images (1).jpgBy Chris Palamountain and Rebecca Bjork 

Popular culture is not kind to New Jersey. Whether the protagonists are hard-partying young adults or table-flipping housewives, the images flickering on the screen divert our attention from the fact that big businesses in key sectors of the economy make their home in the Garden State or do business there. For those companies, how New Jersey judges apply New Jersey law in the class action context greatly impacts their potential liability as employers. A recent decision from Judge Katharine Hayden of the U.S. District Court for the District of New Jersey provides a clear analysis of the scope of employer liability under New Jersey law, and can provide companies headquartered in New Jersey more comfort that the fact that they are headquartered there does not expose them to nationwide liability under state law.

Facts At Issue 

In Seibert v. Quest Diagnostics Inc., No. 11-CV-304 (D.N.J. Mar. 28, 2012), Plaintiff Seibert sued her former employer, Quest Diagnostics Inc., under the New Jersey Law Against Discrimination (“NJLAD”), claiming that Quest had discriminated against her because of her age. Based on the fact that Quest is headquartered in Madison, New Jersey – and alleging that key sales force retention policies were conceived of and instituted in New Jersey – Plaintiff sought to bring her state claims as a nationwide class action on behalf of other former Quest sales force employees who were forty or older at the time of their employment with Quest ended. 

After Plaintiff filed her amended complaint alleging the nationwide class, the Magistrate Judge presiding over the case directed Quest to file a motion to limit the NJLAD class to New Jersey employees. The Court then ordered Plaintiff to show cause why she should not be required to amend her complaint to reflect that the purported NJLAD class would be limited to former Quest employees that were employed in New Jersey. 

The Court’s Analysis 

The statutory language of NJLAD does not expressly require that the protected employment occurred in New Jersey. Plaintiff argued that the lack of an express limitation meant that the statute conceivably applied to those individuals employed outside of New Jersey. In further support of her view that the Court should interpret the NJLAD broadly to cover persons employed outside of New Jersey, Plaintiff presented the following statutory interpretation argument – The New Jersey legislature evinced an intent to apply the NJLAD to employees outside of New Jersey because although it modeled the NJLAD after New York’s discrimination statute, it did not adopt the New York statutory language limiting the application of that statute to “the people of this state,” but instead limited protections to “inhabitants of this state.”

The Court quickly disposed of Plaintiff’s statutory interpretation argument, stating that “[i]t is disingenuous to argue that the use of the word ‘ inhabitants’ as opposed to ‘people’ somehow demonstrates the legislature’s ‘clearly expressed’ intent to give the NJLAD a broad extraterritorial application.” Id. at 5. The Court buttressed this conclusion with the fact that New Jersey state courts have consistently applied the NJLAD only to plaintiffs who worked in New Jersey. Id. 

As her fallback, Plaintiff alternatively argued that the issue of whether the NJLAD applied could not be decided at that time because the answer required a complex analysis under New Jersey’s choice of law rules. More specifically, Plaintiff argued that the “most significant relationship” test emphasized where the wrongful conduct took place, and she identified the following facts as establishing that the age discrimination at the heart of her case took place in New Jersey: (1) Quest is headquartered in New Jersey; (2) the discriminatory policies emanated from top management in New Jersey; (3) three key policy-makers worked in New Jersey; (4) high-ranking employees were required to sign non-compete agreements with a provision indicating that New Jersey law governed; and (5) Quest did not contest the choice of venue in New Jersey. 

The Court pointed out that Plaintiff’s application of the “most significant relationship” test was misguided because the New Jersey Supreme Court adopted that test in a tort, not employment action. Id. at 6. Instead, the Court found that the “governmental interest test still appears to be used in the employment context.” Id. Under the governmental interest test, the key question was whether the state had such significant state interest that the choice of its law was neither arbitrary nor unfair. 

Finally, the Court rejected Plaintiff’s argument that the many other decisions rejecting application of New Jersey law to out-of-state employees were distinguishable because none of those cases involved class action challenges to decisions made in New Jersey from companies headquartered in New Jersey, stating simply that her argument was “unavailing.” Id. at 9.

Implication For Employers 

For other companies headquartered in New Jersey with employees outside of the state, this decision provides a strong road map for limiting purported nationwide class claims based on state law, and sets the stage for an argument that employment rights created by the New Jersey legislature only apply to New Jersey employees.