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The New Jersey Supreme Court’s latest pronouncement on the enforceability of employment arbitration agreements is a win for employees — and a boon for managers because it gives guidelines on how to obtain waivers of the right to sue. The issue in Leodori v. CIGNA Corp., A-120-01, decided Feb. 13, was whether an employee’s acknowledgment of having reviewed the company handbook was a sufficient manifestation of agreement to an arbitration clause that waived the right to jury trial. The lower courts said yes, but the justices unanimously said no. “Without plaintiff’s signature on the Agreement that accompanied the ‘You and CIGNA’ handbook, we cannot enforce the arbitration provisions unless we find some other explicit indication that the employee intended to abide by that provision,” wrote Justice Peter Verniero. “No other indication appears in the record.” The court declined to extend the implied-contract doctrine of Woolley v. Hoffmann-La Roche, 99 N.J. 284, modified, 101 N.J. 10 (1985), to an employee waiver of rights, essentially treating the doctrine as a one-way street, enforceable only against employers. The enforcement of handbook terms against an employee requires the employee’s signed agreement or “some other unmistakable indication that the employee affirmatively had agreed to arbitrate his claims,” the justices said. CIGNA’s bungled effort to secure employee assent to its arbitration policy also apparently doomed the effort. About a month after it circulated the handbook and the agreement form, CIGNA backed off, telling employees by e-mail that it had mishandled the process and offering them the option of signing only the more general receipt rather than the agreement. Based on employee feedback, CIGNA said, it was “removing the link between signing the Handbook receipt and future compensation and benefits actions.” The e-mail “further clouded” the issue of Leodori’s intent, because it was “open to interpretation such that doubts are raised concerning the agreement’s validity,” wrote Verniero. CIGNA’s attorneys did not return calls requesting comment. They are Michael Furey, a partner with Riker, Danzig, Scherer, Hyland & Perretti in Morristown, N.J., and Edward Ellis, a partner with Philadelphia’s Montgomery, McCracken, Walker & Rhoads. Lawyers who represent employers say the result in the case isn’t surprising, given the fact that Paul Leodori didn’t sign the arbitration agreement, which was on a detachable page in the inside back cover of the 77-page handbook. Leodori, then a lawyer in the legal department of CIGNA’s sister company, INA Insurance, says many other employees, lawyers and nonlawyers alike, refused to sign away the right to a jury trial. “[There is] a good argument that he didn’t agree to it,” says Glenn Montgomery, a partner with Bedminster, N.J.’s Pollock, Montgomery & Chapin. “There must have been a reason he didn’t sign it.” Montgomery represented the defendant employer in Garfinkel v. Morristown Obstetrics & Gynecology Associates, 168 N.J. 124 (2001), which held that an employee can be bound by a knowing, voluntary and unambiguous agreement to arbitrate a statutory claim. Jill Jachera, a partner with the Princeton, N.J. office of Morgan Lewis & Bockius, calls the ruling “probably correct” and also “positive for employers to the extent they seek to implement a company arbitration policy.” Jachera represented the employer in Martindale v. Sandvik, 173 N.J. 76 (2002), which upheld an arbitration agreement provision in a job application form. WELCOME GUIDANCE Like other management-side lawyers, Jachera sees the court’s discussion of what CIGNA did wrong as a road map that will help them steer clients around the pitfalls that tripped up CIGNA. “Management benefits whenever the court gives clear guidelines,” agrees James Flynn, a partner with Newark’s Epstein Becker & Green. “Certainly many people on the management side will now be advising their clients in light of Leodori‘s guidelines on how better to perfect these agreements and waivers.” Peter Fratterelli, a partner with Haddonfield, N.J.’s Archer & Greiner, sees another upside for management. Though requiring an individual manifestation of assent, the court made it clear that employers need not negotiate individual agreements with the entire workforce. The court also found that CIGNA’s arbitration provision would have effectively waived Leodori’s right to sue if he had assented, even though the clause does not mention jury trials and its list of statutory claims does not include CEPA or whistleblower claims, which impliedly fall within the reference to “any other federal, state or local statute.” The ruling “allows employers to rely on a broad catchall,” says Fratterelli. Employee lawyer Neil Mullin, of Smith Mullin in Montclair, N.J., agrees, saying the ruling “sets a very low threshold for what needs to be on the form that’s given to the employee.” In fact, the ruling is so helpful to employers that Mullin calls it “a formula for stripping away the right to jury trial” and a form of “tort reform by corporations and condoned by the courts.” CIGNA’s apparent backing off in the face of employee resistance highlights the issue of what an employer should do if an employee refuses to sign a form agreeing to arbitration. Employees who know “there is no hammer hanging over their head” might balk at signing, says Jachera. But firing them if they do not sign would harm morale and could violate public policy under Pierce v. Ortho Pharmaceutical Corp., 84 N.J. 58 (1980), she adds. Conditioning continued employment on a waiver of the right to go to court amounts to duress, says Leodori, who is now a partner with Nelson, Levine, DeLuca & Horst in Blue Bell, Pa. Continued employment might not be considered adequate consideration for the waiver of the right to a jury trial, Jachera says, suggesting employers should present an arbitration provision and agreement in conjunction with another form of consideration, such as a stock option plan. LEGISLATION AFOOT Pending state and federal legislation would overrule Leodori, Martindale and Garfinkel by outlawing employment arbitration clauses. A-2881, introduced last Sept. 12, would amend the Law Against Discrimination to bar employers from conditioning hiring, continued employment or compensation on an employee’s waiver of litigation rights, requesting a prior waiver of claims or punishing employees for pursuing legal remedies. The Assembly approved the bill in a 44-24-8 vote on Oct. 7. A companion bill, S-1800, introduced the same day, has been stalled in the Senate Labor Committee since October. Jachera, who testified against the legislation, says it would not only bar enforcement of arbitration clauses but also make it an unfair labor practice to request one. It is also unclear how the bill would affect the securities industry, which routinely uses arbitration, and collective bargaining agreements, which often provide for it, she says. On the federal level, Rep. Robert Andrews, D-N.J., filed H.R. 540 on Feb. 5, which would amend the Federal Arbitration Act to prohibit conditioning employment on agreement to arbitrate and, where there exists a valid arbitration agreement, to require employee consent to arbitrate a dispute once the dispute arises.

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