A Passaic County judge has reconsidered and reversed his own decision to send an employment case to arbitration, instead finding that a mandatory arbitration provision contained in the employee handbook could not be enforced because the handbook itself contained multiple instances of language specifying that it was neither binding nor a contract of employment. Because the handbook was not intended to serve as a binding contract, the judge found that an employee could not be bound by language therein that requires arbitration of employment-related disputes.
The underlying dispute involved allegations by an at-will employee that his supervisor harassed and discriminated against him on the basis of his religion. The employer argued that the employee was required to litigate any such claims in private arbitration, not in a public lawsuit. The employer pointed to a binding arbitration provision contained in the employee handbook as a basis to require arbitration. Judge Frank Covello initially agreed with the employer and the language contained in the employee handbook. However, on a motion for reconsideration brought by the employee, Judge Covello reversed his decision finding the arbitration provision unenforceable. More specifically, language repeated multiple times throughout the handbook specified that it was not intended to serve as an enforceable contract or one of guaranteed employment. The phrase “I understand that this handbook or any other written or verbal communication by a management representative is neither a contract for employment nor a legally-binding agreement” persuaded Judge Covello that the employer could not utilize the language to avoid certain contractual obligations while seeking to enforce others against the employees. In light of the judge’s finding, the employer must now defend the actions of its supervisor in a public court case.
It is not uncommon for employers to prefer arbitration for resolving employment-related disputes due to its reduced costs and increased speed and privacy compared to a public lawsuit with a judge and jury. Unsurprisingly, savvy employees tend to prefer work arrangements unrestricted by arbitration provisions, allowing them to leverage the public nature of a lawsuit in court.
The rules of arbitration vary. Generally, the parties choose a single arbitrator—usually a practicing attorney or retired judge—to hear and decide the case. The matter, including resolution, is generally private and kept out of public access, unlike documents in a public lawsuit which are often available online. Discovery and the exchange of documents is also more limited. With this decision, compulsory arbitration agreements may now be the subject of scrutiny and reconsideration.
How Frier Levitt Can Help My Practice
New Jersey employers who wish to maintain an effective employee handbook and bind their employees to arbitration must understand the intricacies of the law, or they may find themselves like the employer in this case—facing public litigation of employment-related disputes in open court rather than with the privacy of an arbitration. At Frier Levitt, we stay on the cutting edge of legal guidance in this rapidly-changing field of law and are well-equipped to provide advice and counsel tailored to each client’s unique situation and needs. Call Frier Levitt today to see how we can help you navigate your business’ employment practices and policies.
