The New Jersey Appellate Division recently struck down an arbitration provision contained in an employee handbook which included a disclaimer of any contractual relationship between the employer and employee. In Morgan v. Raymours Furniture Co., 443 N.J. Super. 338 (App. Div. 2016), the Court relied upon equitable principles in holding that an employer cannot get “both the benefit of its disclaimer in most instances, while insisting that the handbook was contractual when it suits its purposes — a proposition to be rejected if for no other reason than it runs counter to the ancient English proverb: ‘wolde ye bothe eate your cake, and haue your cake?’ John Heywood, Dialogue of Proverbs (1546).” Id. at 342.

This is not the first time that Raymours Furniture Company has gone to court over the enforceability of its arbitration program —with mixed results.  The New Jersey District Court, considered the same issue in Raymours Furniture Co. v. Rossi, No. 13-4440, 2014 U.S. Dist. LEXIS 1006, 2014 WL 36609, at *6-9 (D.N.J. Jan. 2, 2014).  The Rossi Court came to the same conclusion as the Appellate Division in Morgan, finding that Raymour’s Arbitration Program was not enforceable because it was part of an employee handbook that contained a clear disclaimer of any contractual relationship being implied by the handbook, and there was no exception made for the arbitration program. The Rossi Court opined that where a voluminous handbook clearly states that it is not intended to create a contract of employment, the employer cannot simultaneously claim that some of the handbook’s provisions are contractual, while others are not. However, a district court in Massachusetts reached the opposite conclusion, upholding Raymour’s Arbitration Program under Massachusetts law. Daniels v. Raymours Furniture Co., No. 13-11551, 2014 U.S. Dist. LEXIS 44409, 2014 WL 1338151, at *6 (D. Mass. Mar. 31, 2014). In another decision decided the same year, a Pennsylvania federal court opined that it would enforce Raymour’s arbitration provision, but noted that it did not consider the impact of the disclaimer language in the handbook since the employee never raised the issue. Alexander v. Raymours Furniture Co., 2014 U.S. Dist. LEXIS 111962, 2014 WL 3952944 (E.D. Pa. Aug. 13, 2014).

Despite the mixed results in Federal Courts, the Morgan Court made clear that its decision was based upon the “strength of our Supreme Court’s own prior rulings,” despite any contrary federal law. However, the Morgan Court indicated that it would likely have come to a different conclusion if the employee had executed a stand-alone arbitration agreement without any disclaimer language. But as that had not occurred, the Court quipped “To that we only need say, “if my grandmother had wheels, she’d be a bicycle.” Id. at 344.

By Francine Foner, Esq. and Ty Hyderally, Esq.

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