Is My Employee Arbitration Agreement Enforceable?

Yet again, New Jersey’s appellate court has demonstrated its reluctance to enforce agreements to arbitrate signed as part of a new employee’s orientation. In a previous post we discussed a ruling from the Appellate Division demonstrating the risk of having employees execute arbitration agreements during an orientation process. The court in that case refused to enforce the agreement because the employee maintained that pressure was exerted upon her to immediately execute the document, thus depriving her of the opportunity to bring the document home and seek out legal advice.

Another opinion issued by the Appellate Division on November 10, 2021, provides the latest insight on the missteps an employer can make when seeking to enter into a binding arbitration agreement with an employees.

The Facts:  In Cordero v. Fitness International LLC, a former employee of LA Fitness filed a complaint in the New Jersey Superior Court alleging sexually harassment by her former manager. LA Fitness moved to compel arbitration pursuant to an agreement executed by the employee during onboarding her first day on the job. According to the employee, a general manager with LA Fitness placed her at a desk and told her to “sign a few things electronically” before she could start work. He then sat next to her and instructed her to sign an electronic signature pad as he clicked through various documents. The employee claimed she never actually saw the documents that she electronically signed. When the employee later filed her sexual harassment complaint, LA fitness moved to compel arbitration based on the following language contained in a document she signed during onboarding:

I AGREE THAT I WILL RESOLVE ANY AND ALL CLAIMS OR CONTROVERSIES BETWEEN ME AND [DEFENDANTS] EXCLUSIVELY BY FINAL AND BINDING ARBITRATION IN MY INDIVIDUAL CAPACITY BEFORE A NEUTRAL ARBITRATOR INSTEAD OF ANY COURT ACTION OR JURY TRIAL WHICH I HEREBY EXPRESSLY FOREVER GIVE UP.

The Ruling:  The lower court ruled that the employee voluntarily signed the arbitration provision. The Appellate Division reversed, explaining that “the circumstances surrounding Plaintiff’s execution of the agreement is subject to conflicting interpretations… and does not present a clear expression of an explicit and voluntary agreement to forego the court system.” The Court focused on the fact that the manager did not remember the specifics of the day the employee signed the agreement, and the employee continued to assert that the computer was turned away from her without her ever seeing the language on screen.

In addition, the court rejected the argument that the arbitration provision was also contained in the employment application executed by the employee. Among other things, the court noted that the application containing the arbitration provision included a disclaimer stating, “neither this document nor any offer of employment from the employer constitutes an employment contract unless  a specific document to that effect is executed by both parties and myself.” Whereas the application suggested that any binding agreement would be set forth is a separate document, it did not sufficiently alert the employee that she was consenting to arbitration.

The Appellate Division remanded the case back to the lower court with instructions that it focus on whether the employee had the opportunity to review the arbitration agreement she executed during onboarding such that the agreement could be binding on her.

The Take-Away:  If an employer wants employees to be bound by agreements to arbitrate employment disputes, the employer must ensure that the process for execution clearly demonstrates that the employee read the arbitration provision and knowingly and voluntarily consented to it. Certain factors, such as hovering by the employee and coaxing them to quickly execute the document, opens the door to claims that the employee felt pressured to sign and was not aware that they were waiving important legal rights. A far better practice is to provide either a physical or electronic copy of the arbitration agreement to the employee with instructions that they are not to execute it immediately, but must take several days to review the document at home and only after the expiration of the review period should they return an executed copy to the employer. Ideally, this should be done after a job offer is made but prior to the employee’s anticipated start date. The communication to the employee should also make it clear that the execution of the arbitration agreement is a condition of employment and a failure to do so will result in the offer being withdrawn. Finally, the employee should be encouraged to seek legal counsel before executing the document.

If you have concerns regarding an arbitration provision provided to your own employees, reach out to experienced employment law attorneys for further guidance.