New Jersey Continues to Chip Away at Mandatory Arbitration Provisions

What Employers Must Consider When Drafting Agreements

On August 11, 2017, the Appellate Division of the New Jersey Superior Court decided Dugan v. Best Buy Company Incorporated. In that case, as in a series of recent cases, the Appellate Division struck down an arbitration policy instituted by the Defendant to be used by its employees.

In this case, Mr. Dugan was the general manager of a Best Buy store. Best Buy had an electronic service called eLearning which it used to introduce and inform employees of company policies. In February of 2016, the eLearning site contained a mandatory arbitration provision which was to become effective on March 15, 2016. On the electronic learning site, the Plaintiffs scrolled through several screens which outlined the process for resolving disputes, including a screen which had text that said, “effective March 15, 2016 you will bring that claim in arbitration, rather than in court.” On the electronic learning site, the employees were informed that by remaining employed they would be deemed to have accepted and agreed to the policy regarding arbitration. Further, it contained an acknowledgement indicating that the employees read and understood the arbitration policy. The employees were then expected to electronically acknowledge that they have read the policy and understood it by clicking a box.

Despite reiterating New Jersey’s long established policy of favoring arbitration, the court determined that the arbitration policy was not agreed to by the Plaintiff. The court reasoned that arbitration like any other contractual provision, required mutual assent. The court found that the Best Buy policy was satisfactory and sufficient to alert the employees that they were waiving their right to sue in court. The policy was not a product of negotiation but merely an imposition on the employees by the management. Normally assent is established in the State of New Jersey by a signature or some other “explicit indication” that the employee intended to be bound by the provision. Here, the Plaintiff did not sign any document. Rather, he clicked an electronic acknowledgement that he has read and understood the policy. The court held that merely acknowledging receipt did not constitute assent.

However, the policy also went on to state that continued employment constituted acceptance of the policy. In previous holdings, the New Jersey courts found that continued employment constitutes sufficient consideration for employment related agreements.

For the first time, the Appellate Division imposed a requirement that a certain amount of time must pass before continued employment constitutes a manifestation of assent.  They drew a distinction in this case and the Jaworski v. Ernst & Young case. In Jaworski, the employee worked for five years after the policy went into effect before he was terminated. In that case, that constituted assent to the policy. In this case, the Plaintiff was employed for only three weeks after the effective date of the policy and the court held that the three weeks of employment did not constitute a sufficient manifestation of assent to the arbitration agreement.

In Dugan, we see once again the courts fashioning requirements, such as the length of employment requirement mentioned in the Dugan case, to impose conditions on the enforceability of arbitration agreements which were hereto before unknown in the law. Thus, drafters of these agreements, primarily employers, HR departments and attorneys, must be specifically vigilant in the language that they choose. Draftsmanship is critically important given the extra scrutiny imposed on these agreements by the New Jersey courts.

Author:  James A. Paone, II, Esq.