Can Employers Mandate Arbitration of NJLAD Claims? The Monmouth County Superior Court Says Yes

Written by: Jacqueline Voronov, Esq. and Joseph A. Keane, Esq.

A recent New Jersey Superior Court decision held that the Federal Arbitration Act (“FAA”) trumps the 2019 Amendment to the New Jersey Law Against Discrimination (“NJLAD”) that purported to ban mandatory pre-dispute employment arbitration agreements.

Back on March 18, 2019, New Jersey Governor Phil Murphy signed a law that amended the NJLAD in several irritating important ways.  You can read all about it in our previous alert here.  For starters, the Amendment nixed confidentiality or non-disclosure clauses in employment contracts or settlement agreements.  Adding to the frustration of employers throughout the Garden State, the Amendment also prohibited any prospective waivers of procedural or substantive rights (including jury trial and class action waivers) arising out of employment claims.  Whether that squared with the FAA remained entirely unclear.

Two years later, employers have received some much needed clarity.  In a matter of first impression, Judge Henry P. Butehorn, J.S.C. of the Monmouth County Superior Court Law Division ruled in Janco v. Bay Ridge Automotive Management Corp. that a former employee’s claims brought under the NJLAD were subject to the arbitration agreement that she signed when she was first hired, notwithstanding the 2019 Amendment.

The plaintiff in Janco filed a complaint asserting claims of discrimination, harassment, and retaliation in violation of the NJLAD.  In response, the defendants filed a motion seeking to dismiss the complaint and compel the matter to arbitration pursuant to the terms of the employment contract that plaintiff signed when she was hired. The employment contract contained an arbitration agreement titled “Mutual Agreement to Arbitrate Claims.”

Ms. Janco argued, among other things, that the arbitration agreement was unenforceable by virtue of the NJLAD Amendment prohibiting prospective waivers of rights.  The Court squarely rejected this argument.  The Court analogized the case to the Estate of Anna Ruszala ex rel. Mizerak v. Brookdale Living Communities, Inc., a 2010 case where the Appellate Division invalidated a similar statutory amendment in the context of the Nursing Home Rights Act.  In Ruszala, the Appellate Division held that New Jersey’s prohibition against arbitration agreements was “irreconcilable with our national policy favoring arbitration as a forum for dispute resolution.”[1]  Applying the same reasoning, the Janco Court held that that the NJLAD Amendment was nullified by the FAA, and granted defendants’ motion to compel arbitration per the terms of the employment contract.

THE TAKEAWAY

This decision provides some certitude for New Jersey employers who had been left unsure of the enforceability of their arbitration agreements in the wake of the 2019 NJLAD Amendment.  Arbitration agreements are still very much alive and well in the employment context.  Granted, the Janco decision can still be overturned on appeal; however, the likelihood is minimal.

Employers considering adopting or modifying arbitration agreements should consult with counsel before doing so as they must still ensure that their arbitration agreements, explanations of the agreements to employees, and methods of assent comply with New Jersey law.  Hall Booth Smith, P.C.’s labor and employment attorneys are available to answer any questions you may have on this or other employment law issues.

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[1] 415 N.J. Super. 272, 293 (App. Div. 2010)