The Devil Is Not In The Details: NJ Supreme Court Rules Arbitration Agreements Are Enforceable Even Where an Arbitral Forum or Procedure Is Not Spelled Out
On September 11, 2020, the New Jersey Supreme Court issued a 6-0 decision in Flanzman v. Jenny Craig, Inc., compelling arbitration under an agreement which did not set forth a process for choosing an arbitrator or designating an organization to conduct the proceeding. The Court’s ruling reversed the Appellate Division decision that imposed such requirements and reinstated the trial court’s decision compelling the parties to arbitrate their employment age discrimination dispute.
Plaintiff Marilyn Flanzman was employed by Jenny Craig, Inc., in 1991 and in 2011 signed a document agreeing to arbitrate disputes involving her employment. The agreement, titled “Arbitration Agreement,” provided that the parties would resolve all employment-related disputes by “final and binding arbitration” which would take the place of “a jury or other civil trial.” The agreement was silent on the identity of the arbitrator, the organization to administer the proceeding, and the process for selecting an arbitrator.
In February 2017, Plaintiff complained and was ignored on three separate occasions about her lack of work hours. Plaintiff left the company and sued for age discrimination, constructive discharge, discriminatory discharge, and harassment. The employer Jenny Craig, Inc. moved to compel arbitration. The trial court granted Jenny Craig’s motion and ordered the parties to arbitrate. The Appellate Division reversed because the form agreement failed to designate an “arbitral forum or arbitral institution” and at minimum should have identified a process for an arbitration for the agreement to be enforceable.
The New Jersey Supreme Court disagreed with the Appellate Division and looked to the New Jersey Arbitration Act (NJAA) to fill in the gaps in the employer’s documentation: “[T]he NJAA, which provides a default procedure for the selection of an arbitrator and generally addresses the conduct of the arbitration, clearly expresses the Legislature’s intent that an arbitration agreement may bind the parties without designating a specific arbitrator or arbitration organization or prescribing a process for such a designation” and further “provides general guidance as to how the arbitration will proceed.” Thus, the Court concluded that while parties to an arbitration agreement are free to agree upon an arbitrator or arbitral process, it is not required for an arbitration agreement to be enforceable.
Going forward, attorneys and employers should be mindful of the Court’s guidance when drafting arbitration agreements. “A detailed description of the contemplated arbitration in an arbitration agreement enhances the clarity of the agreement” and, “if the parties identify a specific arbitrator or arbitrators or agree to retain an arbitrator affiliated with a given arbitration organization who will apply that organization’s rules, they may avoid future disputes.”