Opinion ID: 1889791
Heading Depth: 1
Heading Rank: 2

Heading: What is the Basis for an Award of Punitive Damages Under the LAD?

Text: The LAD provides that for any complaint filed under this act, [a]ll remedies available in common law tort actions shall be available to prevailing plaintiffs. N.J.S.A. 10:5-13. That provision amended the LAD in response to our holding in Shaner v. Horizon Bancorp, 116 N.J. 433, 561 A. 2d 1130 (1989), in which the Court had reasoned that the LAD's provision for judicial enforcement was limited to relief akin to an administrative remedy. In the finding and declaration provision of the LAD, the Legislature catalogued the various harms suffered by victims of discrimination. See N.J.S.A. 10:5-3. The Legislature found that [s]uch harms have, under the common law, given rise to legal remedies, including compensatory and punitive damages. The Legislature intends that such damages be available to all persons protected by this act.... Ibid. (emphasis added). The Legislature indicated that the LAD shall be liberally construed in combination with other protections available under the laws of this State[,] consistent with the Legislature's opposition to such practices of discrimination. Ibid. The seminal New Jersey case discussing the assessment of damages against LAD violators is Lehmann, supra, 132 N.J. 587, 626 A. 2d 445. In Lehmann, the Court held that an employer is strictly liable for equitable relief to remediate any discriminatory hostile environment found in the workplace. 132 N.J. at 616-17, 626 A. 2d 445. However a claim for compensatory damages is governed by agency principles. Id. at 619, 626 A. 2d 445. Under these principles, an employer whose supervisory employee is acting within the scope of his or her employment [is] liable for the supervisor's conduct in creating a hostile work environment, ibid., and even in the more common situation in which the supervisor is acting outside the scope of his or her employment, the employer will be liable in most cases for the supervisor's behavior under the exceptions set forth in § 219(2) [of the Restatement (Second) of Agency ]. Id. at 619-20, 626 A. 2d 445. An employer is generally liable for a hostile work environment created by a supervisor because the power an employer delegates to a supervisor to control the day-to-day working environment facilitates the harassing conduct. Id. at 620, 626 A. 2d 445. [ Heitzman v. Monmouth County, 321 N.J.Super. 133, 144-45, 728 A. 2d 297 (App.Div.1999) (footnotes and additional citation omitted).] However, the Court in Lehmann held that an employer should be liable for punitive damages [under the LAD] only in the event of actual participation by upper management or willful indifference. 132 N.J. at 625, 626 A. 2d 445 (emphasis added). Lehmann was the first New Jersey case to impose the requirement that in order for an employer to be held liable for punitive damages under the LAD, there must be some involvement by a member of the employer's upper management. [1] Lehmann did not set forth a precise definition or criteria by which to measure whether an offender is a member of upper management for the purposes of assessing punitive damages against the defendant employer. Lehmann held, however, that [c]oncerning punitive damages,... a greater threshold than mere negligence should be applied to measure employer liability. 132 N.J. at 624, 626 A. 2d 445. Punitive damages are to be awarded `when the wrongdoer's conduct is especially egregious.' Id. at 624-25, 626 A. 2d 445 (quoting Leimgruber v. Claridge Assocs., 73 N.J. 450, 454, 375 A. 2d 652 (1977)). More recently, in Taylor v. Metzger, the Court noted that [a] supervisor has a unique role in shaping the work environment. Part of a supervisor's responsibilities is the duty to prevent, avoid, and rectify invidious harassment in the workplace. 152 N.J. 490, 503, 706 A. 2d 685 (1998) (quoting Lehmann, supra, 132 N.J. at 622-23, 626 A. 2d 445). Because the plaintiff's supervisor was the perpetrator of the racial harassment of the plaintiff, plaintiff could not seek the redress that would otherwise be available to a victim of invidious workplace harassment, namely, resort to her own supervisor. Id. at 505, 706 A. 2d 685. These statements in Taylor suggest that because the harasser was plaintiff's supervisor, his discriminatory treatment of her increased [the] severity of the conduct. Id. at 504, 706 A. 2d 685.
In Kolstad v. American Dental Association, ___ U.S. ___, 119 S.Ct. 2118, ___ L.Ed. 2d ___ (1999), the Supreme Court recently held that victims of workplace discrimination may recover punitive damages under Title VII of the Civil Rights Act, 42 U.S.C.A. § 1981(a)(b)(1), without showing that the employer's conduct was egregious. However, by a separate 5-4 vote, the Court held that an employer will not be vicariously liable for a manager's discriminatory employment decisions when those decisions are contrary to the employer's good faith efforts to comply with Title VII. That decision is based on the express terms of 42 U.S.C.A. § 1981(a)(b)(1), which allows an award of punitive damages in a case of reckless indifference to human rights. Prior to 1991, victims of job bias could seek relief only in the form of reinstatement. In 1991, Congress amended Title VII to provide compensation to the victims of employment discrimination for their pain, suffering, and lost future wages. It also allowed a jury to award up to $300,000 in punitive damages if the employer acted with malice or reckless indifference to the federally protected rights. Congress clearly intended that the standard apply to employers that engage in unlawful practices with callous indifference to the rights of workers. Justice O'Connor's opinion for the Court is distinguished for its thoughtful discussion of the tensions between common-law principles of vicarious liability for punitive damages based on the unlawful conduct of employees acting with the scope of their employment, and the underlying policies of anti-discrimination programs. To repeat her analysis: Although jurisdictions disagree over whether and how to limit vicarious liability for punitive damages, see, e.g., 2 J. Ghiardi & J. Kircher, Punitive Damages: Law and Practice § 24.01 (1998) (discussing disagreement); 22 Am. Jur. 2d, Damages § 788 (1988) (same), our interpretation of Title VII is informed by the general common law of agency, rather than ... the law of any particular State. ... The Restatement of Agency places strict limits on the extent to which an agent's misconduct may be imputed to the principal for purposes of awarding punitive damages: Punitive damages can properly be awarded against a master or other principal because of an act by an agent if, but only if: (a) the principal authorized the doing and the manner of the act, or (b) the agent was unfit and the principal was reckless in employing him, or (c) the agent was employed in a managerial capacity and was acting in the scope of employment, or (d) the principal or a managerial agent of the principal ratified or approved the act. Restatement (Second) of Agency, supra, § 217 C. See also Restatement (Second) of Torts § 909 (same).