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SLOWLY BUT SURELY THE TIDE IS TURNING AGAINST FORCED ARBITRATION

If you are a frequent reader of this blog, you may know we have written several times in the past about the scourge of forced arbitration.  Forced arbitration prevents workers from being able to sue their employers in court for violating wage and hour, discrimination, whistleblower and other employment laws. Public Citizen, a not-for-profit consumer advocacy group, says that, “Corporations use forced arbitration clauses in contracts as a get-out-of jail free card” and point out how corporate apologists for arbitration argue it is a cheaper alternative to lawsuits when in practice it serves as a tool used to cheat employees out of their day in court. And according to Public Citizen, more than 60 million workers are subject to forced arbitration; by 2024 it is expected that more than 80% of private sector, nonunion workers will be subject to forced arbitration. Likewise, forced arbitration stops consumers from being able to vindicate their rights and recover damages before an impartial judge and jury. Indeed, the Economic Policy Institute reports that individual consumers seeking relief in arbitration win just 9% percent of the time.

The Federal Arbitration Act (FAA) was enacted in 1925 with the goal of ensuring the enforcement of arbitration agreements in any “maritime transaction or … contract evidencing a transaction involving commerce[.]” 9 U.S.C. § 2. The U.S. Supreme Court (Court) has recognized the FAA as evidencing “a national policy favoring arbitration.” Southland Corp. v. Keating, 465 U.S. 1, 10 (1984). New Jersey not only follows the FAA; it has also enacted its own state legislation endorsing a public policy favoring arbitration agreements.  The New Jersey Arbitration Act, N.J.S.A., 2A:23B-1 to 32,  is similar to the federal statute in many respects, and provides that “[a]n agreement … to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract.”

While giving full force and effect to the FAA and the New Jersey Arbitration Act, New Jersey courts have repeatedly demonstrated their discomfort with the lack of opportunity for meaningful consent afforded to workers who are often faced with a choiceless “take it or leave it” job scenario when it comes to consenting to arbitration. In Skuse v. Pfizer, Inc., 457 N.J. Super. 539 (App. Div. 2019), our Appellate Division required clauses purporting to indicate agreement to arbitration be clearly received and acknowledged by employees, especially when the forced agreement is part of a “training” web video.  In  Kernahan v. Home Warranty Admin. of Fla., Inc., 236 N.J. 301 (2019), the New Jersey Supreme Court found that using the heading “Mediation” for an arbitration clause might cause the average reader some confusion, especially when the clause said the arbitration would be governed by the designated forum’s non-existent “Commercial Mediation Rules.” An appellate court in Alexander Defina v. Go Ahead and Jump 1, LLC, 2019 N.J. Super. Unpub. LEXIS 1404 (App. Div. 2019), held that language waiving a “trial” in favor of arbitration did not sufficiently inform a consumer or employee that arbitration is different from having his or her claim determined by a court or jury which is the test required by Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430 (2014).

Maybe the most significant development in curtailing the use of forced arbitration in New Jersey took place earlier this year when New Jersey Governor Phil Murphy signed into law Senate Bill S 121 which, among others, provides that a provision in any employment contract or agreement which has the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment, including claims that are submitted to arbitration, would be deemed against public policy and unenforceable.

Hopefully the tide is beginning to turn against forced arbitration even on  a national level as shown by the fact that the United States House of Representatives recently passed by a vote of 225-186 a bill known as the Forced Arbitration Injustice Repeal (FAIR) Act which will outlaw the use of forced arbitration on employees and consumers alike. The purpose behind the FAIR Act is twofold: (1) it prohibits pre-dispute arbitration agreements that force arbitration of future employment, consumer, antitrust, or civil rights disputes; and (2) prohibits agreements and practices that interfere with the right of individuals, workers, and small businesses to participate in a joint, class, or collective action related to an employment, consumer, antitrust, or civil rights dispute.  Unfortunately, the prospects of the FAIR Act becoming law anytime soon is not good given the Trump Administration’s opposition to the bill. However, the FAIR Act’s fortunes may soon be changing given a new presidential election is only a year away.

If your employer is trying to get you to sign a document containing a forced arbitration clause, don’t sign it and instead immediately call the attorneys at Mashel Law (732) 536-6161 or fill out the contact form on this page for immediate help and advice. At Mashel Law, LLC, located in Marlboro, New Jersey, we are dedicated to protecting the rights of employees.