Agreement to Arbitrate Trumped “Not a Contract” Language in Employee Handbook and Acknowledgement Form

The District of New Jersey recently held that a binding arbitration procedure contained in an employee handbook and the corresponding waiver in a signed acknowledgement form were enforceable despite a disclaimer in the handbook declaring the document to be unenforceable as a contract.

In Brooks v. Brookdale Senior Living Communities, Inc., No. 12-CV-2821 (RBK/AMD) (D.N.J. Dec. 20, 2012), the defendant employer moved to dismiss the employee’s complaint and compel arbitration on the grounds that the employer had a binding arbitration procedure in its handbook and the employee executed a waiver of her right to sue the employer in court under two New Jersey statutes. Notably, the waiver was contained in the acknowledgement form signed by the employee upon receipt of the handbook one inch above the signature line. Arguing against arbitration, the employee asserted that the waiver was not valid or enforceable because the handbook and the acknowledgement form both contained language stating that the handbook did not form the basis for a “contract of employment.”

In granting the defendant’s motion and compelling arbitration, the Court ruled that the arbitration agreement was written in plain language and placed front and center in the acknowledgment form so as to create a “clear[ ] and unmistakabl[e]” waiver of statutory rights under New Jersey law. The Court, however, was not unsympathetic to the employee’s confusion over the handbook’s potentially conflicting provisions, which on the one hand emphasized the strict at-will nature of the employee’s employment, but, on the other hand, sought to enforce the arbitration agreement procedure as a contractual right. Ultimately, noting New Jersey’s liberal construction of arbitration agreements in favor of this alternative forum for dispute resolution, the Court found that the clear language in the acknowledgment form saved the employer from its otherwise “inelegant drafting techniques.”

Moving Forward

This decision highlights the importance of clearly-drafted handbook provisions and acknowledgments, as well as the value of having legal counsel review these critical documents to ensure that its provisions do not cause otherwise avoidable confusion.  For answers to questions regarding drafting and reviewing employee handbooks and other related issues, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

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