On February 15, 2022, the New Jersey Appellate Division upheld a trial court Order compelling arbitration of discrimination and wrongful termination claims brought by a former employee who was terminated for testing positive for marijuana. In a matter of first impression, the Appellate Division in Antonucci v. Curvature Newco, Inc. held that federal law governing arbitration preempts a 2019 amendment to the New Jersey Law Against Discrimination (NJLAD) invalidating employment agreements that require employees to waive certain rights, with respect to discrimination, retaliation, and/or harassment claims.
Gilbert Antonucci worked as an Engineer for SMS Systems Maintenance Services, Inc. (SMS), from 2010 until 2017, when SMS merged with Curvature Newco, Inc. and the combined entity became Curvature Newco, Inc. (Curvature). In October 2019, as part of a training program, Curvature sent Antonucci the electronic version of Curvature’s Employee Handbook and Code of Ethics and Conduct for his review and electronic signature. Included with these policies and procedures was an Arbitration Agreement, which was attached as an Exhibit to the Handbook and identified accordingly in the table of contents.
The Arbitration Agreement required resolution of all disputes between Curvature and an employee by binding and final arbitration, and specifically covered all employment-related claims, including claims of discrimination, harassment, and retaliation, as well as wrongful termination. The Arbitration Agreement also explained that the employees were forfeiting their right to bring claims in court and their right to a jury trial. It went on to set forth an overview of the arbitration process and specifically indicated that the Arbitration Agreement was intended to be governed by and to be construed in accordance with the Federal Arbitration Act (FAA). Antonucci did not sign the Arbitration Agreement in the designated space, but after reviewing the Code and Handbook to which the Arbitration Agreement was attached for over an hour and a half, he electronically clicked “I accept” acknowledging his receipt of the policies and procedures outlined therein. The Arbitration Agreement further provided that Antonucci’s continued employment constituted acceptance of the agreement.
Following an anonymous complaint to Curvature regarding the odor of marijuana in Antonucci’s vicinity, Antonucci tested positive for marijuana, resulting in the termination of his employment with Curvature on May 31, 2020. According to Antonucci, his firing constituted discrimination and wrongful termination, as he had a valid medical marijuana card, due to a medical condition. Instead of following the dispute resolution procedures set forth in the Arbitration Agreement, Antonucci filed a lawsuit in New Jersey state court asserting claims of discrimination and wrongful termination under New Jersey’s Compassionate Use Medical Cannabis Act for failure to accommodate his disability. He also asserted claims for post-employment harm alleging Curvature contested his unemployment claim.
Trial Court Decision
The trial court, in dismissing Antonucci’s complaint with prejudice, found that Antonucci entered into the Arbitration Agreement, which was clear that Antonucci’s continued employment constituted acceptance. The trial court further found that the Arbitration Agreement was valid and enforceable, and covered Antonucci’s discrimination and wrongful termination claims.
Appellate Division’s Decision
On appeal, Antonucci argued that the trial court made a mistake in finding that he agreed to the Arbitration Agreement. He also argued that, by ruling as it did, the trial court indirectly held that the 2019 amendment to New Jersey’s discrimination law, which invalidates employment agreements that require employees to waive certain rights, with respect to discrimination, retaliation, and/or harassment claims, is preempted by the FAA, the federal law governing arbitration agreements.
To respond to Antonucci’s first argument, the Appellate Court reviewed prior cases regarding the enforceability of contracts, and concluded, like the trial court, that the Arbitration Agreement was valid and enforceable, its terms were clear, and Antonucci acknowledged that he had reviewed all of the policies and procedures that were sent to him, and his continued employment constituted acknowledgment of his agreement to arbitrate employment-related disputes.
As for Antonucci’s second argument, the Appellate Court was tasked with considering a matter of first impression. By examining the interpretation and purpose of the FAA, and its interplay with New Jersey’s discrimination law, and relevant case law, the Appellate Court concluded that when arbitration is mandated by an agreement governed by the FAA, the federal law preempts the state law, and such agreement to arbitrate is enforceable. In so ruling, the Appellate Court noted that the U.S. Supreme Court has recognized that arbitration of statutory claims does not forgo the substantive rights afforded by the statute, it only submits to their resolution in an arbitral, rather than judicial, forum. The Appellate Court further emphasized that the amendment may apply to other provisions of an arbitration agreement such as one that reduces the time to bring a discrimination claim, because its application would protect the law’s 2-year limitation period.
The Appellate Court, though affirming the trial court’s order compelling arbitration, reversed the trial court’s dismissal of Antonucci’s lawsuit, as the court’s dismissal of the case was inappropriate under the FAA. In accordance with the FAA, the trial court should have stayed the civil action pending the outcome of arbitration. The Appellate Court sent the case back to the trial court for a new order consistent with its ruling.
Arbitration is an efficient and confidential way for employers and employees alike to resolve employment disputes. But in the wake of recent challenges to the validity and enforceability of arbitration agreements, employers must be abundantly clear and intentional about the language used in their arbitration agreements. Among other things, arbitration agreements must clearly convey the rights employees are waiving, which claims are covered under the agreement, whether employees are intended to be bound by the agreement by continued employment, even in absence of a signature, and which laws govern enforceability. Additionally, in light of the 2019 amendment to New Jersey’s discrimination law, employers must still ensure compliance of all arbitration agreement provisions taking effect after the effective date of the amendment, and not otherwise preempted by the FAA.
Should you have any questions regarding the Appellate Division’s decision or the enforceability of your organization’s Arbitration Agreements, please contact John C. Petrella, Esq., one of the region's leading Employment Litigation attorneys here or Latiqua M. Liles, Esq., who specializes in Human Resources Counseling & Compliance.
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