NJ Appellate Division Rules that Continued Employment Means Consent to Arbitration

On July 23, 2015, the New Jersey Appellate Division upheld Ernst & Young’s alternative dispute resolution (“ADR”) policy statement as valid and enforceable.  In Jaworski v. Ernst & Young, No. A-5259-13T2, three former employees brought suit in the Superior Court alleging that their termination, which came after more than ten years of employment, was motivated by their age in violation of the New Jersey Law Against Discrimination.  Prior to their terminations, Ernst & Young had implemented and periodically revised its ADR policies, notifying its employees that any claims, controversies, or other disputes would be resolved through the corporate Common Ground Program.  Ernst & Young’s program prohibited employees from filing lawsuits and proceeding to a jury trial.  Employees were also told that continuing with their employment for a certain period of time was an acknowledgement and acceptance of the program's arbitration requirements.  The employees were also provided with notices of periodic changes to the arbitration policy by electronic distribution.  The plaintiffs argued that the arbitration language created an illusory agreement because Ernst & Young retained the right to unilaterally modify its terms and the Common Ground Program, violated their constitutional right to a jury trial, and that the program was unconscionable because it imposed substantial forum costs.

The Appellate Division held that the continued employment by each plaintiff following receipt of the policy did, in fact, constitute an agreement to settle claims by alternative methods.  The Appellate Division also found that Ernst & Young repeatedly responded to developments in the law by amending its ADR procedures to provide “great, not fewer protections.”  Because the employees only had to give written notice of the intention to mediate no later than thirty days after receiving the second electronic notice of an amendment or termination of the program, the Appellate Division found that the ADR provision not illusory.  Moreover, the ADR policy specifically included state statutory anti-discrimination claims as “Covered Disputes,” Ernst & Young had “clearly and unequivocally” put its employees on notice that these types of claims were subject to mandatory arbitration.  Finally, the Appellate Division rejected the unconscionability claim as the ADR provision specifically contained a fee-sharing provision which stated in the event of arbitration, costs would be shared equally by the company and the employee.

Given that the New Jersey Supreme Court has yet to address the issue of illusory agreements in ADR policies, there is a strong likelihood the Supreme Court will accept review on appeal.  In New Jersey, continued employment has already been found to constitute sufficient consideration to support certain employment-related agreements including non-compete agreements.

Employers’ Takeaways:

• This decision allows Employers to obtain consent to ADR policies without an actual written agreement between the Employee and Employee.
• Employers should clearly specify that an Employee indicates his or her agreement to ADR by beginning or continuing employment with the Employer.
• Ensure that your company’s policies with respect to ADR are clear and unequivocal, and ensure that any and all revisions to ADR policies are distributed to employees.

For more information regarding this decision and best practices when implementing or revising alternate dispute resolution policies, please contact John C. Petrella, Director of the firm’s Employment Litigation Practice Group at jpetrella@genovaburns.com or Dina M. Mastellone, Esq., Director of the firm’s Human Resources Practice Group, at dmastellone@genovaburns.com or 973-533-0777.