After extensive briefing and oral argument by Goldberg Segalla’s Caroline J. Berdzik and Elizabeth A. Chang, a New Jersey judge compelled arbitration of employment-related discrimination claims in favor of an international fast food company, upholding an arbitration agreement signed after the enactment of N.J.S.A. 10:5-12.7(a)-(b), known as Section 12.7. The decision establishes caselaw favorable to large employers in New Jersey, strengthening the state’s protections for arbitration agreements.

Section 12.7 in the spotlight

During the plaintiff’s onboarding process, the employee voluntarily entered into a binding arbitration agreement to arbitrate any claim, dispute, or controversy under the Federal Arbitration Act (FAA). The plaintiff also expressly waived the right to a jury trial. The employer also provided the plaintiff with the opportunity to opt out of the arbitration agreement by sending an email or a letter to that effect within 30 days of signing the agreement. However, the employee never exercised the opt-out right and continued employment.

After the plaintiff filed suit, Caroline and Liz, partners in the firm’s Employment and Labor practice, filed a motion to compel arbitration and argued that courts across the country repeatedly have confirmed that the FAA displaces any state statute disfavoring arbitration, including statutes such as Section 12.7. They also argued that the plaintiff failed to set forth any evidence to revoke the arbitration agreement under the FAA’s savings clause. In fact, the plaintiff’s deliberate and voluntary decision to sign the arbitration agreement and not opt out after 30 days constituted clear and unmistakable evidence that the plaintiff agreed to arbitrate the claims. Thus, Caroline argued the agreement was enforceable under the FAA, despite the contradictory language in Section 12.7.

In opposition, the plaintiff’s counsel primarily argued that Section 12.7 barred and nullified all pre-dispute arbitration agreements, including the agreement at issue. The plaintiff further argued that there was no agreement reached under contract law.

Significant win for New Jersey employers

In his order, the judge adopted Caroline and Liz’s arguments and found that Section 12.7 contravened longstanding principles and caselaw liberally construing arbitration agreements and favoring arbitration.  The judge found that the plaintiff assented to the agreement and could not demonstrate any reason to set aside the agreement. The judge granted our motion to compel arbitration and denied the plaintiff’s cross-motion for attorney’s fees and costs. The significant decision calls into question the viability of Section 12.7 with respect to pre-dispute arbitration agreements of employment claims due to well-developed FAA caselaw.

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Attorneys on Goldberg Segalla’s Employment and Labor team view our representation of employers as a strategic partnership aimed at protecting the enterprise and its leaders while helping the organization advance its management philosophy and maintain its company culture. We understand the risks employers face, along with the pressures placed on management, because attorneys on this team have experienced them firsthand as in-house counsel and human resources officers at various companies in multiple industries.