Schorr & Associates’ Employment Case of The Week ending November 18, 2016

Ladeairous v. Toyota Motor Sales U.S.A. Inc., MID-L-3891-16 (Law Div. November 14, 2016)

New Jersey courts are continuing to refuse to enforce arbitration agreements which are contained in employment manuals, especially where those manuals contain contract disclaimers and where the policies are subject to change at the employer’s sole discretion.

Daniel J. Ladeairous was a portfolio manager with Toyota Motor Sales, U.S.A.  He filed a discrimination lawsuit alleging that he suffered discrimination, harassment, and retaliation based on the conduct of his direct superior. Those allegations included being repeatedly berated with homophobic slurs, physically threatened, and being present during the making of anti-Semitic and racist comments directed at other employees and customers.  The defendant filed a motion to dismiss based upon its argument that Ladeairous had agreed to submit all claims through arbitration.

The court carefully analyzed the employment manual in question, and ruled that the arbitration policy contained in the employer’s manual was unenforceable.  The court relied, in part, on the decision in our recent case, Morgan v. Raymours Furniture.  In that case, the Appellate Division refused to enforce an arbitration agreement on both equitable and legal grounds where the employment manual contained disclaimers that nothing in the manual was intended to create an enforceable contract. This situation was somewhat different than Morgan in that Mr. Ladeairous had also signed a standalone agreement.

Nevertheless, the trial court judge declined to enforce the standalone agreement which referenced the policy.  The court cited numerous equitable principles, including (1) the
Handbook and the Arbitration Agreement were both drafted by defendant; (2) Plaintiff signed the Handbook and Arbitration Agreement during his employment orientation; (3) he did so without the assistance or advice of counsel; (4) he did so without being given a thorough or unbiased explanation of the documents by defendant’s representatives; and (5) he did so without being afforded an adequate opportunity to read and digest these extensive documents.

The court also made legal rulings that the arbitration policy was unenforceable due to the contract disclaimers in the handbook, as well as the fact that the handbook makes it clear that the employer can change the arbitration policy at its sole discretion.  The court concluded:

While arbitration agreements are certainly permissible in an employment context, where an employer: (1) expressly states in the agreement that no contractual obligations exist between it and the employee; and (2) reserves the right to amend or change any of its policies or obligations in its sole discretion, that agreement will not be enforceable.

This is an unpublished Law Division case, which is not precedential.  But it is a well-written, well-reasoned decision which adds to the growing list of courts in New Jersey refusing to enforce arbitration agreements where the employer seeks to enforce handbook policies.  Considering how easy it would be for employers to simply create a separate arbitration agreement, there is no reason for courts to permit employers to take a shortcut, essentially tricking an employee into agreeing to arbitration by tucking the arbitration policy into the middle of a manual that contains disclaimers and options for the employer to unilaterally change the policy.

Trial Judge: Douglas K. Wolfson, J.S.C.