Appellate Decision May Prompt New Jersey Employers to Seek Jury Waivers Instead of Arbitration Agreements

Earlier this month, the Superior Court of New Jersey, Appellate Division, issued a decision that may cause employers considering mandatory arbitration agreements to consider jury-waiver agreements instead. In Noren v. Heartland Payment Systems, Inc., 2017 WL 476216 (App. Div. Feb. 6, 2017), the Court invalidated a jury-waiver provision’s application to statutory employment claims, but explained that, worded properly, such waivers are enforceable.  Litigating in court without a jury has certain advantages and New Jersey employers considering arbitration programs may also want to consider jury waiver provisions as another possible option.

The Facts

Defendant Heartland Payment Systems, Inc. (“HPS”) hired plaintiff Greg Noren (“Noren”) as a Relationship Manager in April 1998.  In that position, Noren sold debit and credit, payroll and other processing card services to merchants.  In 2002, HPS terminated Noren’s employment but then rehired him.  In connection with his rehiring, Noren signed an agreement that contained a jury-waiver provision.  In 2003, he signed another agreement containing an identical jury-waiver provision.  Both jury-waiver provisions provided that HPS and Noren “irrevocably waive any right to trial by jury in any suit, action or proceeding under, in connection with or to enforce this Agreement.”  In June 2005, HPS terminated Noren’s employment.

Trial Court

Noren filed a lawsuit asserting claims for breach of contract and violation of the New Jersey Conscientious Employee Protection Act (“CEPA”).  Noren requested a jury trial, but the court denied the request in light of the jury-waiver provisions.  After a bench trial, the judge dismissed Noren’s lawsuit.  Noren appealed.

Appellate Division

On appeal, the Appellate Division reversed the judgment of the trial court.  In reaching its decision, the Appellate Division observed that both the New Jersey Constitution and the statutory language of CEPA guarantee the right to a jury trial.  Thus, according to the Court, the issue was whether the jury-waiver provision to which Noren and HPS agreed “is a legally enforceable waiver of this constitutionally and statutorily guaranteed right.”  Based upon “customary principles of contract law,” the Court explained that such a waiver must be clear and unmistakable.  No magic language is required but, the Court explained, “to effect a waiver, the language must clearly explain (1) what right is being surrendered and (2) the nature of the claims covered by the waiver.”

Applying these principles, the Court held that the language of the jury-waiver provisions in Noren’s agreements was deficient.  According to the Court, the contractual language “made no reference to statutory claims and did not define the scope of claims as including all claims relating to Noren’s employment.”  The Court also noted that the reference in the jury-waiver provisions to “this Agreement” limited “the category of disputes for which a jury trial is waived.”  Thus, the Appellate Division concluded that the jury-waiver provisions “fail[ed] to clearly and unambiguously explain that the right to a jury trial is waived as to a CEPA claim.”  The Appellate Division remanded the CEPA claim to the trial court for a jury trial.

Practical Takeaways

The practical implication of this decision is that New Jersey courts are likely to treat a properly-worded jury trial waiver similar to a mandatory arbitration provision.  Courts have long recognized a federal policy favoring arbitration based on the Federal Arbitration Act.  In light of this policy, New Jersey courts generally enforce properly-crafted arbitration agreements.  No such federal policy favors jury-waiver provisions.  However, in its decision in Noren, the Appellate Division did not reference this distinction and instead analyzed the enforceability of jury-waiver provisions by applying the reasoning of caselaw addressing the enforceability of arbitration provisions.  In other words, the Court held jury-waiver provisions to the same standard as arbitration provisions.  Thus, in New Jersey, jury waiver provisions appear to be as enforceable as arbitration provisions.  Accordingly, employers considering arbitration agreements should also consider whether jury-waiver agreements are better suited to meet their needs.

For employers, arbitration offers many potential advantages over litigating in court with a jury.  For instance, an arbitrator is less likely than a jury to award a plaintiff a surprising and unwarranted multi-million dollar verdict.  And, arbitrations are generally private, with no public filings unless a party moves to enforce an arbitration award.  Moreover, the employer plays a role in selecting the arbitrator.  However, arbitration has drawbacks.  For instance, an arbitration award is generally not appealable and the cost of arbitration (which, for the employer, includes paying the arbitrator’s fees) can be exorbitant.  Litigating in court without a jury does not have these drawbacks.  The employer can appeal a judge’s rulings and is not responsible for paying the judge’s fees.  Plus, judges are typically more inclined than arbitrators to dismiss a plaintiff’s claims on summary judgment.

In short, there are advantages and disadvantages to resolving employment disputes in court with a jury, in court without a jury, or in arbitration.  New Jersey employers seeking an alternative to court litigation should consider arbitration agreements but, in consultation with counsel, may also want to consider whether jury-waiver agreements would be a more suitable alternative to meet their goals.

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