Facts Still Matter When Trying to Enforce Arbitration Agreement Under New Jersey Employment Law

The recent trend has been for courts to find arbitration agreements enforceable under both Federal and New Jersey employment law.  However, prior to enforcing an arbitration agreement, courts must  find that there was actually agreement.  This simple concept was emphasized again by the Appellate Division of the Superior Court of New Jersey in the case of Christina Imperato v. Medwell, LLC.

In that case, Christina Imperato was hired by Medwell, a chiropractic office.  She had a limited education and no prior medical or office experience.  When she was hired, Dr. Ali Mazandarani sat with her and had her sign some pre-employment forms.  They were not explained; Mazandarani sat with her, handed her the forms, and pointed to where she should sign.  She was not given the opportunity to read these or take them home.  The documents included a five page agreement which required that employment disputes be resolved by arbitration rather than court.

Imperato sued Medwell in the Superior Court of New Jersey for sexual harassment in violation of New Jersey’s Law Against Discrimination.  Medwell’s attorneys filed a motion asking the court to dismiss the lawsuit and order the case to arbitration.  The trial judge allowed discovery, including depositions, on the limited question of whether Imperato signed the arbitration agreement, and if so whether she signed it voluntarily and knowingly.  The judge then held a hearing with live testimony on that single issue.

After hearing the testimony, the judge concluded that although she had signed the agreement – which she readily admitted – she had not done so voluntarily and knowingly.  He found that Mazandarani’s action had the effect of making Imperato feel that she had no choice, and that he prevented her from understanding what she was signing.  The judge therefore denied Medwell’s motion to dismiss Imperato’s suit, and allowed discovery to proceed before holding a jury trial in Superior Court.

Medwell appealed to the Appellate Division.  The Appellate Division upheld the trial judge’s decision.

First, the Appellate Division explained that appellate courts will not substitute their opinions on the facts for those of the trial judge who could actually see and heat the witnesses, and was therefore in a better position to judge their credibility.

But more importantly, however, the Appellate Division explained that the trial judge had correctly applied the law.  It explained that while arbitration agreements are favored, they are still contracts subject to New Jersey contract law and New Jersey employment law.  In order to be enforceable all parties must understand the terms and agree to them voluntarily – in legal terms, there must be a “meeting of the minds.”  When one party has superior bargaining power and uses it to force the other party to sign something they don’t understand, there has been no meeting of the minds and the agreement therefore can be enforced.

Nonetheless, it is important to remember that this is the exception rather than the rule.  An employee who signs an agreement to arbitrate should expect that it will be enforced because the law favors enforcing arbitration agreements.  However, employers need to bear in mind that if they want to enforce the agreement, they need to ensure that the employee actually understands the agreement and has voluntarily agreed.