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New Jersey Supreme Court Rules on Arbitration Agreements Between Employers and Employees

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.”

The case before the NJSC last year involved a rather timely issue. The plaintiff claimed religious discrimination after her employer allegedly fired her for refusing, on religious grounds, to get a vaccine. The employer successfully argued to the trial court that the plaintiff had agreed to mandatory arbitration.

The Appellate Division ruled that the agreement was not enforceable. The arbitration agreement was contained in a “training module” emailed to all employees. It asked them to click a button to “acknowledge” receipt of the arbitration policy. It also stated that any employee who did not click the button within sixty days would be deemed to have agreed to the policy. It did not ask employees to affirm that they agreed to the policy. The court cited the 2003 and 2014 NJSC decisions in finding that there was nothing to indicate a “meeting of the minds.”

The NJSC disagreed with the Appellate Division’s findings and reversed the ruling. It noted that its 2014 decision did not require a “prescribed set of words…to accomplish a waiver of rights.” It held that the arbitration agreement, as presented by the employer to the employee, was sufficient to create a duty to arbitrate the dispute.

The employment lawyers at the Resnick Law Group are available to assist you if you have a dispute with your employer in New Jersey or New York. Please contact us today online, at 973-781-1204, or at 646-867-7997 to schedule a confidential consultation with a member of our team.

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