Arbitration agreements are a common feature in many employment contracts. Under an arbitration agreement, the employee and employer agree to submit any disputes to the arbitration process, either before or in place of filing a lawsuit. Advocates for employees’ legal rights tend to view arbitration as favoring employers for a variety of reasons. While both federal and state law generally favor enforcing arbitration agreements, New Jersey courts sometimes apply extra scrutiny to make sure they are fair to employees. A decision issued by the New Jersey Supreme Court (NJSC) in the summer of 2020 offers a cautionary example of how courts may follow the strict letter of the federal and state arbitration statutes, even when it might seem unfair to the employee. The Appellate Division had ruled in 2019 that an arbitration agreement was unenforceable under the law of contracts. In a 5-1 ruling, the NJSC reversed that decision.
Both federal and state law provide that arbitration agreements are presumed to be enforceable and irrevocable, unless a party can show “a ground that exists at law or in equity for the revocation of a contract.” 9 U.S.C. § 2, N.J. Rev. Stat. § 2A:23B-6. Even if, as is often the case, an employee has no opportunity to negotiate the specific terms of an arbitration agreement, courts will likely find it to be enforceable as long as there was a “meeting of the minds,” meaning that both parties knowingly agreed to all of the contract’s provisions.
In 2003, the NJSC ruled that an employee can only waive statutory rights, such as the right to a trial in a court of law, through “an explicit, affirmative agreement that unmistakably reflects the employee’s assent.” The court further held in 2014 that an arbitration agreement “must be clear and unambiguous” about an employee’s agreement “to arbitrate disputes rather than have them resolved in a court of law.”