FAA Trumps NJLAD: NJ Superior Court Upholds Employer’s Arbitration Agreement in NJLAD Case

In a matter of first impression, the Monmouth County Law Division in Janco v. Bay Ridge Automotive Management Corp., found that a former employee’s claims brought under the New Jersey Law Against Discrimination were subject to the arbitration agreement that she signed when she was first hired. The Court further held that the recent amendment to the Law Against Discrimination (NJLAD) which prohibits a waiver of any right or remedy available under the NJLAD was superseded by the Federal Arbitration Act.

Facts

Karina Janco signed an arbitration agreement as part of her onboarding documents when she was hired by Bay Ridge Automotive. This agreement stated that both “the employer and employee mutually consent to the resolution by final and binding arbitration of all disputes, claims or controversies of any kind between them,” which include “claims for discrimination, harassment, and/or retaliation. . . .” When Ms. Janco later filed a lawsuit in state court alleging that her employer violated the NJLAD, Bay Ridge Automotive moved to dismiss her complaint and compel arbitration pursuant to the arbitration agreement she signed.

Ms. Janco first argued that the agreement should not be enforced because she was not aware of what she was signing. She claimed that during her employee orientation she was instructed to sign numerous documents, which included the arbitration agreement. She stated that the paperwork she was given to review was difficult to read because she did not have her glasses on during the orientation meeting, and she could not read the “fine print.” She said she spent about five to ten minutes reviewing the documents, and signed them all that day because she wanted to get right to work. Ms. Janco argued that the arbitration agreement was not enforceable because it did not clearly indicate an agreement to arbitrate a discrimination claim and further, that the language of the NJLAD explicitly prohibits the waiver of any right or remedy accorded under its provisions.

Law Division Decision

The Court addressed both of Ms. Janco’s arguments and found that 1) the arbitration agreement was enforceable on its face because it evidenced mutual assent; and 2) the Federal Arbitration Act (FAA) preempted the NJLAD’s ban on employment contracts that required an employee to waive a right provided for by the NJLAD.

Mutual Assent Between the Parties

The Court examined the arbitration agreement and surrounding circumstances and determined that there was clear evidence of mutual assent between Janco and Bay Ridge to arbitrate any claims between them. First, the Court found that the language of the agreement clearly explained the difference between an arbitration and a jury trial, and that the employee was waiving the right to a jury trial by signing the agreement. This language was in bold-face type, with capital letters right above the employee’s signature line. In addition, the agreement was presented as a separate document that was three pages in length, and not connected to or “buried among other documents.” The Court also found it important that the agreement clearly stated that all discrimination, harassment, and/or retaliation claims were included in the waiver, as opposed to the catch-all language of “any and all claims arising out of the Agreement,” which was previously found to be too vague to be enforceable as against NJLAD claims.

The Court also noted that it found no evidence that Janco was rushed or hurried in signing the documents, or that she indicated that she did not understand what she was signing, or that she requested additional time to review or take the documents home with her that night. Nor did anyone refuse to answer a question she had about any of the documents or make any affirmative misrepresentations about their contents. In sum, the Court found that there was no basis on which Janco could argue that the process was unfair or one-sided.

Federal Preemption

Janco also argued that even were the arbitration agreement to be found enforceable generally, new language from the March 2019 amendment to the NJLAD prohibits the waiver of any right afforded by the statute by any subsequent employment contract. Therefore, Janco argued, the arbitration agreement could not be enforced against her claims, because it prospectively waived her right to a jury trial under the NJLAD.

The Court rejected this argument, and in a matter of first impression, found that the FAA preempted the state law, and nullified the 2019 amendment to the NJLAD. The Court explained that its prohibition of any prospective waiver acted as a general ban against all arbitration agreements in employment contracts, which by nature waive the right to a jury trial in favor of arbitration of claims. Therefore, the amendment was “irreconcilable with our national policy favoring arbitration as a forum for dispute resolution,” and in the event of such a conflict, the federal law trumps the state law in question.

Bottom Line

This decision offers some clarity on the newly amended language in the NJLAD, and assures employers that a signed arbitration agreement will be enforceable, even if the employee asserts claims under the NJLAD. Of course, the appropriate steps in drafting and review of these agreements must be taken to ensure that the agreement is one that would indicate mutual assent by both parties. The Court in this case found that it was critical that the agreement contained language that explicitly informed the employee that she was waiving the right to a jury trial for any claims brought against her employer, including claims alleging discrimination, retaliation, and harassment. The impact of this waiver was again plainly noted in two bold-faced sentences directly above the employee’s signature line. No one rushed the employee through the onboarding documents, and no one prohibited her from taking it home to review before she signed. It is important that the employee be given the opportunity to review and understand what he or she is agreeing to in connection with her employment.

Lastly, it should be noted that this opinion originates from the Law Division. Should Ms. Janco appeal the decision, the Appellate Division will have an opportunity to definitively weigh in on the dispute.

For more information regarding this decision and best practices to implement an effective arbitration agreement for your workforce, please contact John C. Petrella, Esq., Chair of the firm’s Employment Law & Litigation Practice Group via email here or Counsel Erica M. Clifford, Esq. via email here or 973-533-0777.