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New Jersey Supreme Court Rules Arbitration Agreement In Employment Application Was Valid And Enforceable


HLD, v. 30, n. 9 (September 2002)

New Jersey Supreme Court Rules Arbitration Agreement In Employment Application Was Valid And Enforceable

In 1994, defendant Sandvik, Inc. hired plaintiff Maureen Martindale as a benefits administrator. Plaintiff's signed application for employment included an arbitration agreement. The agreement required that plaintiff arbitrate any dispute arising from her employment with defendant. In 1996, plaintiff obtained disability leave during a difficult pregnancy. After giving birth, plaintiff requested and defendant granted family and medical leave. Before her family and medical leave went in to effect, however, defendant notified plaintiff that her position was being eliminated as part of a company reorganization. Plaintiff sued defendant in state trial court, alleging a violation of the New Jersey Family Leave Act (FLA). Subsequently, plaintiff amended her claim to add a claim under the New Jersey Law Against Discrimination (LAD). Defendant then moved to stay the proceedings and compel arbitration. The trial court granted the motion and dismissed plaintiff's complaint without prejudice. On appeal, the Appellate Division affirmed, holding that the arbitration agreement in the employment application was valid and enforceable. Plaintiff appealed.

The New Jersey Supreme Court affirmed. Although the Federal Arbitration Act pre-empts state laws that invalidate arbitration agreements, it allows states to regulate contracts under general contract principles, the high court noted. Thus, the high court framed the relevant issue as whether the arbitration agreement was a valid contract under state law. Answering this question in the affirmative, the high court rejected plaintiff's contention that the arbitration provision was unenforceable because the employment application did not constitute an employment contract. Rather, the high court said, "[t]hat agreement is complete in and of itself and need not be part of a larger employment contract." Next, the high court held that the arbitration agreement in the employment application was supported by consideration in the form of defendant's willingness to consider employing plaintiff. "Although defendant was under no obligation to actually hire plaintiff, defendant's consideration of plaintiff's application, its extension of an offer and the commencement of employment, and thereafter the provision of compensation and on-going employment constituted sufficient consideration to support the parties' agreement to arbitrate their disputes," the high court wrote. Thus, the high court concluded that the arbitration agreement was binding, as would be any other contractual term not contrary to public policy.

The high court also rejected plaintiff's alternative argument that the agreement to arbitrate constituted a contract of adhesion and therefore was unenforceable. Even if the employment application could be considered a contract of adhesion, the high court declined to invalidate the arbitration agreement. In so holding, the high court noted that the "employment application was not offered on a take-it-or-leave it basis." On the contrary, plaintiff was given the chance to ask questions about the application, and the high court found nothing in the record to indicate that defendant would have refused to consider her for the position had she asked to alter any of the application's terms. Moreover, the high court observed, plaintiff failed to show that the terms of the arbitration agreement were oppressive or unconscionable. "The insertion of an arbitration agreement in an application for employment simply does not violate public policy," the high court said.

Finally, addressing whether the valid arbitration agreement covered the instant action, the high court found no indication that the legislature intended to restrict arbitration for claims brought under the FLA or the LAD. In fact, both statutes contemplate pursing claims in an administrative setting. The high court also concluded that the language of the arbitration agreement encompassed plaintiff's statutory causes of action. Under the arbitration provision, plaintiff agreed to waive her right to a jury trial "in any action or proceeding relating to my employment with Sandvik" and that "all disputes relating to my employment . . . or termination thereof" shall be subject to arbitration. According to the court, the wording of the arbitration provision provided plaintiff with sufficient notice that all claims relating to her employment would be resolved via arbitration.

A dissenting opinion argued that, "because of the vast disparity in bargaining power between an employer and a job applicant, a waiver of the right to jury trial and consent to arbitration contained in a job application form should be unenforceable as a matter of public policy."

Martindale v. Sandvik, Inc., No. A-10-01 (N.J. July 17, 2002) (18 pages).

Health Lawyers thanks Lisa D. Taylor, of St. John & Wayne, L.L.C., in Newark, New Jersey, for sending us a copy of this decision.

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