NJ Appellate Division Issues Latest Pro-Arbitration Ruling Requiring Former Re/Max Agent to Arbitrate Sexual Harassment Claims Brought under LAD

NJ Appellate Division Issues Latest Pro-Arbitration Ruling Requiring Former Re/Max Agent to Arbitrate Sexual Harassment Claims Brought under LAD

By Lindsey Andreozzi, Esq., February 24, 2021

Earlier this month, the New Jersey Appellate Division issued a decision that will join the litany of New Jersey cases following the recent trend of liberally enforcing arbitration agreements.

In Sengebush v. House Values Real Estate School LLC d/b/a Re/Max House Values et al., A-3094-19T4, the New Jersey Appellate Division issued a decision that will require a former Re/Max agent to arbitrate her sexual harassment and discrimination claims brought in state court under the New Jersey Law Against Discrimination (“LAD”). This decision follows just months after two landmark pro-arbitration decisions were issued by the New Jersey Supreme Court. In the 5-1 decision for Skuse v. Pfizer, Inc., 2020 WL 4760077 (N.J. Aug. 18, 2020), the Court held that an electronic arbitration agreement was enforceable under New Jersey contract law, and that Plaintiff “clearly and unmistakably” agreed to arbitrate her claims, according to the standard previously set forth by the Court in Leodori v. CIGNA Corp., 175 N.J. 293, 814 A.2d 1098 (2003). Similarly, in Flanzman v. Jenny Craig, 2020 WL5491899 (N.J. Sept. 11, 2020), the New Jersey Supreme Court unanimously held that an employee’s arbitration agreement that did not designate an arbitral forum or process for selecting an arbitral forum was valid and enforceable.

In March 2016, Plaintiff Lindsey Sengebush (“Plaintiff”) entered into an agreement to act as an exclusive real estate sales associate for Re/Max House Values (the “Agreement”). The Agreement contained an arbitration provision requiring “all disputes arising out of the Agreement, plaintiff’s conduct, activities or service as a real estate licensee, and Plaintiff’s relationship with Re/Max HV or any Re/Max affiliate to first go to mediation and then binding arbitration.” After entering into the agreement, Plaintiff worked as a real estate sales associate for Re/Max House Values from April 2016 until July 30, 2019, when she was terminated.

In November 2019, Plaintiff filed a complaint against Re/Max House Values and two individual named defendants, asserting various LAD claims for sexual harassment and gender discrimination as well as common law torts. Defendants moved to dismiss the complaint under Rule 4:6-2(a), alleging that the court “lacked jurisdiction of the subject matter based on an agreement to arbitrate” and under Rule 4:6-2(e), contending that it failed to state claims upon which relief could be granted in light of the binding arbitration agreement governing Plaintiff’s claims. After hearing oral arguments, the trial court issued a written opinion and orders dismissing plaintiff’s complaint without prejudice and staying the proceedings pending arbitration. The trial court held that the Agreement’s language “not to resort to the courts or the judicial system” was broad enough to waive the Plaintiff’s right to a jury trial and the right to pursue statutory claims, including LAD claims, in court. Also notably, the trial court found that Plaintiff was an independent contractor and, therefore, she could not assert claims under LAD.

Following Plaintiff’s appeal, on February 2, 2021, the appellate panel affirmed the trial court’s finding that Plaintiff’s claims were covered by the arbitration provision in her Agreement, stating that the parties’ Agreement was broad enough to waive Plaintiff’s right to a jury trial or to pursue statutory claims in court. However, the Appellate Division vacated the April 2, 2020 order, reasoning that the trial court should have entered an order explicitly staying the action and compelling arbitration under the Agreement. Further, the appellate panel agreed with Plaintiff’s argument that the trial court erred in holding that Plaintiff was an independent contractor, observing that this issue should be determined by the arbitrator.

While the Appellate Court’s decisions on these issues were largely consistent with the current requirements set forth by the New Jersey Supreme Court for a binding and enforceable arbitration agreement under Martindale v. Sandvik, Inc., 173 N.J. 76 (2002) and Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430 (2014), the Court’s ruling that the Agreement’s “broad” language was sufficient to cover Plaintiff’s statutory LAD claims is noteworthy, to say the least.

While arbitration case law in New Jersey is ever-evolving, we recommend that employers continue to specifically detail the statutory employment claims in their arbitration agreements to ensure that they are enforceable and in order to make it abundantly clear to employees that they are waiving their right to pursue their claims in Court.

Please contact an NFC team member if you have any questions or seek further assistance.

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