By: Chantal N. Guerriero, Esq. and Ty Hyderally, Esq.

          Yesterday, the Supreme Court ruled to uphold an arbitration agreement in two cases between transportation workers and their employers, despite acknowledging that the employees likely fell under an arbitration exemption clause under the Federal Arbitration Act (“FAA”). In so doing, the Supreme Court clarified that “[t]he [New Jersey Arbitration Act, (“NJAA”)] may apply to arbitration agreements even if parties to the agreements are exempt under section 1 of the FAA.” Arafa v. Health Express Corp., ___ NJ ___ , ___ (2020) (slip op. at 30). The decision serves as another unfortunate example of New Jersey’s tendency to liberally interpret arbitration agreements and, in turn, uphold them.

In the first case discussed, Essam Arafa v. Health Express Corporation (A-6-19) (083174), the Court acknowledged that because the plaintiffs were truck drivers who were involved in interstate commerce, they were exempt from having to submit to arbitration under the exemption clause of the Federal Arbitration Act. However, the Court went on to note that the severance provision in the Agreement made clear that the parties intended for the Agreement to survive even after a provision was found to be unenforceable.

Further, the court held that whereas the FAA did not apply, the New Jersey Arbitration Act would nonetheless apply. The Court clarified that “no express mention of the NJAA is required to establish a meeting of the minds that it will apply inasmuch as its application is automatic.” Arafa (slip op. at 25). The Court ruled in this manner despite the plaintiffs’ argument that there was no meeting of the minds or mutual assent by the parties when they entered into the Agreement.

In the second case included in the opinion, Gloria Colon v. Strategic Delivery Solutions, LLC (A-7-19) (083154), the Court noted that, while it was not clear whether the plaintiffs were exempt from the FAA, as it was not clear that they were engaging in interstate commerce, the NJAA would apply if the trial court determined that the FAA did not.

In both cases, the plaintiffs brought statutory wage claims for which the court ultimately determined that the plaintiffs had “knowingly and voluntarily waived the right to pursue their statutory wage claims in court.” Arafa (slip op. at 29).

Going forward, employees should be mindful of whether or not they want to enter into arbitration agreements with their employers.  It is a decision with potentially significant consequences.  There are potential ramifications to entering into such agreements.  If you believe that you may have a legal cause of action, but are bound to an arbitration agreement, you should seek legal advice in order to determine the manner in which you may move forward with your potential claims.

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