Is Your Arbitration Agreement Enforceable? If It Does Not Designate an Arbitration Forum, It May Not

In a recent case, the New Jersey Appellate Division addressed the question of whether an arbitration agreement that does not specify an arbitration forum, or any process for conducting the arbitration, is enforceable. The court held that it is not.

In Flanzman v. Jenny Craig, Inc., Dkt. No. A-2580-17T1 (App. Div. 2018), the plaintiff, an eighty-two-year-old weight loss counselor who had worked for defendant employer for twenty six years, filed a lawsuit against her former employer alleging that her hours were reduced substantially from full-time to three hours per week, and then she was ultimately terminated, in violation of the New Jersey Law Against Discrimination (NJLAD). The defendant filed a motion to compel arbitration over the dispute, citing to the arbitration agreement plaintiff signed in 2011, twenty years after the date of her hire but six years prior to her termination.

Plaintiff argued that the arbitration agreement lacked mutual assent and was invalid because there was no process mentioned in the agreement as to how an arbitration forum was to be selected, such as the American Arbitration Association (AAA) or the Judicial Arbitration and Mediation Services (JAMS). The Appellate Division explained that an arbitration agreement, like any other contract, must demonstrate that plaintiff has unequivocally waived his/her statutory right to a jury trial on his/her claims.

The court concluded that in this case, there was no “meeting of the minds” sufficient to constitute a waiver of plaintiff’s rights to a trial by jury on her claims against her employer. The employer omitted any reference to an arbitration forum or a process for conducting the arbitration through an arbitration organization, such as AAA or JAMS. Failure to identify a specific arbitrator would not have rendered the agreement invalid because statutory authority would have permitted the court, on motion, to select an arbitrator for the parties. However, there is no statute giving the court the authority to select an arbitration forum for the parties. The court opined that “[w]e emphasize that the issue in this case is whether to invalidate an arbitration agreement because the parties failed to identify any arbitration forum and any process for conducting the arbitration. The agreement must first reflect a meeting of the minds about what rights ostensibly replaced plaintiff's right to a jury trial. If the parties had done that, but remained unable to choose a particular arbitrator, then they could have arguably petitioned the court to make such a selection.”

Thus, for an employee to be considered to have waived his/her rights to bring a lawsuit against his/her employer and instead be required to arbitrate the dispute, the arbitration agreement must include an arbitration forum and a process for conducting the arbitration, such as via designation of an arbitration organization.