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A sea change is coming in challenging discriminatory treatment. From July 2016 through June 2017, almost 2,000 defamation, inverse condemnation, Conscientious Employee Protection Act (CEPA), and Law Against Discrimination (LAD) cases were filed in New Jersey state court. See Administrative Office of the Courts – Court Management Statistics, New Jersey Judiciary Civil Statistics July 2016 – June 2017. Of those, 806 settled. This means that about 45 percent of employment-related discrimination complaints were resolved without a court’s liability determination. As a result, we’ll never know how many of those defendants committed no unlawful act but nevertheless hedged their bets. Just eight months into the next term, 1,193 of these cases already have been filed. As the State moves to understand a newly mobilized political climate, so too must employers adapt to this changed world of “Me Too” and “Time’s Up.” Employers wonder, then, what can they add to their internal management systems to better protect themselves against frivolous claims?

While an attorney’s role in employment law remains important, employers should consider a pre-emptive tool for warding off meritless claims. In New Jersey, an intentional employment discrimination plaintiff will survive past summary judgment if he shows that the employer’s adverse employment action was more likely motivated by the employer’s alleged animus than the employer’s articulated, legitimate reason. Baker v. Nat’l State Bank, 312 N.J. Super. 268, 284 (App. Div. 1998) (citing McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802 (1973)). If an employer used community-trusted, self-validating, consistent metrics to measure employee performance, courts might consider these indicators to form a complete defense. As such, employers would be able to obtain summary judgment and avoid settlement costs. The innovations of “blockchain” technology could be that pre-emptive tool.

Blockchain technology is most commonly associated with Bitcoin. These peer-to-peer transactions have disrupted the traditional banking sector by eliminating the need for formal institutions in favor of community oversight. See Marco Iansiti and Karim R. Lakhani, “The Truth About Blockchain,” Harvard Business Review (2017). Bitcoin essentially began when a group of people trusted each other to electronically send and receive money (the value) without a bank-sponsored cashier to enter data, and without a bank-sponsored website to mark the transaction. See Mohit Mamoria, “WTF is The Blockchain?” Hackernoon (2017). Instead, its users rely on publicly available (albeit disguised) data and an algorithm to maintain the transaction’s honesty.

Each user has a unique public and private key: Jane can transact by sending a message to John’s public key that John, and only John, can open with his own private key. See Michele D’Aliessi, “How Does the Blockchain Work?” Medium (2016). To validate the transaction, a member of the technology forum needs to calculate a unique identifier (predetermined by the algorithm) indicating that John used his private key to access the value Jane sent to him—and indicating that the same value deducted from Jane’s account was added to John’s account. This unique identifier is a number that platform users try to predict by randomly entering different numbers until the one they enter matches the unique identifying number the algorithm predetermined.

Once any member configures the particular number validating a particular transaction, the transaction is memorialized into an impermeable ledger (creating the so-called “blockchain”). To incentivize members to use their time and energy to configure that number, the system offers users additional real value via Bitcoins. A user’s ability to gain something of real value in exchange for validating someone else’s transaction increases buy-in and investment. And because users are incentivized to configure the number, a potential bad actor is statistically unlikely to configure the number before another community user does. See Ian Cohn, Travis West & Chelsea Parker, “Smart After All: Blockchain, Smart Contracts, Parametric Insurance, and Smart Energy Grids,” 1 Geo.L. Tech. Rev. 273 (2017) (an article integral to this piece’s analysis).

Every blockchain participant can write to and view the ledger, but no participant can change the rules of administration. The distributed ledger is synchronized in real time by the entire blockchain community, which prevents users from posting invalid transactions to the blockchain. Humans must initially define the variables, but the actual contract execution is automated based on a defined parameter or event. Thus, an employer could input a real event, such as an employee’s tardiness or poor customer service review, which the employee would have to agree occurred. If not, the blockchain system fails—and noncompliance with the company’s choice to use blockchain technology to document good and bad behavior, in itself, could create a new event: an investigation by the company’s legal counsel. If the employee does comply with the blockchain system and agrees that the event occurred, then the blockchain system acknowledges that two individuals in real time agreed that this event occurred. Once events or values (if different mal-actions were pre-programmed with varying values indicating offense severity) accumulate, a new event can be triggered: demotion, warning or termination.

Blockchains are ideal for situations where no single user controls the rules of transaction. By contrast, a centrally administered database places a single entity in control of the rules of the platform, while also creating a central store of data that can be hacked or corrupted. Naturally, businesses use a centrally administered human resources department. But if several employers used blockchain systems with agreed upon inputs equaling identical outputs, a non-meritorious plaintiff would not be able to “demonstrate such weaknesses, implausibilities, inconsistencies, incoherencies, or contradictions in the employer’s proffered legitimate reasons for its action that a reasonable fact finder could rationally find them unworthy of credence.” Reyes v. McDonald Pontiac-GMC Truck, 997 F. Supp. 614, 619 (D.N.J. 1998). A court would not have to administer its own credibility determination (which, when viewing evidence in the light most favorable to the non-moving party, favors plaintiffs). The blockchain itself deters inconsistencies because of its community-based validation.

New Jersey introduced 2018 Bill NJ A.B. 3613 in March 2018, which acknowledges in part that:

[T]he development of distributed databases and ledgers protected against revision by publicly-verifiable open source cryptographic algorithms, and protected from data loss by distributed records sharing, colloquially called ‘Blockchain,’ has reached a point where the opportunities for efficiency, cost savings, and cybersecurity deserve study.

New Jersey recognizes that Bitcoin remains only an early indicator of this technology’s potential success. With this bill and the New Jersey Blockchain Initiative Task Force, New Jersey is laying the groundwork for businesses to exploit this technology for good.

Within the last year, legal scholars have published articles recognizing blockchain technology’s ability to revolutionize “smart contracts” and insurance regulation. A litigant would face an uphill battle when asking a court to enforce allegedly agreed-upon but un-incorporated issues if the litigant himself and the blockchain community verified all contract terms. Similarly, in the employment context, a plaintiff would face difficulty asserting his employer’s discrimination was the most likely reason underlying his employer’s adverse employment action if there were pre-programmed, universal metrics by which to flag a terminable offense triggered by an event.

While blockchain technology comes with its own flaws (the system only works if the majority of users are honest), meritorious employment discrimination plaintiffs could be adversely affected. Targeted employees should not feel that there is a newer, larger system against them. But with blockchains, there are contemporaneous checks and balances. Centrally administered systems, such as mainframe networks, store information that can be altered unilaterally: a plaintiff can argue that the employer’s own data from the employer’s own network is a cover for true animus. Blockchain ledgers cannot be altered unilaterally; employers cannot overburden the system lest their activity be flagged. This ensures that true instances of unlawful employment discrimination will see trial, and frivolous claims will not. Only this time, maybe the employers will not have to pay such a high settlement price if they are “backed” by an entire community.

 

Rachel Sollecito is currently the law clerk to Hon. Maryann Nergaard, J.S.C., Morris/Sussex, Civil Division. Upon her clerkship’s completion, she will join the law firm of Gold, Albanese, Barletti & Locascio as an associate in its Red Bank office.