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Posted: February 26, 2019

Employment Contract Term Waiving Claims for Workplace Injuries Unenforceable in New Jersey

On December 11, 2017, the New Jersey Supreme Court issued a decision in Vitale v. Schering-Plough Corporation, No. 078294, holding that a pre-accident agreement disclaiming liability was unenforceable, explaining:

In section 39, the Legislature declared a public policy regarding certain agreements entered into in advance of a workplace accident:

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.

That provision addressing pre-accident agreements has been a component of the Workers’ Compensation Act since 1913, when section 39’s similarly-worded predecessor statute was enacted as an amendment to the Act. The provision has been construed in several decisions to void a pre-accident agreement by which the employee purports to waive his or her right to the workers’ compensation benefits authorized by the Act. Those decisions make
clear that, unless authorized by N.J.S.A. 34:15-7, a preaccident employer-employee agreement that prospectively deprives the employee of workers’ compensation benefits is contrary to public policy pursuant to section 39. The Legislature, however, did not restrict section 39 or its predecessor statute to the waiver of workers’ compensation benefits through pre-accident agreements, as it could have by means of a simple modification of the statutory language.

Instead, the Legislature chose expansive terminology in section 39. It provided that no pre-accident “agreement, composition, or release of damages,” other than an agreement authorized by N.J.S.A. 34:15-7, would bar a claim for “damages” — the same term that appears in section 40 to describe the remedy that an employee would pursue in a third-party claim. As we have frequently noted, we cannot write in an additional qualification which the Legislature pointedly omitted in drafting its own enactment. We decline to do so here. We construe section 39’s broad language to encompass not only pre-accident agreements waiving the employee’s right to assert the statutory claim for workers’ 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.

. . .

In sum, we view sections 39 and 40 of the Workers’ Compensation Act to state public policy governing this appeal. Under section 40, the Act does not bar or limit common-law premises liability claims against potentially liable third parties, but provides for a lien on the employee’s recovery that may relieve the financial burden of a compensation award on the employer’s workers’ compensation carrier. To ensure that the statutory scheme properly balances the interests of the employee, the employer, the employer’s workers’ compensation carrier and any potentially liable third party, the Legislature declared in section 39 that any pre-accident agreement, composition or release of damages other than that defined in N.J.S.A. 34:15-7, is contrary to public policy.

Applying the contract principles set forth in Rudbart, Stelluti, and Rodriguez, we conclude that the Disclaimer is void because it is contrary to the public policy expressed in sections 39 and 40 of the Workers’ Compensation Act.

The Disclaimer, by which Vitale waived any claims arising from or related to injuries which are covered under the Workers’ Compensation statutes, constitutes an agreement, composition or release of damages made before the happening of any accident. It is not an agreement authorized by N.J.S.A. 34:15-7, and is therefore not within the sole exception identified in section 39. Accordingly, the Disclaimer is in the category of employment agreements that the Legislature has declared to be against public policy.

(Internal quotations and citations omitted) (emphasis added).

Litigating contract disputes is a large part of our practice. In New Jersey, contracts usually are enforced as written. However, there are exceptions, including the one here, where a statute prevents parties from including certain kinds of damages waivers in their contracts. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding a contract dispute.

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