November 2002

In the recently decided case of Martindale v. Sandvik, Inc., A-10-01 (reported in our July 2002 Labor & Employment Law Alert) the New Jersey Supreme Court indicated that an employment application, which contained an arbitration agreement as part of its terms, was valid. The court held that the employee who signed the employment application was bound by its terms, including the waiver of a jury trial.

In response to this decision, a bill (S1800) has been introduced by Senator Nia H. Gill. The Assembly version of the bill (A2681), which is identical to the Senate version, has already passed by a wide margin (44-24-8). The bill, currently with the Senate Labor Committee, calls for an amendment to the New Jersey Law Against Discrimination (LAD).

The bill essentially states that it shall be an unlawful employment practice for an employer to make the waiver of rights granted under the LAD (or any other law, for that matter) a condition of hiring, continued employment or compensation, or a term, condition or privilege of employment. This would, of course, prohibit any waiver of the right to a jury trial, public adjudication in a court of law, discovery of evidence, compensatory damages, punitive damages, attorney fees, or statute of limitations.

Further, the bill states that an employer cannot request any employee or prospective employee to waive any claims prior to the existence of an “actual dispute.” Once there is an “actual dispute,” the employee or prospective employee can voluntarily agree to waive a trial by jury, etc. The key is that there must be an “actual dispute,” although “actual dispute” is not defined.

This bill, if passed, would in essence force employers to reword arbitration clauses in employment agreements and job applications to indicate that upon the existence of an “actual dispute,” the employee must be requested – not required – to waive the right to a jury trial voluntarily.

It should be noted that arbitration agreements have been the subject of several recent court cases. The U.S. Supreme Court (Circuit City Stores, Inc. v. Adams) affirmed the legal validity of arbitration agreements, and the New Jersey Supreme Court (Garfinkel v. Morristown Obstetrics & Gynecology Associates, P.A.) found that an arbitration clause in an employment agreement was so ambiguous as to negate its effect, although the court did affirm the validity of arbitration agreements generally.

If S1800 passes, it will be interesting to see if the courts uphold its validity. In the meantime, our friends and clients should be aware of the bill and its effect.

November 2002