Last Thursday, Judge Anne Thompson found unconstitutional a portion of the New Jersey Law Against Discrimination (NJLAD). The ruling specifically addresses the provision in the NJLAD that was added in March 2019, discussed here, which, in effect, voided any employment contract that required an employee to waive his or her right to a jury and to arbitrate a claim of discrimination, retaliation or harassment. That provision, considered by many as stemming from the #MeToo movement, forced employers to revisit their arbitration programs and employment contracts.

Judge Thompson’s ruling held that the provision in question conflicted with the Federal Arbitration Act (FAA) and, therefore, violated the Constitution’s Supremacy Clause. The judge enjoined the state from enforcing the provision “with respect to arbitration agreements between employers and employees that are governed by the FAA.” The opinion reiterated that the FAA reflects a federal policy in favor of arbitral dispute resolution, in accordance with prior Supreme Court decisions. Since the FAA is a federal statute, any state law that conflicts with it or frustrates its purpose must be void. While the provision did not mention arbitration agreements by name, the omission was of no consequence because the provision nevertheless discriminated against arbitration. According to the court, the waiver of the right to go to court and receive a jury trial is the “primary characteristic,” or “defining trait” of arbitration agreements, and the amendment to the NJLAD effectively singled out “arbitration agreements for disfavored treatment.”

The decision clarifies for employers that the FAA remains the law of the land with respect to arbitration agreements and that employers may continue to rely on such agreements or provisions as part of their risk mitigation practices, unless federal law changes. Our attorneys will continue monitoring the case and any appeal.