United States: New Jersey Courts Continue To Raise The Bar For Enforceable Arbitration Agreements

Last Updated: November 29 2018
Article by Keith J. Rosenblatt and Dylan C. Dindial

The New Jersey Appellate Division recently issued a decision adding yet another hurdle for employers in the Garden State to overcome in drafting and enforcing arbitration agreements. In Flanzman v. Jenny Craig, Inc.,1 the court found that because an arbitration agreement did not establish the forum for the arbitration, the agreement lacked sufficient details to establish the "meeting of the minds" component crucial to rendering it enforceable. As a result of this decision, employers operating in New Jersey should consider taking a fresh look at their arbitration agreements to ensure they include the necessary provisions.

Background

New Jersey not only follows the Federal Arbitration Act, but also has enacted its own state legislation endorsing a public policy favoring arbitration agreements.2 The New Jersey Arbitration Act, which is similar to the federal statute in many respects, provides, "[a]n agreement ... to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract."3 In relying on this state law-based exception contained in both the federal and state arbitration statutes, however, New Jersey courts have continuously increased the requirements to show mutual assent to arbitrate under state contract law. As a result, courts have created a moving target, expanding protections for employees and burdening employers attempting to draft and enforce arbitration agreements.

For example, in 2001, the New Jersey Supreme Court held that because a waiver of an employee's right to a jury trial and judicial forum under the New Jersey Law Against Discrimination (LAD) and similar statutes must be knowing and voluntary, an agreement to arbitrate such claims is invalid unless it unambiguously states an intention to waive statutory rights specifically, and generally references the types of claims included, such as workplace discrimination claims.4 Thus, an arbitration provision in an employment contract by which the parties broadly agreed to arbitrate "any controversy or claim arising out of, or relating to, this Agreement or the breach thereof" was held not to cover LAD claims.5 Just two years later, the court expanded arbitration enforceability requirements again, holding that implied consent to arbitration – such as by continued employment after receiving an employee handbook containing an arbitration provision – is insufficient consent.6 Rather, to constitute a knowing and voluntary waiver, the agreement "must reflect that an employee has agreed clearly and unambiguously to arbitrate the disputed claim."7 Therefore, the court held, an arbitration agreement must show "an explicit, affirmative agreement that unmistakably reflects the employee's assent," such as by an employee's signature.8

In the past 15 years, New Jersey appellate courts have considered and addressed what constitutes clear and unambiguous assent to arbitration. The resulting prerequisites are far more than a simple signature, and include strict requirements for the contents of arbitration agreements. In fact, under New Jersey law, mutual assent requires that employees have an understanding both of the terms of the arbitration agreement and the ramifications of their assent.9 In order to establish such an understanding, arbitration agreements must explain both that an employee is waiving his/her right to seek relief from a court or jury, including with regard to statutory discrimination and retaliation claims, and how arbitration differs from a court proceeding.10

New Decision

In a new decision issued on November 13, 2018, the New Jersey Appellate Division has taken the requirements to show mutual assent to arbitrate one step further. In Flanzman, the employer sought to compel a former employee to arbitrate her age discrimination and harassment claims under the LAD. The arbitration agreement at issue covered the basics of enforceability, but did not identify any arbitration forum or process for conducting the arbitration. It was signed by the plaintiff and stated:

Any and all claims or controversies arising out of or relating to [plaintiff's] employment, the termination thereof, or otherwise arising between [plaintiff] and [defendant] shall, in lieu of a jury or other civil trial, be settled by final and binding arbitration. This agreement to arbitrate includes all claims whether arising in tort or contract and whether arising under statute or common law including, but not limited to, any claim of breach of contract, discrimination or harassment of any kind.

The trial court enforced the agreement, but the Appellate Division reversed. The court held the agreement was insufficient to establish a meeting of the minds because it did not establish the forum for the arbitration, and therefore failed to set forth the ramifications of agreeing to arbitrate. Although the court clarified that it did not require the identification of a specific arbitrator or any special language in arbitration agreements, the agreements must "either designate [an arbitral] forum or communicate the general method for selecting a different arbitration setting." One way that may be accomplished, the court explained, is by indicating in the agreement that the arbitration will be conducted by the American Arbitration Association or JAMS, two organizations that administer arbitration proceedings and establish certain due process and procedural safeguards under their arbitration rules. According to the court, only by doing so will the parties have sufficient information concerning "the substantive and procedural setting for the entire arbitration process" to establish mutual assent. The court stopped short of requiring that the agreement mandate a specific arbitrator or arbitration selection process, noting that under the New Jersey Arbitration Act, the parties could ask a court to make those determinations once the forum has been designated in the agreement.

Recommendations

Going forward, employers doing business in New Jersey should review and revise their arbitration agreements to ensure those agreements identify the forum for arbitration or, at a minimum, provide the general method for selecting an arbitration setting. The more specifics included in the arbitration agreement, the more likely it is to be enforced. Alternatively, under Flanzman, arbitration agreements that "generally address in some fashion the process that foreclosed [the employees'] right to a jury trial" will also satisfy mutual assent as to the ramifications of the waiver and the procedures that replaced judicial adjudication. As a result, arbitration agreements that set forth the specific procedures to be used in arbitration, rather than a specific arbitral forum or arbitrator, would likely also be valid under current New Jersey law.

Footnotes

1 No. A-2580-17T1, 2018 WL 5914420, at *2 (N.J. Super. Ct. App. Div. Nov. 13, 2018) (approved for publication).

2 N.J.S.A. 2A:23B-1 et seq.

3 N.J.S.A. 2A:23B-6(a).

4 Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168 N.J. 124 (2001).

5 Id. at 134-135.

6 Leodori v. CIGNA Corp., 175 N.J. 293 (2003).

7 Id. at 302.

8 Id. at 303.

9 Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430, 443 (2014).

10 Atalese, 219 N.J. at 446.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Keith J. Rosenblatt
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions