"Strong Evidence" That Employee Pilfered Company Products Not Enough For Summary Judgment

Originally published on the Employer's Law Blog

In a recent decision, Gibbs v. Caswell-Massey, the New Jersey Appellate Division reversed a trial court's award of summary judgment in favor of an employer on an employee's disability discrimination case, despite the presence of "strong evidence" that the employee had stolen and sold company products. In doing so, the Appellate Division relied heavily upon a non-precedential opinion of an unemployment appeals tribunal, which found that the employer had not presented sufficient evidence of the theft and sale of company property to thwart the employee's claim for unemployment benefits.

Plaintiff, a thirteen year employee of the company, took a leave of absence in November 2006 to undergo hernia surgery. While she was on leave, the company learned that plaintiff's husband had been selling company products at a local flea market. The company was given various evidence to prove the allegations, including photographs of the flea market booth, showing company products on display; a book in the plaintiff's handwriting that was apparently a pricelist for the products; and a copy of the lease for the booth, specifically mentioning the company's products. Plaintiff denied stealing any products, claiming she had purchased the goods, which her husband then sold without her knowledge.

The company terminated plaintiff on December 1, 2006, just a few days after her return from leave, citing an employment agreement she had signed in 1993 that prohibited her from engaging in competition with the company or from receiving any outside remuneration. She filed suit, alleging, among other things, that her termination was an act of discrimination and retaliation on the basis of her disability, in violation of the New Jersey Law Against Discrimination ("NJLAD").

Separate from the lawsuit, plaintiff won an appeal by the company regarding her receipt of unemployment compensation following her termination. The unemployment appeals tribunal held that the company failed to establish that she was terminated for misconduct, finding that there was no evidence that any products were actually sold at the flea market or that she violated her employment agreement.

Although the trial court granted the employer summary judgment on plaintiff's NJLAD claims, the Appellate Division reversed. According to the Appellate Division, the company had "engaged in an ineptly conducted, cursory investigation; relied upon a biased and highly questionable source...; turned a blind eye to the explanation of a thirteen-year employee..., and had no evidence whatsoever that even a single [company] product had been either exposed for sale, much less actually sold, at the [flea market] or elsewhere."

In addition, despite acknowledging that the decision of the unemployment appeals tribunal was owed no administrative deference and had no preclusive effect on the lawsuit, the court cited the tribunal's finding as additional evidence supportive of its decision, calling it "an exemplar of a rational decision-maker akin to... a reasonable juror." The court acknowledged, but ultimately disregarded, the fact that the tribunal's decision was "truncated and attenuated due to the constraints of the [unemployment] agency's procedures."

The Appellate Division's decision ignored the fact that just because the investigation may have been faulty does not mean that the employer was relying on it as a pretext for discrimination. Nevertheless, the Appellate Division reversed the trial court's order granting the employer summary judgment and ordered the case to trial.

As this case illustrates, prior administrative proceedings, including unemployment appeal tribunal hearings, may play a significant role in future litigation. Employers that choose to participate in these administrative hearings should do so with the expectation that courts may rely upon the outcome as persuasive authority.

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