S-3851, which was introduced on December 4 by Senator Loretta Weinberg (D-Bergen), would bar provisions in employment contracts that waive any substantive or procedural right or remedy relating to a claim of discrimination, retaliation or harassment.  The bill prohibits the waiver of any right or remedy under the NJ Law Against Discrimination or any other statute or case law.  This bill would, effectively, prohibit employers from requiring employees to use arbitration as the preferred method for resolving employment-related disputes involving discrimination and wage & hour, and it would eliminate class action waivers.  The bill also prohibits confidentiality provisions that restrict the disclosure of any details relating to a claim of discrimination, retaliation or harassment, including claims that are submitted to arbitration.  The bill also contains an anti-retaliation provision and a fee-shifting mechanism, which holds any person who seeks to enforce any prohibited provision liable for the employee’s reasonable attorney’s fees and costs.

The use of mandatory arbitration agreements in the employment setting has been the subject of tremendous debate and litigation.  Legislation has also been proposed at the federal level, which would prohibit the use of arbitration agreements.  And, the US Supreme Court is currently deciding a series of cases challenging whether class action waivers violate the National Labor Relations Act (NLRA).  These cases, together with the legislative initiatives at the state and federal level, highlight the tension between the Federal Arbitration Act (FAA), which permits arbitration of employment disputes, and other federal laws like the NLRA, as well as the tension between the FAA and states’ efforts to restrict the use of arbitration agreements.  If Senator Weinberg’s legislation passes, it will have a significant impact on the use of arbitration to resolve employment-related disputes.  However, to the extent that her legislation runs afoul of the FAA, it would be susceptible to invalidation by the federal courts.

Following the New Year, SPSK will hold a seminar for our clients and friends to discuss the impact of the legal challenges to employment arbitration clauses, and the legislative initiatives intended to prohibit their use.  Watch for an invitation to arrive in Mid-January.  In the meantime, if you are concerned that your arbitration clause may be challenged in court, we can ease your mind with a thorough analysis and assessment of your arbitration agreement or policy.