Recent New Jersey Appellate Division Decision Refuses to Compel Arbitration In Age Discrimination Suit

The New Jersey Appellate Division recently issued a decision which found an arbitration agreement unenforceable against a plaintiff who was alleging age discrimination under New Jersey’s Law Against Discrimination, N.J.S.A. 10:5-1 (“LAD”). Our attorneys represent both employers and employees in employment law, and the determination of whether an arbitration agreement is enforceable is one of the first issues that must be decided in any case where there is a signed arbitration agreement.

 

The decision was in the case of Flanzman v. Jenny Craig, Inc.  In that case, the employer, Marilyn Flanzman, was an eighty-two year old former weight loss counselor who worked for Jenny Craig, Inc. for twenty-six years.  Who filed suit for alleged age discrimination and harassment.  The trial court below compelled the case to proceed to arbitration.  Marilyn filed an appeal based on the trial court’s order to compel arbitration.  On appeal, the Appellate Division was asked to determine whether the arbitration agreement between the parties was invalidated because the parties failed to identify any arbitration forum or process for conducting the arbitration.

 

The Appellate Division ultimately ruled that the parties lacked a “meeting of the minds” and therefore held that the arbitration agreement was invalid, reversing the trial court’s decision below.  The Court came to its decision because neither party could identify the rights that plaintiff was given under the arbitration agreement in exchange for plaintiff waiving her right to a jury trial.  In its opinion, the Appellate Division found “selecting an arbitral institution informs the parties, at a minimum, about the institution’s general arbitration rules and procedures.  Without knowing this basic information, parties to an arbitration agreement will be unfamiliar with the rights that replaced judicial adjudication.  That is the parties will not reach a ‘meeting of the minds.’”

 

There are some key takeaways from the Flanzman opinion for both employers who have employees sign arbitration agreements and for employees who have agreed to arbitrate claims which arise within the workplace.

 

(1) The arbitration forum needs to be specific.

As the Appellate Division stressed in its Flanzman opinion, courts place great value in a party’s right to a jury trial and are unwilling to find an arbitration agreement enforceable unless there is a showing of a clear understanding that both parties agreed and understand the consequences of waiving the right to a jury trial.  Id. at 621.  For there to be a clear understanding, the arbitration forum or process for conducting the arbitration needs to be specific.  Selecting the particular arbitration forum, such as the American Arbitration Association or JAMS, within the arbitration agreement will avoid the issues that the employer in the Flanzman case faced.

(2) Assigning a specific arbitrator is not required.

While the arbitration forum and/or arbitration process is required to be clearly set forth, the specific arbitrator or method for choosing the arbitrator is not required for an arbitration agreement to be enforceable.  If the parties cannot reach on an agreement on selecting a particular arbitrator, the parties make an application to the Court.  However, the arbitration agreement can specify the procedure in which an arbitrator is selected to avoid the possibility for such an application to be made.

In addition, there are several other factors to consider which drafting an arbitration agreement for a business’s employees and considerations for employees who are subject to an arbitration agreement who have potential claims against that employer such as claims under the LAD and/or New Jersey’s Conscientious Employee Protection Act, N.J.S.A. 34:19-1 (“CEPA”).

Our employment law attorneys can help advise both employers and employees regarding potential employment related claims and an arbitration agreement’s effect on those claims.  To set up an appointment to speak with one of our attorneys, please call (973) 890-0004 or e-mail us.  We can help.