Employee’s Waiver of Compensation Claim Against Employer’s Customer Held Unenforceable

           In any number of situations involving off-site premises employment, employers often require as a condition of employment that the employee agree to waive potential claims for personal injuries against the owner of the premises where the employee will be working.  Computer technicians, entertainers, security personnel and temporary help workers are among those categories of employees who are often singled out for this treatment, often as either a requirement of the employer’s customer or, perhaps, as the employer’s incentive to secure the work from its customer.  The New Jersey Supreme Court has just ruled that, whatever the reason, the courts in this state may not enforce such a waiver, thereby permitting the employee to proceed against the customer for personal injuries sustained on the customer’s premises as a result of the customer’s negligence or other breach of duty.

            Plaintiff Philip Vitale was a security guard hired by Allied and thereafter assigned to perform services at Allied’s customer, Schering-Plough Corp.  At the commencement of his employment, Allied required Barton to sign a disclaimer, in which he acknowledged that if he sustained a work-related injury, he would be entitled to recover benefits under the Workers’ Compensation law, but that he was prospectively releasing any claim against Allied’s customer relating to or arising out of injuries covered under that law.

            After three years working as a security officer, Vitale was promoted to the position of a field manager, training and supervising other security guards at the Schering-Plough facility.  In that role, Vitale happened to fall down the stairs in a “cluttered stairwell” while descending the stairs to secure uniforms for his fellow employees, allegedly sustaining injuries to his head, neck, shoulder and lower back.  Vitale sought and received both temporary disability and a permanent partial disability award in a settlement reached with Allied before the Division of Worker’s Compensation, and then filed a lawsuit against Schering-Plough, claiming that it had negligently maintained the stairwell, and had failed to warn him of a dangerous condition on its premises.

            Schering-Plough then moved for summary judgment dismissing Vitale’s complaint on the basis of the waiver Allied had secured on Schering-Plough’s behalf.  The motion was denied, and the jury awarded Vital a substantial award.  After the Appellate Division affirmed in part and reversed in part the trial court’s decision, the matter was brought to the Supreme Court which, in a unanimous decision, affirmed the denial of summary judgment and remanded the matter for a new trial on the issue of whether Schering-Plough was liable for its negligence.

            Significantly, the Court refused to uphold the waiver (and thereby exonerate Schering-Plough irrespective of any demonstrated negligence) on two related but separate bases: (a) that the waiver was a contract or adhesion, imposed upon the employee lacking any significant bargaining power, and thereby unconscionable; and (b) the contractual provision at issue was exculpatory (i.e., eliminative of a common-law duty) and thereby contrary to public policy.  While the statutory Worker’s Compensation scheme expressly contemplates a quid pro quo for the employer (the employer’s responsibility for statutory damages insulates it from any tort or contract claims), there is no similar statutory bargain implied in law between the third party customer and the employee.[i]  Since 1913, it has been the policy of this state not to permit an employee to waive his or her right to recover against the employer under the Worker’s Compensation laws, and the Court declined to uphold the waiver of his tort claim against the party allegedly causing the underlying accident.

            As a result the Court held that the contractual promise not to bring suit against Allied’s customer was unenforceable, though the matter was remanded to the trial court for a new trial on the issue of Schering-Plough’s actual liability.

            The significance of this decision cannot be overstated.  The Supreme Court of New Jersey has signaled its willingness to void contractually-imposed employee waivers/releases of rights if it can justify its decision on ethereal “public policy” grounds.  As “public policy” is often in the eye of the beholder, this decision can be used as precedent for the striking down of any number of contractual provisions – dealing with, for example, jury waivers, restrictive covenants, access to confidential information, recourse to the courts – that employers incorporate in the agreements they offer to their prospective employees.  What the contract giveth, the Court mayeth take away, at least as concerns what the employer may have premised its employment offer upon.

Rick Shulman

Contact Rick at rshulman@pricemeese.com should you have questions about this article. 

[i]   In fact, the Supreme Court, in Vitale v. Schering-Plough Corporation, Case No. A-20-16 (December 11, 2017) noted that under N.J.S.A. 34:15-40 a worker’s compensation insurance carrier may seek reimbursement against a third party, other than the employer, when it pays out benefits.