Week Ending 1/8/16: Morgan v. Raymours Furniture Company

Schorr & Associates’ Employment Case of The Week ending January 8, 2016

Morgan v. Raymours Furniture Company, Inc., 2016 N.J. Super. LEXIS 1 (App. Div. January 7, 2016)

By Alan Schorr

Two years ago, Schorr & Associates started their year with a federal district court victory in Raymours v. Rossi in which the Court refused to enforce arbitration where an employer’s arbitration policy was contained in a manual that contained an express disclaimer that anything in the manual constituted a contract or was contractual in nature. 2016 has started the same as 2014, with the very first published Appellate Division case of 2016 addressing the same issue and bringing a resounding victory for this law firm and against forced mandatory arbitration.

Grant Morgan alleges that he was a successful furniture salesman at a Raymour and Flanigan furniture store.  He alleges that after repeatedly complaining about age discrimination, he was presented with a mandatory arbitration agreement and advised that if he did not agree to relinquish his rights to sue for discrimination and to a jury trial, he would be terminated.  He refused, and Raymours terminated him for refusing to sign the arbitration agreement.  Morgan sued for age discrimination and retaliation.

After unsuccessfully moving to change venue, Raymours moved to dismiss and compel arbitration based upon a policy contained in its electronic handbook.  The trial court denied the motion and Raymours filed an interlocutory appeal, which is permitted as of right in motions to compel arbitration.

The handbook in question was distributed electronically.  Employees, including Mr. Morgan, were not asked to agree to the terms of the manual, but merely were asked to check a box indicating that they "received a copy of the Associate Handbook", and, further, that they understand that the rules, regulations, procedures and benefits contained therein are not promissory or contractual in nature and are subject to change by the company.   The handbook itself contained numerous other disclaimers, including:

Nothing in this Handbook or any other Company practice or communication or document, including benefit plan descriptions, creates a promise of continued employment, [an] employment contract, term or obligation of any kind on the part of the Company.

Raymours argued that even if Raymours was not bound by the agreement to arbitrate, that the employee should be so bound.  Raymours also argued that, despite the disclaimers, the arbitration section of the handbook should be severed and enforced.  Raymours argued that the public policy favoring arbitration is so strong that normal New Jersey law on enforcement of contracts should be disregarded.  Raymours argued that New Jersey law is out of step and not consistent with U.S. Supreme Court mandates enforcing arbitration against employees.

The Appellate Division rejected those arguments out of hand, finding that the arguments so lacked merit that they did not merit further discussion in a written opinion.  The Court, however, wanted to address the equities of Raymours’ argument, hence the decision to publish this opinion.  The Court ruled that where an employer seeks the benefit of enforcement of a handbook contract against an employee while disclaiming any enforcement of the handbook contract against the employer, the Court may reject the attempt to enforce on equitable grounds as well as legal grounds.  Citing such classic equitable quotes as, "wolde ye bothe eate your cake, and haue your cake?" and "sauce for the goose is sauce for the gander," the Court ruled that equity jurisdiction alone could serve as basis for denial.  The Court explained that defendants seeking mandatory arbitration are seeking an injunction - a stay of the lawsuit - which therefore triggers the Court’s equity jurisdiction.

With regard to Raymours’ argument that the decision and New Jersey’s law conflicts with Federal law, the Appellate Division cited a 4th Circuit decision that was released one week after oral argument in this case, which came to the same conclusion under nearly identical circumstances. See Lorenzo v. Prime Commc’ns, L.P., 806 F.3d 777 (4th Cir. 2015).

This published opinion gives plaintiff employment practitioners another argument against mandatory arbitration in that equitable principals may be used to defeat an mandatory arbitration motion.  For employers, this result can easily be avoided by creating standalone arbitration agreements that clearly explain the program and does not disclaim that the agreement is enforceable or contractual.

Raymours has advised that they are appealing to the New Jersey Supreme Court, so watch this space for future developments.

Plaintiff’s attorney: Alan H. Schorr, Schorr & Associates, P.C.

Defendant’s attorneys: James G. Fannon, Edward T. Groh.

Trial Judges: M. Patricia Richmond, J.S.C.

Appellate Division Judges: Fisher, Espinosa, and Rothstadt (Fisher, P.J.A.D. on the published decision).

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