Title: Martindale v. Sandvik, Inc.
Citation: N/A
Docket Number: a-10-01
State: new-jersey
Issuer: new-jersey Supreme Court
Date: July 17, 2002

This appeal considers whether an arbitration agreement that was executed by the parties was valid and enforceable notwithstanding its inclusion in an application for employment. In 1994, plaintiff was hired as a benefits administrator by the defendant. When plaintiff applied for the position, she had to complete and sign an employment application that included an arbitration agreement. The arbitration agreement stated that all disputes relating to the employment or termination of the employment would be decided by an arbitrator. The arbitration provision stated further that plaintiff agreed to waive the right to a jury trial in any action or proceeding relating to her employment and that her agreement was knowing and voluntary and was given without duress or coercion. Finally, the arbitration provision stated that plaintiff had the right to consult an attorney before signing it. Other than defendant advising plaintiff that she was required to sign that page of the application, there is no claim that plaintiff was coerced into signing the arbitration agreement. In January 1996, plaintiff informed the defendant that she was pregnant. About two weeks before giving birth, plaintiff experienced medical problems related to the pregnancy and obtained disability leave. After giving birth, defendant granted plaintiff's request for family and medical leave to commence at the termination of the disability leave. Prior to the termination of the disability leave, defendant notified plaintiff that her position was being eliminated due to a reorganization of defendant's holding company and its financial department. Defendant ceased disability payments to plaintiff in November 1996. Plaintiff filed a complaint alleging a violation of the New Jersey Family Leave Act (FLA) and filed an amended complaint adding a claim under the New Jersey Law Against Discrimination (LAD). Defendant moved to stay the proceedings and to compel arbitration. The trial court granted the motion and dismissed plaintiff's complaint without prejudice, but ordered a stay pending appeal. On appeal, the Appellate Division affirmed the trial court's ruling. The panel determined that the arbitration agreement contained in the employment application was valid and enforceable and rejected the contention that the agreement was a contract of adhesion. HELD : Plaintiff is bound by the arbitration agreement contained in her application for employment because it was a valid and legal agreement to arbitrate, its language was clear and unambiguous, and it was sufficiently broad to encompass plaintiff's statutory causes of action. 1. The first step in determining the enforceability of an arbitration agreement is to determine whether a valid agreement exists. Arbitration agreements may not be subjected to more burdensome contract formation requirements than that required for any other contractual topic. Congress enacted the Federal Arbitration Act (FAA) to abrogate the then-existing common law rule disfavoring arbitration agreements and to place arbitration agreements on the same footing as other contracts. Although it is firmly established that the FAA preempts state laws that invalidate arbitration agreements, the FAA specifically permits states to regulate contracts, including contracts containing arbitration agreements, under general contract principles; therefore, an arbitration clause may be invalidated upon such grounds as exist at law or in equity for the revocation of any contract. The New Jersey Legislature codified its endorsement of arbitration agreements in N.J.S.A. 2A:24-1 to -11, and New Jersey courts have also favored arbitration as a means of resolving disputes. (Pp. 5-10). 2. The parties executed an agreement to arbitrate all claims against the defendant. Enforceability is not determined by whether the arbitration agreement is contained in an application for employment or in an employment contract, but rather by whether the arbitration agreement constitutes a valid and enforceable contract. (Pp. 10 to 11). 3. Basic contract principles render a promise enforceable against the promisor if the promisee gave some consideration for the promise. If the consideration requirement is met, there is no additional requirement of gain or benefit to the promisor, loss or detriment to the promisee, equivalence in the values exchanged or mutuality of obligation. The arbitration agreement contained in the Application for Employment signed by plaintiff was supported by consideration in the form of defendant's willingness to consider employing plaintiff. Although defendant was under no obligation to actually hire plaintiff, defendant's consideration of plaintiff's application, its extension of an offer and the commencement of employment, and thereafter the provision of compensation and on-going employment constituted sufficient consideration to support the parties' agreement to arbitrate their disputes. That agreement is binding, as would be any other contractual term not contrary to public policy contained in a signed employment application that led, as here, to employment. (Pp. 11 to 14). 4. A contract of adhesion is a contract presented on a take-it-or-leave-it basis, commonly in a standardized printed form, without opportunity of the adhering party to negotiate except perhaps on a few particulars. Even if an agreement is found to be a contract of adhesion, that does not render the contract automatically void. In determining whether to enforce a contract of adhesion, courts must look not only to the standardized nature of the contract, but also to the subject matter, the parties' relative bargaining positions, the degree of economic compulsion motivating the adhering party, and the public interest affected by the contract. Here, it is not determinative that plaintiff was required to sign an employment application containing an arbitration agreement in order to be considered for employment. The employment application was not offered on a take-it-or-leave-it basis. Defendant gave plaintiff an opportunity to ask questions about the application, and to consult with an attorney, and plaintiff herself was an educated person who was experienced in the field of human resources. Nothing in the record indicates that plaintiff asked to alter any terms of the application or that defendant would have refused to consider her for the position if she did not assent to the arbitration provision as presented. Even if the arbitration agreement could be characterized as a contract of adhesion, however, the agreement's subject matter and the public interests affected lead to the conclusion that it should not be invalidated. The affirmative policy of this State favors arbitration as mechanism of resolving disputes. (Pp. 14 to 19). 5. In determining the scope of the agreement, the duty to arbitrate rests solely on the parties' intentions as set forth in the writing. An employee may be bound by an agreement to waive his or her right to pursue a statutory claim in a judicial forum in favor of arbitration. In so doing, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral forum. The parties should be bound to the agreement unless either the Legislature has evinced an intention to preclude a waiver of judicial remedies, or the statutory claim cannot be vindicated in an arbitral forum. Here, the text and legislative histories of the FLA and New Jersey's LAD do not restrict the use of an arbitral forum. (Pp. 19 to 22). 6. The language in the arbitration agreement not only was clear and unambiguous, it was also sufficiently broad to encompass reasonably plaintiff's statutory causes of action. The arbitration provision does not contain any limiting references and its wording provided plaintiff with sufficient notice at the time she signed it that all claims relating to employment with and termination from defendant would be resolved through arbitration. It also addressed specifically a waiver of the right to a jury trial, augmenting the notice to all parties that claims involving jury trials would be resolved instead through arbitration. Finally, plaintiff's waiver of her right to pursue her statutory claims in a judicial forum was knowing and voluntary. (Pp. 22 to 26). The judgment of the Appellate Division is AFFIRMED. JUSTICE STEIN, dissenting, in which JUSTICES LONG and ZAZZALI join, is of the view that because of the vast disparity in bargaining power between an employer and a job applicant, a waiver of the right to jury trial and consent to arbitration contained in a job application form should be unenforceable as a matter of public policy. CHIEF JUSTICE PORITZ and JUSTICES COLEMAN and VERNIERO join in JUSTICE LaVECCHIA's opinion. JUSTICE STEIN filed a dissenting opinion in which JUSTICES LONG and ZAZZALI join. SUPREME COURT OF NEW JERSEY Plaintiff-Appellant, v. SANDVIK, INC., SANDVIK COROMANT COMPANY, INC., PAUL HODGEN, RICK ASKIN and JOHN CASCIANO, Defendants-Respondents, and JOHN DOES ONE through SEVENTEEN, Defendant. Argued January 14, 2002 Decided July 17, 2002 On certification to the Superior Court, Appellate Division. Anthony N. Iannarelli, Jr. argued the cause for appellant. Jill E. Jachera argued the cause for respondents (Morgan, Lewis &amp; Bockius, attorneys; Joseph A. Piesco, Jr., on the brief). The opinion of the Court was delivered by LaVECCHIA, J. This appeal addresses the enforceability of an arbitration agreement contained in an application for employment. The courts below concluded that the agreement to arbitrate executed by the parties was valid and enforceable notwithstanding its inclusion in an application for employment, and therefore held that plaintiff was bound to submit her claims against her former employer to arbitration. All of plaintiff's claims were held to be encompassed by the arbitration agreement, including her statutory claims concerning family leave and those alleging discrimination. We agree and affirm the judgment of the Appellate Division. I UNDERSTAND THAT I AM WAIVING MY RIGHT TO A JURY TRIAL VOLUNTARILY AND KNOWINGLY, AND FREE FROM DURESS OR COERCION. I UNDERSTAND THAT I HAVE A RIGHT TO CONSULT WITH A PERSON OF MY CHOOSING, INCLUDING AN ATTORNEY, BEFORE SIGNING THIS DOCUMENT. I AGREE THAT ALL DISPUTES RELATING TO MY EMPLOYMENT WITH SANDVIK OR TERMINATION THEREOF SHALL BE DECIDED BY AN ARBITRATOR THROUGH THE LABOR RELATIONS SECTION OF THE AMERICAN ARBITRATION ASSOCIATION. Plaintiff also submitted a resume that set forth her educational background and extensive experience in the field of benefits administration. It is undisputed that defendant provided her with the opportunity to ask questions about the application and the arbitration agreement and to consult a third party, including an attorney, before signing the documents. Although plaintiff asked questions about the position, she did not ask any questions about the application. According to plaintiff, defendant informed her that she was required to sign page four of the application; nonetheless, there is no claim that plaintiff was coerced into signing the arbitration agreement. Similarly, defendant s Director of Human Resources, John Casciano, testified at a deposition that his practice, followed in respect of plaintiff, was to ask an applicant to read the Application for Employment, review the document with the applicant, and offer to answer any questions. He said that applicants were permitted to take the application home to complete it, and then return it at a later date. In January 1996, plaintiff informed defendant that she was pregnant. Nearly two weeks before giving birth, plaintiff began to experience medical problems related to her pregnancy. Consequently, plaintiff obtained disability leave. After giving birth, plaintiff requested and defendant granted family and medical leave to commence at the termination of plaintiff s disability leave. However, prior to the termination of plaintiff s disability leave and the commencement of her family and medical leave, defendant notified plaintiff that her position was being eliminated due to a reorganization of defendant s holding company and its financial department. Defendant ceased disability payments to plaintiff in November 1996. Plaintiff filed a complaint against defendant alleging violation of the New Jersey Family Leave Act, N.J.S.A. 34:11B-1 to 16 (FLA). Defendant removed the matter to the United States District Court for the District of New Jersey and filed a motion to dismiss, in part. Defendant alleges that while that motion was pending it recalled the agreement to arbitrate contained in the Application for Employment. A remand to the Law Division ensued and thereafter plaintiff amended her complaint to add individual defendants and a claim under the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 to 49 (LAD). Defendant then moved to stay the proceedings and compel arbitration. The trial court granted the motion and dismissed plaintiff s complaint without prejudice, but ordered a stay pending appeal. On appeal, the Appellate Division affirmed the orders dismissing plaintiff s complaint and compelling arbitration. The panel held that the arbitration agreement contained in the Application for Employment was valid and enforceable, and rejected the contention that the agreement was a contract of adhesion. We granted plaintiff s petition for certification. 169 N.J. 610 (2001). Plaintiff-Appellant, v. SANDVIK, INC., SANDVIK COROMANT COMPANY, INC., PAUL HODGEN, RICK ASKIN and JOHN CASCIANO, Defendants-Respondents, and JOHN DOES ONE through SEVENTEEN, Defendant. STEIN, J., dissenting. The issue in this appeal is whether an employee should be bound by a mandatory arbitration agreement contained in an application form that she signed when she initially applied for a job with her employer. The majority has concluded that the arbitration agreement is enforceable. In my view, because of the vast disparity in bargaining power between an employer and a job applicant, a waiver of the right to jury trial and consent to arbitration contained in a job application form should be unenforceable as a matter of public policy. I UNDERSTAND THAT I AM WAIVING MY RIGHT TO A JURY TRIAL VOLUNTARILY AND KNOWINGLY, AND FREE FROM DURESS OR COERCION. I UNDERSTAND THAT I HAVE A RIGHT TO CONSULT WITH A PERSON OF MY CHOOSING, INCLUDING AN ATTORNEY, BEFORE SIGNING THIS DOCUMENT. I AGREE THAT ALL DISPUTES RELATING TO MY EMPLOYMENT WITH SANDVIK OR TERMINATION THEREOF SHALL BE DECIDED BY AN ARBITRATOR THROUGH THE LABOR RELATIONS SECTION OF THE AMERICAN ARBITRATION ASSOCIATION. As written, the agreement does not appear to require defendant to arbitrate any dispute that arises with an employee. Although plaintiff does not dispute that she was given an opportunity to ask questions about the application and to take it home for further review if she so desired, she recalls being told that she was required to sign page four of the application, which included the arbitration agreement. Plaintiff subsequently was hired by defendant and worked as a Benefits Administrator until she went on disability leave because of complications with a pregnancy. Although plaintiff was granted a family and medical leave of absence after giving birth, she was informed before her leave commenced that her position was being eliminated as a result of a change in the organization of defendant s holding company. Plaintiff received her last disability payment in November 1996. Subsequent to her termination, plaintiff filed claims under the New Jersey Family Leave Act, N.J.S.A. 34:11B-1 to -16, and the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 to 49. Defendant moved to stay the proceedings and to compel arbitration based on the arbitration agreement in the Application for Employment plaintiff signed prior to being hired. The trial court granted the motions and dismissed plaintiff s complaint without prejudice, but the court granted a stay pending appeal. The Appellate Division affirmed the dismissal and the order compelling arbitration. We granted certification. 169 N.J. 610 (2001). The tenant sued the landlord based on personal injuries she sustained when she fell down the apartment s stairway, alleging that her fall resulted from the stairway s negligent construction. The trial court granted summary judgment for the defendant based on the exculpatory provision. The Appellate Division reversed, acknowledging its authority to invalidate exculpatory provisions in landlord and tenant contracts on public policy grounds. Id. at 585. In determining whether or not the provision at issue should be enforced, the court stated that a basis for declaring invalid a bargain, otherwise valid, which exempts one from future liability, is where a relationship exists in which the parties have not equal bargaining power; and one of them must accept what is offered or be deprived of the advantages of the relation. Ibid. (citations omitted). The court observed that, [u]nder present conditions, the comparative bargaining positions of landlords and tenants in housing accommodations within many areas of the state are so unequal that tenants are in no position to bargain and that an exculpatory clause which purports to immunize the landlord from all liability would be contrary to public policy. Id. at 588. In Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 386 (1960), this Court invalidated an express automobile warranty that sought to limit [a] manufacturer s liability to replacement of defective parts, and which disclaim[ed] all other warranties, express or implied[.] The plaintiff automobile buyer and his wife sought recovery from the defendant automobile manufacturer and dealer for personal injuries sustained while driving an allegedly defective automobile soon after it was purchased. Although recognizing the basic principle of the freedom of parties to contract, we concluded that, in the framework of modern commercial life and business practices, such rules cannot be applied on a strict, doctrinal basis. Ibid. We observed: The conflicting interests of the buyer and seller must be evaluated realistically and justly, giving due weight to the social policy evinced by the Uniform Sales Act, the progressive decisions of the courts engaged in administering it. . . .[and] the bargaining position occupied by the ordinary consumer in such an economy. The history of the law shows that legal doctrines, as first expounded, often prove to be inadequate under the impact of later experience. In such case, the need for justice has stimulated the necessary qualifications or adjustments. [Ibid. (citations omitted).] Although we acknowledged the argument that the buyer had accepted the exclusion of liability for personal injuries in return for the replacement of defective parts, we determined that [a]n instinctively felt sense of justice cries out against such a sharp bargain. Id. at 388. We concluded that a standardized form disclaiming an implied warranty of merchantability when there was such a gross inequality of bargaining position[s], was so inimical to the public good as to compel an adjudication of its invalidity. Id. at 391, 404. In Vasquez v. Glassboro Service Ass n, Inc., 83 N.J. 86, 104-05 (1980), we invalidated a provision in a migrant farm worker s employment contract. The plaintiff farm worker came to New Jersey from Puerto Rico to perform seasonal farm work and resided in the living quarters at the defendant farmer s association labor camp. On the day the worker was discharged he was informed that, pursuant to his employment contract, he would have to gather his belongings and leave immediately. He was not allowed to remain at the labor camp overnight. In assessing the validity of the eviction provision in the employment contract, we acknowledged the inequality of bargaining power between migrant farmworkers and their employers. Id. at 103 (citing Kuzmiak and noting that [a] migrant farmworker has even less bargaining power than a residential tenant ). We analogized a migrant farmworker with a consumer who must accept a standardized form contract to purchase needed goods and services. Ibid. We found that [n]either farmworkers nor consumers negotiate the terms of their contracts, and [i]n both instances, the contracts affect many people as well as the public interest. Ibid. In finding the employment contract unenforceable we stated: The unconscionability of the contract inheres not only in its failure to provide a worker with a reasonable opportunity to find alternative housing, but in its disregard for his welfare after termination of his employment. The inherent inequity of the contract arouses a sense of injustice and invokes the equitable powers of the courts. [Id. at 104.] We also have addressed whether unconscionable provisions in contracts should be invalidated based on public policy concerns in several other contexts. See Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 555 (1967)(invalidating provision in contract for purchase of realty that obligated owners to pay broker s commission where consummation of sale [was] frustrated by the inability or the unwillingness of the buyer ); Solari Industries, Inc. v. Malady, 55 N.J. 571, 576 (1970)(holding that noncompetitive agreements in employment contracts must be reasonable under all relevant circumstances in order to prevent injury to public); Shell Oil Co. v. Marinello, 63 N.J. 402, 409 (1973), cert. denied, 415 U.S. 920, 94 S. Ct. 1421, 39 L. Ed. 2d 475 (1974)(invalidating termination provision in oil company s lease and dealer agreement because grossly disproportionate bargaining position between parties created unfair agreement that violated public policy); Karlin v. Weinberg, 77 N.J. 408, 423 (1978)(refusing to enforce noncompetitive agreement in employment contract beyond period of time needed to protect employer s practice); Gladden v. Cadillac Motor Car Div., 83 N.J. 320, 334-35 (1980) (invalidating as unconscionable warranty between consumer and tire manufacturer that limited manufacturer s liability to refund for or replacement of damaged tires). The court also noted that the agreement, which required only the employees but not Circuit City to arbitrate their claims, lacked the modicum of bilaterality required for contracts to be enforceable under California law. Id. at 894 (quoting Armendariz v. Foundation Health Psychcare Services, Inc., 6 P.3d 669, 692 (2000)). In addition to being a one-sided obligation, the agreement at issue also restricted employees from seeking punitive damages and imposed a strict one-year statute of limitations for legal disputes. The agreement also explicitly required employees to share the cost of an arbitrator s compensation. In Cooper v. MRM Investment Co., No. 3:01-1596, 2 002 WL 753832 (M.D. Tenn. Apr. 29, 2002), a Tennessee federal district court held that a mandatory arbitration agreement that an employee was required to sign in order to obtain employment was a contract of adhesion and unenforceable under Tennessee law. The employee was hired to work for a Kentucky Fried Chicken (KFC) franchise that was owned by MRM Investment Company (MRM). The plaintiff filed a lawsuit against MRM, alleging that one of the MRM owners sexually harassed her and that she was constructively discharged. Both claims were dismissed pursuant to the arbitration agreement that was included in her employment contract. Although the agreement signed by the employee does not appear to have been included in a job application, the court s discussion of the burdens facing prospective employees helps underscore the unfairness of mandating such concessions in employment applications. The court stated that [t]his agreement is a form contract, drafted by KFC s attorneys, offered to Plaintiff on a take it or leave it basis. Plaintiff had no choice. She either had to accept the job based on the terms outlined in the KFC Arbitration Agreement, or she had to find another job. . . . Especially in today s economy, the choice to leave it often amounts to no choice at all. Indeed, if she leaves it, she probably forgoes the opportunity for employment. NO. A-10 SEPTEMBER TERM 2001 ON CERTIFICATION TO Appellate Division, Superior Court MAUREEN MARTINDALE, Plaintiff-Appellant, v. SANDVIK, INC., SANDVIK COROMANT COMPANY, INC., PAUL HODGEN, RICK ASKIN and JOHN CASCIANO, Defendants-Respondents. DECIDED July 17, 2002 Chief Justice Poritz PRESIDING OPINION BY Justice LaVecchia CONCURRING OPINION BY DISSENTING OPINION BY Justice Stein