Alan Schorr’s Employment Case of The Week ending July 24, 2015

Jaworski v. Ernst & Young US LLP, __ N.J. Super. __, 2015 N.J. Super. LEXIS 120 (App. Div. July 23, 2015 [published])

An Appellate panel this week found a new way to enforce mandatory arbitration, even when an employee never signs an agreement but merely continues to work after the new arbitration policy is announced by the employer.

Three Ernst & Young employees sued for age discrimination under the New Jersey Law Against Discrimination.  The Defendant employer filed a motion to dismiss and compel arbitration, which was granted by the trial court.  The employees appealed.  The most interesting and perplexing of the issues involved one of the Plaintiffs, Robert Holewski, who never actually signed an arbitration agreement.  In 2002, the arbitration policy was announced via an e-mail bulletin.  In was later revised several times.  The twist here is that in these amendments the employees were not asked to affirmatively indicate their assent.  Rather, the policy stated that by continuing employment, each employee understood and assented to the policy.

The Appellate Division reviewed well-established case law, such as Leodori v. Cigna Corp., which required that signed assent is required for the enforcement of an arbitration agreement.  The panel here held that Leodori did not control because in Leodori the employee was expected to sign in order to indicate agreement.  In this case, the employer did not seek a signature, but rather constructed a system in which the mere continuation of employment meant that the employee, read, understood and agreed with the policy, even if the employee did not even actually read or understand the policy.

After holding that all of the plaintiffs had assented to the arbitration policy by continuing to be employed, the Court then addressed and rejected several other arguments.  The plaintiffs alleged that the policy was illusory because the employer reserved the right to modify the agreement and therefore was not bound by its own agreement.  The Court rejected that argument, holding that the agreement was not illusory because any change does not become binding upon an employee for thirty days.  The Court clearly missed the point, since a thirty day waiting period does not change the fact that the employer was free to change the agreement at will.  The panel, obviously determined to enforce arbitration, rejected a long list of cases holding the opposite view.

The panel continued on to reject the plaintiffs’ other arguments that (1) the plaintiffs never agreed to arbitrate claims regarding termination; (2) the program was not a valid waiver if constitutional and statutory rights; and (3) the program was unconscionable to due cost to the plaintiffs.

It was just six weeks ago that the U.S. Supreme Court denied certiorari in the New Jersey Supreme Court case in Atalese v. U.S. Legal Services Group, L.P., which held that an agreement to arbitrate must clearly and unambiguously advise a party that they are waiving their right to sue.  Without a procedure that ensures that an employee has read and understands the agreement, I cannot understand how this opinion can be consistent with the decision in Atalese.  This opinion should cause great concern that employers will see this as a green light to skip the necessary requirement of providing proper notices and ensuring that the employee truly understands the terms of the arbitration policy.

The Plaintiff intends to appeal to Supreme Court, so this may not be the last we will hear of this case.

Plaintiffs’ counsel: Christopher Lenzo, Lenzo & Reis, LLC.

Defendant’s counsel: Robert T. Szyba, Loren Gesinsky, Seyfarth Shaw LLP.

Trial Court Judge: Mary Costello, Hudson County.

Appellate Judges: Lihotz, Espinosa and St. John.