Recently, the New Jersey Supreme Court issued a new opinion further defining the reach of New Jersey’s Consumer Fraud Act. In Allen v. V and A Bros., Inc., the Supreme Court ruled that an employee or owners of a company who has violated a regulatory provision can be liable under the consumer fraud act. It is not new that owner can be liable with their own intentional misrepresentation of fact and thus liable under the consumer fraud act. What is new is that a violation of a regulation, which may be truly a technical violation and not one that requires intent, can lead to the personal liability of an owner or employee responsible for the implementation of the regulation.
It has been the law for many years that an officer or employee could be liable for their affirmative act of misrepresentation or omission under the CFA. It was the individual’s acts that created the liability against them as well as their corporate employer. In Allen the question became, in the absence of an affirmative act of misrepresentation, could an employee or owner of a company be personally liable under the CFA for violating a regulation. A regulatory violation is a strict liability and does not require an affirmative act. In this case, the plaintiffs allege that the contractor violated several regulations affecting home improvement contractors. They alleged that the contractor did not have a written contract under NJAC 13:14A – 16.2; failed to obtain final approval for the construction before obtaining final payment as is required by NJAC 13:45A-16.2 (10), and finally that the contractor failed to obtain their consent for modifying the design as required by NJAC 13:405A -16.2 (a)(3) (IV)
Each of the regulations alleged to have been violated regulated the conduct of a “seller.” The regulation’s definition of the “seller” means a “person engaged in the business of making or selling home improvements . . .” and included not only the business entity but “their officers, representatives, agents and employees.” NJAC 13:45A-16.1A. Given the regulations’ definitions and the definition of person under the CFA, the Court had little trouble finding that an employee or officer could be liable based upon the liberal interpretation required of the CFA.
In this instance the Court had little trouble finding the owners and employees could be liable for violating the particular regulations and therefore, the Consumer Fraud Act. The Court was also quick to point out that not all regulations may result in the liability of the individual. Individual liability would be decided based upon the wording of the regulation. So if a regulation only regulated the conduct of the business entity and did not extend to its agents, then only the entity could be liable for the violation. Also the Court noted that if the business entity had a “policy” of not requiring a written contract, than its employees may not be liable for carrying out that policy because the employee had little choice in the employee’s actions.
The lesson to be learned is if you are an employer make sure you and your employees understand and follow the law. If you are an employee it is for your own protection to understand what the law requires of you and not to violate it. Neither the employee/owner nor the business entity wants to liable to a customer for triple the customer’s damages and to pay the customer’s attorney. Violating a regulation, even if unknowingly, could put you and the business in that position.