A recent Federal court decision in New Jersey upheld a provision in an arbitration agreement that subjected an employee to the imposition of attorney’s fees in a failed claim against the employer and in addition, prevented the arbitrator from awarding punitive or exemplary damages against the employer. In this case, the plaintiff was a former employee and alleged that the employer violated his rights by failing to pay overtime. He also claimed a violation of the New Jersey Law Against Discrimination by denying his request to work at home when he was diagnosed with an anxiety disorder. He then also alleged that the employer terminated him in retaliation for his request for the accommodation.
The employer moved to dismiss the case and to compel arbitration pursuant to a mandatory arbitration clause located in the plaintiff’s employment contract. The court granted the motion and compelled arbitration of the case. The employee appealed and argued that the terms of the arbitration agreement were unconscionable because they significantly limited his statutory rights under New Jersey employment law(s) and unfairly favored the employer.
In upholding the arbitration agreement, the Court ruled that the agreement was not offered on a “take it or leave it” basis because the agreement stated that: 1) the plaintiff had read the terms and conditions of the employment agreement in its entirety; 2) that he understood the terms and conditions of the employment agreement; 3) the plaintiff had an adequate opportunity to consider the employment agreement before signing it and 4) the employee had an adequate opportunity to consult with an attorney about the contents of the employment agreement. Additionally, the Court held that the provision exposing the plaintiff to the assessment of attorney’s fees did not “affront the sense of justice, decency, or reasonableness so as to make the Arbitration Agreement unenforceable.” Finally, the Court upheld the agreement’s prohibition of punitive and exemplary damages as the provision was not wholly inconsistent with the NJLAD and FLSA due to the fact that NJLAD only permits punitive and exemplary damages in certain instances and federal law allows “compensatory, not punitive damages.”
This case demonstrates that New Jersey Courts are willing to allow contract law to dictate the handling of employment cases filed under certain statutes.
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By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Employment Law Attorney