Court Finds that Unemployment Benefits Don’t Offset Back Pay Award


The New Jersey Appellate Division has reinstated a jury award for back pay in a claim based on discrimination and retaliation under the New Jersey Law Against Discrimination. The court concluded that a lower court had improperly reduced the jury award by offsetting unemployment benefits against it. The case was sent back to the lower court with the explicit ruling that no deduction or offset was allowed.

The plaintiff in the case had filed a lawsuit alleging discrimination based on a disability, seeking lost wages, as well as damages for emotional distress. The court rejected the claim for emotional injury, but the jury awarded him $83,000 for back pay. The judge subsequently reduced the damage award by $14,000, offsetting the award by 50% of the unemployment benefits the plaintiff had received. The plaintiff appealed, arguing that the offset was inappropriate, and the defendant appealed, contending that the damage award should have been reduced by the full amount of the unemployment benefits.

The issue the court addressed was what is known as the “collateral source” rule, which prohibits duplicate recovery from different sources in personal injury or wrongful death actions. The purpose of the collateral source rule is to prevent a party from recovering the same loss from a number of parties. In finding that the collateral source rule did not apply to lawsuits based on discrimination, the court ruled that offsetting a back pay award by amounts received in unemployment compensation was contrary to the intent of the Law Against Discrimination, and inappropriately shifted the benefit of unemployment compensation from the wronged employee to the wrongdoer—the employer who engaged in discrimination.

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