Arbitration Agreement Invalid

Jan 28, 2019

In a case involving the validity of an arbitration agreement, the Appellate Division recently held that an employer who had e-mailed its workforce a “training module” which described the company’s mandatory arbitration policy was inadequate to require employees to submit their disputes to binding arbitration.  Skuse v. Pfizer, Inc., et al. – N.J. Super. – (App. Div. 2019).  Plaintiff, Amy Skuse, filed a complaint in the Law Division against her former employer, Pfizer, alleging violations of the New Jersey Law Against Discrimination.  Pfizer sought to dismiss her complaint based upon the company’s arbitration policy.  The trial court dismissed her complaint and compelled arbitration, but the Appellate Division reversed.

The plaintiff had received an e-mail and completed a training module presenting the company’s mandatory binding arbitration policy.  Pfizer argued that through this process she consented to arbitration.

The court noted that a state cannot subject an arbitration agreement to more burdensome requirements than those governing the formation of other contracts and one of those fundamental elements of contract law is the requirement of the contracting parties’ mutual assent.  If there is no meeting of the minds as to the material terms of an arbitration agreement, the court has the authority to decline to compel arbitration. 

The court noted that the case of Leodori v. CIGNA Corp., 175 N.J. 293 (2003) is the guiding precedent in the State of New Jersey.  In Leodori, the court refused to approve an arbitration agreement and noted that an arbitration provision cannot be enforced against an employee who does not sign or otherwise explicitly indicate his or her agreement to it.

The court noted that obtaining an employee’s binding waiver of his or her legal rights is not a training exercise.  An employer must do more than teach employees about the company’s binding arbitration policy through e-mail modules and separate links.  The employer must also obtain its employee’s explicit, affirmative and unmistakable assent to the arbitration policy in order to secure their voluntary waiver of their rights under the law.

The court noted that Pfizer had labeled its e-mail maze a “training activity” rather than stating what it actually was: an agreement and a waiver of rights.  While the Appellate Division did not intend to disallow the transmitting of company policies to workers through e-mail and asking them to acknowledge those policies, it held that arbitration policies are only enforceable if the employee explicitly agrees to them, and the click box on the last page used the word “acknowledge” rather than the word “agree” when presented with the arbitration agreement.

Finally, the Appellate Division rejected Pfizer’s argument that plaintiff was “deemed” to be bound by the mandatory arbitration policy because she continued to work for Pfizer for more than sixty days after receiving the agreement.  The court noted that the sixty-day provision was a unilateral declaration by the company and was an attempt to bypass the evidential requirements of Leodori so that employees who did not communicate their voluntary agreement to the arbitration policy will be imagined to have provided such an agreement if they kept reporting to work for longer than two months.  Significantly, the Appellate Division disagreed with another panel which had upheld such a provision.  See, Jaworski v. Ernst & Young, 441 N.J. Super. 464 (App. Div. 2015).