Arbitration Agreements Do Not Need to Designate Rules or Forum

New Jersey Supreme Court enforces arbitration agreement in age discrimination caseLast week, the New Jersey Supreme Court ruled that, to be enforceable, an arbitration agreement does not necessarily have to set forth the rules or procedures that will apply in arbitration or to select a forum for the arbitration.

The case involved Marilyn Flanzman, who worked for Jenny Craig as a weight maintenance counselor in Paramus, New Jersey, for almost 27 years.  In 2011, she signed an Arbitration Agreement with Jenny Craig.  That agreement states that all disputes, including discrimination claims, must be resolved through “final and binding arbitration” rather than a jury or other civil trial.

In February 2017, Jenny Craig reduced Ms. Flanzman from thirty-five hours per week to nineteen hours per week.  At the time, Ms. Flanzman was 82 years old.  In April 2017, Jenny Craig further reduced Ms. Flanzman’s hours, to approximately thirteen hours per week.  In June 2017, the company reduced her to only three hours per week.  When Ms. Flanzman complained to her supervisors, they told her: “That is just the way it is,” and that if she did not accept her new schedule she would be fired.  Ms. Flanzman, who apparently was the only employee in Paramus whose hours were reduced so dramatically, rejected the three-hour-per-week schedule.

Ms. Flanzman filed a lawsuit in which she claimed Jenny Craig harassed her, discriminated against her, and constructively discharged her because of her age, in violation of the Law Against Discrimination (“LAD”).  Jenny Craig filed a motion to compel arbitration, which the trial court granted.

Ms. Flanzman appealed.  The Appellate Division reversed the trial court’s ruling.  It concluded that an arbitration agreement is unenforceable unless it specifies the procedures that would apply in arbitration, such as by selecting an arbitral institution like the American Arbitration Association (“AAA”) or JAMS that has established procedures for arbitration.  Accordingly, it concluded that the case had to proceed in Court, rather than in arbitration.

However, on September 11, 2020, the New Jersey Supreme Court overturned the Appellate Division’s ruling, and reinstated the trial court’s order referring Ms. Flanzman’s age discrimination case to arbitration.

Specifically, in Flanzman v. Jenny Craig, Inc., the Supreme Court repeated its previously-established requirement that courts should enforce an arbitration agreement only if the parties “clearly and unambiguously” agreed to its terms, and the agreement “in some general and sufficiently broad way” explains “that the plaintiff is giving up her right to bring her claims in court or have a jury resolve the dispute.”

But the Court ruled that this does not require the parties to agree to a specific arbitrator and the procedures that will apply in the arbitration in advance.  While the Court suggested that it often is wise for parties to agree to those items in advance, doing so is not required for an arbitration agreement to be enforceable.  Rather, the NJAA specifically states that if “the parties have not agreed on a method” to select an arbitrator, then a court can appoint the arbitrator.

Accordingly, Ms. Flanzman’s case will be decided by an arbitrator rather than by a jury.

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