Alan Schorr’s Employment Case of The Week ending January 4, 2013

Brooks v. Brookdale Senior Living Communities, Inc., U.S. District Court – New Jersey, Dkt. No. 12-2821(RBK/AMD) (December 20, 2012)

The New Jersey District Court has ruled that an arbitration policy contained in an employee handbook is enforceable, even though the handbook contains an express disclaimer that nothing in the handbook is “intended to create an employment contract or any other type of contract.”

Cary Brooks was a medication dispensation technician. In April 2010, she suffered work-related injuries. She alleged that the Defendant refused to accommodate her injuries, and that the employer terminated her because of her disability. The matter was filed in 2012 in State Court and removed to Federal Court for diversity jurisdiction (there was no individual defendant named).

When Ms. Brooks began her employment in 2007, she received an Associate Handbook. The introduction to the Handbook expressly stated that it is “only intended to be a source of information and a general statement of Brookdale policies and procedures. It is not a contract of employment, expressed or implied, or a promise of employment upon specific terms.” Further, under the heading of employment, the handbook stated:

The policies and procedures set forth in this Handbook are not intended to create an employment contract or any other type of contract, nor are they to be construed as contractual obligations of any kind or an offer to form a contract.

On the same date, she signed an “Associate Handbook Receipt and Acknowledgment” form which stated:

I understand this Handbook does not create a contract of employment, express or implied, between Brookdale and me and I should not view it as such, or as a guarantee of employment for any specific duration . . . . I understand that Brookdale has an Employment Binding Arbitration policy in place should any disputes arise between Brookdale and me, and that I agree to arbitrate the dispute by a final binding arbitration.

The Court acknowledged that State law determines whether there is a valid binding contract, but also repeatedly cited the Federal Arbitration Act and New Jersey’s public policy favoring arbitration. The Court enforced the arbitration policy even though the very handbook that discussed the policy disclaimed that anything in the handbook could be construed as a contract. The Court acknowledged that the handbook was ambiguous and confusing:

In reaching this determination, the Court is sympathetic to Plaintiff’s concerns that, essentially, Defendant appears to have been talking out of both sides of its proverbial mouth when it provided Plaintiff with the Handbook and Acknowledgment form. That is, the Handbook explicitly states that “the policies and procedures set forth in this Handbook,” of which the Arbitration policy is necessarily a part, “are not intended to create . . . any other type of contract, nor are they to be construed as contractual obligations of any kind.” . . . A reasonable employee reading this broad and unequivocal language might well be puzzled, then, to learn that her employer in fact specifically intended one particular policy in that Handbook to have binding effect on their employment relationship. While the defect is cured in the Acknowledgement Form by the use of language explicitly stating that the employee “agree[s] to arbitrate the dispute by a final binding arbitration,” the inclusion of language on that same form reiterating that the “Handbook does not create a contract of employment, express or implied, between Brookdale and me” seems to work at cross purposes.

Despite all of the foregoing, the Court concluded that the public policy favoring arbitration was so strong that it overcame all of those defects.

The Court’s decision flies in the face of New Jersey law. In New Jersey, an arbitration provision will only be enforceable where it “results from an explicit, affirmative agreement that unmistakably reflects the employee’s assent.” Leodori v. Cigna Corp., 175 N.J. 293, 298 (2002). A party’s waiver of statutory rights “must be clearly and unmistakably established, and contractual language alleged to constitute a waiver will not be read expansively.” Garfinkel v. Morristown Obstetrics & Gynecology, 168 N.J. 124, 132 (2001). An agreement to arbitrate must be knowing, voluntary and unambiguous. Spolitback v. Cyr Corp., 295 N.J. Super. 264, 270 (App. Div. 1996).

Given the admitted ambiguities and the express disclaimer, this is a very unfair result for the unsuspecting employee. No New Jersey State Court that I am aware of has enforced arbitration based upon a manual that expressly disclaims that there is a contract. Unfortunately, Federal Courts all over the country, and now in New Jersey, have ruled the same way under the same circumstances. Obviously, plaintiffs whose cases may be susceptible to dismissal due to an arbitration policy should bring their actions in State Court and take great care to draft a Complaint that is not removable to Federal Court.

Plaintiff’s counsel: Daniel B. Zonies

Defendant’s counsel: Eric A. Savage, Littler Mendelson, PC

District Court Judge: Robert B. Kugler, U.S.D.J.