New Jersey Supreme Court Issues Latest Pro-Arbitration Ruling Requiring Delivery Drivers in New Jersey To Arbitrate Dispute With Employer Despite Federal Exemption

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New Jersey Supreme Court Issues Latest Pro-Arbitration Ruling Requiring Delivery Drivers in New Jersey To Arbitrate Dispute With Employer Despite Federal Exemption

By Iman Wells, Esq., on July 16, 2020

On July 14, 2020, the New Jersey Supreme Court issued its long-anticipated decision in two companion cases – Arafa v. Health Express Corp and Gloria Colon v. Strategic Delivery Solutions, LLC – holding that delivery drivers were required to arbitrate their wage and hour claims under the New Jersey Arbitration Act (“NJAA”) even if they were exempt under section 1 of the Federal Arbitration Act (“FAA”). Section 1 of the FAA exempts from arbitration “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce”. The NJAA does not contain a similar exemption.

In Arafa and Colon, delivery drivers sued their employers in New Jersey Superior Court asserting proposed class action claims for wage and hour violations. The employers then successfully compelled the suits to arbitration. On appeal, the panel in Colon agreed that the case could be compelled to arbitration under the NJAA, but remanded the case for the trial court to decide whether the FAA still exempted the drivers from arbitration. The panel in Arafa reversed the trial court’s order compelling arbitration after ruling that the arbitration agreement in that case was not valid.

The New Jersey Supreme Court’s ruling is significant because it is now clear that employers of transportation workers in New Jersey may still enforce arbitration agreements under the NJAA even if the employees would otherwise be exempt under the FAA. The opinion also reinforces the United States Supreme Court ruling that “[t]he FAA contains no express pre-emptive provision, nor does it reflect a congressional intent to occupy the entire field of arbitration” and rejected “the proposition that the inapplicability of the FAA must vitiate the entire agreement to arbitrate.” Arafa v. Health Express Corp., No. 083154, 2020 WL 3966956, at *12, n.2 (N.J. July 14, 2020) (citing Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford, Jr., Univ., 489 U.S. 468, 477, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989)).

This case is another reminder that employers should reexamine their arbitration agreements and provisions to ensure compliance with the ever-evolving case law in New Jersey.

The case is Arafa v. Health Express Corp., No. 083154 (July 14, 2020), Gloria Colon v. Strategic Delivery Solutions, LLC, No. 083154 (July 14, 2020). The full opinion is available here.


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