Last week, the New Jersey Appellate Division issued another decision that restricts the ability of employers to enter arbitration agreements with their employees. The two-judge panel in Dugan vs. Best Buy Co. Inc., voided an otherwise valid arbitration agreement over the check-the-box agreement process the company used to roll out its new policy.


The employer’s arbitration policy was explained in considerable detail. Employees were informed that by continuing employment following the effective date of the policy, they would be considered to have agreed to the policy. They then were asked to check a box indicating that they had read and understood that policy.


The panel found the procedure inadequate to create an enforceable agreement for arbitration, though it could not agree on why.


Judge Moynihan held that the failure to include the phrase “I agree” rendered the check box insufficient to form an agreement, and further held that although continued employment can signify agreement, three weeks was too short to “meet the high standard required” of an agreement to arbitrate.


Judge Vernoia concurred but disputed that reasoning, pointing to recent New Jersey precedent which required “nothing beyond the mere commencement of continued employment.” Instead, Vernoia concluded that the phrase “you are considered to have agreed” rendered the agreement unenforceable, as it only described how defendant would “perceive” continued employment, and did not expressly state that the continued employment would “constitute” agreement.


What Does This Mean?

Great question. According to the Federal Arbitration Act, state courts may invalidate arbitration agreements only according to generally applicable principles of contract law. If the standards applied to this arbitration agreement were to be applied more broadly to contract formation, it would significantly weaken the enforceability of contracts in New Jersey. That seems unlikely. Other contracts simply are not treated like the arbitration agreement in this case, which of course puts New Jersey at odds with the United States Supreme Court and controlling federal law.


The case is an unpublished, and therefore non-precedential opinion, which limits its effect even on future arbitration cases. It is, however, a reminder that despite the Supreme Court’s recent Kindred Nursing decision, New Jersey state courts continue to disfavor arbitration agreements.


NJCJI will continue to monitor this case if it is appealed. If you have any questions about our work on arbitration, please contact NJCJI President Alida Kass.