Your NJ Business Is At Risk From Employee, Consumer Fraud And Class Action Lawsuits

How You Can Protect Yourself And Your Company

By: Laura D. Ruccolo, Esq.

There are sharks in the water and they are circling your business looking for a basis to sue. They are not looking for the business disputes that you have with your suppliers or vendors. They are looking at the people you know: your partners, your employees and your customers. If you are a business owner or are in management, you need to assess your risks and take immediate steps to help defend against potentially crippling lawsuits.

The reality is that the State of New Jersey encourages these sharks by providing plaintiffs with huge incentives to file lawsuits:

•   The NJ Consumer Fraud Act awards treble damages and requires businesses to pay for all of the plaintiff’s legal fees (up until last month the NJ Courts were debating whether plaintiff’s even had to prove any damages!).

•   Employee lawsuits can be based on any one of a dozen laws: discrimination, sexual harassment, whistle blower, etc., and also can require businesses to pay for all of the plaintiff’s legal fees, and plaintiff’s can also be awarded punitive damages.

•   Class action lawsuits often allege minor issues such as a small overcharge to your customers that most likely was done innocently over many years. Just the time and expense of assembling and analyzing thousands of records can be daunting, let alone the damage awards and the requirement that businesses pay for all of the plaintiff’s legal fees.

•   The NJ Attorney General and the various state agencies have the power to investigate and sue a business alleging consumer protection violations or employment discrimination. In some cases, the statutes permit the owners and officers to be personally sued.

Worst of all, most of these claims are not covered by your insurance policies! It is not just the Fortune 500 companies that face these suits. Every business including small family-owned businesses remains at risk.

Having this kind of lawsuit filed against your business is only the start of your troubles. These lawsuits are all public records that are reported daily to all of the media outlets. In the press your company will be presumed guilty of not only what the lawsuit alleges, but the public may assume that each alleged violation is just the tip of the iceberg. Whether the claim appears frivolous or not, if not properly handled it could be very damaging to your business and harm not only the reputation of the company but also that of its owners and management. You likely have a lawyer that is on retainer to represent your business in transactions, corporate matters, contracts and the like. Once you receive one of the types of lawsuits described above, you need to assess the ability of your lawyer to litigate with these sharks.

Unless your lawyer is experienced in these types of cases, gets involved early, performs an internal investigation and then systematically dismantles the allegations against the business, your company may be in trouble. Frivolous Action demands need to be sent to these plaintiffs, and in the class action setting, a relentless barrage must be launched to establish that even if some of the allegations are true, the “class” of plaintiffs have little in common. These proofs can result in the early dismissal of the class action before any extensive discovery gets started, by eliminating the class and requiring each claimant to file individual lawsuits, which rarely happens.


Assessing The Risk

The following are some of the most common class claims brought against businesses and their owners:

The Top Five Employment Class Action Claims:

1.  New Jersey Wage and Hour. This type of class action claim is brought by both the State of New Jersey or an individual employee on behalf of all of your company’s employees. The claim usually involves a claimed failure to pay overtime pay or a claim that the employer is not paying the employees for all hours worked. The employer could face damages that not only include unpaid wages owed, but also attorney’s fees and fines if the action if brought by the State.

2.  Fair Labor Standards Act (FLSA). This type of class action claim is brought under Federal law and is similar to claims under the New Jersey Wage and Hour statute, but may also include claims that a class of individuals is being treated as “independent contractors” are incorrectly characterized and as such and is entitled to all benefits of an employee.

3.  Equal Pay Act. Class action claims under this Federal Statute, which is essentially a discrimination claim, assert that men and women performing the same job are not receiving the same pay and difference in pay is improperly based on he employee’s gender.

4.  Prevailing Wage Act. This type of class actions can be both under federal and state law. The claim is brought when a company performs work under a contract with a governmental entity, and the employee claims that he or she did not receive the full amount of pay he or she is entitled to under the statute.

5.  Discrimination. This type of class action claim can be filed by either an individual or the State. The claim is that employees are treated differently, based on a protected category such as age, race, gender and sexual preference.

The Top Five Consumer Class Action Claims:

1.  New Jersey Consumer Fraud Act. This class involves claims such as false advertising or unconscionable business practices. The statute, one of the toughest in the country, provides the successful claimant with treble damages and attorney’s fees. While the individual’s claim may be very small, for example $10.00, when it involves thousands of customers, the business may be facing millions of dollars in damages including attorney’s fees.

2.  New Jersey Truth in Consumer Contract Notice Warranty Act.  This class claim involves claims that the form contract documents the business is using contains language that violates a clearly established legal right that the customer is entitled to. This statute provides for not only actual damages, but also a statutory penalty of at least $100.00 in addition to attorney’s fees. Claims under this statute, like claims under the New Jersey Consumer Fraud Act, are commonly brought because of the big potential payoff.

3.  Breach of Warranty. This class claim involves allegations that your business makes promises to consumers, either in an advertisement, on a receipt you provide to your customers or verbally and does not keep that promise.

4.  Defective Products.  If you sell or manufacture a product, you are at risk for claims that it is defective. This does not always mean that the product causes injury, but it may mean that the product does not perform the way it is expected to perform.

5.  Discrimination. Similar to the class claims you may face by your employees, consumers can also sue your business claiming that they were treated differently than others, based on a protected category, such as such as age, race, gender and sexual preference.


What You and Your Company Can Do

Keep in mind that just because a lawsuit is filed by an individual does not mean that it will not turn into a class action.  What can you do to protect your business?  First, immediately hire experienced legal counsel.  You want to hire an attorney who has defended these types of claims in the past and knows how to fend them off.  An experienced attorney will immediately and aggressively investigate the claims and begin planning your defenses.  In some cases, an experienced attorney will be able to get the lawsuit dismissed without any payment.  However, even if it is not possible to get the lawsuit dismissed, an experienced attorney may be able to help you prevent the court from allowing the lawsuit to proceed as a class action.  Even if that is not possible, perhaps because there is a violation of law, an experienced attorney can help you save money by negotiating a fair settlement.


Laura D. Ruccolo, Esq. has an extensive business background and has been successfully representing large and small businesses and their owners for the past 20 years. She has earned her reputation as an aggressive and intelligent business litigator.  It is not uncommon for the party she litigated against to hire her after the action is over.  Laura has successfully defended numerous class actions, and in some cases has obtained a total dismissal of the case.

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