New Jersey Courts Continue To Raise The Bar For Enforceable Arbitration Agreements

The New Jersey Appellate Division recently issued a decision adding yet another hurdle for employers in the Garden State to overcome in drafting and enforcing arbitration agreements. In Flanzman v. Jenny Craig, Inc.,1 the court found that because an arbitration agreement did not establish the forum for the arbitration, the agreement lacked sufficient details to establish the "meeting of the minds" component crucial to rendering it enforceable. As a result of this decision, employers operating in New Jersey should consider taking a fresh look at their arbitration agreements to ensure they include the necessary provisions.

Background

New Jersey not only follows the Federal Arbitration Act, but also has enacted its own state legislation endorsing a public policy favoring arbitration agreements.2 The New Jersey Arbitration Act, which is similar to the federal statute in many respects, provides, "[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."3 In relying on this state law-based exception contained in both the federal and state arbitration statutes, however, New Jersey courts have continuously increased the requirements to show mutual assent to arbitrate under state contract law. As a result, courts have created a moving target, expanding protections for employees and burdening employers attempting to draft and enforce arbitration agreements.

For example, in 2001, the New Jersey Supreme Court held that because a waiver of an employee's right to a jury trial and judicial forum under the New Jersey Law Against Discrimination (LAD) and similar statutes must be knowing and voluntary, an agreement to arbitrate such claims is invalid unless it unambiguously states an intention to waive statutory rights specifically, and generally references the types of claims included, such as workplace discrimination claims.4 Thus, an arbitration provision in an employment contract by which the parties broadly agreed to arbitrate "any controversy or claim arising out of, or relating to, this Agreement or the breach thereof" was held not to cover LAD claims.5 Just two years later, the court expanded arbitration enforceability requirements again, holding that implied consent to arbitration - such as by continued employment after receiving an employee handbook...