New Jersey Appeals Court Holds Sexual Harassment Claim Must Be Arbitrated, but Arbitration Clause Cannot Bar Punitive Damages

On August 23, 2018, a panel of judges on the Superior Court of New Jersey, Appellate Division, held in Roman v. Bergen Logistics that, while the plaintiff was bound to arbitrate her claims against the company, the clause in the arbitration agreement barring her from seeking punitive damages under the New Jersey Law Against Discrimination (NJLAD) was invalid.

The plaintiff, Milagros Roman, was hired as a human resources generalist at Bergen Logistics in September 2015. When she was hired, she signed an arbitration agreement that contained a clause stating that she waived her right to punitive damages. Roman was terminated by her immediate supervisor, Gregg Oliver, on December 30, 2015.

Roman alleged in her 2017 complaint that Oliver sexually harassed her, created a hostile work environment, and fired her in retaliation after she objected to his sexual harassment. Roman’s complaint alleged violations of the NJLAD and intentional infliction of emotional distress against the company and Oliver.

The Bergen County Superior Court dismissed Roman’s lawsuit, holding that the arbitration agreement was a valid waiver of her right to bring her claim in court and to pursue punitive damages under the NJLAD.

The Appellate Division affirmed in part and reversed in part. The panel held that Roman must arbitrate her claims because she knowingly agreed to arbitrate claims against the company, but that the clause barring her from seeking punitive damages under the NJLAD was unenforceable because it violates the public policy of the NJLAD.

The panel reasoned that a contractual provision preventing an employee from seeking punitive damages under the NJLAD violates public policy in two ways. First, it eliminates a remedy that the legislature expressly provided to victims of discrimination when it passed the statute. Second, it removes an essential element of deterrence and punishment for high level employees who are in positions to control the employer’s policies and actions regarding discrimination in the workplace.

The panel then dismissed the case to proceed to arbitration, subject to its holding that the provision barring the plaintiff from seeking punitive damages was null and void.