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WSHB Case Update: New Jersey Supreme Court Rules that the Worker’s Compensation Act Prohibits Waivers of an Employee’s Claims Against Third-Party Tortfeasors

February 2, 2018

Why this Case is Important

In Vitale v. Schering-Plough Corporation, 231 N.J. 234 (2017), the New Jersey Supreme Court held that section 39 of the New Jersey Worker’s Compensation Act prohibits a waiver of an employee’s claims against third-party tortfeasors. Courts have traditionally applied this statute to prohibit waivers of an employee’s right to worker’s compensation benefits. The Vitale decision expands the scope of the prohibition to include waivers of an employee’s claims against third-parties. Therefore, employees cannot be required to waive future tort claims against third-parties as a condition of employment.

Facts of Case

The plaintiff in Vitale was a security guard employed by a security services contractor and assigned to the defendant’s facility. As a condition of employment, the plaintiff executed a liability waiver with his employer purporting to release claims against his employer’s clients, including the defendant. After the plaintiff was injured at the defendant’s facility, the defendant sought dismissal of the plaintiff’s claims based on the waiver.

The Ruling

The New Jersey Supreme Court ruled against the defendant, finding that the waiver signed by plaintiff was unenforceable as against public policy. In declining to enforce the waiver, the New Jersey Supreme Court centered its analysis on section 39 of New Jersey’s Worker’s Compensation Act, which provides as follows:

No agreement, composition, or release of damages made before the happening of any accident, except the agreement defined in section 34:15–7 of this title shall be valid or shall bar a claim for damages for the injury resulting therefrom, and any such agreement is declared to be against public policy.

N.J.S.A. 34:15-39. The Court noted that New Jersey courts have traditionally applied this statute to void pre-accident waivers of the right to worker’s compensation benefits. In deciding whether the prohibition on pre-injury waivers also applied to employee claims against third-party tortfeasors as in the case before it, the Court focused on the statutory language, which it described as “expansive.” Given the broad language, the Court interpreted the statute to bar “not only pre-accident agreements waiving the employee’s right to assert the statutory claim for worker’s compensation benefits, but agreements waiving the employee’s right to assert a common-law action for damages against a third-party based on a workplace accident, that is addressed in section 40.” The Court found support for this interpretation in Delaware, Lackawanna & Western Railroad Co. v. Smyth, 93 N.J. Eq. 80, 82-83 (Ch. 1921), a Chancery Division case from 1921 which applied section 39’s predecessor statute to reach a similar conclusion. The Vitale Court reasoned that depriving the plaintiff of the opportunity to pursue a third-party claim would effectively eliminate the employer’s worker’s compensation lien on third party recoveries, disrupting the legislature’s balancing of interests embodied in the Worker’s Compensation Act.

Conclusion

The Vitale decision prohibits an employee from waiving future tort claims against as a condition of employment, but the case leaves several questions unanswered. For example, if an employee signs a liability waiver as part of a one-time participation in recreational physical activity, is the waiver enforceable? Although courts routinely enforce liability waivers context where risk of injury is an inherent part of the activity, e.g., Stelluti v. Casapenn Enterprises, LLC, 203 N.J. 286, 313 (2010), an expansive interpretation of the Vitale may result in the invalidity of such waivers if the person engaging in recreational physical activity is doing so in the scope of their employment.

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