Termination after FMLA Leave Raises Questions about Arbitration Agreement

Frank Ferreri

Somerset, NJ (WorkersCompensation.com) – When an employee asks for FMLA leave, any legal question that comes up as a result tends to focus on whether the employer properly granted or denied the employee’s time off.

However, as Dahl v. Open Road Auto Group, No. A-0528-21 (N.J. Sup. Ct. App. Div. 04/18/22, unpublished) recently showed when an employee was terminated after FMLA leave, an employer’s handling of an FMLA situation may lead to questions regarding portions of an employment contract, such as an arbitration agreement.

A service manager for an automobile dealership disagreed with how the dealership handled guidelines related to the COVID-19 pandemic, including social distancing, nonessential business protocols, and representing aspects of the business to customers.

FMLA, Termination

The manager took a period of approved FMLA leave. He notified human resources of his return-to-work date. On the date of his return, the dealership notified him that he was terminated, attributing the termination to the dealership’s “consolidation” of his position due to COVID-19.

The manager filed a complaint in court, alleging violations of state civil rights and employment laws. In response, the dealership filed a motion to dismiss the case due to an arbitration agreement the manager singed as part of his new hire paperwork.

In support of its case, the dealership reported that the arbitration agreement was a condition of employment, but the manager countered that he did not attend a new hire orientation and that he did not receive any instruction regarding mandatory binding arbitration.

In the trial court, the judge found that he could not enforce the arbitration provision, explaining that an employee who is given paperwork and asked to “sign it now or leave and you’re fired” does not have an agreement that is the product of mutual assent.

The judge held in the manager’s favor, prompting the dealership to appeal.

Mutual Assent?

Under New Jersey law, an arbitration agreement must be the product of mutual assent, and if the parties agree on essential terms and manifest an intention to be bound by those terms, they have created an enforceable contract.

The court in this case concluded that the dealership did not show that there was a meeting of the minds to arbitrate. The court pointed out that the manager possessed only a high school diploma, did not attend an orientation, did not receive an explanation of the agreement, did not understand the meaning of the arbitration agreement, was rushed into signing the agreement, and was told that if he delayed singing the agreement he would not have a job.

“Considering these facts, absent a discussion informing the employee about the implications and waivers implied in the arbitration agreement, it is unenforceable,” the court wrote.

As a result, the appeals court upheld the trial court’s ruling in the manager’s favor.