United States: N.J. Supreme Court Rules That A Retaliation Case Requires An Underlying Complaint That Is Made "Reasonably And In Good Faith"

In Carmona v. Resorts International Hotel, No. A-83-05 (February 21, 2007), the New Jersey Supreme Court held, in a case of first impression, that a plaintiff asserting a statutory retaliation claim under the New Jersey Law Against Discrimination ("LAD") must prove, as part of the prima facie case, that an initial complaint was filed reasonably and in good faith, and that an unreasonable, frivolous or bad-faith complaint is an insufficient basis to establish a LAD retaliation claim. In addition, the court held that, within the limits of New Jersey's evidentiary rules, an employer's investigative report concerning a terminated employee's statutory claim(s) can be admitted into evidence if the report is relevant and is offered to show the decision-maker's motive in taking adverse action against the plaintiff.

Carmona is significant because it may limit the circumstances under which a plaintiff can prevail on a statutory retaliation claim, and because it underscores the importance, and utility, of an investigative report when defending at trial against a retaliation, or arguably, any statutory employment claim.

The plaintiff, Reinaldo Carmona ("Carmona"), a Hispanic front desk agent employed by Resorts Atlantic City hotel ("Resorts"), missed work on several occasions because of a drug dependency problem. By August 2001, he had accumulated enough "unauthorized absences" to subject him to discipline under Resorts' absenteeism and progressive discipline policy.

Approximately two months later, Carmona complained to Resorts about what he believed was Resorts' racially discriminatory application of its medical leave and absenteeism policy. The day before Carmona lodged his complaint, however, Resorts observed Carmona and a Hispanic coworker, William Santiago ("Santiago"), improperly upgrade guest rooms in exchange for gratuities. After Santiago and Carmona admitted to Resorts' investigators that they had committed this infraction, and after the hotel had completed and documented its investigation into these transgressions, Resorts fired both employees. Carmona thereafter sued Resorts under the LAD, claiming that Resorts subjected him to a hostile work environment, discriminated against him concerning its medical leave of absence and attendance policy, and retaliated against him for complaining about the alleged harassment and discrimination.

The trial court refused to admit Resorts' investigative report, which would have shown its legitimate, nondiscriminatory reason for discharging Carmona and Santiago, and rejected Resorts' request to tell the jury that Carmona had to demonstrate he possessed a reasonable good faith belief for his race discrimination complaint. Instead, the judge reasoned that if the jury believed Carmona was fired because he complained, that complaint was reasonable as a matter of law. The jury returned a verdict for Carmona and awarded him compensatory damages and lost wages.

On appeal, Resorts challenged both the trial court's refusal to issue its proposed jury instruction on Carmona's retaliation claim as well as its failure to admit the investigatory report into evidence.

Regarding the jury instruction, the Supreme Court agreed with Resorts that Carmona's bare filing of a discrimination complaint - which allegedly triggered the later claimed retaliation - did not implicate LAD's statutory protections unless he possessed a reasonable good faith basis for making the complaint. The court analogized LAD retaliation claims to those filed under the New Jersey Conscientious Employee Protection Act (CEPA), which requires a plaintiff to show that he/she reasonably believed that his/her employer's conduct violated a law, rule, regulation or public policy.

The court held that in LAD retaliation cases, the plaintiff "bears the burden of proving that his/her original complaint – the one that triggered his/her employer's retaliation – was made reasonably and in good faith" and that an unreasonable, frivolous, bad-faith or unfounded complaint is insufficient to establish liability for retaliation under LAD.

The court also held, contrary to the lower courts, that Resorts' investigative report was an admissible, non-hearsay statement because it was relevant to show that Resorts terminated Carmona for legitimate, nondiscriminatory reasons, especially because Resorts' motivations were directly at issue. The court cautioned, however, that any such report also must be relevant; namely, there must be a showing that one of the decision-makers knew about its contents and acted upon it, and that all portions of the report are separately admissible or properly redacted to omit inadmissible information.

With these general employment law developments in mind, Carmona is noteworthy for New Jersey employers for several reasons.

First, it imposes a significant evidentiary proof hurdle upon plaintiffs pursuing LAD statutory retaliation claims and narrowly restricts the circumstances under which they can prevail on those claims. Unless and until the plaintiff establishes the reasonableness of the complaint giving rise to the alleged retaliatory act, or that he/she lodged the complaint for reasons other than to thwart an otherwise appropriate disciplinary action, it is unlikely the retaliation claim will survive summary dismissal.

Second, Carmona provides an incentive for employers to investigate and create reports regarding incidents of employee wrongdoing that could lead to an adverse employment action. If the employee later challenges the employer's motivation for the adverse action, the investigative report may, if the decision-maker relied upon it, demonstrate that the employer possessed a legitimate, nondiscriminatory reason for an adverse employment action relating to the employee's wrongdoing.

Finally, Carmona underscores the general value and utility of documenting employee discrimination and harassment complaints, as well as whistleblower type complaints. Indeed, because the Supreme Court analogized LAD retaliation claims to those under CEPA, it is likely that the court's evidentiary ruling in Carmona would likewise extend to CEPA actions.

Of course, the need to properly investigate employee claims is nothing new. Employee lawsuits increasingly focus on the quality of the organization's investigations and investigators. Often these lawsuits are won or lost based on the jury's answer to questions such as "Was the investigator properly trained?" or "Did the investigator go too far and violate an employee's privacy rights?" At the same time, courts are giving greater deference to properly conducted investigations. The U.S. Supreme Court rulings in Burlington Industries and Faragher created an affirmative defense for employers who respond properly in harassment cases.

Commenting on these court cases, the Equal Employment Opportunity Commission recently advised that employers should ensure that the individual who conducts the investigation will objectively gather and consider the relevant facts. Whoever conducts the investigation should be well-trained in the skills that are required for interviewing witnesses and evaluating credibility. Additionally, as evidenced by Carmona, an effective, unbiased and well-documented investigation is one of the best weapons against liability in employment litigation.

In light of Carmona, we recommend that employers:

• train human resources personnel on how to conduct effective internal investigations that produce objective results and withstand scrutiny in subsequent litigation;

• promptly and thoroughly investigate employee discrimination and harassment complaints as well as allegations about employee wrongdoing, regardless of whether the complaint is initially viable;

• document and maintain investigatory findings; and

• apprise decision-makers involved in personnel decisions respecting the subject employee about the report and its contents.

By adopting the foregoing procedures, employers may minimize their risk of legal exposure to statutory discrimination, harassment and retaliation claims and, if litigation ensues, will be better positioned to defend against and defeat one or more of those claims.

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