Arbitration Agreements in New Jersey Need a Forum Selection Clause

Written by Sattiraju Law Firm on May 13, 2019

Mandatory arbitration agreements are popular in employment contracts. Arbitration is an alternative method to litigation and is quite popular because it is perceived as less expensive and faster than litigation. Arbitration is also private, which is why many employers prefer it.

However, New Jersey courts have looked skeptically on many arbitration agreements, and a recent appellate decision discussed in the National Law Review gives employees another ground for voiding them. In the case at issue, an arbitration agreement did not identify the forum in which the parties would arbitrate their dispute, which in the court’s eyes made the arbitration agreement invalid.

Where Will You Arbitrate

The case, Flanzman v. Jenny Craig, Inc., involved an 82-year-old employee of Jenny Craig who was presented with an arbitration agreement after working for the company for 20 years. The arbitration agreement, however, did not tell the plaintiff where they would arbitrate any legal issues or how they would go about choosing a forum for arbitration.

After signing the agreement, plaintiff saw her hours reduced dramatically before she was ultimately terminated. She fought back, bringing a lawsuit for age discrimination.

The issue before the court was whether Jenny Craig could force the plaintiff to arbitrate the age discrimination suit. The appellate court decided for the worker, holding that the agreement as written was insufficient because it did not identify the actual forum where the dispute would be arbitrated, such as the American Arbitration Association (AAA).

The appellate court was very clear that identifying the forum is not required for an agreement to be valid. But, at a minimum, the agreement must identify the method for selecting a forum. Because the agreement before the court failed to do even that, the Court struck it down.

Why does the forum matter in arbitration? Well, different arbitral forums have different procedures and rules, so a worker must know which one has been selected or the method of selection before they can give up their right to bring a lawsuit in court.

Will this Decision Help You?

This decision could have far-reaching effects for many workers with arbitration agreements. If your agreement lacks a forum selection clause, then the agreement might not be binding. This means you could litigate any employment dispute in court.

However, many employers are probably aware of the court’s decision and are busily having their lawyers draft new arbitration agreements for their employees to sign. Before doing so, read your agreement carefully and make sure you understand where your dispute will be arbitrated.

New Jersey Breach of Contract Attorneys

If you are in the middle of a contract dispute—or if you see one developing on the horizon—you should meet with an attorney to understand your rights under your employment contract.

At the Sattiraju Law Firm, we have helped many employees in New Jersey protect their rights. When no one else is in your corner, we will be.

For more information about our services, give us a call, 609-454-0637. You can schedule an initial consultation to discuss the circumstances surrounding your dispute.

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