enforcement of this disclaimer would be contrary to the Act because it would not permit the plaintiff to pursue the defendant as a joint employer, who could be liable to pay him workers’ compensation benefits. New Jersey recognizes that an employee may have two employer, both of which may be liable for workers’ compensation (the “joint employer doctrine”). There is a 3 part test developed to establish such a special-employment relationship with the “joint employer.”

The court pointed out that the type of relationship between Allied Barton and the defendant has been long recognized. Further, the court had previously recognized the concept of joint employment in a similar context where a company hired security guards and supplied them to work guarding other businesses’ sites. Thus, the Appellate Division appeared to implicitly rule that, should this disclaimer be enforceable, the plaintiff would be giving up his right under the Act to pursue a claim against Schering-Plough as a joint employer.

For these reasons, the court found the disclaimer to be unenforceable. It is apparent that the Court’s ruling was intended to protect the injured employee’s interests. Interestingly, although this decision is primarily grounded in workers’ compensation doctrine, it actually provides a civil remedy that would have been not been available to the employee, should the disclaimer have been deemed valid.

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Betsy G. Ramos

About the Author

About the Author:

Ms. Ramos is an Executive Committee Member and Co-Chair of the Litigation Department at Capehart Scatchard, P.A. located in Mount Laurel, New Jersey. She is an experienced litigator with over 25 years experience handling diverse matters. Practice areas include tort defense, business litigation, estate litigation, tort claims and civil rights defense, construction litigation, insurance coverage, employment litigation, shareholder disputes, and general litigation.

For the years 2020 and 2021, Ms. Ramos was selected for inclusion in The Best Lawyers in America© in the practice area of Litigation - Insurance. The attorneys on this list are selected based upon the consensus opinion of leading lawyers about the professional abilities of their colleagues within the same geographical area and legal practice area. A complete description of The Best Lawyers in America© methodology can be viewed via their website at: https://www.bestlawyers.com/methodology.

In 2021, Capehart Scatchard and Ms. Ramos received the “Best Law Firm” ranking in the area of Litigation – Insurance (Metro, Tier 3) published by U.S. News & World Report and Best Lawyers®. Law firms included on the list are recognized for professional excellence with consistently impressive ratings from clients and peers. To be eligible for a ranking, a firm must have at least one attorney who has been included in the current edition of Best Lawyers in America, which recognizes the top five percent of practicing lawyers in the United States. Betsy Ramos (Litigation – Insurance) was recognized for this prestigious award in the 2021 edition. For a description of the “Best Law Firm” selection methodology please visit: https://bestlawfirms.usnews.com/methodology.aspx.

“Best Law Firms” is published by Best Lawyers in partnership with U.S. News & World Report. For a description of the selection methodology please visit: https://bestlawfirms.usnews.com/methodology.aspx.

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