Labor and Employment

ARBITRATION AGREEMENTS REVISITED

By: M. Karen Thompson


For some time now, New Jersey courts have recognized the validity of employees' agreements to arbitrate statutory employment claims, including claims under the Law against Discrimination ("LAD") and Conscientious Employees' Protection Act ("CEPA"). Unfortunately, courts have repeatedly demonstrated a reluctance to actually enforce such agreements. The most recent opinion issued by the Appellate Division, Quigley v. KPMG Peat Marwick, 330 N.J. Super. 252 (App. Div. 2000) continues to give lip service to the enforceability of these agreements generally, citing the strong public policy favoring arbitration. As in many other cases, however, the court refused to enforce the agreement there because it determined it was ambiguous and the employee had not knowingly and voluntarily waived his statutory rights.

The court found the agreement ambiguous because it only required arbitration of disputes arising out of the agreement itself or the terms and conditions of plaintiff's employment, rather than disputes relating to claims of discrimination or termination of employment. In addition, the agreement failed to expressly waive statutory rights redressable under the LAD and other discrimination laws. The court also held that plaintiff could not have knowingly waived his right to a jury trial under the LAD because no such right existed when he signed the agreement.

Arbitration has consistently proven to be a more expeditious and less costly method of dispute resolution than litigation. As an alternative to litigation of employment disputes, which carry the risk of exorbitant jury verdicts, arbitration can be a real boon to employers. We continue to believe that a valid and enforceable arbitration agreement can be crafted to require employees to arbitrate, rather than litigate, their claims under the LAD, CEPA and other employees' rights statutes. Critical factors to consider include the circumstances under which the agreement is presented to the employee, as well as the precise language used in the agreement. The agreement should clearly state its purpose and the statutory rights which are being waived, as well as the fact that it applies to any disputes arising out of the employment relationship or its termination, including claims of discrimination.