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Employment lawyers on both sides of the aisle just got good news from the New Jersey Appellate Division, which has put a fresh gloss on the “after-acquired evidence” rule in wrongful termination cases. The doctrine limits a fired worker’s remedies where the employer discovers, after the fact, evidence of misconduct that would have been grounds for discharge had it been known earlier. The worker cannot sue for reinstatement nor for economic damages running from the date the employer digs up the dirt. The good news for employers in the Dec. 5 ruling, Taylor v. International Maytex Tank Terminal Corp., A-0838-01, is that economic damages can be cut off even before the date of discovery if the employee engaged in a cover-up to keep the misconduct from the employer’s eyes. But plaintiffs scored a victory, too: a ruling that the after-acquired evidence doctrine does not prevent recovery of noneconomic or punitive damages. “An employer who creates a hostile work environment should not be excused from responding in damages for personal injuries caused by its discriminatory conduct simply because it later learns that the injured employee did something in the past, which if known at the time, would have caused his or her termination,” Judge Jack Lintner wrote, joined by Judges James Petrella and Lawrence Bilder. The decision reversed a 2001 trial court ruling that barred recovery of all damages by the plaintiff. Lintner distinguished between economic injuries, which “bear a direct relationship to restoration of employment status, which might be jeopardized by the employee’s past conduct,” and noneconomic loss. The latter relates “to injuries that have no direct nexus to a plaintiff’s status as an employee” but instead “embody damages resulting from alleged misconduct of an employer which, although directed at an employee, is nevertheless subject to redress because of indignities suffered, not because of the person’s status as an employee.” To deny recovery of noneconomic damages would undermine important public policies behind the Law Against Discrimination and the Conscientious Employee Protection Act, Lintner said, since workers who once did something wrong might suffer discriminatory treatment in silence rather than complain. Taylor’s former employer, International Maytex Tank Terminal Corp., stores hazardous chemicals in 640 storage tanks on its premises in Bayonne, N.J. In February 1997, while Taylor was on duty, 19,200 gallons of methyl tertiary butyl ether, or MTBE, described by the appeals court as a highly toxic gasoline additive, escaped from a tank. No one was hurt, but the spill cost the company $300,000 and brought the city fire department, a hazardous materials unit and a mobile decontamination unit to the scene. It was reported to the Department of Environmental Protection. Taylor denied responsibility but was suspended and demoted the next month. It was not until December 1999, after he sued the company for race discrimination and quit his job, that he admitted in a deposition that he and his boss, Tim Shaffery, left the valve open and that he and Shaffery agreed to lie about it. Shaffery claimed the cover-up was Taylor’s idea. On Jan. 14, 2000, the company terminated Shaffery and wrote to Taylor that he and Shaffery would both have been fired at once if it was known they were lying about the spill. The closest the state high court has come to reaching the issues decided in Taylor was Cedeno v. Montclair State University, 163 N.J. 473 (2000). There, the justices affirmed the dismissal of discrimination and whistleblower claims by a plaintiff who failed to disclose on his job application to Montclair State University that he had been convicted on four counts of bribery in Pennsylvania. Justice Daniel O’Hern dissented, based on McKennon v. Nashville Banner Publishing Co., 513 U.S. 352 (1995), which held that employers cannot escape all liability for employment discrimination if, at the time of the adverse action, nondiscriminatory reasons existed but could not have motivated the employer because they were then unknown. The Cedeno majority distinguished McKennon on the ground that the plaintiff, as a conflicted felon, was statutorily barred from holding the job. Taylor’s lawyer, Neil Unger, of Edison, N.J., sees his case as limiting. “Only in very, very rare circumstances will a court bar more than just economic damages … where an employee has been found to engage in an act that warrants firing,” says Unger. To let the employer completely off the hook would encourage discrimination, he says. Unger disagrees with the appeals court’s affirmance of the lower court’s finding that there was no issue of fact on whether International Maytex would have fired Taylor if it had known the truth. Unger contested that finding on appeal and says he will raise it again if the case winds up in the supreme court. Ronald DeMaria, the lawyer for International Maytex, says the company is still weighing its options. He says the ruling is a “very nice opinion for employers” because of the rollback of the damages cutoff date and because a jury need not decide if the company would have fired Taylor for the cover-up. DeMaria, a partner with Morristown, N.J.’s McElroy Deutsch & Mulvaney, says it was the panel’s judges and not Unger who raised the issue of whether Taylor could recover noneconomic damages and that the parties never briefed the issue.

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