Alan Schorr’s Employment Case of The Week ending April 19, 2013

Rowan v. Hartford Plaza Ltd, LP, 2013 WL 1350095 (App. Div. April 5, 2013) (unpublished)

This week’s Case of the Week addresses the thorny issues of independent contractor coverage and individual liability under the New Jersey Law Against Discrimination. These two issues seem to come up all the time and they are frequently misunderstood by judges and counsel alike. Here, the Court provides excellent analysis on all issues, earning it Case of the Week honors.

Janet Rowan, Kathleen Lownes, and Nancy Heidler worked for a variety of corporate defendants, which were owned by one or both Joseph Samost and his wife Iva Samost. The three plaintiffs all alleged that they were sexually harassed by Mr. Samost. It is not clear from the record whether any of the plaintiffs were terminated; it appears to be strictly a case of hostile working environment, at least from the initial complaint. They filed suit under the LAD against the corporations and the individual owners. At the end of discovery, the defendants filed for summary judgment, which was granted on a number of issues.

First, the Court held that the plaintiffs were independent contractors and therefore not protected from sexual harassment by the LAD. Second, the Court ruled that the claims against the individual defendants were dismissed, holding that individuals cannot aid and abet their own discriminatory actions. Third, the Court denied the plaintiffs’ request to amend their Complaint to add a Count for violation of the LAD section N.J.S.A. 10-5-12(l). The Court also denied the defendants’ request for counsel fees on the basis of alleged frivolous pleadings. The parties appealed and cross-appealed all four issues.

On the issue of whether the plaintiffs were employees or independent contractors, the Court analyzed the twelve part “Pukowsky” test to determine whether a worker is an employee or an independent contractor. It determined that there was a material issue of fact regarding those factors which precluded summary judgment and reversed summary judgment on that basis. See D’Annunzio v. Prudential Ins. Co. Of Am., 192 N.J. 110 (2007).

The distinction between independent contractors and employees remains important under the LAD because the Appellate Division has repeatedly held that employees are protected but independent contractors are not. I have always found that distinction to be illogical. Nowhere in the LAD does the statute expressly prohibit harassment. Our Courts, however, have read into the statute that “discrimination” also means “harassment”. Lehmann v. Toys ‘R’ Us, Inc., 132 N.J. 587, 600–01 (1993). Why should contractors be permitted to sexually or racially harass their subcontractors? However, section (a), which prohibits discrimination against employees, is written slightly differently than section (l), which applies to contractors. Section (l) does not expressly prohibit discrimination, but rather prohibits a person from “refusing to contract” with a person because of that person’s protected class status. As a result, Courts, including the Court here, have consistently held that the Law Against Discrimination does not protect independent contractors from harassment but does protect them from unlawful termination of contract.

Next, and perhaps the most important of the Court’s rulings, was the determination that a person can be held individually liable for his or her own discriminatory actions. Under the LAD, individual liability is governed by subsection (e), which prohibits “any person, whether an employer or an employee or not, to aid, abet, incite, compel or coerce the doing of any of the acts forbidden under this act, or to attempt to do so.” Some courts, especially Federal court opinions, have misinterpreted this subsection as requiring that individual liability cannot be attached unless the individual aids or abets the discriminatory acts of the employer or another employee. This Court, however, got it right. It simply does not make sense that an individual who sexually harasses a person should escape liability while a person who assists him is held liable. The Court here reversed summary judgment for the husband-owner who actually allegedly sexually harassed the plaintiffs, but upheld the dismissal against the wife-owner, finding no evidence that she aided or abetted.

Finally, the Court reversed the Trial Court’s refusal to permit the plaintiff to amend the Complaint to allege violation of subsection (l) with regard to the plaintiffs. Here, the facts are a bit sketchy because the opinion does not address whether there is a wrongful termination claim. Nevertheless, the plaintiffs will be permitted to amend their Complaint to allege subsection (l) for wrongful termination of contract in the event that the Court or the jury ultimately finds that the plaintiffs were contractors and not employees.

The cross-motion for sanctions by the wife-owner for frivolous pleadings was denied by the Trial Court and that denial was upheld by the Appellate Division. Although the claim was dismissed, the Courts did not find the claim to be brought in bad faith or frivolously.

Although this case is unpublished, it has good analysis and is a good one to file away.

Plaintiffs-Appellants’ counsel: Deborah L. Mains and Nancy A. Valentino, Costello & Mains, PC.

Defendants-Respondents’ counsel (Husband and his corporations) – Steven E. Angstreich and Lauren N. Schwimmer, Weir & Partners LLP.

Defendant-Respondent- Cross-Appellant (Wife) – Gary P. Lightman and Glenn A. Manochi, Lightman and Manochi.

Trial Court Judge – Michael J. Kassel, J.S.C.

Appellate Court Judges: Alvarez, Waugh and St. John (per curiam).