A recent decision from the New Jersey Appellate Division serves as a warning to employers that arbitration clauses contained in employee handbooks are likely unenforceable. In C.M. v. Maiden Re Insurance Services, LLC, (“Maiden Re”), the employee filed an action in the New Jersey Superior Court alleging that she was wrongfully terminated by Maiden Re for seeking a reasonable accommodation to her disability in violation of the New Jersey Law Against Discrimination. Maiden Re moved to dismiss the Complaint and instead compel the employee to resolve the dispute before an arbitrator pursuant to the arbitration clause contained Maiden Re’s employee handbook. The Trial Court granted Maiden Re’s motion, sending the matter to arbitration. On appeal, the Appellate Division refused to enforce the employee handbook’s arbitration clause and remanded the matter back to the Trial Court for resolution of the discrimination claim.
Handbook Disclaimer Renders Agreement to Arbitrate Unenforceable: Like most employee handbooks, Maiden Re’s handbook contained a contractual disclaimer specifically providing that its terms and conditions, “should be regarded as management guidelines only…” and were “not intended to create contractual obligations…” nor “intended to create a contract…” The inclusion of the contractual disclaimer proved fatal to Maiden Re’s efforts to compel the employee to arbitrate her claims. The Appellate Division reasoned that Maiden Re “cannot selectively disavow the [disclaimer] language in the handbook to insulate the “arbitration” provision from the legal consequences of the disclaimer provision.”
The court also questioned whether the employees’ electronic acknowledgement of the handbook that failed to include language indicating that the employee was waving her right to adjudicate employment disputes in a judicial forum, was sufficient evidence of an ”unambiguous intention” to arbitrate statutory claims. The court noted that it did not need to rule on the issue because the disclaimer rendered the arbitration provision unenforceable.
The Take Away: Employers seeking to enter into enforceable arbitration agreements with employees must do so by way of a stand-alone agreement that is signed by the employee. Agreements to arbitrate contained in an employee handbook, especially those with contractual disclaimers, will be unenforceable and the employee will be free to pursue employment claims in a court of law. Moreover, arbitration agreements must be carefully crafted to ensure employees are adequately apprised of the waiver of statutory rights and other consequences of electing arbitration. Therefore, the advice of experienced employment counsel should be sought to ensure that your arbitration agreements will be deemed enforceable.