The opinion of the court was delivered by
ST. JOHN, J.A.D.
Plaintiffs Paul Jaworski, Alexander Haggis and Robert Holewinski appeal from the trial court's order compelling arbitration of their age-discrimination suit against defendants Ernst & Young U.S. LLP (EY) and two of its executives, Tracey Gunter and Richard Baker. Plaintiffs challenge the enforceability of EY's mandatory arbitration policy on constitutional, statutory and common law grounds. The employees were provided notice of changes to the arbitration policy by electronic distribution. We must determine whether, if the policy states assent is given by continued employment, remaining employed with the company evinces an unmistakable indication that the employee affirmatively has agreed to arbitrate his claims pursuant to the changed policy. Having reviewed the arguments advanced in light of the record and governing law, we affirm.
The record discloses the following facts and procedural history. Plaintiffs are former employees of EY's Secaucus office whose employment was terminated in August
In August 2002, EY initiated the Common Ground Program (the Program), a set of mandatory alternative dispute resolution (ADR) procedures for its employees. The Program provided in pertinent part:
As a non-exhaustive list of examples of Covered Disputes within the Program's ambit, EY provided: (1) "[c]laims based on federal statutes" including civil rights and anti-discrimination laws; (2) "[c]laims based on state statutes and local ordinances including state and local anti-discrimination laws"; (3) "[c]laims based on common law theories such as tort and contract"; (4) "[c]laims concerning wages, salary and incentive compensation programs" subject to limited exceptions; and (5) "[c]laims concerning application, interpretation and enforcement of the Program." The provision further emphasized that "[a]ll Covered Disputes, whether or not listed here, must be resolved through the Program."
In the event of a Covered Dispute, the Program first required "the parties ... try to resolve the [dispute] through mediation" provided by the CPR Institute for Dispute Resolution (CPR). Should a dispute remain unresolved following mediation, either party was then able to proceed with binding arbitration, also through CPR. Any dispute for $250,000 or less was to be decided by one arbitrator, whereas any controversy involving more than $250,000, "or if the party initiating [arbitration] so chooses," went before a three-arbitrator panel. As to discovery, the program limited each party to one deposition pre-hearing, unless the arbitrator(s) found "the party seeking the [additional] discovery ha[d] a substantial need for it and ... the discovery sought [was] consistent with the expedited nature of arbitration and not unduly burdensome."
In addition to requiring the initiating party to pay any filing fees as well as the party's own attorney's fees, the Program provided:
Finally, the ADR policy included a provision on Termination or Amendment of the Program:
On July 29, 2002, EY announced the implementation of the Program to all United States (U.S.) personnel, including plaintiffs, via its Daily Connection email bulletin. The July 29 message provided a brief synopsis of the Program and directed the reader to two links, one leading to the policy's provisions in their entirety in EY's employee manual and the other to an article about the Program.
On March 23, 2006, EY announced revisions to the Program through a Daily Connection message to all U.S. employees, including plaintiffs. The three main changes, as identified in the email, were: (1) "Employees now have a choice of three ADR providers" — CPR, the American Arbitration Association (AAA) and JAMS; (2) "[e]xcept for a fee equal to what it would have cost the employee to sue in court, the firm will pay the entire cost of mediation (not including any attorney's fees)"; and (3) "[d]isputes up to $1 million will be heard by a single arbitrator, rather than by a three-arbitrator panel."
The amendments also clarified certain important provisions through highlighting and italicization, unlike the 2002 version. For instance, under the 2006 Program,
The 2006 amendments provided for expanded discovery, including a party's right to depose three individuals prior to any arbitration hearing. As to arbitration fees:
Finally, the 2006 policy amended the "Termination or Amendment" clause, so that:
However, as in the original policy, "[t]ermination or amendment will not affect a Covered Dispute as to which [mediation] had been initiated when the termination or amendment was proposed."
On April 25, 2006, EY sent the revised terms to all U.S. personnel via email. EY's records reflect that plaintiffs received the April 25 email.
On June 18, 2007, EY distributed another revised version of the Program via email to U.S. personnel, including plaintiffs. As with the previous iterations of the Program, an employee indicates agreement with its provisions by continuing employment with EY after the "Effective Date," in this case July 18, 2007. The main substantive difference between the 2006 and the 2007 versions is that under the latter an employee may only choose between AAA and JAMS, not CPR, for purposes of mediation and arbitration.
On August 3, 2007, Jaworski signed an EY Employment Agreement acknowledging and assenting to the terms of the Program. The last paragraph of the agreement states:
On January 27, 2010, Haggis signed a similar contract agreeing to arbitration of any Covered Disputes. Holewinski, however, signed his Employment Agreement on May 19, 2004, but did not sign a new agreement after either the 2006 or 2007 amendments to the Program became effective. Nevertheless, Holewinski, Haggis and Jaworski all continued their employment with EY after July 18, 2007.
Subsequent to their termination, plaintiffs filed the instant suit in the Law Division. In lieu of an answer, defendants moved to dismiss and compel arbitration, which plaintiffs opposed. The judge denied defendants' motion, concluding, although plaintiffs' claims fell within the meaning of Covered Disputes under the Program, because the record was "devoid of any indication that ... plaintiffs signed any paperwork regarding the arbitration agreement," the Program was unenforceable as applied to them.
This appeal ensued.
We begin by noting the applicable legal principles that guide our analysis. Orders compelling or denying arbitration are deemed final and appealable as of right. See R. 2:2-3(a); Hirsch v. Amper Fin. Servs., LLC, 215 N.J. 174, 186, 71 A.3d 849 (2013). We exercise plenary review of the trial court's decision regarding the applicability and scope of an arbitration agreement. See Atalese v. U.S. Legal
We first must determine which iteration of the Program controls as to each plaintiff's employment relationship with EY. Jaworski and Haggis signed employment agreements on August 3, 2007, and January 27, 2010, respectively. These agreements unambiguously referenced and assented to the terms of the Program, including the 2007 amendments, particularly with regards to "WAIV[ING] ANY RIGHT [THE EMPLOYEE] MAY HAVE TO HAVE A DISPUTE BETWEEN MYSELF AND [EY] DETERMINED BY A COURT OF LAW." Jaworski's and Haggis' signatures constituted "explicit, affirmative agreement[s] that unmistakably reflect[ed] the employee[s'] assent" to be bound by the 2007 amendments to the Program and arbitrate any employment-related disputes in lieu of proceeding in court. See Leodori v. CIGNA Corp., 175 N.J. 293, 303, 814 A.2d 1098, cert. denied, 540 U.S. 938, 124 S.Ct. 74, 157 L.Ed.2d 250 (2003). Therefore, there can be no dispute they are each bound by its terms as in force as of each party's termination date.
However, Holewinski signed his employment agreement with EY in 2004, subsequent to the initial enactment of the Program in 2002, but before the later amendments. Relying on Leodori, he argues he cannot be forced to arbitrate under the policy in effect as of his termination date, because he never explicitly indicated his agreement thereto. Any attempt to compel arbitration, Holewinski submits, must be done under the original 2002 Program.
In Leodori, the Court declined to enforce an employment agreement's arbitration provision where there was no evidence the plaintiff-employee assented to the agreement's terms through his signature, and where there was no "other unmistakable indication that the employee affirmatively had agreed to arbitrate his claims." Leodori, supra, 175 N.J. at 306-07, 814 A.2d 1098. However, in reaching its decision, the Court clarified, "`[t]o enforce a waiver-of-rights provision in this setting, the Court requires some concrete manifestation of the employee's intent as reflected in the text of the agreement itself.'" Id. at 300, 814 A.2d 1098 (alteration in original) (emphasis added) (quoting Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168 N.J. 124, 135, 773 A.2d 665 (2001)).
Here, unlike Leodori, where the employer's "own documents contemplated [the
Therefore, consistent with Leodori, we conclude Holewinski, Jaworski and Haggis are bound by the Program in its iteration as of the date of their termination.
Plaintiffs challenge EY's mandatory ADR policy as unenforceable on several grounds. Specifically, they aver: (1) the Program constitutes an illusory agreement because EY retains the right to unilaterally modify its terms; (2) plaintiffs never agreed to arbitrate claims relating to the termination of their employment; (3) the Program is not a valid waiver of plaintiffs' constitutional and statutory rights to a jury trial; and (4) the Program is unconscionable since it imposes substantial forum costs on plaintiffs they would not incur if proceeding in a court of law. We address each argument seriatim.
Plaintiffs first argue the Program constitutes an illusory promise because, given EY's right to modify or terminate, it impermissibly reserves the decision whether to resolve a particular employment-related dispute through mediation and arbitration to EY's sole discretion.
Due to the preemptive effect of the FAA, a state may not invalidate an agreement to arbitrate on public-policy grounds or by defenses "`that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.'" Atalese, supra, 219 N.J. at 441, 99 A.3d 306 (quoting Concepcion, supra, 563 U.S. at ___, 131 S.Ct. at 1746, 177 L.Ed.2d at 751). However, "state courts remain free to decline to enforce an arbitration provision by invoking traditional legal doctrines governing the formation of a contract and its interpretation." NAACP of Camden Cnty. E. v. Foulke Mgmt. Corp., 421 N.J.Super. 404, 428, 24 A.3d 777 (App.Div.), certif. granted, 209 N.J. 96, 35 A.3d 679 (2011), appeal dismissed, 213 N.J. 47, 59 A.3d 1083 (2013).
Under general principles of contract law, an agreement, including one to arbitrate disputes, based only upon an illusory promise is unenforceable. See Del Sontro v. Cendant Corp., 223 F.Supp.2d 563, 578 (D.N.J.2002) (citing Bryant v. City of Atl. City, 309 N.J.Super. 596, 621, 707 A.2d 1072 (App.Div.1998)). "An illusory promise has been defined as[] a `promise which by [its] terms make[s] performance entirely optional with the promisor whatever may happen, or whatever course of conduct in other respects he may pursue.'" Bryant, supra, 309 N.J.Super. at 620, 707 A.2d 1072 (second and third alterations in original) (quoting Restatement (Second) of Contracts, § 2 cmt. e (1979)) (internal quotations marks omitted); see also Customized Distribution Servs. v. Zurich Ins. Co., 373 N.J.Super. 480, 493, 862 A.2d 560 (App.Div.2004) ("An illusory promise is defined as one `in which the promisor does not bind himself.'" (quoting Black's Law Dictionary 1213 (6th ed. 1990))), certif. denied, 183 N.J. 214, 871 A.2d 91 (2005). Generally, however, "courts should seek to avoid interpreting a contract such that it is deemed illusory." Bryant, supra, 309 N.J.Super. at 621, 707 A.2d 1072 (citing Russell v. Princeton Labs., Inc., 50 N.J. 30, 38, 231 A.2d 800 (1967); Nolan v. Control Data Corp., 243 N.J.Super. 420, 431, 579 A.2d 1252 (App. Div.1990)).
Here, despite plaintiffs' suggestions otherwise, the Program was not founded on an illusory promise by EY to resolve any Covered Disputes through arbitration. The provision covering Termination or Amendment of the Program reads:
On its face, the provision provides if EY changes its arbitration policy, even in response to a previously-accrued claim, any change does not become binding on a particular employee until thirty days after he or she receives the second electronic notice of the amendment. Construing the Termination or Amendment clause's language as plaintiffs suggest would functionally read out the notice provision.
Moreover, plaintiffs erroneously seek to treat the language that "[t]ermination or amendment will not affect a Covered Dispute as to which [mediation] has been initiated when the termination or amendment was proposed" as exhaustive, so that the only disputes to which an amendment to the Program would not apply are those already in mediation at the time EY announced the change. No such exhaustiveness is explicit or even suggested in the language of that sentence itself or the surrounding provisions. Therefore, even if EY altered the Program before an employee initiated mediation for an accrued claim, that employee, pursuant to the explicit terms of the policy, would have thirty days to initiate before the proposed amendment altered his or her rights under the former language.
This reading of the notice provision does not render the language regarding the inapplicability of any termination or amendment to a Covered Dispute for which mediation has been initiated meaningless or superfluous. Rather, the latter clarifies that an employee who has already begun mediation need not take any additional action post-proposal of an amendment in order to preserve his or her rights under the status quo of the Program, pre-amendment.
In light of the principle that "courts should seek to avoid interpreting a contract such that it is deemed illusory," Bryant, supra, 309 N.J.Super. at 621, 707 A.2d 1072, our construction of the Termination or Amendment clause provides a sound and equitable response to the parties' concerns. First, an employer is able to respond to developments in the law by adopting changes to its ADR policy without the prohibitively burdensome and costly obligation to negotiate the terms with each and every one of its employees. Indeed, we note that the facts of this case underscore the wisdom of endowing employers with such flexibility. Even a cursory review of EY's ADR policy, as it has developed since its initial enactment in 2002, demonstrates EY has repeatedly responded to positive developments in the law to amend its ADR procedures to provide greater, not fewer, protections for its
Equally important, employees need not fear that an employer may change the terms to retroactively alter an employee's rights. All an employee must do, pursuant to the unambiguous terms of the agreement, to ensure he or she can arbitrate under the terms in existence at the time of accrual is provide written notice to EY of the intention to mediate no later than thirty days after receiving the second electronic notice of a proposed amendment to or termination of the Program. We therefore determine EY's ADR Program is not unenforceable as an illusory contract.
Plaintiffs next argue the trial court erred in dismissing their suit in favor of arbitration because they never agreed to arbitrate claims relating to the termination of their employment. Relying on Garfinkel and Quigley, they contend EY's failure to include language relating to "discharge," "dismissal" or "termination" in defining what constitutes a Covered Dispute subject to mandatory arbitration removes plaintiffs' claims arising from termination from the Program's ambit. We are not persuaded.
In Garfinkel, the Court concluded an arbitration provision, which stated "that `any controversy or claim' that arises from the [employment] agreement or its breach shall be settled by arbitration," was "insufficient to constitute a waiver of [the] plaintiff's" statutory claims. Garfinkel, supra, 168 N.J. at 134, 773 A.2d 665; see also Quigley, supra, 330 N.J.Super. at 272, 749 A.2d 405 (noting the lack of any reference to statutory claims in arbitration clause). However, in providing guidance, the Court advised:
Plaintiffs contended their claims arose under the Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -49. Unlike the provisions in Garfinkel or Quigley, EY's Program explicitly states "[c]laims based on state statutes and local ordinances, including state and local anti-discrimination laws," are Covered Disputes. By specifically including state statutory anti-discrimination claims as Covered Disputes, EY clearly and unequivocally put plaintiffs on notice that any claims arising under the LAD, regarding termination or otherwise, were subject to mandatory arbitration. See also Atalese, supra, 219 N.J. at 444, 99 A.3d 306 ("No particular form of words is necessary to accomplish a clear and unambiguous waiver of rights.").
Plaintiffs next argue the ADR policy is not a valid waiver of their constitutional and statutory rights to a jury trial. They aver the decisions in Atalese and State v. Blann, 217 N.J. 517, 90 A.3d 1253 (2014), when read in conjunction,
This argument is similarly unavailing.
In Atalese, the Court emphasized:
Unlike the arbitration clause struck down in Atalese, here, EY's written ADR policy unambiguously provides, with special emphasis through highlighting and italicization, "
Finally, plaintiffs contend the arbitration agreement is unconscionable because it exposes them to significant expenses related to the cost of paying arbitrators, which would not be incurred in a court of law. Plaintiffs rely on several extra-jurisdictional decisions to argue cost-sharing provisions for arbitration expenses are invalid. Additionally, plaintiffs point to a footnote in Atalese, where the Court noted that its opinion "should not be read to approve that part of the arbitration clause that states: `The costs of arbitration, excluding legal fees, will be split equally or born by the losing party, as determined by the arbitrator.'" Atalese, supra, 219 N.J. at 448 n. 3, 99 A.3d 306. Plaintiffs argue this statement implicitly invalidates EY's fee-sharing provision.
The Supreme Court has recognized that "the prospects of having to shoulder all the costs of arbitration could chill ... [plaintiffs] from pursuing their statutory claims through mandatory arbitration." Delta Funding Corp. v. Harris, 189 N.J. 28, 42, 912 A.2d 104 (2006). In Delta Funding, the Court invalidated an arbitration cost-shifting provision that potentially "could force [the plaintiff-consumer] to bear the risk that she will be required to pay all arbitration costs" as an unconscionable "deterrent to the vindication of her statutory rights." Id. at 43, 912 A.2d 104. In Atalese, the Court again expressed its displeasure with terms that potentially shift the entire cost of arbitration to the losing party. See Atalese, supra, 219 N.J. at 448 n. 3, 99 A.3d 306.
However, both Delta Funding and Atalese are distinguishable.
For these reasons, we conclude EY's ADR policy, as reflected in the 2007 iteration of its Program, is valid and enforceable as to plaintiffs, and hold the trial court properly dismissed the complaint in favor of mandatory arbitration.
Affirmed.