New Jersey Court Rules Federal Arbitration Act Preempts State Law Against Discrimination, Allowing Employers To Compel Arbitration ' For Now

• Published date: 22 March 2022
• Subject Matter: Employment and HR, Litigation, Mediation & Arbitration, Contract of Employment, Discrimination, Disability & Sexual Harassment, Unfair/ Wrongful Dismissal, Arbitration & Dispute Resolution
• Law Firm: Duane Morris LLP
• Author: Ms Kathleen O'Malley and Alison C. Morris

In the wake of the #MeToo movement, the New Jersey Legislature amended the Law Against Discrimination (LAD) on March 18, 2019, and restricted the ability of employers to keep confidential the details of claims of discrimination, retaliation and harassment. The 2019 LAD amendment also deems any employment contract (other than a collective bargaining agreement) against public policy and unenforceable if it contains a waiver of any substantive or procedural right or remedy relating to a claim of discrimination, retaliation or harassment. While this provision appears to negate an employer's ability to compel arbitration of LAD claims, we previously noted that the LAD's ban on arbitration was likely to be preempted by the Federal Arbitration Act (FAA). On February 15, 2022, the New Jersey Appellate Division addressed the issue head-on in a case of first impression.

In Antonucci v. Curvature Newco, Inc., No. A-1983-20 (App. Div. Feb. 15, 2022), the Appellate Division held that the LAD's prohibition on the arbitration of claims of discrimination, retaliation or harassment did not apply and was preempted by the FAA. The plaintiff, Antonucci, electronically acknowledged an arbitration agreement attached to the employee handbook he received from his employer in October 2019, subsequent to the LAD amendment banning contracts that limit substantive and procedural rights under the law. Pursuant to the terms of the arbitration agreement, Antonucci waived his right to a jury trial and agreed to submit to arbitration all disputes relating to his employment, including statutory, contractual and/or common law claims of wrongful termination, discrimination, harassment and retaliation arising under federal, state or local law. The arbitration agreement specifically stated that it was "enforceable under and subject to the Federal Arbitration Act, 9 U.S.C. Sec. 1, et seq."

Following termination of his employment in May 2020, Antonucci filed a complaint in New Jersey state court against his employer and certain company employees, alleging claims of discrimination and wrongful termination under the LAD. The employer moved to dismiss the complaint and compel arbitration. The trial court found that the arbitration agreement was valid and enforceable, thus reaffirming that employers may send, and employees may consent to, arbitration agreements electronically per the New Jersey Supreme Court's decision in Skuse v. Pfizer, Inc., 244 N.J. 30 (2020). The trial court dismissed the...