Posted on Friday, August 7th, 2015.
Continued Employment Demonstrates Assent to Arbitration Provisions
Arbitration provisions in employee agreements and employee handbooks are generally enforced by both federal and state courts if there is evidence of a valid agreement between the parties. A recent decision by the Appellate Division of the New Jersey Superior Court, in Jaworski v. Ernst & Young U.S. LLP, 2015 WL 4470949 (App. Div. July 23, 2015) gives employers another line of defense against employee challenges to these types of arbitration provisions.
In Jaworski, three employees sued their former employer, Ernst & Young (EY) after being terminated by their former employer alleging that they were being terminated because of their age, in violation of the New Jersey Law Against Discrimination Act (LAD). Each employee had signed agreements with EY, at various points in their employment, that consented to the Common Ground Program. The Common Ground Program required that any “covered disputes” to mediation and then arbitration, barring lawsuits by employees. When the program was amended in 2006, employees were told that continuing with their employment was an acknowledgement and acceptance of the program’s arbitration requirements. Id. at *3. All of the plaintiffs continued their employment after 2007 until their terminations in 2012.
At the beginning of its examination, the court initially examined the employment relationships of all of the plaintiffs with EY. One of the plaintiffs argued that he never agreed to the 2006 modifications, which stated that continuing employment was an acknowledgement and acceptance of the program arbitrations requirements. The Court rejected that argument, however and specifically noted, that the individual plaintiff continued his employment for five years after receiving the 2006 modification to the Common Ground Program: “[I]n New Jersey, continued employment has been found to constitute sufficient consideration to support certain employment-related agreements.” Id. at *5 (internal citations omitted.)
The plaintiffs also challenged the program on several grounds, all of which were denied by the court. First, the court held that the program was not unenforceable as an illusory contract because even though the company could modify the terms of the program, the employee could provide notice to mediate before the new terms of the program took effect. Id. at * 7. Second, the court held that the plaintiffs’ terminations qualified as “Covered Disputes” under the program’s state and local laws provision. Id. at 8. Next, the court disagreed with the plaintiffs argument that the arbitration provisions were not a valid waiver of their constitutional rights, citing that Common Ground Program contained unambiguous waivers. Id. at *9. Finally, the court held that the program was not unconscionable because it did not place the burden of cost of the arbitration entirely on the employee. Id.
Though the plaintiffs intend to appeal this decision, it favors valid arbitration programs as a means of resolving disputes and further weakens another potential route of employee challenges to them. We will closely follow this case and will provide an update if and when a further decision is issued by the New Jersey Supreme Court.
If you would have any questions about your company’s ADR policies, would like assistance in drafting one, or if you have any questions about any other labor and employment matter, please contact any member of Trimboli & Prusinowski, LLC at 973-660-1095 for assistance.