New Jersey Supreme Court Hands Victory to Employers Seeking to Utilize Arbitration

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Mandatory arbitration provisions are common features of employment agreements, particularly for large employers. At the same time employers have consistently become more and more reliant on technology and electronic management and training tools for communicating policies to employees. These two initiatives clashed in the case Skuse v. Pfizer, Inc., where the New Jersey Appellate Division initially refused to uphold Pfizer’s arbitration agreement that was e-mailed to employees and contained within an electronic training module. On August 18, 2020, the New Jersey Supreme Court issued the final word, finding that an employee was bound by the arbitration provision by electronically clicking on an “acknowledgment” that she would be bound by the agreement if she continued working.

Pfizer terminated Amy Skuse in 2017, and Ms. Skuse filed a lawsuit against Pfizer claiming that her termination was due to religious discrimination, in violation of the New Jersey Law Against Discrimination (“LAD”). Pfizer moved to dismiss Skuse’s complaint, and compel arbitration. While Skuse was employed, Pfizer’s human resources department sent an e-mail to employees at their corporate e-mail addresses, describing that all employees were subject to the company’s arbitration and class action waiver agreement. The e-mail included a link to the text of the agreement itself, as well as an “FAQ” describing the legal effect of the agreement. The agreement stated in bold font on the final page that employees would be considered to have agreed to arbitration by continuing their employment for 60 days. Pfizer also incorporated the agreement into a training module, where employees were asked to “acknowledge” the agreement.

The controversial aspect of the Skuse litigation came out of the 2019 opinion from the New Jersey Superior Court, Appellate Division, in Skuse v. Pfizer, Inc., 457 N.J. Super. 539, 561 (App. Div. 2019) (”Skuse I”). In Skuse I the Appellate Division determined that Pfizer could not demonstrate Skuse knowingly and voluntarily agreed to submit her LAD claims to arbitration, because she was asked to “acknowledge” (not “accept”) the agreement within the training module. Skuse I also was persuaded by the fact the agreement was sent to all employees within a litany of other e-mails, and it was unknown how much attention Skuse paid to that specific e-mail.

The New Jersey Supreme Court disagreed, however. In Skuse v. Pfizer, Inc., (A-86-18) (082509) (N.J. Aug. 18, 2020) (“Skuse II”), it reversed the Appellate Division and compelled arbitration of Skuse’s LAD claims. The Court in Skuse II found that it was appropriate for Pfizer to use the term “acknowledge,” as opposed to “accept,” because the provision established employees would be considered to have accepted the agreement if they continued working for 60 days after reading it. The Court found that Pfizer correctly used the term “acknowledge” in this context because the actual “acceptance” was established by the employees’ continued employment. The Court did observe that Pfizer should not have labeled its communication explaining the arbitration agreement as a “training module” or training “activity,” but that doing so did not render it invalid.

Skuse II is a welcome decision for employers increasingly reliant on electronic applications, acknowledgments, and training exercises for having its employees agree to terms and conditions of their employment, including arbitration. Regardless of what medium the agreement is being made, the cornerstone of an effective arbitration agreement remains to be clearly and unambiguously informing the reader what rights he/she is waiving, and what rights are being substituted (for example: going to AAA or JAMS). However, Skuse II also makes clear that context still matters for enforcing electronic agreements. The Court found that Pfizer’s e-mails and “FAQs” explaining arbitration and how it differs from the “ordinary” procedure of going to court weighed in favor of finding that the plaintiff knowingly waived her right to sue.

In the wake of Skuse II, on September 16 the New Jersey Supreme Court declined a request to hear the case of a former Cantor Fitzgerald executive seeking to avoid arbitration of her LAD claim. The Supreme Court declining to hear the case implicitly approves the Appellate Division’s earlier decision, compelling arbitration pursuant to an agreement that was e-mailed to employees. In that case, the employee argued that electronic agreement using the word “accept,” as opposed to “agree,” invalidated the agreement. Although the trial court was sensitive to the plaintiff’s argument, the final word is that using this language is sufficient to demonstrate mutual assent.

These cases notably avoided a glaring issue concerning arbitration agreements in the Garden State. That is, effective March 18, 2019 N.J.S.A. 10:5-12.7(a) establishes that “any employment contract that waives any substantive or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment shall be deemed against public policy and unenforceable.” Most practitioners believe this provision is meant to prevent employers from enforcing arbitration agreements against LAD claims.

If the effect of N.J.S.A. 10:5-12.7(a) is to prevent employers from enforcing arbitration agreements in the face of LAD claims, this raises a number of concerns under the Federal Arbitration Act (FAA). The FAA and the federal preemption doctrine require arbitration agreements to be considered on equal footing with other contracts. In this regard, the U.S. Supreme Court has held that any state law which outright prohibits arbitration of a particular type of claim is preempted by the FAA, and therefore invalid. See AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 341 (2011).

Though the New Jersey Supreme Court avoided this issue for now, the U.S. District Court for the District of New Jersey appears ready to tackle it head-on. New Jersey Civil Justice Institute v. Grewal, Case No. 3:19-cv-17518 was filed in August 2019 seeking to directly invalidate N.J.S.A. 10:5-12.7 as applied to arbitration agreements, on the basis of preemption. On July 21, 2020 Judge Anne E. Thompson denied a motion to dismiss brought by the New Jersey Attorney General’s office, and issued an order stating that the merits of the preemption issue will be scheduled for oral argument in October 2020. It is likely there will be a decision from Judge Thompson before the end of the year, setting the stage for any appeals (including possibly an application to the Supreme Court) in 2021.

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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