Enforcement of Emailed Arbitration Agreement Struck Down

Written by Ravi Sattiraju on April 6, 2018

Arbitration agreements are routinely used by employers to deprive employees of their constitutional right to a jury trial in resolving employment disputes. And employers attempt to bind their employees to such agreements in a litany of ways. However, one New Jersey federal court has ruled that simply emailing an employee an arbitration agreement is not enough to enforce that agreement.

In Schmell v. Morgan Stanley & Co., Inc., 2018 WL 1128502 (D.N.J. Mar. 1, 2018), the plaintiff sued his former employer under the New Jersey Law Against Discrimination alleging that his employment was unlawfully terminated because of his status as a recovering drug and alcohol addict. Id. at *1. After removing the case from state to federal court, the defendant-employer immediately filed a motion to compel arbitration of the lawsuit under an arbitration agreement that was emailed to the plaintiff and all other employees of the defendant. Id. at *1-2. The email explained that the arbitration program was mandatory unless the employees opted out and that their continued employment without opting out constituted acceptance of the arbitration agreement. Id. at *2. The plaintiff never opted out and remained employed for two years after the email was sent but certified “that he has no recollection of receiving, viewing, or opening” the email with the arbitration agreement and therefore maintained that he should not be bound by it. Id. at *2-3.    

The court noted on the one hand that under New Jersey law, “arbitration agreements ‘must be the product of mutual assent’”. Id. at *2 (citation omitted). On the other hand, “[i]t is [also] true that under New Jersey law ‘where an arbitration agreement [even one provided electronically] states an employee accepts its terms by continued employment, the agreement will bind an employee who continues employment beyond the agreement’s effective date.’” Id. at *3 (citations omitted). Therefore, the court initially observed that “[g]iven the opt-out procedure here, it appears that Plaintiff’s continued employment without opt-out constitutes assent.” Id. at *3.

However, the court recognized that, unlike the many cases relied upon by the defendant, “here there is an underlying dispute as to whether Plaintiff had notice of the agreement.” Id. at *3. The court, therefore, determined that the “Plaintiff’s certification presents a genuine dispute of material fact as to whether he was on notice of the agreement to arbitrate such that there was a meeting of the minds and he could mutually assent to the terms of the [arbitration agreement]. And without adequate notice, there is a genuine dispute of material fact as to whether the alleged assent through continued employment without opt-out was knowing and voluntary.” Id. at *4. The court, therefore, denied the defendant-employer’s motion to compel arbitration and retained jurisdiction over the lawsuit.

How does this affect you?

This case is important because it appears to place a strict burden on an employer attempting to enforce an arbitration agreement to prove that the employee actually received and reviewed the emailed arbitration agreement and thereafter agreed to it. Simply proving the email was sent to the employee’s work email address was not enough in this case to sufficiently dispute the employee’s contention that he had “no recollection of receiving, viewing, or opening” the email. Employers have been put on notice that they must employ procedures to confirm receipt and review of arbitration agreements if they want courts to enforce them.     

Even if your employer claims you are bound by an arbitration agreement, there may be ways of defeating that claim. Immediately contact the attorneys at The Sattiraju Law Firm, P.C. in Princeton, New Jersey at (609) 722-7039 for a free consultation. We fight for workers’ justice under a myriad of employee-rights statutes and have successfully defeated motions to compel arbitration.

Posted Under: New Jersey Employment Law
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