New Jersey ‘Ban’ Against Mandatory Arbitration Provisions Suffers Another Setback | Blogs | Labor and Employment Law Perspectives
Since its enactment in 2019, the ban on mandatory arbitration provisions in employment contracts contained in Section 12.7 of the New Jersey Anti-Discrimination Act (NJLAD) has been on ice. And it looks like he just got thinner.
A recent case from the New Jersey Appellate Division—Antonio c. Curvature Newco, Inc., et al. (A-1983-20) – upheld what the US District Court in New Jersey had already determined in 2021: Section 12.7 is preempted by the Federal Arbitration Act (FAA) and cannot prevent employers from including mandatory arbitration provisions in employment contracts.
To be clear, Section 12.7, which amended the NJLAD, does not contain any Express prohibiting an employer from requiring its employees to arbitrate claims arising out of their employment, such as discrimination and other claims. Rather, the amendment attempts to achieve the same objective by simply providing that “[a] any provision of any employment contract that waives any substantive or procedural right or remedy relating to a complaint of discrimination, retaliation or harassment shall be deemed contrary to public order and unenforceable”. The law also prohibits the prospective waiver of any “right or remedy” under the NJLAD or “any other statute or case law.”
The New Jersey Legislature’s scrupulous avoidance of the word “arbitration” in section 12.7, however, did not save the amendment when considered on the matter. NJ Civil Justice Institute. against Grewal, civil. No. 19-17518. Far from it, the United States District Court was advised of the legislator’s game and questioned whether the implicit the prohibition of arbitration clauses in employment contracts was contrary to the FAA. The court held that “[c]critically, a state law that “avoids[s] ‘referring to arbitration by name’ does not avoid FAA preemption. Specifically, the court noted that any law that effectively discriminates against arbitration or “covertly” prohibits the waiver of the right to file a claim in court and be heard by the jury (which are the “primary” and “final” features of arbitration provisions) violates the FAA. The court then held that since Section 12.7 practically discriminates against arbitration, it is preempted by the FAA and its application should be permanently enjoined.
Earlier this year, considering the issue for the first time, the New Jersey Appellate Division wholeheartedly adopted the district court’s reasoning. Litigation on appeal was a trial court ruling requiring an employee to arbitrate whether his termination for a failed drug test constituted a failure to accommodate under New Jersey’s employment law. medical use of cannabis with compassion. (The arbitration agreement was set forth in an employee handbook which the plaintiff acknowledged having received and reviewed; and the agreement provided that continued employment constituted assent to its terms.) Relying on the United States Supreme Court precedent, the Appellate Division unanimously held that while Section 12.7 did not “expressly distinguish” arbitration agreements, it nevertheless succeeded in prohibit their use in employment contracts in violation of the FAA.
Given the strong language and unambiguous message of both Grewal and Antonucci case, it seems clear that section 12.7 no longer constitutes a significant obstacle to the application of the mandatory arbitration provision of an employment contract governed by the FAA. Employers should beware, however, that Antonucci case left open if Section 12.7 is enforceable when applied to an arbitration agreement governed by the New Jersey Arbitration Act, NJSA 2A: 23B-1 and following. Therefore, prudent employers are well advised to consult a lawyer when drafting arbitration clauses in their employment contracts.