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Unemployment Benefits Do Not Factor Into Damages Calculations in Employment Discrimination Lawsuits

A recent New Jersey Appellate Division opinion now makes it explicitly clear that unemployment benefits cannot be deducted from back pay damages in employment discrimination cases under the New Jersey Law Against Discrimination (“LAD”).  Acevedo v. Flightsafety International, Inc., No. A-1295-14T2, N.J. Super._(App. Div. Mar. 6, 2017).  While this has technically been the law for quite some time, trial judges have routinely ignored or confused the rule because in most other civil cases, unemployment benefits are deducted based on the law known as the “collateral source statute” ( N.J.S.A. 2A:15-97), which requires the deduction of duplicate benefits in most civil cases.

In Acevedo, plaintiff Rex Fornaro was a flight instructor who filed a disability discrimination and retaliation claim under the LAD against his employer, Flightsafety International, a flight training school.  At trial, the jury awarded Fornaro back pay of $83,000.  The trial judge then reduced the back pay by about $14,000, representing 50% of the unemployment compensation he received.  Fornaro appealed, contending among other issues, that the trial judge erred in offsetting his back pay award by 50%.

The Appellate Division agreed, reversing the trial court and explicitly holding that the collateral source statute does not apply to LAD cases.  The Court emphasized that the LAD is a remedial legislation, intended “to eradicate the cancer of discrimination…, protect employees, and deter employers from engaging in discriminatory practices.”  Therefore, “[s]hifting the benefit of unemployment compensation from the wronged employee to the discriminating employer does not serve the LAD’s deterrent purpose.” Id.

Other courts have previously reached the same conclusion regarding unemployment benefits in discrimination verdicts.  However, the Appellate Division intended to make Acevedo the final word on this issue, thereby preventing employers from arguing, in future trials or on appeal, that unemployment benefits should be deducted.