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New Jersey Court Rules on Mandatory Arbitration in Whistleblower Case

Arbitration clauses are an increasingly common feature of New Jersey employment contracts, as well as around the country. If a dispute arises between the employee and employer, they agree to submit it to arbitration, a form of alternative dispute resolution (ADR) that somewhat resembles a trial, instead of the court system. Employment contracts may state that the results of the arbitration process are binding or non-binding. While arbitration may offer some advantages, it is widely perceived as favoring employers. New Jersey courts therefore tend to examine arbitration clauses very closely to ensure that employees have knowingly entered into an agreement that effectively bars them from taking their claims to court. A recent decision by the New Jersey Appellate Division, Walsh v. Prospect EOGH, Inc., et al, No. A-328-17T2, slip op. (N.J. App., Nov. 21, 2018), provides an example of this sort of scrutiny.

The arbitration process is essentially an informal trial, conducted by one or more arbitrators, who are often retired judges or attorneys. The parties submit evidence and arguments, and the arbitrators render an “arbitration award.” This could include an award of damages to one party, an order to do or refrain from doing something, or a declaration of some matter in dispute. If an arbitration clause states that the process is binding, statutes like the Federal Arbitration Act prevent courts from reviewing arbitration awards, except in cases involving alleged fraud or other misconduct.

Arbitration is arguably advantageous because it bypasses the slow-moving court system, where a lawsuit may wait years for a trial date. Parties in an arbitration may be able to select an arbitrator with knowledge of the specific issues involved in the dispute, rather than having the case decided by a randomly-assigned judge. These advantages, however, can also be distinct disadvantages employment disputes. The employer is likely to be at an advantage in selecting an arbitrator.

The dispute in Walsh involved alleged retaliation, in violation of the New Jersey Conscientious Employee Protection Act (CEPA), against an employee for “voic[ing] her objections to the hospital’s practices.” Walsh, slip op. at 3. The complainant’s employment contract included a clause requiring “final and binding arbitration” of disputes. Id. The complainant signed the arbitration agreement, but the employer did not.

When the complainant filed suit in New Jersey Superior Court, the employer moved to compel arbitration. The complainant claimed that she did not remember signing the arbitration agreement, and argued that it was void because the employer did not sign it. The trial court denied the employer’s motion without holding a hearing or issuing a written order explaining its reason for the ruling.

The Appellate Division reversed the trial court’s order, and remanded the case with instructions to hold a hearing on the motion to compel arbitration. It denied the employer’s request “to review the motion de novo,” on the ground that it had no information about why the trial court reached its decision. Id. at 4. Perhaps ironically, the court’s insistence on an explanation of the lower court’s ruling, essentially as a matter of due process, demonstrates a possible advantage of using the court system instead of arbitration.

If you are dealing with a dispute with an employer in New Jersey or New York, the Resnick Law Group’s skilled and experienced team of employment lawyers are available to help you. Please contact us today at 973-781-1204, at 646-867-7997, or online to schedule a confidential consultation to discuss your case.

More Blog Posts:

New Jersey Court Denies Two Motions to Compel Arbitration by Employer in Wrongful Termination Lawsuit, The New Jersey Employment Law Firm Blog, July 6, 2018

New Jersey Appellate Court Invalidates Arbitration Clause in Employee Handbook, The New Jersey Employment Law Firm Blog, April 1, 2016

New Jersey Appellate Court Rules on Enforceability of Employee Arbitration Agreements, The New Jersey Employment Law Firm Blog, October 27, 2015

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