On certification to the Superior Court, Appellate Division.
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
In this appeal, the Court addresses the evidentiary burden in an employment discrimination case that will satisfy the second prong of the prima facie case under the McDonnell Douglas burden-shifting scheme.
This matter comes before the Court on Stanley Roberts Inc.'s appeal from a denial of its motion for a directed verdict; therefore, the Court accepts as true all the evidence supporting Stewart Zive and accords him all legitimate inferences.
Stanley Roberts, Inc. (SRI) is an importer of flatware for retail sale. SRI hired Zive in May 1991 to head its new "Homeworld" division. Prior to working for SRI, Zive had substantial experience as a sales executive. Between 1991 and 1994, Homeworld's sales steadily increased from $905,000 to $2 million. In 1995,1996, and 1997, the sales figures declined below $2 million. Edward Pomeranz, the president of SRI, told Zive that Homeworld needed $2.5 million in yearly sales to justify keeping the division open. Zive, believing that Homeworld could earn that amount in 1998 even though Homeworld had never had sales above $2 million, agreed to meet the goal. Sales only reached $1.5 million that year. Although Zive admitted he was unable to reach the sales goal imposed by Pomeranz, there was never any suggestion that Zive's job was in jeopardy.
Zive suffered a debilitating stroke on December 3, 1998 that paralyzed the left side of his body. Zive worked from home during his rehabilitation. On March 8, 1999, Zive contacted Pomeranz to say he was ready to return to work. At that time, Zive was told his services were no longer needed. At the time of Zive's firing, the effects of the stroke were still evident, especially in gait and speech. Zive was offered a severance package and medical insurance for one year. SRI thereafter issued a memorandum notifying Homeworld sales representatives that Zive was no longer employed with the company and that the division will continue under Zive's assistant, Tom Garda. According to Zive, the Homeworld division remained open, and another employee who performed essentially all of Zive's former job functions eventually replaced Garda.
On June 24, 1999, Zive sued SRI, alleging discriminatory discharge in violation of the New Jersey Law Against Discrimination (LAD). At trial, SRI moved for a directed verdict, claiming that Zive had not presented a prima facie case of discrimination because he failed to prove that he met the "legitimate expectations of his employer" under the test formulated in Clowes v. Terminix Int'l, Inc., which adapted McDonnell Douglas to an employment termination matter. The trial judge denied SRI's motion and the matter proceeded to a jury. The trial court also denied SRI's request that the jury be charged on the elements of the prima facie case. The jury found for
Zive, awarding $225,000 in compensatory damages and $75,000 for pain and suffering. SRI appealed.
The Appellate Division affirmed, holding that a discharged employee in an LAD case need not show that his performance met his employer's subjective legitimate expectations. Instead, the plaintiff must show that he was "objectively qualified" for the position. The court equated objective qualification with basic performance, holding that Zive had worked for SRI for eight years, had substantial experience and was objectively qualified for the position. The court would not accept the $2.5 million sales goal as an objective measure of Zive's performance, finding it a subjective goal established to determine whether Homeworld was worthy as a division of SRI. The appellate panel also approved the trial court's decision not to instruct the jury regarding the burden-shifting analysis of McDonnell Douglas and to pose only the ultimate issue of whether Zive proved an act of discrimination by a preponderance of the evidence.
The Supreme Court granted certification.
HELD: So long as the employee shows that he has been performing in the position from which he has been terminated, the second prong of a prima facie case under McDonnell Douglas is fulfilled. The quality of the employee's performance does not come into play on the plaintiff's prima facie case.
1. The LAD is remedial legislation that should be construed liberally in order to achieve the goal of eradicating discrimination in employment. The LAD prevents only unlawful discrimination against disabled individuals; it does not prevent the termination of anyone who is unable to perform adequately the duties of his job. Discriminatory intent in termination cases is difficult to prove through direct evidence, which is often unavailable. To address this difficulty, the burden-shifting scheme articulated in McDonnell Douglas was adopted in New Jersey, enabling a plaintiff to make his or her case through circumstantial evidence. Under McDonnell Douglas, a plaintiff in a failure to hire case must prove a prima facie case of discrimination. To do so, a plaintiff must prove that he: 1) belongs to a protected class; 2) applied and was qualified for a position for which the employer was seeking applicants, 3) was rejected despite adequate qualifications; and 4) after rejection, the position remained open and the employer continued to seek applications for persons of plaintiff's qualifications. The evidentiary burden is modest: it is to demonstrate to the court that plaintiff's factual scenario is compatible with discriminatory intent. The prima facie case is to be evaluated solely on the basis of the evidence presented by the plaintiff, regardless of defendants' efforts to dispute that evidence. (Pp. 7-13)
2. The establishment of the prima facie case creates an inference of discrimination. At that point, the matter moves to the second stage of the McDonnell Douglas test, where the burden of production shifts to the employer to articulate a legitimate, nondiscriminatory reason for the employer's action. In the third stage of the burden-shifting scheme, the burden of production shifts back to the employee to prove by a preponderance of the evidence that the reason articulated by the employer was merely a pretext for discrimination and not the true reason for the employment decision. (Pp. 13-15)
3. In Clowes, the Court recognized the need to adjust the elements of the prima facie case to account for the differences needed in approach between a hiring case and a discharge case. Thus, in a discharge case, a plaintiff must prove that: 1) he was in a protected group; 2) he was performing his job at a level that met his employer's legitimate expectations; 3) he nevertheless was fired; and 4) the employer sought someone to perform the same work after he left. This standard was not meant to impose a greater burden on the plaintiff; rather, it is an analogue to McDonnell Douglas. (Pp. 15-16)
4. Of the forty-one jurisdictions with case law on this subject, only eight, including New Jersey, have adopted the "employer's legitimate expectations" standard. The remaining jurisdictions use either objective qualifications or a combination of objective qualifications and some evidence of performance as the second prong benchmark. There is a similar split in the federal circuits, which, like the states, have generally rejected the "employer's legitimate expectations" standard. What is seen in these jurisdictions is the underlying unease over making the second prong in a termination case greater than the second prong in a hiring case and thus casting too great a burden on an LAD termination case. (Pp. 16-21)
5. This Court previously held that the "employer's legitimate expectations" is an objective and not subjective standard, reserving the issue of the employer's subjective expectations for the pretext stage of an LAD case. To satisfy that objective standard, all that is necessary is that plaintiff produce evidence showing that he was actually performing the job prior to termination. Along with the remaining prongs of the prima facie case, that evidence is sufficient to support the conclusion that the plaintiff's claim of discrimination is plausible enough to warrant promotion to the next step of the McDonnell Douglas test. In addition, only the plaintiff's evidence should be considered. Performance markers like poor evaluations are properly debated in the second and third stages of the burden-shifting test and do not come into play as part of the second prong of the prima facie case. (Pp. 21-24)
6. In applying the standard adopted today, the Court is satisfied that Zive established a prima facie case, including the second prong. He was a member of a protected class; he worked for SRI for eight years; he had significant experience as a sales executive prior to working at SRI; he was actively engaged in administration and management of Homeworld; and, until his stroke, he had never been told his job was at stake. In addition, the Homeworld division and Zive's job continued after Zive's firing. (Pp. 24-25)
7. It is unnecessary to charge the jury on the elements of a prima facie case. The fact that the jury is not so instructed does not remove the issue of performance from the jury's consideration. The jury will consider performance when it decides the ultimate question of whether the employee was fired as a result of discrimination. (Pp. 25-27)
Judgment of the Appellate Division is AFFIRMED.
CHIEF JUSTICE PORITZ and JUSTICES LaVECCHIA, ZAZZALI, ALBIN, WALLACE and RIVERA-SOTO join in JUSTICE LONG'S opinion.
The opinion of the court was delivered by: Justice Long
The appeal provides us with an opportunity to clarify an issue that has dogged courts across the nation: on a Law Against Discrimination (LAD) termination claim, what is the plaintiff's evidentiary burden that will satisfy the second prong of the prima facie case under the McDonnell Douglas*fn1 burden-shifting scheme. We hold that so long as the employee shows that he has been performing in the position from which he was terminated, the second prong is fulfilled. We further hold that the quality of the employee's performance does not come into play on the plaintiff's prima facie case.
Because the case comes to us on Stanley Roberts's appeal from the denial of its motion for a directed verdict, we accept as true all the evidence supporting Zive and accord him all legitimate inferences. R. 4:40-1; Verdicchio v. Ricca, 179 N.J. 1, 30 (2004)(noting that both Rule 4:40-1 and Rule 4:37-2(b) are governed by same standard: "[I]f, accepting as true all the evidence which supports the position of the party defending against the motion and according him the benefit of all inferences which can reasonably and legitimately be deduced therefrom, reasonable minds could differ, the motion must be denied" (citations omitted)).
So viewed, the following are the facts of the case: Stanley Roberts, an importer of flatware for retail sale, hired Zive in May 1991 to head its new "Homeworld" division. Prior to working for Stanley Roberts, Zive had substantial experience as a sales executive.
Between 1991 and 1994, Homeworld's sales steadily increased from $905,000 to $2 million. In 1995, sales declined for the first time to $1.7 million and in 1996, to $1.3 million. To help meet sales goals, Zive hired an assistant, Tom Garda, and Homeworld's sales increased to $1.8 million in 1997.
Despite the fact that Homeworld had never earned more than $2 million, Edward Pomeranz, the president of Stanley Roberts, told Zive that Homeworld needed $2.5 million in yearly sales to justify keeping the division open. Zive thought that Homeworld would earn that amount in 1998 and agreed to meet the goal. In September 1998, Garda was asked to head another division and reduced the time he spent with Homeworld. By October of 1998, it was apparent that Homeworld would not achieve the sales goal; instead, it ...