Mandatory Arbitration Provision in Employee Handbook Held Unenforceable

We are pleased to report that the Appellate Division, in Morgan v. Raymours Furniture Company, Inc., rejected Defendant’s motion to compel mandatory arbitration.  In this case, the employer, Raymour, sought to compel arbitration based upon an arbitration policy contained in its employee handbook that was circulated electronically.  The handbook contained several disclaimers advising that nothing in the handbook could be enforced as a contract, and that none of the terms of the handbook could be enforced against the employer.

The Court emphatically rejected the Defendants’ claim that there was an enforceable arbitration agreement, and held that the same disclaimers that prevent a contract from forming against the Defendant also prevent a contract from forming against the Plaintiff.  Even more important, the Appellant Division ruled that a motion to compel arbitration is actually akin to a motion for an injunction, and that therefore the motion could be denied on purely equitable grounds.  This will permit Plaintiff employees to argue that motions to compel mandatory arbitration can be rejected based on grounds of fundamental unfairness.

Hopefully this decision will be upheld on appeal and Plaintiff employees will not be denied access to courts and juries on account of obscure arbitration clauses.