New Jersey’s Different Treatment of Employee Arbitration Agreements and Insurance Policies is Difficult to Reconcile
New Jersey and Federal law have established a strong legal policy in favor of arbitration. New Jersey’s courts, like the federal courts, regularly uphold arbitration agreements in employment contracts. They have repeatedly enforced these agreements and do not consider them “contracts of adhesion.” This is starkly different than how New Jersey’s courts treat insurance policies, and ignores the long-established legal principles upon which its analysis of insurance policies rests.
Contracts of adhesion are agreements where the two parties have unequal bargaining power, and the party with the greater leverage forces “oppressive or unconscionable” terms on the other. They are often presented on a “take it or leave it” basis. When a New Jersey court finds a contract of adhesion, it will strain to protect the weaker party, whether by construing the agreement against the stronger party, eliminating unfair or oppressive terms, or voiding it in its entirety.
In Martindale v. Sandvik New Jersey’s Supreme Court ruled that despite forcing an employee at the company’s Fair Lawn plant to give up her constitutionally protected right to a trial by a jury of her peers, the agreement was not “oppressive or unconscionable.”
An employee and employer, especially a large, multi-national corporation such as Sandvik, simply do not have equal bargaining power. There is a large labor pool for employers to choose from, especially in these troubled times. This gives the employer the upper hand. Employers can – and do – tell employees to agree to arbitration or go look for work elsewhere; this is no choice at all for most employees. Indeed, this is all the more true when an arbitration requirement is adopted as a policy after an employee has already started work and is given the choice of either agreeing to arbitration or being out of a job, despite the years, and often decades, invested by the employee.