New Jersey Supreme Court Voids Waiver of Third-Party Liability in Employment Contracts

Michael A. Rowe

In Vitale v. Schering-Plough Corp., A-20-16 (Dec. 11, 2017), the New Jersey Supreme Court ruled that an employment contract that limits a worker’s right to sue a third party after an injury is unenforceable because it contravenes public policy.

Allied Barton Security Services (“Allied”) hired Plaintiff as a security guard. As a condition of employment, Allied required Plaintiff to sign an agreement entitled “Worker’s Comp Disclaimer” (the “Disclaimer”). Under the Disclaimer, Plaintiff released all rights he may have had against “any customer…of Allied Security to which [Plaintiff] may be assigned, arising from or related to injuries which are covered under the Workers’ Compensation statutes.”

Allied assigned Plaintiff to provide security at a facility operated by its customer, Schering-Plough Corporation (“Schering”). While on duty at Schering, Plaintiff tripped over a bag of snow-melting ice left on the stairs. Plaintiff sustained injuries to his head, neck, and back. He filed a claim against Allied pursuant to the Workers’ Compensation Act. Plaintiff and Allied settled the claim with Plaintiff receiving $45,552 in workers’ compensation benefits.

Plaintiff then sued Schering, alleging that Schering breached a duty of care owed to him as an invitee. Schering moved for summary judgment, arguing that Plaintiff’s claims were barred by the Disclaimer. The trial court denied the motion, ruling that barring Plaintiff’s claims would violate public policy. The jury found that Schering was negligent and awarded Plaintiff $900,000 in damages. The Appellate Division affirmed the trial court’s denial of summary judgment and the jury’s damages award. The Supreme Court granted certification to address the question of whether Schering was entitled to summary judgment based upon the Disclaimer.

The Court ruled that an employment contract limiting a worker’s right to sue a third party after an injury is unenforceable. The Court considered Sections 39 and 40 of New Jersey’s Worker’s Compensation Act.  Section 39 bars pre-accident agreements that purport to waive workers’ compensation benefits. N.J.S.A. § 34:15-39. Section 40 permits a workers’ compensation carrier to seek reimbursement of benefits it pays when a third party caused the employee’s injuries. N.J.S.A. § 34:15-40. The Court found that the Disclaimer ran afoul of the legislature’s intent, as expressed in Sections 39 and 40. In so doing, the Court explained that the Disclaimer was unenforceable because it “would not only deprive [Plaintiff] of the opportunity to pursue a common-law action against a potentially culpable third party, but would eliminate [Allied’s] workers’ compensation carrier’s lien on any damages” awarded to Plaintiff in his third-party action.

The decision is an important one because it confirms that a worker cannot be forced to release his right to sue a third party in connection with a workplace injury. Businesses in New Jersey which hire a company to provide labor should be aware that they remain liable for workers’ compensation claims filed by the other company’s employee, even if the employee signed a waiver such as the one in this case. In addition, this decision in important because it protects a workers’ compensation carrier’s right to seek reimbursement of benefits it pays to a plaintiff when a third party causes plaintiff to suffer damages.

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