New Jersey Law May Be Challenged as Improper Job Arbitration Ban

A 2019 amendment New Jersey made to its Law Against Discrimination to ban employment contracts that force workers to waive their court rights may be challenged by the U.S. Chamber of Commerce and another employer advocate as preempted by the Federal Arbitration Act, a federal judge ruled.

The Chamber and the New Jersey Civil Justice Institute both have direct standing to bring the suit and associational standing through their members, the court said Tuesday. The dispute is also ripe for court intervention because employers in the state “must immediately adjust their conduct or face potential litigation,” the court said.

That includes potential enforcement suits by the New Jersey attorney general’s office, the U.S. District Court for the District of New Jersey said. The groups sued Attorney General Gurbir Grewal in August 2019 after the amendment was enacted March 18, 2019.

They say the change to the NJLAD is an improper ban on employment arbitration and thus preempted by the FAA, which is read as broadly favoring the enforcement of valid job arbitration pacts. Grewal, in his official capacity, moved to dismiss, arguing the groups lacked standing to sue and that the case wasn’t ripe for adjudication.

Judge Anne E. Thompson rejected both arguments. The groups have standing to sue directly as organizations that have had to divert resources to address the issue, including by assembling educational materials for their members and organizing meetings and educational events, the judge said.

The suit pleads enough for associational standing because it alleges the groups’ members include New Jersey employers that continue to enter into pre-dispute arbitration agreements with employees, Thompson said. There was no need to list the groups’ members in the suit, she said.

The new arbitration pacts some employers are entering also is enough to establish the potential imminent injury needed for federal standing to sue, the court said.

That’s a course of conduct that is now arguably banned under the amendment, Thompson said. And other members who comply with the amendment are potentially injured by foregoing their right to arbitrate and incurring the higher costs of litigation, she said.

There’s a credible threat Grewal will enforce the amendment to preclude mandatory arbitration of sexual harassment and other job bias claims, Thompson said.

Stone Conroy LLC represents the Chamber and the New Civil Justice Institute. The state department of law and public safety represents Grewal.

The case is N.J. Civ. Justice Inst. v. Grewal, 2020 BL 270535, D.N.J., No 3:19-cv-17518, unpublished 7/21/20.