Garfinkel v. Morristown Obstetrics & Gynecology Associates, P.A.
168 N.J. 124, 773 A.2d 665, 17 I.E.R. Cas. (BNA) 1551 (2001)
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Rule of Law:
An arbitration clause in an employment agreement must contain a clear and unmistakable waiver of an employee's right to a judicial forum for statutory claims; a general clause requiring arbitration for any controversy 'arising out of' the agreement is insufficient to waive the right to sue under the New Jersey Law Against Discrimination (LAD).
Facts:
- On August 9, 1996, Dr. David Garfinkel entered into an employment agreement with Morristown Obstetrics & Gynecology Associates, P.A. (MOGA).
- The agreement contained a clause stating, 'any controversy or claim arising out of, or relating to, this Agreement or the breach thereof, shall be settled by arbitration[.]'
- In January 1998, MOGA allegedly informed Garfinkel he would not be permitted to become a shareholder because he was 'born the wrong sex.'
- On March 6, 1998, a MOGA shareholder-physician informed Garfinkel that he was being terminated.
- A few days later, another MOGA shareholder allegedly told Garfinkel the reason for his termination was that he 'did not attract patients well because he was male[.]'
Procedural Posture:
- Dr. David Garfinkel (plaintiff) filed a complaint in the Law Division of the Superior Court against Morristown Obstetrics & Gynecology Associates, P.A. (defendants).
- Defendants moved to dismiss the complaint, arguing that the claims were subject to the arbitration clause in the employment agreement.
- The trial court granted the defendants' motion to dismiss and compelled arbitration for all claims.
- Garfinkel (appellant) appealed the trial court's decision to the Appellate Division.
- The Appellate Division affirmed the trial court's ruling, holding that the broad language of the arbitration clause covered the statutory and common-law claims.
- The Supreme Court of New Jersey granted Garfinkel's petition for certification.
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Issue:
Does a generic arbitration clause in an employment agreement, stating that 'any controversy or claim arising out of, or relating to, this Agreement' shall be settled by arbitration, constitute an enforceable waiver of an employee's right to sue in court for statutory violations under the New Jersey Law Against Discrimination (LAD)?
Opinions:
Majority - Verniero, J.
No. A generic arbitration clause requiring arbitration for claims 'arising out of, or relating to, this Agreement' does not constitute an enforceable waiver of an employee's statutory rights under the LAD. The court reasoned that while parties may agree to waive statutory remedies in favor of arbitration, any such waiver must be 'clearly and unmistakably established.' The broad, boilerplate language in this agreement is ambiguous because it suggests the parties only intended to arbitrate disputes involving a contract term or condition, not statutory claims. The clause makes no mention of statutory rights, the LAD, or discrimination claims generally. The court rejected the argument that Garfinkel's status as a sophisticated professional with legal counsel made the clause enforceable, stating that the focus must be on the unambiguous text of the writing itself. To be enforceable for statutory claims, a waiver-of-rights provision should, at a minimum, state that the employee agrees to arbitrate all statutory claims arising from the employment relationship and reflect a general understanding of the types of claims being waived.
Analysis:
This decision significantly raises the standard for employers in New Jersey seeking to compel arbitration for statutory employment discrimination claims. It establishes that generic, boilerplate arbitration clauses covering disputes 'arising out of the agreement' are insufficient to waive an employee's right to a judicial forum under the LAD. The ruling forces employers to draft explicit and specific arbitration clauses that clearly notify employees they are waiving their right to sue for statutory claims, such as discrimination. This precedent protects employees by ensuring that any waiver of these critical statutory rights is truly knowing and voluntary, as evidenced by unambiguous language in the contract.
