HLD, v. 30, n. 9
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
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.