Mandatory Arbitration Takes Another Hit in New Jersey

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Mandatory Arbitration Takes Another Hit in New Jersey

November 15, 2018

Francine Foner, Esq., Ty Hyderally, Esq.

On October 24, 2018, we wrote about two recent decisions that each limited the enforceability of mandatory arbitration agreements which require News Jersey employees to forego their right to a jury trial and instead arbitrate. ([1] On November 8, 2018, the Appellate Division dealt another blow to the enforceability of arbitration agreements in the employment context, in the unreported decision of Tian K. Reid v. DCH Auto Group, Inc., et al., 2018 N.J. Super. Unpub. LEXIS 2472.

On July 27, 2017, Tian K. Reid (“Reid”) filed a complaint in the New Jersey Superior Court against his former employer for discrimination and retaliation under the New Jersey Law Against Discrimination. Reid’s former employer moved to compel arbitration of the dispute, based upon an arbitration provision contained in an employment application that Reid had signed when he began a position as the finance and insurance director at DCH Academy Honda, a subsidiary of DCH Auto Group (USA)(“DCH Auto”), on July 1, 2008. That arbitration provision stated that Reid and “the Company” agreed to arbitrate any dispute concerning Reid’s employment.

On April 1, 2014, Reid transferred to a position at DCH Freehold Nissan, another subsidiary of DCH Auto, for which he completed an internal online application. However, no party provided any copy of the employment application for the transfer, or even a blank form of the application which was supposedly used by DCH Auto for such internal transfers. Thus, there was no proof presented that Reid ever agreed to arbitration of employment disputes with DCH Freehold Nissan.

Despite this, the employer argued that the arbitration provision in the employment application that Reid signed when he applied for his former position with DCH Academy Honda continued to control his employment disputes with DCH Freehold Nissan. The Trial court agreed, based upon the definition of “the Company” in the arbitration agreement expressly including “and/or its subsidiaries, affiliates, owners, directors, officers, managers, employees, agents, and parties affiliated with its employee benefit and health plans)[.]” Id. at *7-8

However, the Appellate Division disagreed and reversed, finding that the arbitration provision in the application that Reid previously signed with DCH Academy Honda “did not state that it would continue to apply when, as here, plaintiff transferred employment to a separate affiliated company.” Id. at *1 and *10-11. The Court further opined that “If defendant intended the provision to apply to future employment relationships between plaintiff and affiliates of DCH Academy Honda, then the language in the arbitration provision needed to reflect that intent.” Id. at *11.

Thus, this decision, albeit unpublished, is persuasive authority that arbitration agreements used by affiliated companies in New Jersey, which do not clearly specify that they apply to transferred employment to a separate affiliated company, will not apply to disputes arising after a transfer.

[1] See revised opinion published on November 13, 2018 in Flanzman v. Jenny Craig at 2018 N.J. Super. LEXIS 156.

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