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New rules for New Jersey arbitration agreements

On behalf of Cohn Lifland Pearlman Herrmann & Knopf LLP | Jan 22, 2019 |

There are several types of employment contracts that help protect businesses from liability under certain circumstances. One type of employment contract is an arbitration agreement.

These agreements can help prevent employees from suing their employer in court. However, a New Jersey court recently instated a new rule for arbitration agreements that could affect employers throughout the state. 

Agreements must include a ‘forum’

Earlier this fall, an elderly New Jersey woman sued her employer for employment discrimination after she was terminated. While her employer claimed that she signed an arbitration agreement several years prior that prevented her from bringing a lawsuit to court, the Supreme Court of New Jersey found the employer failed to identify a forum to settle disputes out of court.

The employer’s arbitration agreement stated that employment disputes must be settled by arbitration “in lieu of a jury or other civil trial.” While the employer provided wording that was clear and unambiguous, as required by law, the Court reasoned that it did not provide a specific arbitration location. The Court determined that without a specified forum or “arbitral institution,” the parties would be unaware of their rights and could not have a “meeting of the minds.”

Arbitral institutions are forums that help supervise and resolve disputes through a formal arbitration process. The following are examples of appropriate arbitral intuitions:

  1. American Arbitration Association (AAA)
  2. Judicial Arbitration and Mediation Services (JAMS)

It is important that a specified forum or arbitral institution in an agreement still exists when a dispute arises. If not, the arbitration agreement might not be valid, and an employee can likely bring a dispute to court. For this reason, and many others, it can be beneficial to consult with an experienced employment law attorney if a business dispute arises involving arbitration agreements or other employment contracts.