NJ Appellate Division Reiterates Requirement That Arbitration Agreements Must Be Clear and Unambiguous To Be Enforceable

In two unrelated yet similar cases, the Superior Court of New Jersey, Appellate Division reiterated the requirements that arbitration provisions in employment agreements must be unambiguous, written in clear language, and specifically state whether the provision is binding in the event of an acquisition or transition.

On September 1, 2015, in Milloul v. Knight Capital Group, Inc., the Appellate Division reversed the trial court’s order granting a motion to compel arbitration.  In Knight Capital, the plaintiff alleged he suffered anti-Semitism and was terminated based on religious discrimination and in retaliation for complaining to Human Resources.  In granting the motion compelling arbitration, the trial court relied on the Dispute Resolution Agreement (“DRA”) that was signed by the plaintiff at the commencement of his employment with the defendant.  The DRA provided that employees would settle all statutory and common law claims, including claims regarding harassment and discrimination, by arbitration.  Thus, the trial court found that the plaintiff had waived his right to a trial for claims under the New Jersey Law Against Discrimination (“NJLAD”).  The Appellate Division, however, reversed and found that the language in the DRA contained no clear waiver of a right to trial.  The Appellate Division found that an employee has a right to know that he or she is waiving his right to trial and what claims they are agreeing to arbitrate.  Thus, the arbitration provision was invalid since it (1) failed to include language informing the employee that they are waiving their right to a trial and (2) was not presented in a way that was simple, clear, understandable, and easily readable.

On September 8, 2015, in Filippis v. Ericsson, Inc., the plaintiff worked at Telcordia Technologies, Inc. from 1978 until January 2007 when he was terminated as part of a force adjustment. The plaintiff was thereafter rehired by Telcordia in December 2007 and signed an arbitration agreement. When Ericsson purchased Telcordia in January 2012, the plaintiff signed a conditional transfer agreement that would become effective if the plaintiff was still employed with Telcordia as of January 1, 2013.  The plaintiff, however, was terminated due to a reduction-in-force on December 28, 2012 and the conditional transfer agreement did not contain an arbitration provision.  The plaintiff filed a complaint alleging that he was wrongfully terminated by Telcordia on the basis of his age and that Ericsson had refused to hire him for the same reason in violation of the NJLAD.  The trial court found that the 2007 arbitration agreement contained “clear and unequivocal terms” that the plaintiff’s claims were subject to arbitration. On appeal, the plaintiff argued that the court erred in compelling arbitration and that the claims should have been severed since there was no valid arbitration agreement between him and Ericsson and thus, Ericsson could not use its predecessor’s arbitration agreement.  The Appellate Division upheld the decision by the trial court and found that the agreement to arbitrate was both extremely broad and yet specific enough to include disputes between the plaintiff and Telcordia's successor on claims concerning age discrimination. Moreover, the Appellate Division found that arbitration as the appropriate forum for the plaintiff's failure to hire claim as he was relying on the same facts and seeking the same relief as his wrongful termination claim against Telcordia, which the plaintiff conceded he agreed to arbitrate.

Employers’ Takeaways:

• Arbitration Agreements must be “written in a simple, clear, understandable and easily readable way” and must include specific language notifying an employee that he or she is waiving a right to a trial.
• Arbitration Agreements must specifically include which claims are and are not subject to arbitration.
• Arbitration Agreements will be upheld against a successor company if the agreement is clear and unambiguous and contains language including a company’s “present and future parents, subsidiaries, affiliates, successors and assigns . . . ."

For more information regarding these decisions and best practices regarding arbitration clauses, 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.