HR Management & Compliance

Dispute Over Unsigned Arbitration Agreement Means Judge Must Wear Detective’s Cap

On July 18, 2022, the New Jersey Appellate Division provided a perfect reminder why all employers and HR professionals should diligently confirm that new hires complete all on-boarding paperwork. It reversed a trial court’s order compelling arbitration, finding that the terminated employee’s failure to sign or acknowledge receipt of an arbitration agreement presented a factual mystery that required a more in-depth investigation by the judge before she could enforce an unsigned arbitration agreement.

Background: The Mystery of the Unsigned Arbitration Agreement

The mystery began with the onboarding of Ravin Bhoj, who started his employment with OTG Management, LLC, on October 5, 2020, as its human resources director at Newark Liberty International Airport. He was hired by Peg Oerter, the regional director of human resources, who extended him an offer letter for the role via email on September 11, which he promptly signed and returned via email the following day.

Oerter’s email attaching the offer letter contained additional documents, including an agreement regarding postemployment competition (the noncompete agreement), all of which Bhoj signed and returned September 12. On October 5, he attended OTG’s onboarding training, which included a 30-minute block of time for new hires to complete additional HR paperwork in the company’s electronic onboarding program.

The question of whether Bhoj agreed to arbitrate all of his employment claims with OTG developed throughout his onboarding process, where only a murky view of the facts was presented to the trial court. For instance, during onboarding, he signed paperwork, including the offer letter, which made reference to a mandatory mutual agreement to arbitrate that employees were encouraged to “carefully review and consider.”

Bhoj and OTG disputed whether the company ever provided the arbitration agreement to him or if he received it and simply never signed or returned the paperwork. Oerter later certified to the trial court that the arbitration agreement was one of the documents uploaded to OTG’s electronic onboarding program for review during the October 5 training. OTG also admitted that the arbitration agreement wasn’t included in the paperwork accompanying the offer letter Oerter emailed Bhoj on September 11. Bhoj opposed this certification with his own in which he certified he never saw nor signed the arbitration agreement during the onboarding process.

Further complicating matters was the fact that the noncompete agreement, which Bhoj signed along with the offer letter, contained its own arbitration provisions covering postemployment competition disputes. He certified that it was his understanding the arbitration agreement referred to in his onboarding paperwork related specifically and exclusively to the arbitration provisions in the noncompete agreement. Therefore, he claimed, he had only manifested his agreement to arbitrate claims limited to the provisions of the noncompete, not to all claims he might have against OTG.

OTG terminated Bhoj’s employment on February 3, 2021. On March 16, he filed a complaint against the company and Oerter alleging violations of the New Jersey Conscientious Employee Protection Act (CEPA). Specifically, he alleged they wrongfully terminated him after he confronted Oerter about allegedly unlawful payroll practices by the company.

OTG and Oerter asked the court to compel arbitration, seeking enforcement of the unsigned arbitration agreement on the theory that Bhoj had notice of the mutual agreement to arbitrate, and his continued employment after receiving the paperwork in OTG’s electronic onboarding program manifested his implicit assent to be bound. The trial court agreed with OTG’s theory and entered the order compelling arbitration on October 22, 2021.

Appellate Division Uncovers More Questions

The Appellate Division, however, wasn’t impressed by the lower court’s detective work and proved far more reluctant to fill in the factual gaps surrounding the parties’ agreement to arbitrate.

As a procedural matter, the Appellate Division pointed out how there was a clear dispute over the basic facts of whether the parties had entered into an enforceable agreement in the first place. It was by no means clear to the Appellate Division from the record whether Bhoj had received the arbitration agreement during the October 5 onboarding training, as OTG certified in its motion papers, or whether OTG in fact never provided the agreement at all, as Bhoj certified in his opposition. The appellate panel stated clearly that in such a situation, where the underlying facts of a request to compel are in dispute based on competing certifications, the trial judge should hold an evidentiary hearing to weigh the credibility of the declarants.

The Appellate Division also had a problem with the language of the arbitration agreement itself, specifically the absence of any provision that Bhoj’s continued employment following receipt of the agreement would constitute assent to be bound by mandatory, mutual arbitration. The issue here was complicated by an apparently boilerplate provision in the agreement under the heading CONSIDERATION, which reads:

Employee acknowledges that his/her execution of this Agreement is a condition of his/her employment or continued employment with Employer. Employee also acknowledges that his/her employment or continued employment constitutes the consideration for Employee’s agreement to the terms of this Agreement, and that such consideration is adequate.

The appellate panel found this language insufficient to inform an explicit and knowing waiver of rights, which New Jersey courts require for the enforceability of arbitration agreements, saying, “even if Bhoj had reviewed the Arbitration Agreement during onboarding, because these provisions do not unambiguously state that continued employment beyond a certain period would constitute assent, he cannot be deemed to have assented through continued employment alone.”

Thus, the Appellate Division held that the only way the trial court could have found mutual assent to form a binding arbitration agreement would be through a searching investigation during an evidentiary hearing. This, according to the panel, is the only way to get to the bottom of the mystery of the unsigned arbitration agreement. Bhoj v. OTG Management, LLC.

Bottom Line

Arbitration remains a favored form of dispute resolution, according to New Jersey’s judicial policy. Our courts take very seriously their gatekeeping role in the arbitration context, however, as the Bhoj mystery makes clear. At times, a judge must become a Sherlock Holmes or a Jessica Fletcher to uncover whether employees clearly manifested their intent to arbitrate their claims with an employer. You can avoid resorting to such judicial detective work, however, by carefully crafting arbitration agreements and ensuring that your employees sign and agree to all relevant agreements.

For more information on what your company can do to ensure your arbitration agreement will be enforceable, please contact John C. Petrella, chair of the Genova Burns, LLC’s employment litigation practice group, at jpetrella@genovaburns.com, or Dina M. Mastellone, chair of the firm’s human resources practice group, at dmastellone@genovaburns.com.