New Jersey Appellate Division Requires Arbitration Provisions to Include Specific Waiver of Right to Sue in Court
Two recent New Jersey Appellate Division decisions have serious implications for employers utilizing or contemplating arbitration provisions. In both decisions – Kelly v. Beverage Works NY Inc., decided on November 26, 2014, and Dispenziere v. Kushner Cos., decided on November 21, 2014 – the Appellate Division relied on the New Jersey Supreme Court’s September decision in Atalese v. U.S. Legal Services Group, which held that an arbitration provision was unenforceable because it lacked “clear and unambiguous language” that the party signing the agreement is waiving its right to sue in court.
Kelly v. Beverage Works NY Inc.
In Kelly, plaintiff was employed as a merchandise sales representative with Beverage Works NY Inc. (“Beverage Works”) and was a member of Local 713, I.B.O.T.U., IUJAT (the “Union”). After plaintiff was out of work for a period of time due to a work-related injury, Beverage Works terminated him for numerous performance deficiencies.
Plaintiff filed suit against Beverage Works and certain individuals asserting violations of the New Jersey Law Against Discrimination (“LAD”) . Thereafter, the trial court granted defendants’ motion to dismiss the complaint for lack of subject matter jurisdiction and to compel arbitration pursuant to the collective bargaining agreement (“CBA”) between the Union and Beverage Works. On appeal, plaintiff argued that (1) the CBA’s arbitration provision was not binding on him because he did not sign it, and (2) alternatively, the CBA’s relevant provisions were too ambiguous to compel arbitration of his statutory claims.
The CBA, which incorporated the Employee Handbook and its Code of Conduct, included employee termination and arbitration provisions stating in part that “any dispute as to the existence of cause for discharge, . . . shall be determined in accordance with Grievance and Arbitration provisions hereinafter contained.” The CBA further provided:
Any disputes between the Union and the Employer arising out of or under this Agreement shall first be taken up for amicable adjustment between the disputants. Either disputant may elect to have such dispute arbitrated by a panel of arbitrators consisting of the American Arbitration Association, Mr. Wellington Davis, or Mr. J.J. Pierson.
Notably, however, neither the CBA nor the Employee Handbook expressly stated that employees waive their right to a jury trial by agreeing to arbitration.
In reversing the trial court’s order granting the defendants’ motion to dismiss and compel arbitration, the Appellate Division cited Atalese and held the arbitration provisions unenforceable because they did not “clearly and unambiguously waive [the plaintiff’s] right to pursue his claims in court[.]” Notably, the Appellate Division stated that though Atalese involved a consumer service agreement and not a CBA, “[w]e discern no reason to conclude that employees bound by a CBA should be charged with greater understanding of their rights than the average consumer.”
Dispenziere v. Kushner Cos.
Though not an employment case, Dispenziere reinforces the importance of a properly-worded arbitration provision. In Dispenziere, plaintiffs were a group of purchasers of condominium units in a real estate development in Perth Amboy known as The Landings at Harborside (the “Landings”). The Landings was allegedly marketed to the general public, including the plaintiffs, as a $600 mixed-use development that would include townhouses, condominiums, retail space, and parks. After the plaintiffs executed purchase agreements for their respective units, the scope of the project was scaled back. The plaintiffs subsequently brought suit against the project developer and its affiliated entities (the “defendants”) alleging violations of the Consumer Fraud Act and a myriad of other claims, including negligence, breach of contract, and breach of the implied covenant of good faith and fair dealing. The defendants then moved to compel arbitration pursuant to the arbitration provision contained in the purchase agreements, which the trial court granted.
In reversing the trial court and holding the arbitration provision unenforceable, the Appellate Division again relied on Atalese and found “the arbitration provision in the purchase agreements . . . devoid of any language that would inform unit buyers such as [the] plaintiffs that they were waiving their right to seek relief in a court of law.” Significantly, the Appellate Division expressly rejected defendants’ argument that many plaintiffs were represented by counsel when they executed their purchase agreements and, thus, had the opportunity to fully review the agreements.
The Kelly and Dispenziere decisions should serve as a reminder to employers to review their existing arbitration agreements and policies and consider including language whereby employees expressly acknowledge waiver of their right to sue in court. This is especially true in light of recent unfavorable decisions for employers on the enforceability of arbitration provisions, such as Raymours Furniture Co. v. Rossi, where the court held that an arbitration agreement contained in an employee handbook was unenforceable because the handbook contained a disclaimer which stated that the handbook did not create a contract and that the employer may unilaterally change its policies.
The Gibbons Employment & Labor Law Department regularly provides guidance to employers regarding arbitration provisions and employee handbooks.