Arbitration Clause Held Too Vague to Cover Statutory Claims

Employers drafting arbitration clauses for employment contracts and others drafting arbitration agreements generally need to be familiar with the line of New Jersey cases involving arbitration clauses, including the Appellate Division’s recent opinion in Anthony v. Eleison Pharmaceuticals LLC, Docket No. A-932-15T4 (App. Div. July 18, 2016), where the court held that an arbitration clause that does not include reference to a waiver of plaintiff’s statutory rights or a jury trial does not constitute a valid waiver of the right to have claims decided in a judicial forum.

In Anthony, the plaintiff filed a five-count complaint in Superior Court against Eleison, including four alleged violations of the New Jersey Wage Payment Act for failing to pay him once a month, failing to pay him minimum wage, failing to pay him overtime compensation, and failing to pay him upon separation of his employment. Central to the dispute was plaintiff’s employment contract which contained the following dispute resolution provision: “The parties agree that should any dispute arise out of this Agreement, a phased dispute resolution process shall resolve the dispute.” The “phased” process culminated in binding arbitration. In response to the complaint, defendants filed a motion to compel arbitration, arguing in part that plaintiff had agreed to the dispute resolution provision in his employment contract, and, thus, to arbitration. The trial court agreed, finding that the arbitration provision was clear and the dispute “arose out of the Agreement.”

On appeal, the New Jersey Appellate Division vacated the order compelling arbitration and remanded the matter to the lower court. In doing so, the court applied the principles announced in Atalese v. U.S. Legal Servs. Grp., L.P., a 2014 New Jersey Supreme Court case addressing the validity of arbitration clauses. In Atalese, the Court held that an arbitration provision in a consumer contract must contain a clear and unambiguous waiver of an individual’s rights to sue in court granted by various consumer protection statutes. Although the Court did not require specific language that must be included to accomplish a valid waiver of rights with regard to statutorily based claims, it did provide examples of sufficient waiver language, to which the Appellate Division in Anthony cited. Building on Atalese, the Anthony court held that, while no specific language is required, an arbitration clause governing employment-related disputes must make it clear to the employee that he or she is agreeing to a waiver of the right to a judicial remedy for statutorily based claims and to a jury trial.

Employers are advised to review their arbitration agreements to make sure they comply with the requirements of Atalese and Anthony. Specifically with regard to statutorily-based claims, the “any dispute” language employed in the arbitration clause at issue in Anthony is patently insufficient to compel the arbitration of such claims. Judicial remedy and jury trial waivers in arbitration agreements should expressly reference statutorily-based claims.

For questions regarding this blog, or arbitration agreements generally, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.