New Jersey Finally Gets a Roadmap to Creating a Valid Arbitration Clause

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Tuesday, New Jersey’s Supreme Court approved as legally binding an arbitration agreement provided to employees electronically, concluding the arbitration agreement was effectively, clearly, and unambiguously communicated to the company’s employees. The decision in Skuse v. Pfizer, Inc., (A-86-18) (Aug. 18, 2020), ratified a five-page Mutual Arbitration and Class Waiver Agreement rejected by the lower court. In doing so, the Supreme Court resolved years of conflict and provided employers with much needed practical steps for drafting similar agreements and communicating them to employees. The most significant guidance from the decision is discussed below:

Helpful Do’s and Don’ts

  • Make any waiver-of rights provisions in arbitration agreements clear and unambiguous. New Jersey employees must know they are agreeing to arbitrate all statutory claims arising out of their employment or its termination;
  • Clearly explain that the employee’s continued employment with the company after an arbitration agreement’s effective date constitutes assent to that agreement. The Supreme Court specifically concluded Pfizer unambiguously explained the employee would “deemed to have consented, ratified and accepted this Agreement” by continuing employment with the company after the effective date;
  • Don’t be afraid to use emphasis and be repetitive. In Pfizer, multiple follow-up communications to employees underscored all “covered colleagues will be bound by the agreement as part of their continued employment at Pfizer.”
  • Set up a Frequently Asked Questions (FAQs) page in connection with any agreement, so employees can learn more about exactly what they are agreeing to. The Supreme Court found Pfizer’s FAQs page persuasive because it further emphasized “[t]he Arbitration Agreement is a condition of continued employment with the Company. If you begin or continue working for the Company sixty (60) days after receipt of this Agreement, it will be a contractual agreement that binds both you and the Company.”
  • Use plain language to explain what rights employees are relinquishing if they remain employed. The Court approved Pfizer’s straightforward wording that the claims affected would be resolved by arbitration, not “by a court or jury”; that the employee is “waiving her right to sue or go to court to secure relief”; and that the parties “FOREVER WAIVE AND GIVE UP THE RIGHT TO HAVE A JUDGE OR A JURY DECIDE ANY COVERED CLAIMS” (set out in all caps in the agreement);
  • Describe arbitration for employees. On its FAQs page, Pfizer briefly outlined an arbitration proceeding, defined the arbitrator’s role, explained the effect of an arbitrator’s decision, identified a specific arbitration organization as the administrator of its program, and designated that organization’s employment arbitration rules as the governing rules for the proceeding. Those communications suitably informed the employee “that there is a distinction between resolving a dispute in arbitration and in a judicial forum,” and clarified if the employee assented, arbitration would be “the only means of dispute resolution permitted” to the employee.
  • Use precise labels for the document. Call the arbitration agreement exactly that, and do not identify it as a “training module” or an “activity” in a training program or anything potentially misleading to employees.
  • Require a signature on the agreement itself. An employee’s mere acknowledgement of receipt of the agreement could be insufficient.

Employers’ Bottom Line: When communicating arbitration agreements to employees, state up front, clearly and unambiguously, that they are waiving their right to pursue litigation of potential employment disputes in a judicial forum. Explain the precise rights employees are waiving and provide helpful insight into what arbitration means for employees. Provide answers to common employee questions, perhaps through an FAQs page, about what their assent to the agreement means. “Clear and unambiguous” is the name of the game when drafting these and other important employee documents.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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