Arbitration

SLOWLY BUT SURELY THE TIDE IS TURNING AGAINST FORCED ARBITRATION

Published on: October 4, 2019 | by Mashel Law, L.L.C.

If you are a frequent reader of this blog, you may know we have written several times in the past about the scourge of forced arbitration. Forced arbitration prevents workers from being able to sue their employers in court for violating wage and hour, discrimination, whistleblower and other employment laws. Public Citizen, a not-for-profit consumer advocacy group, says that, “Corporations use forced arbitration clauses in contracts as a get-out-of jail free card” and point out how corporate apologists for arbitration argue it is a cheaper alternative to lawsuits when in practice it serves as a tool used to cheat employees out of their day in court. And according to Public Citizen, more than 60 million workers are subject to forced arbitration; by 2024 it is expected that more than 80% of private sector, nonunion workers will be subject to forced arbitration. Likewise, forced arbitration stops consumers from being able to vindicate their rights and recover damages before an impartial judge and jury. Indeed, the Economic Policy Institute reports that individual consumers seeking relief in arbitration win just 9% percent of the time.

The Federal Arbitration Act (FAA) was enacted in 1925 with the goal of ensuring the enforcement of arbitration agreements in any “maritime transaction or … contract evidencing a transaction involving commerce[.]” 9 U.S.C. § 2. The U.S. Supreme Court (Court) has recognized the FAA as evidencing “a national policy favoring arbitration.” Southland Corp. v. Keating, 465 U.S. 1, 10 (1984). New Jersey not only follows the FAA; it has also enacted its own state legislation endorsing a public policy favoring arbitration agreements. The New Jersey Arbitration Act, N.J.S.A., 2A:23B-1 to 32, is similar to the federal statute in many respects, and provides that “[a]n agreement … to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract.”

While giving full force and effect to the FAA and the New Jersey Arbitration Act, New Jersey courts have repeatedly demonstrated their discomfort with the lack of opportunity for meaningful consent afforded to workers who are often faced with a choiceless “take it or leave it” job scenario when it comes to consenting to arbitration. In Skuse v. Pfizer, Inc., 457 N.J. Super. 539 (App. Div. 2019), our Appellate Division required clauses purporting to indicate agreement to arbitration be clearly received and acknowledged by employees, especially when the forced agreement is part of a “training” web video. In Kernahan v. Home Warranty Admin. of Fla., Inc., 236 N.J. 301 (2019), the New Jersey Supreme Court found that using the heading “Mediation” for an arbitration clause might cause the average reader some confusion, especially when the clause said the arbitration would be governed by the designated forum’s non-existent “Commercial Mediation Rules.” An appellate court in Alexander Defina v. Go Ahead and Jump 1, LLC, 2019 N.J. Super. Unpub. LEXIS 1404 (App. Div. 2019), held that language waiving a “trial” in favor of arbitration did not sufficiently inform a consumer or employee that arbitration is different from having his or her claim determined by a court or jury which is the test required by Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430 (2014).

THIRD CIRCUIT SAYS UBER DRIVERS MAY BE EXEMPT FROM ARBITRATION AGREEMENTS IF THEY CAN SHOW THEY ARE ENGAGED IN INTERSTATE COMMERCE

Published on: September 17, 2019 | by Mashel Law, L.L.C.

Employment Arbitration Agreements typically force employees to resolve legal disputes with their employer through an opaque process controlled by a privately retained arbitrator, rather than publicly through our relatively transparent jury-based court system. These privately retained arbitrators often favor the large corporation employers who provide them repeat business as opposed to the typical “one and done” worker. Further, arbitrators are not bound by the same rules, legal precedents, and public oversight that judges are when making their decisions. Usually the only issue of arbitration that can be resolved by our courts is the “gateway dispute about whether the parties are bound by a given arbitration clause” Howsam v. Dean Witter Reynold, 537 U.S. 79, 84 (2002), that is, whether the parties entered into a valid and binding arbitration agreement.

In a limited response to the unfairness forced arbitration agreements impose on employees, Congress included a provision in the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16 exempting certain employees from its authority. Section 1 of the FAA provides that “nothing herein shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign interstate commerce.” Id. Our courts often hold that transportation workers fall into the “class of workers engaged in foreign interstate commerce” that are excluded from FAA coverage, and thus are not bound by arbitration agreements. However, recently, in Singh v Uber Techs. Inc., 2019 U.S. App. the Third Circuit was asked to determine the limits of this exemption.

In Singh, an Uber driver in New Jersey brought a class action lawsuit in District Court against Uber for misclassifying their drivers as independent contractors as opposed to employees claiming such a misclassification deprives the drivers from receiving overtime pay. Based on an arbitration agreement between the parties, Uber moved the District Court to dismiss the case under the FAA and have Singh resolve the matter by bringing it to an arbitrator. Singh argued that the District Court did not have the authority to compel arbitration under the FAA as he was a transportation worker excluded from FAA coverage as “any other class of worker engaged in interstate foreign commerce” under Section 1. Uber argued, and the District Court agreed, that only transportation workers that transport goods, not those who transport passengers, are excluded by the residual clause of Section 1 in the FAA. Id. at *13. (“a court must be satisfied that this clause does not apply before making an order that the parties proceed to arbitration”).

NEW JERSEY ENACTS NEW LAW OUTLAWING EMPLOYERS’ USE OF NON-DISCLOSURE AGREEMENTS TO SUPPRESS DISCLOSURE OF DISCRIMINATION CLAIMS AND SEVERELY CURTAIL THE USE OF FORCED ARBITRATION CLAUSES AND JURY WAIVER PROVISIONS

Published on: March 22, 2019 | by Mashel Law, L.L.C.

Clear evidence the seismic effects of the national #Me Too movement has reached the shores of New Jersey occurred when New Jersey Governor Phil Murphy recently signed into law S.121 which effectively stops employers from requiring employees to sign nondisclosure confidentiality agreements – commonly referred to as “NDAs” – when settling employment discrimination, harassment, or retaliation claims. The use of NDAs has become a notorious legal tool used to protect serial harassers and abusers from the shaming cleanse of public disclosure. Further, the law also severely limits an employer’s ability to impose forced arbitration clauses and jury waiver clauses on its employees.

Following other states such as California which have banned the use of NDAs in settlement agreements and employment contracts, proponents of S. 121 argue that it adds new protections for victims of serial abusers in the workplace. “Non-disclosure agreements have, for a long time, been used to silence and intimidate the victims of sexual assault and harassment,” said Senator Weinberg (D-Bergen), one of the law’s chief architects. “Too many victims have been forced to suffer in silence for far too long, leaving abusers to continue to prey on countless women with impunity. Limiting these so-called ‘confidentiality agreements’ will help lift the secrecy that allows abusers to carry on abusing and make our workplaces safer for everyone.”

S.121 has two important components. First, it renders any term in an employment contract or settlement agreement unenforceable against a current or former employee if it “has the purpose of concealing the details relating to a claim of discrimination, retaliation, or harassment.” Importantly, these broad limitations on NDAs apply to new agreements which are executed on or after the law’s effective date of March 18, 2019. While the new law does not appear to apply retroactively, the law’s restrictions would apply to new or renewed agreements with existing employees, and to modifications of previous agreements. However, NDAs regarding non-public trade secrets and proprietary information as well as non-competition provisions are specifically carved out from the law’s reach.

NEW JERSEY APPELLATE DIVISION STRIKES DOWN ARBITRATION CLAUSE IN EMPLOYEE HANDBOOK

Published on: March 30, 2016 | by Mashel Law, L.L.C.

On January 17, 2016, in a published decision, the New Jersey Superior Court, Appellate Division, invalidated a mandatory arbitration clause found in an employee handbook. See Morgan v. Raymours Furniture Co., 443 N.J. Super. 338 (App. Div. 2016). This was a significant victory for employee rights across our State.

Plaintiff Grant W. Morgan worked for Defendant Raymours Furniture Company (“Raymours”) and electronically signed a company handbook which contained a mandatory arbitration clause. The company handbook, like almost every other company or employee handbook signed in this State, also contained a disclaimer provision that read that nothing in the handbook created a promise of continued employment or an employment contract.

After Mr. Morgan electronically signed the company handbook, he started complaining about age discrimination in the workplace. Raymours immediately confronted him with an ultimatum — that he either sign a stand-alone arbitration agreement or his employment would be terminated. Plaintiff refused to sign the stand-alone agreement and Raymours fired him.