On July 23, a NJ appeals court ruled that the discrimination claims filed by three former Ernst & Young employees must be sent to arbitration. The three judge panel came to this decision after claiming the employees’ demonstrated “acceptance of a mandatory arbitration policy by remaining company employees” (Booth). The plaintiffs claim that the arbitrary language used in the agreement allowed Ernst & Young to unilaterally modify its terms. According to the plaintiffs’ attorney, agreements like these create a legal fiction that the employee actually agrees with the terms.
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Court Says Continuing to Work Equaled Arbitration Consent
Michael Booth, New Jersey Law Journal
A New Jersey appeals court ruled July 23 that three former employees of auditing giant Ernst & Young must have their age discrimination claims sent to arbitration because they agreed to alternative dispute resolution by staying on the job.
In a published ruling, the three-judge Appellate Division panel upheld language in Ernst & Young's employment policy that said its employees demonstrated their acceptance of a mandatory arbitration policy by remaining company employees.
"We conclude EY's ADR policy … is valid and enforceable," said Appellate Division Judge Jerome St. John in Jaworski v. Ernst & Young. Judges Marie Lihotz and Marianne Espinosa joined in the ruling.
The plaintiffs—Paul Jaworski, Alexander Haggis and Robert Holewinski—filed suits alleging that Ernst & Young violated the state's Law Against Discrimination by firing them because of their age.
Jaworski, 61 when fired, was the finance director of the company's Global Financial Group and had worked for Ernst & Young for 13 years, according to the court's opinion. Haggis was 57 when he was fired. He had been the manager of accounting and had worked at the company for 17 years. Holewinski, 55 when fired, was the associate director of finance in Ernst & Young's Global Infrastructure Group.
In 2002, Ernst & Young adopted what it called its Common Ground Program. As part of the program, employment disputes were to be first handled through mediation and then, if that was not successful, through arbitration. The program barred employees from filing lawsuits, according to the opinion.
The program was amended several times in the following years. However, employees were continually told that continuing with their employment for a certain period of time was an acknowledgement and acceptance of the program's arbitration requirements, the opinion said.
After being fired, the plaintiffs filed their lawsuit in Hudson County Superior Court and challenged the enforceability of the mandatory arbitration requirement. Judge Mary Costello upheld the requirements of the program and ordered the parties into arbitration. The plaintiffs appealed.
Their attorney, Christopher Lenzo, said he would ask the state Supreme Court to hear another appeal.
Employment agreements such as the one at Ernst & Young create a "legal fiction" that an employee actually agrees with the terms, said Lenzo, of Lenzo & Reis in Morristown. "Employees who have to work for a living have to choose between their jobs or a jury trial. This is not voluntary.
"This is yet another example of a self-serving decision by the judiciary to keep its dockets low," Lenzo added.
Ernst & Young's attorney, Robert Szyba, of the New York office of Seyfarth Shaw, did not return a call seeking comment.
In their appeal, the plaintiffs claimed that the arbitration language constituted an illusory agreement because Ernst & Young retained the right to unilaterally modify its terms. They also argued that they never agreed to arbitration if they were fired, that the program violates their constitutional right to a jury trial and that it was unconscionable because it imposed substantial forum costs on the plaintiffs that they would not face if their claims were heard in court.
St. John said the appeals court rejected the first argument because employers need flexibility to adapt to changes in the law and should not be forced to negotiate changes with each individual employee. And, he said, it was clear that Ernst & Young gave adequate notice to employees about changes in its policies.
The appeals court rejected the second of the plaintiffs' arguments by noting that the program said all disputes must be settled through arbitration.
Regarding the claim that the program's requirements violated the plaintiffs' constitutional right to trial by jury, the appeals court cited the state Supreme Court's ruling from last year in Atalese v. U.S. Legal Services Group. In that case, the court upheld a waiver of rights if the waiver was clear and unambiguous. That was the case here, St. John said.
Lastly, the appeals court rejected the claim that arbitration would force the plaintiffs to carry the costs. The program, St. John said, clearly points out that both sides will share the costs and that the company, if it prevails, would not seek to recover costs from plaintiffs.
Lenzo said one reason he believes the Supreme Court will agree to hear the case is because it has not addressed the issue of illusory agreements.
"I think they will want to weigh in on this," he said.
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