Arbitration Agreements: A Tale of Two States
A decision by the Appellate Division of the Superior Court of New Jersey in Aguirre v. CDL Last Miles Solutions, LLC, No. A-3346-22 (App. Div. Feb. 26, 2024), highlights a key distinction between the enforceability of arbitration agreements in New Jersey compared to other states. Specifically, the Appellate Division emphasized that for an arbitration agreement to be enforceable in New Jersey, it must be “clear and unambiguous.” ?This standard is particularly stringent regarding the waiver of the right to a jury trial. This is especially so when compared to the standard utilized in New York.
In New York, the enforceability standard does not require explicit language mentioning the waiver of a jury trial in arbitration agreements, for the arbitrator agreement to be enforceable to deprive an individual access to the Courts. ?This is inapposite to what would occur in New Jersey. This difference is rooted in the courts’ consideration of the parties’ bargaining power and their understanding of the implications of an arbitration agreement.
In Aguirre, a group of delivery drivers employed by CDL brought a class action lawsuit claiming that they were misclassified as independent contractors rather than employees, leading to the denial of overtime wages. ?The defendants filed motions to compel arbitration, arguing that arbitration agreements signed by the delivery drivers were enforceable. The case also involved an issue about whether New York or New Jersey law should apply.? After considering significant briefing on the issue, the Court ultimately determined that New Jersey law should apply as New Jersey had a materially greater interest in the case.? The Court took cognizance of the fact that the delivery drivers lived in New Jersey, the delivery drivers worked in New Jersey, and CDL operated a warehouse in New Jersey. ?This issue alone was a great victory for the Plaintiffs due to the distinction between the standard in New Jersey and New York with regard to what is required to enforce a waiver of one’s right to a jury trial and one’s access to the Courts.
Relying on the New Jersey Supreme Court decision, Atalese v. U.S. Legal Services Group, 99 A.3d 306, 311 (N.J. 2014), the Court held that the arbitration agreements were not valid where the arbitration agreements did not include a definition of arbitration and did not explain that the drivers would lose their right to bring claims through court.
The Court found that while the arbitration agreements gave some indication of the procedures that would be required to make a claim, the agreements failed to be “clear and unambiguous” as there was no express disclosure that arbitration would be in place of litigation and would be considered a waiver of the right to a jury trial. The Court emphasized that in determining the validity of an arbitration agreement, courts will closely examine the expected level of legal understanding of each party and the circumstances surrounding the signing of the agreement. Notably, the court found it likely the parties were unequal in bargaining power due to the lack of sophisticated negotiations where none of the plaintiffs had counsel.? Further the Court took notice of the impact that standard forms were used.
Arbitration agreements remain a controversial issue due to the employer’s potential to create conditions where arbitration heavily favors the employer. Employers can choose what entities arbitrate claims and where. Studies often indicate that arbitration reduces transparency of an employer’s wrongdoing, lowers an employee’s chance of winning, and results in lower awards than if the dispute was heard before a jury. ?
On the other hand, arbitration is sometimes a protracted process that is not as efficient as an employer hopes.? Further, the arbitrator may have different interests than a judge in deciding Summary Judgment motions.? If the arbitrator grants summary judgment in favor of the company, the arbitration is over, without a hearing.? Arbitrators bill for their time and have potentially different interests with regard to concluding matters in an early fashion. Another significant issue is that arbitration can be very costly to the employer as the employer is generally responsible for all costs of arbitration.
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This blog is for informational purposes only.? It does not constitute legal advice, and may not reasonably be relied upon as such.? If you face a legal issue, you should consult a qualified attorney for independent legal advice with regard to your particular set of facts.? This blog may constitute attorney advertising.? This blog is not intended to communicate with anyone in a state or other jurisdiction where such a blog may fail to comply with all laws and ethical rules of that state of jurisdiction.
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