Unemployment Offset Determined Unlawful in Back-Pay Awards

New Jersey – A recent Appellate Court ruling  determined that a plaintiff-employee’s unemployment benefits were incorrectly credited against a verdict he obtained in a discrimination suit against his former employer.

Rex Fornaro was formerly employed as a flight instructor with Flightsafety International Inc. After his termination, he collected unemployment for 11 months. An Essex County jury awarded $83,000 in back pay, and Superior Court Judge Francine Schott reduced that award by $14,000, which represented half the unemployment benefits the state had paid him. In her decision, Judge Francine Schott noted this was a fair adjustment since both an employer and employee pay into unemployment benefits.

The decision was appealed and in the Appellate Court decision, Judge Susan Reisner wrote: “We hold that the collateral source statute, N.J.S.A. 2A:15-97, does not apply to [New Jersey Law Against Discrimination] cases, and we find no other basis on which to deduct unemployment compensation from back pay awarded under the LAD,”

The panel also relied on federal jurisprudence, including the U.S. Supreme Court’s 1951 decision in NLRB v. Gullett Gin, where the court held that the National Labor Relations Act mandates that unemployment benefits are not to be deducted from back pay awards.