Conflicting wording in Raymour & Flanigan’s employee handbook has led a federal judge to refuse to enforce a provision calling for arbitration of workplace disputes.
Chief U.S. District Judge Jerome Simandle in Camden found that despite the arbitration clause, the handbook also contained language disclaiming creation of any employment contract.
In addition, the company had reserved the right to change the handbook contents at any time without notice, rendering any agreement “illusory,” Simandle held on Jan. 2 in Raymours Furniture Company v. Rossi.
Sandra Rossi, a saleswoman, had worked in the Liverpool, N.Y.-based furniture company’s Cherry Hill showroom since 2000 but was transferred last year to the store in Deptford, which is further from her home.
On June 10, her lawyer, Alan Schorr of Cherry Hill, called the company on her behalf, claiming the transfer amounted to a failure to accommodate her disability—spinal pain—which makes her unable to sit for extended periods. He further alleged the transfer was in retaliation for Rossi’s complaints to the company about discrimination.
On June 28, Schorr demanded $150,000 for Rossi’s retaliation, discrimination and constructive-discharge claims.
Raymour demanded, under a program added to the employee handbook in January 2012, that Rossi arbitrate her claims with the American Arbitration Association.
In 2009, Rossi signed a receipt and acknowledgment for the handbook in which she promised to become familiar with its contents and revisions and agreed that continued employment constituted her agreement to be bound by those revisions.
The acknowledgment also expressed her understanding that Raymour “has the right to change its employment policies at any time” and obligated her to keep up with any changes through the company’s human resources portal.
The new arbitration program specifically covered claims under the Americans With Disabilities Act and Title VII, and provided, “This Program is an essential element of your continued employment relationship with Raymour & Flanigan and is a condition of your employment.”
Employees were notified of the program on Feb. 1, 2012, and Rossi acknowledged receipt and review of the handbook updates a week later.
The program was revised in April 2013 and again, Rossi acknowledged receipt and review.
When the company went to court on July 22, 2013, to compel arbitration, it alleged her claims were subject to an arbitration agreement.
Simandle denied the request based on the disclaimer on page one of the handbook.
Under the heading “THIS HANDBOOK IS NOT A CONTRACT OF EMPLOYMENT,” it stated in boldface type that employment was at-will and said, “Nothing in this Handbook, or any other Company practice or communication or document, including benefit plan descriptions, creates a promise of continued employment, employment contract, term or obligation of any kind on the part of the Company.”
Simandle noted that the disclaimer not only disavowed any agreement but was contradicted 50 pages later by statements about the arbitration program being a condition of employment.
“Plaintiff may not in a single, voluminous document, which bears disclaimer that nothing therein creates a contract of employment, seek to enforce certain provisions while regarding others as unenforceable without clear notice to that effect and unambiguous agreement by Defendant,” wrote Simandle.
He rejected Raymour’s arguments that the more specific arbitration language trumped the general disclaimer and that the Federal Arbitration Act preempted New Jersey precedent that receipt of an employee handbook does not create an implied agreement to arbitrate unless the plaintiff agrees to be bound.
Simandle also based his ruling on the lack of mutual obligation given Raymour’s prerogative to change the handbook unilaterally, making its own performance “entirely optional.”
“The Court will not compel arbitration based on a provision Plaintiff may invoke, modify, or ignore at its sole discretion without notice to and agreement by Defendant,” Simandle stated.
Schorr says the decision recognizes that employers cannot have it both ways unless they are specific about what is supposed to be a contract and what isn’t.
Rossi has not returned to work since the transfer and is collecting unemployment, though Raymour claims it did not terminate her, says Schorr.
Edward Groh, in-house counsel for Raymour, declines comment.
Christopher Mayer of McCarter & English in Newark, who represents employers, says New Jersey law on arbitration agreements in handbooks has been clear since Leodori v. CIGNA Corporation in 2003, but a surprising number of employers do not follow it.
Those whose handbooks are distributed on a regional or nationwide basis “are particularly susceptible to this problem, while courts are less likely to be forgiving with such large employers,” he says.
Claudia Reis, president of the state chapter of the National Employment Lawyers Association, says handbook disclaimers are very common—and employers who want an agreement to arbitrate will put it in a separate agreement or use carve-out language in the disclaimer.
Reis is with Green Savits & Lenzo in Morristown.