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By: Chris Curci
On November 13, 2018, the Superior Court of New Jersey, Appellate Division, issued an important decision holding that an arbitration agreement between the employer and employee was not enforceable. Flanzman v. Jenny Craig, Inc., Docket No. L-6238-17. The arbitration agreement read:
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.
According to the Appellate Division, this agreement was unenforceable because it “failed to identify the general process for selecting an arbitration mechanism.” What exactly does that mean?
In its effort to clarify this standard, the Appellate Division stated that an employer is not required to “detail in the arbitration agreement the exact manner in which the arbitration” will proceed. However, an employer must identify the “forum” for the arbitration and clearly explain how the employee’s judicial rights to a jury trial are being replaced by the arbitration rights.
For example, the Court noted that it would be sufficient for an employer to (1) identify a forum such as the American Arbitration Association (“AAA”) or the Judicial Arbitration and Mediation Services (“JAMS”), and (2) adopt that forum’s rules and procedures. The Court opined that this would be sufficient because AAA and JAMS’s rules and procedures address numerous procedural issues, such as: (1) notification requirements, (2) how to initiate proceedings, (3) management conferences, (4) discovery, (5) the location of the hearings, (6) the number of arbitrators, (7) how to communicate with the arbitrator, (8) attendance requirements, (9) dispositive motions, (10) evidence, (11) modification of awards, (12) and applications for fees, expenses and costs.
In other words, while the arbitration agreement is not required to “detail the exact manner in which the arbitration will proceed,” an employer must specifically identify a forum such as AAA or JAMS and incorporate that forum’s rules and procedures. This allows the employee to fully understand how his or her judicial rights to a jury trial are being replaced by arbitration.
Employers should review their employee arbitration agreements to ensure their enforceability. If you need help with this or any other employment related question, Chris Curci practices Labor & Employment law in Pennsylvania and New Jersey and is a member of Freeman Mathis & Gary’s Labor and Employment Law National Practice Section. He represents employers in litigation and advises clients on all aspects of employment law. He can be reached at [email protected].