Will Collecting Unemployment Reduce the Size of My Employment Lawsuit Verdict?

David Zatuchni

Last updated September 30, 2018.

Getting by in today’s economy can be a real challenge. Despite economic improvements over the last nine years, finding a new job after a termination or lay-off can still take weeks, months, or even longer. As a result, even workers with emergency savings must often apply to the New Jersey Department of Labor and Workforce Development for unemployment benefits to make ends meet.

But what if your termination or lay-off was the result of illegal workplace discrimination or retaliation? And what if you decide to challenge your termination or lay-off by filing a claim against your employer under the New Jersey Law Against Discrimination (the “LAD”)? Will your receipt of unemployment benefits impact your right to recover under the LAD?

In other words, as part of your lawsuit, you will claim financial damages, including back pay for all the weeks or months of lost wages you suffered when you lost your job. If your case proceeds to trial and a jury returns a verdict in your favor, can your employer ask the judge to reduce the value of your verdict by the amount of unemployment benefits you received?

According to a recent New Jersey Appellate Court decision, the answer is no. Keep reading to learn why.

Article at a Glance

  • In a recent lawsuit, a fired flight instructor sued his former employer for disability discrimination and retaliatory discharge.
  • Although the jury awarded the flight instructor $83,000 in damages, the trial court reduced that amount by $14,000 to account for the unemployment benefits the instructor received.
  • The Appellate Court reversed the trial court’s reduction, holding that unemployment benefits cannot be used to offset damages under the Law Against Discrimination.

Fornaro v. Flightsafety Int’l: No Reduction in LAD Damages for Unemployment Benefits

In Fornaro v. Flightsafety International, Rex Fornaro, a flight instructor, sued his former employer, Flightsafety, under the LAD. Fornaro claimed that Flightsafety had engaged in unlawful disability discrimination by terminating him, and that the termination was a retaliatory discharge.

The case went to trial, and a Superior Court jury returned a verdict for Fornaro, awarding him $83,000 in back pay. The Superior Court judge, however, reduced the back-pay portion of the verdict by $14,000, which was around half of what the instructor received in unemployment compensation after his termination.

The judge reasoned that this offset was necessary to prevent Fornaro from receiving a double recovery or “windfall.” After all, both the unemployment benefits and the award of back pay served as income replacements for the fired flight instructor. On the other hand, the judge only reduced Fornaro’s damage award by half of his unemployment benefits because the employer and employee had both paid into the unemployment benefits system.

Fornaro and Flightsafety Appeal: Appellate Court Reverses Reduction in Back Pay

Interestingly, both Fornaro and his former employer appealed the judge’s decision. Fornaro claimed the judge should not have offset any portion of his unemployment compensation against the back-pay verdict, while the employer claimed the judge should have deducted the entire amount of the unemployment compensation.

The Appellate Court agreed with Fornaro. It ruled that unemployment compensation cannot be used to offset LAD awards, due to the special nature of the anti-discrimination statute.

Flightsafety had tried to argue that the reduction was required under N.J.S.A. 2A:15-97, which requires courts to offset an award of damages in personal-injury cases to the extent those damages are duplicated by any benefits received by the injured plaintiff from “any other source other than a joint tortfeasor”—e.g., benefits under a car insurance policy.

But the Appellate Court correctly pointed out that that statute applies only in the limited context of personal-injury cases, with the aim of keeping insurance costs down.  In contrast, the court stated that the LAD was a “deterrent” law, meant to prohibit and punish discrimination.

The court reasoned the LAD’s deterrent effect would be undermined if employers were allowed to use a worker’s unemployment compensation as a credit against the financial harm caused by their wrong-doing.

What Fornaro Means for You

This decision is welcome news for anyone relying on unemployment payments while looking for more work or pursuing a lawsuit against a former employer under the LAD. It means that you will receive the benefit of unemployment payments, not your former employer.

Unfortunately, it doesn’t mean that your former bosses won’t fight you tooth and nail on your LAD claim. If you have been terminated as the result of unlawful discrimination or in retaliation for asserting your rights, you need to contact an employment attorney to help you prepare a strong case against your former employer.

Zatuchni & Associates is an employment law firm committed to protecting employees’ legal rights throughout New Jersey and New York. If you believe you’ve been terminated due to discrimination or retaliation, and you wish to know how to protect your rights, please contact our offices today for a free consultation.

David Zatuchni
David Zatuchni graduated from Northwestern University School of Law in 1995. Since that time, he has exclusively practiced in the field of employment law. For many years, Mr. Zatuchni defended large corporations in all types of employment discrimination lawsuits and labor law matters. Read More

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