Commercial Division Blog

Posted: October 25, 2019 / Categories Arbitation, Mediation and Other ADR, New Jersey Business Litigation

Requiring Employees to View and Acknowledge Seeing Presentation on Mandatory Arbitration Does Not Create Binding Agreement to Arbitrate

On January 16, 2019, the Appellate Division of the Superior Court issued a decision in Skuse v, Pfizer, Inc., Docket No. A-3027-17T4, holding that requiring an employee to view and acknowledge seeing a presentation on mandatory arbitration was insufficient to create a binding agreement to arbitrate, explaining:

We begin our forum analysis by recognizing the federal and New Jersey legislative policies generally favoring arbitration as a dispute resolution process, in situations where that process has been mutually chosen by the parties.

Consistent with these statutory policies, a state cannot subject an arbitration agreement to more burdensome requirements than those governing the formation of other contracts. However, a state can regulate arbitration agreements by applying its contract-law principles that are relevant in a given case.

One of the fundamental elements of contract law is the requirement of the contracting parties' mutual assent. A legally enforceable agreement requires a meeting of the minds. Parties are not required to arbitrate when they have not agreed to do so.

As the United States Supreme Court recognized when construing the FAA in AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011), state-law principles governing contract formation apply to arbitration agreements. If there is no meeting of the minds as to the material terms of an arbitration agreement, or the material terms are internally inconsistent or too vague or indefinite to be enforced, a court has the authority to decline to compel arbitration.

Common-law principles of waiver also bear upon the analysis. At times a contractual provision will express a waiver by one or both parties giving up certain rights they may otherwise possess. An effective waiver requires a party to have full knowledge of his or her legal rights and intent to surrender those rights.

In the context of a contractual arbitration, a necessary waiver would evidence a relinquishment of a party's right to pursue a lawsuit against the other party in court and instead have the claims resolved in arbitration. By its very nature, an agreement to arbitrate involves a waiver of a party’s right to have his or her claims and defenses litigated in court. Here, the issue of waiver specifically concerns the waiver of an employee's right under the LAD to sue in Superior Court an employer who has engaged in alleged discriminatory conduct and seek a jury trial to resolve that claim.

Our case law has extended these requirements of mutual assent and knowing and voluntary waiver to the setting of arbitration provisions contained within employment relationships. For the last fifteen years, the guiding precedent on this subject in our State has been the Supreme Court's 2003 opinion in Leodori, 175 N.J. 293.

The plaintiff in Leodori was employed by the defendant insurance company. During the plaintiff's tenure as an employee, the company had a policy purporting to require all of its workers to submit to binding arbitration of any employment disputes. The arbitration policy was contained in a handbook distributed to all employees, including the plaintiff. The handbook was accompanied by an acknowledgement form, which included an acknowledgment of the employee's receipt of the handbook and a recitation that the employee understood the handbook contained information on company policies. However, the acknowledgment form did not contain any language specifically referring to arbitration. A separate "Employee Handbook Receipt and Agreement" form accompanied the handbook and described the arbitration as a term of employment. Leodori signed the acknowledgement form, but he did not sign the "agreement" form.

After Leodori was terminated, he sued the company in the Law Division for the company's alleged violation of his rights under the New Jersey Conscientious Employee Protection Act, N.J.S.A. 34:19-1 to -8. The trial court dismissed the case based on its finding that the parties had entered into a binding arbitration agreement, and this court reversed that ruling.

On review, the Supreme Court upheld this court and ruled that the company's arbitration policy was unenforceable against Leodori because he had not conveyed his knowing and voluntary agreement to that policy. Writing for the Court, Justice Verniero announced the basic tenet that an arbitration provision cannot be enforced against an employee who does not sign or otherwise explicitly indicate his or her agreement to it.

The Court's opinion in Leodori further instructed that a waiver-of-rights provision must reflect that an employee has agreed clearly and unambiguously to arbitrate the disputed claim. Such a valid waiver results only from an explicit affirmative agreement that unmistakably reflects the employee’s assent. The critical inquiry is whether plaintiff surrendered her statutory rights knowingly and voluntarily.

The Court did recognize the practical burden that large employers may encounter in attempting to obtain such voluntary assent from their employees to waive their rights to sue and submit to arbitration. Given that practical concern, the Court made clear its holding was not to be construed as requiring employers to negotiate individual agreements with their entire workforce to implement a company-wide arbitration policy. As guidance, the Court stated that the employer in Leodori would have substantiated its employee's mutual assent and waiver if it either: (1) obtained the plaintiff's signature on the arbitration agreement, or (2) specified on the acknowledgment form, which the plaintiff did sign, that he had not only received, but also agreed to the arbitration policy. An acknowledgement form signed by the employee need not recite verbatim the arbitration policy, so long as the form refers specifically to arbitration in a manner indicating the employee's assent, and the policy is described more fully in an accompanying handbook or in another document known to the employee. The Court emphasized, with minimal effort, employers can revise the language to include an indication that the recipient has received and agreed to an arbitration policy.

In the ensuing decade and a half since the Court's opinion in Leodori, our courts have faithfully applied its principles demanding the parties' manifested clear assent to arbitrate. Although it is not an employment case, the Supreme Court's seminal opinion on this general topic in Atalese, 219 N.J. at 447, reaffirmed that the words of an arbitration agreement must be clear and unambiguous that a person is choosing to arbitrate disputes rather than have them resolved in a court of law.

We apply these settled legal principles to the methods used by Pfizer to attempt to extract plaintiff's agreement to arbitrate. In doing so, our review of the trial court's legal conclusions is de novo. Like the trial court, we accept the factual concession of plaintiff's counsel that we are to assume, for sake of the analysis, that she did receive the pertinent company emails and did click the acknowledgement box at the end of the presentation.

As a starting point, we note a major technological difference between the setting in Leodori and the present case, namely an employer's use of an electronically transmitted training module to communicate and impose the terms of its mandatory arbitration policy. Unlike the employer in Leodori, Pfizer did not request or obtain physical signatures from the employees who were supplied with the policy. Instead, Pfizer attempted to secure its employees' assent to the policy through the use of digital techniques.

Pfizer, along with amici EANJ and NJCJI, urge us to affirm the trial court's ruling as an appropriate decision for our digital age. We recognize that in our current world, much of an employer's regular communications to its employees, and work-related communications between and among fellow employees, occurs through email and other digital means. A recent 2018 study revealed that an American worker spends, on average, 3.1 hours each weekday checking work email.

Another present reality is that office employees tend to be inundated with a high volume of incoming email messages, and also send out a large number of their own emails. A global study of email statistics reported that, in 2014, the majority of email traffic came from the business world, which accounted for over 108.7 billion emails sent and received per day. As of 2014, business users, on average, reportedly sent and received 121 emails daily, and that figure was projected to increase to 140 emails per day by 2018.

Although the rapid growth of email traffic has advantages of convenience and efficiency, it can be difficult, even for conscientious office workers, to keep up with the unrelenting emails flowing into their email inboxes. We take judicial notice that, in order to deal with this deluge, people frequently skim (or scroll through without reading) written material sent to them digitally, such as when they download computer applications online, or receive impersonal messages or announcements from organizations. People also are prone to bypass links to other documents without meticulously opening and reading the contents of those links. Such habits, although perhaps not always commendable, have become digital survival mechanisms used to separate the proverbial wheat from the chaff.

We do not mean to discourage employers from using email to disseminate company policies and announcements. The difficulty is assuring that the most important employer messages are actually read and understood by the workforce, and, where the law requires it, responded to with the employees' knowing and explicit assent.

The digital communications in this case occurred in the important context of an employer soliciting a waiver of an employee's statutory rights. In that context, it is critical, as Leodori mandates, that the digital communications substantiate an employee's explicit, affirmative agreement that unmistakably reflects the employee's assent to a binding arbitration policy.

The company's binding arbitration agreement was conveyed through what defendants have rather euphemistically called a training module or training activity. As Baker's certification noted, the portal is commonly used by Pfizer employees for many of their assigned trainings. These prosaic labels do not fairly capture the essence of the endeavor, i.e., an effort to extract an employee's knowing and voluntary agreement to waive important rights that have been bestowed upon him or her by law.

Obtaining an employee's binding waiver of his or her legal rights is not a training exercise. It is not on a par with routine or mundane training subjects, such as how to obtain an assigned space in an employee parking lot or process a travel voucher.

We appreciate that Pfizer's arbitration module was previewed by mass emails announcing the forthcoming module and assigning employees to complete it. Even so, these inapt euphemisms dilute the legal significance and necessary mutuality of the contractual process. An employer must do more than teach employees about the company's binding arbitration policy. The employer must also obtain its employees' explicit, affirmative, and unmistakable assent to the arbitration policy, in order to secure their voluntary waiver of their rights under the law.

As is the custom with most employers, Pfizer's arbitration policy is nonnegotiable. An employee cannot refuse to agree to the terms of the policy and remain employed with Pfizer, except for proven retaliatory or discriminatory conduct or some other statutory or contractual violation by the employer in responding to the employee's refusal. Nonetheless, the policy must be presented in a fashion that produces an employee's agreement and not just his or her awareness or understanding.

There is reason to doubt that all Pfizer employees who were sent the training module necessarily accessed and read the arbitration policy through the Resources tab on the third slide. The company's Enterprise Learning Architect, Baker, describes the link to the Resources tab merely as an opportunity that is allowed. Hence, there cannot be confidence that an employee actually took the time and effort to activate the tab and read the contents of the document linked to it.

A critical shortcoming of the company's procedure to obtain its employees' individual assent to waive their rights is the click box that appears at the end of the presentation. The opening slide of the module tells employees that, after being presented with the policy, they will then be asked to acknowledge their receipt of the Agreement. As the Court ruled in Leodori, an employee's mere receipt of the company's arbitration policy was not enough to make it enforceable against him. The employee instead needed to manifest an explicit, affirmative agreement that reflects he unmistakably assented to it.

The four-word click box on the module's third page selectively uses the verb acknowledge and does not use the verb agree. We realize that other portions of the slides do contain and repeat the words agree and agreement. But the only portion of the module that calls for a response by the employee is the critical click box. Before encountering that box, the employee is not asked to initial key portions within the arbitration policy, as often is done with other important legal documents such as a car loan or a house purchase.

Pfizer understandably wants the employee's click in the training module to substitute for a physical signature. The click is a crucial part of the mutual offer-and-acceptance exchange. Some employees surely will skip to the click box at the end of the presentation without paying close or any attention to the verbiage that preceded it. They may well rush to complete the assigned training activity before the company deadline. In keeping with the tenets of Leodori, it is vital that this momentous segment of the module make unmistakably clear that the employee is voluntarily agreeing to the arbitration policy, and not simply acknowledging it.

Here, the intended meaning of the term acknowledge in the click box was clouded by the opening slide explaining that the employee would be asked at the end of the presentation to acknowledge his or her receipt of the company's form agreement – not mentioning the employee's need to also convey his or her assent to its terms. Moreover, the final slide merely thanks the employee for "reviewing" the document. The whole process is called a training activity. Communications so vital to the mutual process of contract formation should not hinge upon loose and inconsistent wording that is reasonably capable of being misunderstood as something short of an agreement.

These deficiencies can be easily cured. For instance, rather than euphemistically calling the process a unilateral training activity, the company could identify the process to employees with terms that more accurately convey what it actually must be: for example, an agreement and a waiver of rights.

More importantly, to comply with the tenets of Leodori, 175 N.J. 293, the click box which seeks an employee's legally binding response should contain the word agree or agreement. For example, it could say, Click here to convey your agreement to the terms of the binding arbitration policy and your waiver of your right to sue. We will not prescribe in rigid fashion the exact language that should be immediately next to the click button, but the words used should have close proximity and prominence and contain the critical word agree or agreement. The weaker term acknowledge does not suffice.

In Leodori, the Court states it would have sufficed for the employer in that case to revise the acknowledgement form to recite that the employee had agreed to the more detailed arbitration provision contained in the handbook. We realize the words agree and agreement appear several times on the slides in Pfizer's module and also within the linked policy. In Leodori, the employees were asked to provide their physical signatures on the company's form, a process that reflects formality. Here, the employee's momentary click of a button or an electronic mouse lacked equivalent formality when that click was not tethered to and spotlighted with a clear and proximate direction that, by clicking the button, the employee is knowingly agreeing to waive his or her legal rights. Given these deficiencies, the use of the words agree and agreement outside of the click button is not sufficient to satisfy the requirements of Leodori in this case.

Similar to the Court's discussion in Leodori, compliance with contract formation and waiver principles could be accomplished with relative ease. The company may have strategically decided to omit the word agree from the click box because using that term might cause some employees to balk and to question the arbitration policy. Regardless of why Pfizer formatted the language to say acknowledge, it still holds the cards by demanding assent from its workers as a condition of continued employment. If an at-will employee refuses to agree to the policy, he or she can be shown the door, unless his or her discharge is otherwise prohibited by law.

The more straightforward method the law requires may well generate discussions by employers with some workers who may hesitate to provide their electronic agreement. But the temporary inconvenience to companies in having such discussions would be offset by the benefit of achieving legally enforceable mutuality and clarity. Indeed, we suspect that very few, if any, employees would refuse to agree to the policy if they knew such refusal would cause them to lose their jobs. Nonetheless, their assent must be procured in a proper manner.

In sum, the wording and method of Pfizer's training module is inadequate to substantiate an employee's knowing and unmistakable assent to arbitrate and waive his or her rights of access to the courts. The trial court's decision validating the company's acknowledgement process is accordingly reversed.

(Internal quotations and citations omitted).

Complex business litigation involves more than courts. Disputes often are--by agreement--decided by private arbitrators. As this decision shows, sometimes there is a question regarding whether an agreement to arbitrate exists. Contact Schlam Stone & Dolan partner John Lundin at if you or a client have a question regarding whether a dispute is subject to an arbitration agreement.