The N.J. Supreme Court Addresses Continuing Violation Theory and Post Employment Retaliation in LAD Cases

Employees who bring late claims against their employers or former employers under the New Jersey Law Against Discrimination, N.J.S.A. § 10:5-1 et seq., (“LAD”),often attempt to avoid the bar of the statute of limitations by relying on the “continuing violation theory.” In Roa v. LAFE, __N.J. __, 2 N.J. Lexis 3 (Jan. 14, 2010), the New Jersey Supreme Court addressed the application of the “continuing violation theory” to LAD claims and narrowed the application of the theory to such claims. The Court also clarified the extent of an employer’s liability for post-employment retaliation. In addition, the Roa Court clarified the extent to which post-employment actions that adversely affect former employees can form the basis for claims under the LAD of “retaliation” against the former employer. The Court’s rulings with regard to these statute of limitations and retaliation issues have considerable significance for employers.

The Facts

In 2003, plaintiffs Fernando and Liliana Roa, husband and wife, were employed by the defendant company. Fernando’s brother, Marino Roa, a vice president, was their supervisor. Plaintiffs alleged that Marino began to harass them after Fernando indicated to Marino’s wife that Marino was having an affair with a female employee. Subsequently, Fernando complained to the company’s owner that Marino was sexually harassing two female employees. The owner failed to take any action, and thereafter Marino’s harassment of plaintiffs intensified. Liliana’s employment was terminated on August 24, 2003 and Fernando’s employment was terminated on October 3, 2003. On October 2, 2003, Liliana underwent surgery, incurring approximately $ 6,000 in medical bills. The company’s health insurer initially refused to cover these expenses because the company had cancelled Fernando’s coverage effective September 30, 2003, even though he was still employed on that date. Eventually, however, the premature termination of Fernando’s health insurance was corrected and the claim was paid in February 2004.

On November 3, 2005, plaintiffs filed a complaint alleging they had been terminated in violation of the LAD in retaliation for having complained about Marino’s harassing conduct. In a separate count under the LAD, they also alleged that the premature cancellation of Fernando’s health insurance was a deliberate act of retaliation. In this regard, although Liliana’s medical bills were eventually paid, the plaintiff’s claimed the premature cancellation of insurance coverage had caused them financial problems, damaged their credit rating and caused them tremendous stress and anxiety. The trial court dismissed both claims, holding that (1) the claims of retaliatory termination were barred by the 2-year statute of limitations applicable to LAD claims and were not saved from being time barred under a “continuing violation” theory and (2) the cancellation of Fernando’s medical insurance coverage was not the type of post-employment action that could give rise to a retaliation claim under the LAD.

The Supreme Court’s Opinion

A. Wrongful Termination/Statute of Limitations/Continuing Violation Theory

After noting that the LAD expressly makes it unlawful to take reprisals against any person because that person “has opposed any practices or acts forbidden” by the LAD, the Supreme Court agreed with the trial court that plaintiffs’ claims that their terminations constituted unlawful retaliation were barred by the statute of limitations because plaintiffs did not file their Complaint until more than 2 years after they were discharged by the defendant company. Although the Court noted that “a judicially created doctrine known as the continuing violation theory has developed as an equitable exception to the statute of limitations,” the Court ruled that this theory did not apply to plaintiffs’ wrongful claims of unlawful termination. The Court adopted the reasoning of the United States Supreme Court in National Railroad Passenger Corp. v. Morgan, 536 U.S. 101 (2002), where “the Court differentiated between discrete acts and continuing violations, noting that some discrete acts, such as termination, failure to promote, denial of transfer, or refusal to hire are easy to identify and that [e]ach [such] incident of discrimination and each retaliatory adverse employment decision constitutes a separate actionable unlawful employment practice.” For limitations purposes, a “discrete retaliatory or discriminatory act occur[s] on the day that it ‘happen[s].” On the other hand a “continuing violation [is] a series of separate acts that collectively constitute one “unlawful employment practice. . . . Such a cause of action accrues on the date on which the last component act occurred.” (Internal quotation marks omitted.)

Accordingly, the New Jersey Supreme Court followed Morgan’s holding that “discrete discriminatory acts are not actionable if time barred, even when they are related to acts which are the subject of timely filed charges. Each discrete discriminatory act starts a new clock for filing charges alleging that act. The charge, therefore, must be filed within the [statutorily prescribed] time period after the discrete discriminatory act occurred.” (Internal quotation marks omitted.) The continuing violation theory does not apply to such discrete acts but to “a pattern or series of acts, any one of which may not be actionable as a discrete act, but when viewed cumulatively constitute a hostile work environment[.]” In such a case, the “cause of action would have accrued on the date on which the last act occurred, notwithstanding ‘that some of the component acts of the hostile work environment [have fallen] outside the statutory time period,’” quoting, Shepherd v. Hunterdon Developmental Center, 174 N.J. 1, 21(2002).

The Court concluded that because plaintiffs’ claims of retaliatory discharge and retaliatory cancellation of insurance coverage were “discrete acts,” the continuing violation theory did not apply. Thus the retaliatory discharge claims, filed more than 2 years before the filing of the Complaint, were barred by the LAD’s statute of limitations.

B. Wrongful Cancellation of Insurance/Statute of Limitations/Discovery Rule/Evidence

The Court reached a different conclusion with regard to the impact of the statute of limitations on plaintiffs’ claim that the cancellation of Fernando’s health insurance constituted unlawful retaliation under the LAD. The Court held that although that claim was in some sense related to plaintiffs’ barred wrongful termination claims, as a “discrete act” it must be analyzed separately to determined whether it also was barred by the statute of limitations. Although the cancellation of coverage claim, like the wrongful termination claims, was filed more than 2 years before plaintiffs filed their complaint, the Court held that it was saved from the bar of the statue of limitations by the “discovery rule.” The Court noted that the “discovery rule” is a well established equitable principle that delays the running of the statue of limitations until the time the claimant learns or should have learned of the act giving rise to his claim. In this regard, the Court observed that plaintiffs had not learned of the cancellation of their insurance until November 11, 2003, less than 2 years prior to the filing of their Complaint. Accordingly, by application of the discovery rule plaintiffs’ claim of retaliation based on the cancellation of their medical insurance was not time barred.

It is also important to note that although plaintiffs’ wrongful termination claims were time barred, the Court held that evidence surrounding those terminations would be inadmissible as background evidence if deemed relevant to the claim of retaliatory cancellation of insurance. The Court held it would for the trial judge to determine whether evidence relating to the plaintiffs’ terminations would be admissible under Evidence Rule 404(b) as evidence of other “wrongs” to prove “motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident when such matters are relevant to a material issue in dispute.” In this regard the Court noted that evidence of prior acts of retaliation could be relevant to the defendant company’s contention that the cancellation of insurance was inadvertent.

C. Wrongful Cancellation of Insurance/Adverse Employment Action

The Court rejected the defendant company’s contention that the cancellation of Fernando’s insurance coverage was not actionable under the LAD as a matter of law because it did not relate to his past or future employment. The Court, relying on federal precedent, held that retaliatory conduct actionable under the LAD need not be conduct related to the workplace. To determine the types of employer conduct that constitute retaliation under the LAD, the Court turned to the standard adopted in Burlington N. & Santa Fe Ry. Co. v. White, 548 U.S. 53 (2006). There, the United States Supreme Court, “in addressing the question of how harmful an act of retaliatory discrimination must be in order to [constitute unlawful retaliation]” held that “a plaintiff must show that a reasonable employee would have found the challenged action materially adverse,” meaning that the conduct “well might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” (Internal quotation marks omitted.) The Court distinguished “materially adverse” actions by the employer from “petty slights, minor annoyances, and simple lack of good manners,” which will not constitute unlawful retaliation.

Turning to plaintiffs’ claim regarding the cancellation of their medical insurance, the Court held that such allegations did not fall into the categories of “petty slights, minor annoyances, and simple lack of good manners,” and thus, if proven, could form the basis of a finding of unlawful retaliation under the LAD.

Conclusion

The Roa case is essentially a good decision for New Jersey employers, as it confines the continuing violation theory to hostile work environment claims. Individuals whose LAD claims are premised on having been terminated, not hired, demoted, not promoted, given a cut in pay or other discrete actions affecting their employment will no longer be able to rely on the continuing violation theory if they fail to timely file their claims. Although the Court held that the “discovery rule” is applicable to LAD claims, this rule will come into play only when the employee is for some reason unaware that he or she has been the subject of an adverse employment action. It is anticipated that this will occur only in the rare case.

The Roa case is, however, a reminder to employers that the potential for retaliation claims does not expire once employment is terminated. To minimize the potential for retaliation claims, employers must be careful to have legitimate business reasons for decisions that could adversely affect their former employees.