There are many benefits to resolving workplace disputes through mediation, including controlling legal expenses, avoiding adverse publicity, and maintaining employee morale. To realize these and other benefits of workplace mediation, many companies ask new employees to sign agreements to mediate and/or arbitrate any workplace disputes that may arise after employment commences. These agreements may appear in employment contracts and/or employee handbooks. A recent New Jersey appellate decision offers a primer on how to properly document such agreements so they are binding and keep workplace disputes out of court. See Tammie S. Nau v. David Chung & Englewood Lab, Inc., 2019 WL 2573281 (N.J. Super. Ct. App. Div. June 24, 2019).
In Nau, the defendants offered plaintiff the position of Executive Vice President of Englewood Lab, Inc. The compensation purportedly included an “equity stake” in Englewood valued at between $7-$9 million. The plaintiff accepted the position pursuant to an employment agreement under which the plaintiff agreed to “comply with all of Englewood’s policies, procedures, rules and regulations, both written and oral.” The agreement further provided for stock options, but did not mention an equity interest in Englewood or provide for the issuance of any shares.
Shortly after signing the employment agreement, plaintiff received Englewood’s Employee Handbook. Section 710 of the Handbook provided that if “a dispute cannot be resolved internally, you and ENGLEWOOD LAB agree to first engage in mediation, and then arbitrate any remaining disputes.” The term “dispute” was defined broadly to “mean any claim you may have against ENGLEWOOD LAB, or ENGLEWOOD LAB may have against you, relating to, arising from, or having any relationship or connection whatsoever with your employment with ENGLEWOOD LAB or the termination thereof.” Section 710 also provided for the dismissal of any civil lawsuits filed contrary to its provisions.
Plaintiff signed an “Acknowledgement and Receipt of Handbook” form which expressly provided that “I agree to mediate and arbitrate any claims I may have against ENGLEWOOD . . . as described in Section 710 of this Handbook, and waive my right to a trial by jury.”
Following the commencement of plaintiff’s employment, Englewood’s CEO sold a majority stake in the company to a third party. He also modified plaintiff’s job responsibilities. Plaintiff subsequently sued, asserting various causes of action in connection with the stock sale and change in her role at the company.
Englewood and Chung moved to dismiss the complaint on the grounds that the court lacked jurisdiction because plaintiff agreed to mediate and arbitrate her claims pursuant to Section 710 of the Handbook. The lower court granted the motion, finding that plaintiff “clearly and unambiguously assented” to Englewood’s mediation and arbitration policy by executing the acknowledgment form, and that the policy encompassed the claims asserted in her complaint. The lower court ordered that all claims should be mediated then arbitrated consistent with that policy.
On appeal, the appellate court noted the strong public policy in favor of enforcing arbitration agreements as a mechanism to resolve disputes that would otherwise be litigated. The court also observed, however, that an agreement to arbitrate must be “the product of mutual assent, as determined under customary principles of contract law.” In a nutshell, a court should compel parties to arbitrate disputes only if it is clear they have agreed to do so.
Turning to plaintiff’s arguments against enforcement of Englewood’s policy, the court held that, even though the agreement to mediate did not appear in plaintiff’s employment agreement, plaintiff’s later execution of the plainly worded acknowledgment form created a valid and binding contract to mediate any disputes.
The court distinguished an earlier case in which it had declined to enforce an arbitration policy in an employee handbook where there was no evidence that the employee had “clearly and unambiguously agreed to a waiver of the right to sue.” Instead, the employee had only acknowledged receiving and understanding the contents of the handbook. In contrast, in the instant case, the plaintiff did not merely acknowledge that she received the handbook and understood its terms, but executed an acknowledgment form containing a separate and express agreement to mediate and arbitrate her claims against Englewood in accordance with Section 710 of the handbook.
The plaintiff raised other nuanced arguments based on the language of the handbook, but the court deflected them all. We won’t go into further detail, but suffice it to say that the decision offers helpful guidance for drafting agreements to mediate and arbitrate that will withstand any subsequent legal challenges.