Unemployment Benefits Cannot Be Used to Offset Back-Pay Awards Under the LAD

After an employee is terminated from his or her employment, he or she will usually apply for unemployment compensation benefits. There has existed a disagreement between attorneys who represent employees (the “plaintiff’s bar”) and attorneys who represent employers (the “defense bar”) as to whether the amount of unemployment benefits received by a terminated employee should be used to reduce, offset or mitigate the amount of a back-pay award that the employee receives if he or she successfully proves a wrongful termination claim under the New Jersey Law Against Discrimination (the “LAD”). This is despite the fact that the applicable New Jersey Model Civil Jury Charge states that

“[a]lthough the back pay award should be reduced by any actual earnings, it should not be reduced by any unemployment benefits or other unearned income the plaintiff may have received.” N.J. Model Civil Jury Charge § 2.33(A)(8).

This disagreement was recently resolved by the New Jersey Appellate Division in the published opinion of Acevedo v. Flightsafety, International, Inc., Docket No. A-1295-14T2, — N.J. Super. —, 2017 WL 875281 (Mar. 6, 2017). After a jury trial in which the jury found the defendant-employer liable for a discriminatory and retaliatory discharge based upon the plaintiff’s disability under the LAD, the jury awarded the plaintiff $83,000.00 in back-pay but the trial judge reduced that amount by $14,000.00, an amount representing fifty percent of the unemployment compensation plaintiff had received post-termination. Id. at *1. The Appellate Division reversed the trial judge’s offset. Id. at *5. (“we hold that unemployment compensation benefits may not be deducted from back pay awarded under the LAD”).

The defendant-employer argued on appeal that “unemployment benefits should be deducted from LAD back pay awards as a matter of policy, on a discretionary basis, to avoid giving a LAD plaintiff a double recovery” but the Appellate Division disagreed. Id. at *2. The Appellate Division first noted that the LAD is remedial legislation, intended to eradicate the cancer of discrimination, protect employees, and deter employers from engaging in discriminatory practices. As such, [s]hifting the benefit of unemployment compensation from the wronged employee to the discriminating employer does not serve the LAD’s deterrent purpose.” Id. at *3. The Appellate Division then went on to cite with approval the reasoning and rationale of two cases cited by the above New Jersey Model Civil Jury Charge: Sporn v. Celebrity, Inc., 129 N.J. Super. 449, 459-60 (Law Div. 1974) and Craig v. Y&Y Snacks, 721 F.2d 77, 83-84 (3d Cir. 1983). Id. at *3-4.

It is important to note that courts have been split on the issue of whether to offset back-pay awards with unemployment compensation benefits because neither of the two cases cited by N.J. Model Civil Jury Charge § 2.33(A)(8) are binding upon our state courts. With the publication of Acevedo, however, that is now the law of the State. Unless the defendant-employer appeals to the New Jersey Supreme Court, the disagreement between the plaintiff’s bar and the defense bar has now been firmly resolved in favor of the plaintiff’s bar’s position.

If you have been wrongfully terminated for any reason by your employer, immediately contact the attorneys at The Sattiraju & Tharney, LLP in Princeton, New Jersey at (609) 722-7039 for a free consultation. We fight for workers’ justice under a litany of employee-rights statutes including the Law Against Discrimination.