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Employment contract barring injury suits against third-party clients violates N.J. public policy

By Lisa Milam-Perez, J.D.

A “worker’s comp disclaimer” that a security guard was required to sign as a condition of employment with a security contractor, and that precluded him from suing the firm’s customers for any on-the-job injuries covered under the workers’ comp statutes, was unenforceable, the New Jersey Supreme Court held. Affirming an appellate decision, the state high court unanimously found such a prospective waiver on third-party lawsuits contravened the public policy embodied in the state’s Workers Compensation Act. The security guard’s employer argued in support of its disclaimer as amicus curiae; several employee advocacy groups and the local National Employment Lawyers Association chapter had weighed in here as well (Vitale v. Schering-Plough Corp., December 11, 2017, Patterson, A.).

When Allied Barton Security Services hired the plaintiff as a security guard, it required him to execute a disclaimer in which he agreed to waive and release his rights to sue an Allied customer for any work-related injuries that are covered under the workers’ compensation statute. The firm then assigned the plaintiff to work at a Schering-Plough Corporation facility, where he sustained head, neck, shoulder, and back injuries after falling down the stairs while on the job. He filed a workers’ comp claim, which he resolved with Allied Barton, and then sued Schering-Plough, asserting the third-party client owed him a duty of care while he worked on its premises, and that it was negligent.

Schering-Plough sought to dispose of the guard’s claim on summary judgment, contending it was barred by the disclaimer he signed with Allied Barton, but the court denied the motion and sent the case to a jury, which found the company negligent. An appeals court affirmed, finding the disclaimer was a substantively unconscionable and an exculpatory contract that violated public policy. However, the reviewing court reversed on the merits of the negligence finding, particularly as to whether there was contributory negligence on the guard’s part, and so it ordered a new trial on liability.

The Supreme Court affirmed the finding that the disclaimer was void as contrary to the public policy embodied in the Workers Compensation Act. First, under Section 39 of the statute, prospective agreements barring claims for damages resulting from workplace injuries covered under the statute contravene public policy. The high court construed this provision broadly to encompass not only pre-accident agreements waiving the right to bring a claim for workers’ comp benefits, but also agreements barring common-law suits against third parties.

Second, the legislature addressed an employee’s right to file tort claims against third parties in Section 40 of the Act, which provides: “Where a third person is liable to the employee . . . for an injury or death, the existence of a right of compensation from the employer . . . shall not operate as a bar to the action of the employee or his dependents, nor be regarded as establishing a measure of damage therein.” This clause allows a workers’ comp insurance carrier to pursue reimbursement of benefits it pays out when a third party caused the covered injury. With this, the legislature clearly intended to allow an injured worker to collect workers’ comp benefits and then pursue a common-law remedy against a negligent third party, and thus minimize the burden on the insurance carrier, in keeping with the equitable goals the statute sought to achieve. To enforce the disclaimer here would undermine this purpose.

Because the waiver in question contravened the Workers’ Compensation Act, it violated New Jersey public policy, and was unenforceable. However, the case was remanded for a new trial on whether the third party was liable for the injury in question.