Employment Contract Limiting Worker’s Right to Sue Third Party

The New Jersey Supreme Court recently heard arguments in Vitale v. Schering-Plough as to whether an employment contract limiting a worker’s right to sue a third party following a workplace injury is enforceable. Merck & Co., successor to Schering-Plough, wants the Court to reverse an Appellate Division decision denying its motion for summary judgment and finding that an employment contract between a security guard and his employer, Allied Barton Security Services, violated public policy.

The guard was required by Allied Barton to sign a waiver of his right to sue any customer as a condition of employment. The guard later fell down a flight of stairs, suffering injuries while performing his job at the Schering-Plough facility. He received Workers’ Compensation benefits from Allied Barton and sued Schering-Plough. The appellate decision upheld a $900,000 award against Schering-Plough to the security guard. The trial court found that the contract was unenforceable because it violated public policy and was a contract of adhesion.

Court of Appeals Ruling

The appellate panel affirmed the trial court’s decision of finding the contract unenforceable, stating that the contract contradicted the Workers’ Compensation Act. The panel found that the contract required the guard, as a condition of employment, to waive his right to sue a third party. The panel further found that the worker had no bargaining power. The panel agreed that it was a contract of adhesion pursuant to where the worker had no choice but to sign if he wanted the job.

On appeal before the Supreme Court, Allied Barton argued that the injured worker would at one time have been an employee of Schering-Plough, and thus barred from filing a negligence claim if he had received Workers’ Compensation payments. Allied Barton noted that the type of third-party contracts issued are a way to keep costs down and are an industry norm. In response to that argument, one Justice asked if the cost savings Schering-Plough enjoyed by using third party contractors, came at the expense of the workers hired by the third-party contractors. Another Justice emphasized that it is always possible to save costs by reducing the standard of care.

The Workers’ Compensation Act

Another issue addressed during the arguments involved a section of the Workers’ Compensation statute, N.J.S.A. 34-15-39, pursuant to which, it was argued, employers cannot require workers to waive rights under the Workers’ Compensation Act. The issue was whether the third-party contract requiring the worker to waive his right to sue third parties did in fact require him to waive any rights under the Act. While agreeing with the Appellate Division that the waiver provision of the employment contract was a contract of adhesion and against public policy, the Court ordered a new trial, finding it was error not to charge the jury on the comparative negligence of the worker.

Cherry Hill Workers’ Compensation Lawyers at DiTomaso Law Advocate for Victims of Workplace Injuries

If you or a loved one has been injured in a workplace incident, contact DiTomaso Law at 856-414-0010 or contact us online. Our Cherry Hill Workers’ Compensation lawyers can help you seek compensation for your injuries from all responsible parties. Our offices are conveniently located in Cherry Hill, New Jersey, and we proudly serve injured individuals throughout South Jersey.