October 25, 2018
In the matter of Milagros Roman v. Bergen Logistics, LLC and Gregg Oliver, plaintiff filed suit for violations of the New Jersey Law Against Discrimination Act (“LAD”) and for intentional infliction of emotional distress. Plaintiff’s claims were for sexual harassment, a hostile work environment and termination in retaliation for rebuffing her boss’ sexual advances. However, when plaintiff was hired she signed an arbitration agreement, in which she agreed to submit such claims to arbitration and waived her right to seek punitive damages. The clause set forth that:
(i) all (past, present and future) disputes, controversies and claims of any nature (whether under federal, state or local laws and whether based on contract, tort, common law, statute . . .) arising out of, involving, affecting or related in any way to your . . . employment . . . and/or termination of employment by or from Company, the conditions of your employment, or any act or omission of Company or Company’s other employees shall be resolved exclusively by final and binding arbitration before the American Arbitration Association . . . . This Agreement covers all employment matters, including but not limited to matters directly or indirectly related to wrongful termination, . . . discrimination, harassment, retaliation (in the whistle blower or any other context), . . . and any other violation of state, federal or common law . . . . . . . . (iii) neither you nor Company shall file or maintain any lawsuit, action or legal proceeding of any nature with respect to any dispute, controversy or claim within the scope of this Agreement, including, but not limited to, any lawsuit, action or legal proceeding challenging the arbitrability of any such dispute . . . . BY SIGNING THIS AGREEMENT YOU AND COMPANY ARE WAIVING ANY RIGHT, STATUTORY OR OTHERWISE, TO A TRIAL BY JURY AND TO PUNITIVE AND EXEMPLARY DAMAGES . . . . . . . . YOU ACKNOWLEDGE AND AGREE THAT YOU . . . READ THIS AGREEMENT AND . . . HAD SUFFICIENT TIME TO STUDY AND CONSIDER IT AND TO CONSULT WITH COUNSEL OF YOUR CHOICE, THAT YOU UNDERSTAND ALL OF ITS TERMS AND ARE SIGNING THIS AGREEMENT KNOWINGLY AND VOLUNTARILY, AND THAT IN DOING SO YOUR ARE NOT RELYING UPON ANY OTHER STATEMENTS OR REPRESENTATIONS BY THE COMPANY, ITS AFFILIATE OR THEIR EMPLOYEES OR AGENTS . . . .
Accordingly, defendants successfully moved in the lower court to have the case dismissed on the grounds that plaintiff needed to submit her claims to arbitration. On appeal, plaintiff argued, among others, that the entire arbitration clause was void because it was against public policy to require her to sign an agreement waiving her right to punitive damages. The Appellate Division upheld the decision to the extent that plaintiff was required to submit her claims to arbitration. However, it severed the portion of the agreement in which plaintiff waived her right to seek punitive damages. In making its decision, the Court noted that the LAD was specifically amended to allow for the recovery of punitive damages as they serve several purposes including deterring “egregious misconduct” and punishing the offender. Such a deterrent would be rendered moot if employers were able to obtain waivers of the right to seek such damages by virtue of a valid arbitration clause.
However, equally important to the Court are the “federal and state policies favoring arbitration of disputes” set forth in the Federal Arbitration Act and the New Jersey Arbitration Act. The Appellate Division found no reason in this action not to sever the unenforceable prohibition of punitive damages from the otherwise valid arbitration clause.