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Employment Law Blog

Categories: Employment Litigation

NJ Supreme Court Set to Tackle Arbitration Agreements in the Digital Age

August 1, 2019

The New Jersey Supreme Court recently granted certification in Skuse v. Pfizer, Inc., 457 N.J. Super. 539 (App. Div. 2019), an Appellate Division case that addresses the appropriate manner in which employers should seek an employee’s agreement to arbitrate, when consent is sought through electronic means, such as online modules. The Court’s view on this issue will shed light on how employers can achieve legally enforceable arbitration agreements through the use of digital techniques.

Skuse
examined two issues: (1) the enforceability of an arbitration agreement that was transmitted to employees through a mandatory online “training module”; and (2) whether an employee who did not acknowledge his/her agreement to be bound by the arbitration agreement was nevertheless bound by “default” because she continued to work for the company for more than sixty days after receiving the arbitration agreement. On the second issue, the Skuse panel expressly acknowledged that it was diverging from the view taken by a sister panel in a previous published case, Jaworski v. Ernst & Young U.S. LLP, 441 N.J. Super. 464 (App. Div. 2015), which was almost certainly a critical factor in the Supreme Court’s decision to grant certification.

In Skuse, Pfizer presented its mandatory arbitration policy to thousands of employees as part of a four-slide “training module” or “activity” or “course” sent via mass email.  The email in turn linked to the company’s computer-based training portal. In a separate email, Pfizer provided a link to frequently asked questions concerning the arbitration policy which included questions such as “Do I have to agree to this?” and “Can I change any parts of the terms of the Arbitration Agreement?” The first slide stated that employment was conditioned on the parties’ agreement to resolve certain disputes through arbitration; that the agreement was contained in the Mutual Arbitration and Class Waiver Agreement that would be available to review and print of the following slide; that it was important the employee be aware of the terms of same; and that the employee would be asked to acknowledge receipt of the agreement. The second slide provided employees with access to a “resource” link to the full text of the policy. On the third slide of the module, employees were asked to “acknowledge” the policy by clicking a box or electronic button. Further, this slide expressly stated that continuing to work for the company for more than sixty days would constitute agreement to the policy. The final slide of the module thanked employees for reviewing the arbitration agreement and provided an email address where they could direct any questions.

Three months after being terminated from Pfizer for her failure to receive a yellow fever vaccination, employee Amy Skuse filed a Complaint against Pfizer alleging violation of the New Jersey Law Against Discrimination, N.J.S.A. 10:5-41 to 49, based on religious discrimination and failure to provide reasonable accommodation for her religious beliefs against receiving injections containing animal protein. In response to the Complaint, Pfizer filed a motion to dismiss the action and to compel Skuse to submit the claims to binding arbitration pursuant to the arbitration agreement Skuse admittedly “acknowledged.”

The trial court granted Pfizer’s motion. In reversing the trial court’s decision, the Appellate Division held that Pfizer’s procedure was inadequate to substantiate Skuse’s knowing and unmistakable assent to arbitrate any claims. In so holding, the court re-emphasized the Supreme Court’s holding in Leodori v. CIGNA Corp., 175 N.J. 293 (2003), which requires explicit, affirmative, and unmistakable assent to arbitration.

Importantly, in its decision, the Appellate Division provided guidance as to best practices for seeking an employee’s legally binding assent to arbitration policies transmitted through electronic means. The following represents a summary of these best practices:

  1. A company’s binding arbitration agreement should be conveyed in a manner that emphasizes the “legal significance and necessary mutuality of contractual process.” Pfizer’s conveyance of its arbitration agreement through a “training module” or “training activity” failed in this respect. To this end, the Appellate Division clearly stated: “obtaining an employee’s binding waiver of his or her legal rights is not a training exercise.”

  2. An arbitration policy must be “presented in a fashion that produces an employee’s agreement and not just his or her awareness or understanding.” Stated differently, an employee’s mere receipt or acknowledgement of the company’s arbitration policy is not enough to make it enforceable against him. The employee must voluntarily agree to the policy. Thus, the acknowledgment “click box” on the third slide of Pfizer’s training module critically failed to extract Skuse’s “explicit, affirmative agreement.”

  3. The material terms of an arbitration agreement cannot be inconsistent or vague.  With regards to Pfizer’s training module, the Appellate Court found that although the Company intended for the employee’s click of the acknowledgment box to substitute for a physical signature and thus represent an agreement to the policy, the term “acknowledge” near the click button was made vague by language in the opening slide explaining that the employee would be asked at the end of the presentation to “acknowledge receipt” of the agreement, without mentioning the employee’s need to also convey his assent to the terms of the policy. Further, the court found that the final slide of the module merely thanked the employee for “reviewing” the document. Finally, Pfizer referred to the entire process as a “training activity,” thus further confusing whether the employee was engaging in an agreement and waiver of rights. 

  4. If an employer wishes to obtain an employee’s knowing and voluntary consent to an arbitration agreement by electronic means, the employee’s click of a button or electronic signature must be “tethered to and spotlighted with a clear and proximate direction that, by clicking the button, the employee is knowingly agreeing to waive his or her legal rights” to access the courts and have a trial. To this end, although the words “agree” and “agreement” appeared several times on the slides in Pfizer’s module and also within the linked policy, the use of these words outside of the click button was deemed insufficient to satisfy the requirements of Leodori.

  5. To comply with the tenets of Leodori, the Appellate Court suggested that in order to seek an employee’s legally binding response to an arbitration agreement, a “click box” could read as follows: “Click here to convey your agreement to the terms of the binding arbitration policy and your waiver of your right to sue.” Indeed, the panel also noted that Pfizer could use a touch screen or other electronic method for employees to supply their signatures.

Turning to the second issue, the Appellate Division rejected Pfizer’s “consent by default” provision on the third slide of the PowerPoint, as likewise not in compliance with Leodori. The 60-day “deemer” provision was a unilateral attempt to bypass the Leodori requirements, effectively deeming employees who remain employed for 60 days to have agreed to arbitration. The panel could not square its sister-panel’s holding to the contrary in Jaworski with the tenets of Leodori. Indeed, the panel observed that such a “deemer” provision would render the clicking process in the training module meaningless after the passage of 60 days.

The Supreme Court’s decision in this matter promises to deliver to employers the requirements for obtaining employees’ agreement to arbitrate in the digital age, while simultaneously resolving an appellate split concerning “deemer” provisions. We anxiously await our Supreme Court’s comment and decision as to these guideposts.

Attorneys: Brian Block and Melody Lins
Related Practice: Labor and Employment
Category: Arbitration, Employment Litigation

New York's Employment Arbitration Ban is Pre-empted by Federal Law. Why New York Employers Need an "Undo" Button.

July 12, 2019

On June 26, 2019, United States District Court Judge Denise Cote, Southern District of New York, held in Latif v. Morgan Stanley & Co., LLC, et al., No. 1:18-cv-11528 (S.D.N.Y. June 26, 2019), that New York’s ban on mandatory arbitration agreements of employment-related sexual harassment claims is preempted by the Federal Arbitration Act (“FAA”)

As previously reported in our blog in the wake of the #MeToo movement, New York enacted “sweeping legislation” to “deal with the scourge of sexual harassment”, including C.P.L.R. §7515, titled “Mandatory arbitration clauses; prohibited,” effective July 11, 2018.

As of July 11, 2018, the new law (1) prohibited contracts that require arbitration of sexual harassment claims and (2) rendered such clauses in then-existing contracts “null and void” except, in both instances, “where inconsistent with federal law.” The “exception” for “federal law” was a reference to the FAA, which the United States Supreme Court has routinely held, pre-empts State laws that limit arbitration.

In Latif, the arbitration agreement provided for final and binding arbitration” of any “statutory discrimination, harassment and retaliation claims.” Plaintiff Mahmoud Latif signed the agreement, alleged he was subjected to sexual harassment and ultimately terminated in retaliation for complaining about it. Latif filed suit and relied on CPLR § 7515 in opposition to Morgan Stanley’s motion to compel arbitration.

Judge Cote relied on AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), in which the United State Supreme Court held that “[w]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.” As such, Judge Cote held, C.P.L.R. § 7515 is “inconsistent with the FAA” because it specifically prohibited arbitration of sexual harassment claims.”

In a footnote Judge Cote noted that the New York’s June 19, 2019 Bill, amendment of Section 7515, “to encompass mandatory arbitration of claims of discrimination generally, rather than specifically of sexual harassment,” ban would be preempted for similar reasons.

It is highly unlikely that Latif will be appealed, and even if it were, even less likely it will be reversed. As such, FAA-covered employers may rely on mandatory arbitration provisions to resolve sexual harassment claims.

Attorney: Lauren Topelsohn
Related Practice: Labor and Employment
Category: Harassment, Employment Litigation

May New York Employers Require Job Applicants to Submit to Marijuana Testing?

May 23, 2019

The answer in New York City is, in most instances, “NO,” and that’s new.

Recently, NYC banned pre-employment marijuana and THC testing.

On May 10, 2019, New York City enacted Int. 1445-A, which makes it unlawful for employers, labor organizations, employment agencies (and their agents) to require a prospective employee to submit to testing for marijuana or tetrahydrocannabinols (“THC,” the active ingredient in marijuana) as a condition of employment, with limited exceptions. The bill became law after Mayor de Blasio took no action on it for thirty (30) days.

When does this new law go into effect?

The law becomes effective May 10, 2020, and amends Section 8-102 of the New York City Code by prohibiting such pre-employment testing as an “unlawful discriminatory practice.”

Are there any limitations?


Notably, the law is limited to “pre-employment drug testing” and does not address testing of current employees and a condition of continued employment.

The law also includes several “safety-related” exceptions, which pre-employment testing for positions in law enforcement, positions that require OSHA training to work on constructions sites, or a commercial driver’s license, and any position that involves the supervision or care of children, medical patients or “vulnerable person” (as defined under New York Social Services Law §488). Other exceptions are intended to avoid testing that may be required by a collective bargaining agreement, federal law, or a federal contract or grant.

What should employers do?

Employers should stay tuned -- the New York City Commission on Human Rights is required to promulgate rules to facilitate the implementation of this law.

Attorney: Lauren Topelsohn
Related Practice: Labor and Employment
Category: Discrimination, Employment Litigation

Lights Out: Class Arbitrations Prohibited by Ambiguous Arbitration Agreements

April 25, 2019

On April 24, 2019, the United States Supreme Court decided Lamps Plus, Inc. v. Varela, No. 17-988, in which it held (by a 5-4 vote) that, under the Federal Arbitration Act (FAA), parties have not agreed to class arbitration where the arbitration clause at issue is ambiguous about the availability of such arbitration. There, a Lamps Plus employee sued the company on behalf of a putative class of employees after a data breach exposed approximately 1,300 employees’ tax information, but the employee had signed an arbitration agreement at the outset of his employment. The agreement stated that all disputes arising out of the employment relationship would be resolved by arbitration and provided that the claims would be resolved in accordance with the rules of the arbitral forum.

Reversing both the district court’s order compelling class arbitration and the Ninth Circuit’s affirmance, the Supreme Court, relying on one of its prior decisions in 2010, reasoned that ambiguity—like silence—in an arbitration agreement regarding class arbitration is insufficient to infer that the parties affirmatively agreed to such arbitration. The Court also rested heavily on what it deemed the fundamental differences between class and individual arbitrations, only the latter of which the Court claimed was envisioned by the FAA. Class arbitration, the Court proffered, does not allow for “lower costs, greater efficiency and speed, and the ability to choose expert adjudicators to resolve specialized disputes.” The Court also eschewed the lower courts’ reliance on the contra proferentem doctrine (ambiguity in a contract construed against the drafter), which it called a “doctrine of last resort,” reasoning that its use by the lower courts was inconsistent with the fundamental rule that arbitration is a matter of consent.

In dissent, Justice Ginsburg pilloried the majority for “how treacherously the Court has strayed from the principle that arbitration is a matter of consent, not coercion.” Observing the current state of arbitration and its present uses, her dissent called for urgent action by Congress to “correct the Court’s elevation of the FAA over the rights of employees and consumers to act in concert. In a separate dissent, Justice Kagan believed that resort to the neutral state contract law principle of contra preferendum—a neutral interpretive principle utilized by all 50 states—was appropriate and required if the arbitration agreement was ambiguous. Justice Kagan chided the majority for disregarding the parties’ actual arbitration agreement.

The Lamps Plus decision is important because it signals that arbitration agreements that are ambiguous as to the availability of class arbitration will be construed as prohibiting the same. Indeed, Lamps Plus (and the Court’s prior decision in Stolt-Nielsen regarding an arbitration clause completely “silent” as to class arbitration) raises an interesting question: is there even a need for an affirmative class arbitration waiver? While in the abstract, perhaps the answer is “no,” the safer and less expensive answer for employers and other companies seeking to preclude class arbitration (and class actions) is “yes.” Dissents notwithstanding, Lamps Plus is yet another win for companies in the Roberts’ Court.

Attorneys: Steven Adler and Brian Block
Related Practice: Labor and Employment
Category: Arbitration, Employment Litigation

Groundbreaking Employment Legislation in New Jersey Precludes Arbitration and Confidentiality

March 26, 2019

On March 18, 2019 groundbreaking employment legislation was enacted in New Jersey. While it is only a few paragraphs long, it makes three significant changes to the employment law landscape in the Garden State.

First, Senate Bill No. 121 bars provisions in an employment agreement that waive any substantive or procedural right or remedy relating to a claim of discrimination, retaliation or harassment (although it does not apply to union employees covered by a collective bargaining agreement (“CBA”)).

Second, the law bars any prospective waiver of rights or remedies under the New Jersey Law Against Discrimination, N.J.S.A. 10-5-1 et seq. (the “NJLAD”) or any other statute or case law.

Third, the law precludes confidentiality of any settlement involving a claim of discrimination, retaliation or harassment.

What does this mean for New Jersey employers? Most importantly, this law appears to run head-on into employers’ efforts over the past ten years and even longer to force these types of claims into arbitration. Since 1990 the NJLAD has provided for a trial by jury, NJLAD 10:5-13. Therefore, requiring employees to sign arbitration agreements for future claims would violate this new legislation because it would cause an employee to waive a substantive right or remedy under the NJLAD. Although it is too early to tell, the Federal Arbitration Act (“FAA”), however, may override this portion of the legislation.

Other provisions in an employment agreement that limit or waive substantive or procedural rights or remedies also are barred. For example, an agreement cannot forbid employees from filing charges of discrimination or retaliation with an administrative agency, such as the New Jersey Division on Civil Rights (“NJDCR”) or the U.S. Equal Employment Opportunity Commission (“EEOC”) and can’t require an employee to waive the right to punitive damages or legal fees if successful.

There also may be a bigger issue lurking here. Section 1b. of the law provides that no right or remedy under any employment statute or case law can be prospectively waived. Does this suggest that section 1a. -- which provides that an “employment contract” cannot waive any rights or remedies relating to a claim of discrimination, retaliation or harassment -- bars releases of previously asserted employment claims? This may require the DCR to approve proposed settlement agreements before such claims can be waived. The term “employment contract” is not defined in the law. However, section 2a. refers to both “employment contracts” and “settlement agreements” and, therefore, the likely interpretation of 1a. is that employees or former employees can release NJLAD and other employment claims in settlement agreements without DCR or EEOC approval.

As a result of the “Metoo Movement”, the legislation forbids confidentiality. The driving force behind this provision is to protect employees from harassment, retaliation and discrimination caused by someone who acted similarly in the past that they otherwise would not have known about due to confidentiality clauses. How will this impact litigation? Many employers only settle in order to avoid bad publicity. Will this legislation force more cases to trial? The legislation tries to protect employers to a limited extent. It provides that should an employee reveal sufficient details of the claim so that the employer is reasonably identifiable, the employer will not be bound to any non-disclosure provision. Does that go far enough? Why should an employer be put on the defensive and have to explain why it settled if a plaintiff’s claims were frivolous and settled by the employer solely to avoid the time and money defending such specious claims?

Finally, the law takes effect immediately and applies to all contracts and agreements entered into, renewed, modified or amended on or after the effective date. We, therefore, suggest that all employers have their employee manuals and employment agreements reviewed prior to any amendments or renewals of those agreements.

Attorney: Steven Adler
Related Practice: Labor and Employment
Category: Employment Litigation, Discrimination, Harassment

Employment Law Intersects with Commercial Litigation

November 27, 2018

The Labor and Employment Law Group at Mandelbaum Salsburg, P.C. prides itself on being able to handle difficult employment litigation cases that also involve commercial disputes. These days, more and more cases straddle employment and other areas of the law. One such case, Metro Commercial Management Services, Inc. v. Istendal, was just decided by the New Jersey Appellate Division on November 19, 2018.

In Metro Commercial an at-will employee brought a minority shareholder oppression claim pursuant to N.J.S.A. 14A:12-7(1)(c), which provides that an action may be brought:

[where] the directors or those in control have acted fraudulently or illegally, mismanaged the corporation or abused their authority as officers or directors or have acted oppressively or unfairly toward one or more minority shareholders in their capacities as shareholders, directors, officers, or employees.

Oppression in the context of an oppressed minority shareholder action, however, does not require illegality or fraud by majority shareholders. Brenner v. Berkowitz, 134 N.J. 488, 506 (1993); “Oppression has been defined as frustrating a shareholder’s reasonable expectations.” Id. Often in these cases, the minority shareholder, as in Metro Commercial, is also a terminated employee and argues that the majority interfered with his reasonable expectation of continued employment by firing him, causing him lost wages and other benefits.

The Appellate Division in Metro Commercial indicated that termination of a minority shareholder’s employment may constitute oppression because a person who acquires a minority share in a closely-held corporation often does so “but for the assurance of employment in the business in a managerial position,” citing Muellenberg v. Bikon Corp., 143 N.J. 168, 181 (1996). Such a person has a reasonable expectation that they will enjoy “the security of long-term employment and the prospect of financial return in the form of salary,” and will have “a voice in the operation and management of the business and the formulation of its plans for future development.” Id. Where these expectations are frustrated by majority shareholders, a court may find that oppression occurred.

In Metro Commercial, the Appellate Division noted that there was no case law in New Jersey that addresses whether an at-will employee’s status is relevant when analyzing whether an employee has a reasonable expectation of continued employment. In Metro Commercial, the Appellate Court affirmed the trial Judge’s finding that the former employee and minority shareholder could not have a reasonable expectation of continued employment where the shareholder agreement provided that “[e]ach [s]hareholder acknowledges that []he is an ‘employee-at-will’ and this can be terminated by the corporation at any time for any reason …” The Appellate Division’s decision is not surprising. However, one wonders how the Appellate Court would have ruled had the minority shareholder been an at-will employee without any form of written agreement. It appears likely that the holding would have been different because the Appellate Division, commenting on the case law from other jurisdictions relied upon by the minority shareholder, stated that in those other matters “there were no written employment agreements …” The Metro Commercial case, thus leaves the door open for minority shareholders to bring wrongful termination claims under the Minority Oppression statute in circumstances where they are employed at-will without any form of written agreement.

The take-away from the Metro Commercial decision is that corporations awarding minority shareholder interests to employees should do so only if there is a provision in the shareholders’ agreement or separate employment agreement making it clear that the corporation may terminate the minority shareholder’s employment with or without cause. It would also be helpful to include a provision confirming that, as an at-will employee, the minority shareholder has no reasonable expectation of continued employment.

Attorney: Steven Adler
Related Practice: Labor and Employment
Category: Employment Litigation