Employment Law: Dispute Arbitration Compelled In Handbook

By: Donna Russo, Esq.

Since 1985, the law is clear that employee handbooks do not create an implied contract if the handbook clearly and prominently states that it is not a contract.  For example, language prominently displayed at the beginning of the handbook that the rules, regulations, procedures and benefits contained in the handbook are not promissory or contractual is sufficient to deem that the handbook is not an implied contract.

In Morgan v. Raymours Furniture Company, Inc. et. als., A-2830-14T2 (1/7/16), the Appellate Division, in a reported decision, addressed the requirement in a handbook that all employee disputes be decided by arbitration.  It is general law that arbitration agreements are favored and absent certain circumstances, are enforceable thereby barring litigation in court.

In Morgan, the Court found that the mandatory arbitration clause in the handbook was not enforceable.  The Court held: “By inserting such a waiver provision in a company handbook, which, at the time, the employer insisted was not ‘promissory or contractual,’ an employer cannot expect–and a court, in good conscience, will not conclude–that the employee clearly and unambiguously agreed to waive the valued right to sue.  And, by the same token, in obtaining the employee’s signature on a rider, which stated only that the employee ‘received’ and ‘underst[ood]’ the contents of the company handbook or rules and regulations, the employer cannot fairly contend the employee ‘agreed’ to a waiver of the right to sue that might be found within those materials.”