Appeals Court Invalidates Employment Arbitration Agreement For Failure To Designate The Arbitration Forum And Process

Employment Arbitration Agreement NJNew Jersey employers must be mindful of the Appellate Division’s recent decision negating an arbitration agreement that failed to identify the arbitration forum or the method by which arbitration would be conducted.  Flanzman v. Jenny Craig, Inc., et al., Docket No. A-2580-17T1 (App. Div. October 17, 2018).

In this particular case, an 82-year old plaintiff brought suit against her former employer, claiming age discrimination and harassment in violation of the New Jersey Law Against Discrimination. The plaintiff worked for the employer for 26 years. In the 21st year of her job her employer presented her with a document that she ultimately signed and which contained the following  provision:

Arbitration Agreement

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.

. . . [Plaintiff] will pay the then-current Superior Court of California filing fee towards the costs of the arbitration (i.e., filing fees, administration fees, and arbitrator fees) . . . .

The agreement mentioned nothing about which arbitration forum the parties had to resort to, such as the American Arbitration Association (AAA) or JAMS, or the process of selecting an arbitration forum to resolve any employment disputes.

The trial court upheld the arbitration agreement, and the plaintiff appealed.

The appellate court reversed, declaring the arbitration agreement invalid because the parties did not have a “meeting of the minds” – a critical element for an enforceable contract.

“The failure to identify in the arbitration agreement the general process for selecting an arbitration mechanism or setting – in the absence of a designated arbitral institution like AAA or JAMS – deprived the parties from knowing what rights replaced their right to judicial adjudication.”

In a contract such as this one, where the parties do not specify the arbitration institution, the appellate court held that the parties must at least identify the process for selecting an alternate forum. “Without doing that, they have no realistic idea about the rights that replaced judicial adjudication because not all arbitration forums, mechanisms, or settings are alike,” the appellate court reasoned. But the appellate court stopped short of dictating any special language that parties must use in an arbitration agreement. 

WHAT IS THE IMPORT OF THIS DECISION?

Boiler plate arbitration provisions will not suffice. The drafter of an employment contract must incorporate specific provisions about where and how the arbitration is to be conducted, and provide for an alternative arbitration forum in the even the one selected by the parties at the time of contract is no longer in business.

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Author:
Admitted to NJ Bar in 1990, NY Bar in 1991. Former Judicial Law Clerk to Honorable Peter Ciolino, Assignment Judge, Superior Court of New Jersey, Bergen County. Member & Barrister: Daniel J. Moore Bankruptcy Inn of Court Member & Barrister: Morris Pashman Inn of Court Member: Bergen County Bar Association NJ Superlawyer - 2008, 2009, 2010, 2011, 2012, 2013 Nominated for inclusion in Best Lawyers of America Member: Litigation Counsel of America, Trial Lawyer Honorary Society

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