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NEW JERSEY APPELLATE DIVISION STRIKES DOWN ARBITRATION CLAUSE IN EMPLOYEE HANDBOOK

On January 17, 2016, in a published decision, the New Jersey Superior Court, Appellate Division, invalidated a mandatory arbitration clause found in an employee handbook. See Morgan v. Raymours Furniture Co., 443 N.J. Super. 338 (App. Div. 2016). This was a significant victory for employee rights across our State.

Plaintiff Grant W. Morgan worked for Defendant Raymours Furniture Company (“Raymours”) and electronically signed a company handbook which contained a mandatory arbitration clause. The company handbook, like almost every other company or employee handbook signed in this State, also contained a disclaimer provision that read that nothing in the handbook created a promise of continued employment or an employment contract.

After Mr. Morgan electronically signed the company handbook, he started complaining about age discrimination in the workplace. Raymours immediately confronted him with an ultimatum — that he either sign a stand-alone arbitration agreement or his employment would be terminated. Plaintiff refused to sign the stand-alone agreement and Raymours fired him.

Mr. Morgan then filed a lawsuit against Raymours in the New Jersey Superior Court in which he alleged a number of causes of action under New Jersey’s Law Against Discrimination, including wrongful termination. Raymours attempted to compel arbitration under the company handbook’s arbitration clause. The motion court denied Raymours’ attempt to compel arbitration and the furniture company appealed.

In what is truly an entertaining read, the Appellate Division affirmed the motion court’s denial of Raymours’ motion to compel arbitration. Presiding Judge of the Appellate Division, Clarkson S. Fisher, Jr., writing on behalf of the three judge panel, began his analysis by noting the obvious:

Here, the employer would seek both the benefit of its disclaimer in most instances, while insisting that the handbook was contractual when it suits its purposes — a proposition to be rejected if for no other reason than it runs counter to the ancient English proverb: “wolde ye bothe eate your cake, and haue your cake?” … as well as its corollary, which may have originated with Aesop, “sauce for the goose is sauce for the gander.”

Judge Fisher also added: “We lastly recognize that had plaintiff executed the stand-alone arbitration agreement presented to him when a rift formed in the parties’ relationship, a different outcome would likely have followed. To that we only need say, ‘if my grandmother had wheels, she’d be a bicycle.’”

Aside from Judge Fisher’s entertaining use of proverbs, this case is especially remarkable because it invokes the concept of equity into an arbitration clause dispute. Judge Fisher, himself, remarked on this when he footnoted, “[m]ake no mistake, although the dispute about the parties’ transactions evoke questions of law, defendants seek a mandatory injunction — a stay of this lawsuit and an order compelling of arbitration — that triggers the court’s equity jurisdiction.”

Equity = fairness. As Judge Fisher wrote, “it is simply inequitable for an employer to assert that, [7]  during its dealings with its employee, its written rules and regulations were not contractual and then argue, through reference to the same materials, that the employee contracted away a particular right.”

The lesson that must be taken away from this case is that when presented with a stand-alone arbitration agreement, employees must question why? In Mr. Morgan’s case, Raymours tried to dupe him after he complained of age discrimination in the workplace. Fortunately for him, Mr. Morgan was savvy enough to see through this ploy and reject the stand-alone agreement. When Raymours tried to use its company handbook as a contract that benefited it but not its employees, the courts of New Jersey said no way! That is unfair. And the courts were absolutely right.

At Mashel Law, we are well experienced in offering sound advice on the enforceability of mandatory arbitration agreements. These agreements must be avoided at all costs because they strip you of your constitutional right to a jury trial.

If you believe you have been the victim of unlawful discrimination or retaliation in the workplace, and are not sure if you are bound by an arbitration agreement, call the New Jersey Employment Lawyers at Mashel Law (732) 536-6161 or fill out the contact form on this page for immediate help. Mashel Law, located in Marlboro, New Jersey, is dedicated to exclusively protecting the rights of employees.