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New Jersey Courts Continue to Set High Bar for Arbitration Clauses

New Jersey appellate courts have lately shown some resistance to the growing use of arbitration in consumer and employment contracts. In September 2014 the New Jersey Supreme Court in Atalese v. U.S. Legal Services Group, L.P., cert. denied, _ U.S. _ (2015), held that arbitration clauses in consumer and employment contracts will not be enforced unless they provided clearly and unambiguously for disputes to be handled through arbitration rather than in a court of law. It was not enough for the contract language to simply say that “any dispute would be subject to arbitration.” Following Atalese, the Appellate Division recently held in Anthony v. Eleison Pharmaceuticals, LLC, (July 18, 2016), that an employer could not compel arbitration of an employee’s claims under the New Jersey Wage Payment Act, N.J.S.A. 34:11-2 to -68, even though the contract provided that “[t]he parties agree that should any dispute arise out of this Agreement, a phased dispute resolution process shall resolve the dispute.” The agreement then described the process, which culminated in binding arbitration.

The plaintiff in Anthony was not an unsophisticated employee. He had been hired as a Vice President and Chief Medical Officer of the defendant at a salary of $250,000 plus bonuses. After this termination, he filed suit under the Wage Act and for breach of contract, claiming he was owed more than $740,000 in salary but had only been paid $476,789. The lower court had upheld the arbitration provision, ruling that the statutory claims arose out of the employment agreement and that the arbitration language covered the employment dispute. The Appellate Division disagreed on both grounds. First, it held that the Wage Act allowed Anthony to bring a claim for unpaid salary and not just a claim that the employment agreement violated the law. Second, the appeals court determined that the arbitration clause did not constitute a clear waiver of the employeee’s right to pursue his Wage Act claim in court. Citing to its decision last year in Barr v. Bishop Rosen & Co., 442 N.J. Super. 599 (App. Div. 2015), involving a stockbroker’s employment claims, the court gave examples of the kind of language that would be needed to enforce an arbitration agreement, including language that “the plaintiff agreed ‘to waive [her] right to a jury trial’ and that ‘all disputes relating to [her] employment  . . . shall be decided by an arbitrator;” that “in agreeing to arbitration . . . [the parties] are waiving their rights to maintain other available resolution processes, such as a court action or administrative proceeding, to settle their disputes;” or that “instead of suing in court, [the parties] agree to settle disputes only by arbitration.” The appeals court noted that the arbitration clause in Anthony was not clear enough because it did not provide for the waiver of the employee’s statutory rights or right to a jury trial.

The Anthony decision reiterates that New Jersey courts will enforce arbitration agreements in consumer and employment agreements only if (1) they are written in clear and unambiguous language; (2) they contain an explicit waiver of any statutory claims or rights the plaintiff is asserting; and (3) they contain an explicit waiver of the right to bring a lawsuit in court and to have a jury trial.

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About this Author

Vincent Gentile, Commercial Litigation Lawyer, Drinker Biddle

Vincent E. Gentile litigates a broad range of civil and commercial matters from trial through appeal. He has represented major corporate clients in complex, multiparty cases and individuals and small businesses in both state and federal courts.

Vince concentrates his practice on financial litigation including defense of accountants and auditors, and on shareholder disputes involving closely held corporations, including shareholder "oppression" cases and appraisal actions. He successfully tried and defended an appeal on one of the early seminal...