New Jersey Supreme Court Sets the Record Straight: The Enforceability of Waiver-of-Rights Provisions


The Employment and Labor Law Alert

March 25, 2003

In Leodori v. CIGNA Corporation, 175 N.J. 293 (Feb. 13, 2003), the New Jersey Supreme Court considered the enforceability of a waiver-of-rights provision contained in an employee handbook. The provision at issue required all employees to resolve employment-related claims by arbitration.

The Facts

Leodori began his employment as an in-house attorney with the Division of Legal and Public Affairs of INA, Defendant CIGNA’s sister company, in June 1995. One year prior, INA had adopted a policy that required arbitration as a means for resolving employment-related disputes. When the policy was revised in August 1996, the same provision was included and INA employees were notified of the revised policy by inter-office mail and regular mail.

In June 1998, INA distributed a handbook that contained a similar arbitration clause. The handbook contained the following disclaimer:

This handbook does not alter the ‘at will’ status of your employment. Just as you may terminate your employment at any time for any reason, your employment may be terminated at any time for any reason. Except for the arbitration policy mentioned in this handbook, which is a term and condition of your continued employment, the policies and practices set forth herein are for your information and guidance. Things change and there is no guarantee that the policies and practices contained herein will not change in the future. The company reserves the right to alter, amend and make exceptions to this handbook at any time in its sole discretion, with our without prior notice.

The handbook also contained the following arbitration provision:

In the interest of fairly and quickly resolving employment-related disagreements and problems, CIGNA’s policy is that arbitration by a neutral third-party is the required and final means for the resolution of any serious disagreement and problems not resolved by the company’s internal dispute resolution process. Both CIGNA and the employee will be bound by any decisions made by a neutral arbitrator. If the employee or CIGNA do not abide by the arbitrator’s decision, either party may go to court to enforce the arbitrator’s decision, but arbitration must be used before going to court. This policy is intended to prevent an employee from going to court over employment-related disputes; it is not intended to take away any other rights.

Although an acknowledgment form accompanied the handbook (and was subsequently signed by Leodori, the acknowledgment did not contain language specifically referring to arbitration.

A second handbook was distributed in July 1998. The new handbook contained an arbitration agreement in the following form:

The agreement to arbitrate applies to serious employment-related disagreements and problems, which are those that concern a right, privilege, or interest recognized by applicable law. Such serious disputes include claims, demands, or actions under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1966, the Civil Rights Act of 1991, the Equal Pay Act, the Age Discrimination in Employment Act, the Employee Retirement Security Act of 1974, the Fair Labor Standards Act, the Rehabilitation Act of 1973, the Americans with Disabilities Act, the Family and Medical Leave Act, and any other federal, state or local statute, regulation, or common law doctrine, regarding employment discrimination, conditions of employment or termination of employment.

Leodori signed an acknowledgment form that accompanied the handbook. The acknowledgment did not contain any reference to the waiver-of-rights or arbitration provision. By signing the acknowledgment, the employee only acknowledged receipt of the handbook; he did not specifically agree to its terms. A second form, the Employee handbook Receipt and Agreement, was also distributed with the handbook. It specifically and clearly identified the arbitration agreement as a term of employment. The first page of the handbook also drew attention to the arbitration provision as an important term of employment. Leodori did not sign Agreement.

Before Leodori actually signed the acknowledgment form, the company distributed an email to all of its personnel. In the email, CIGNA acknowledged that its handling of the employee handbook receipt and agreement process “left a lot to be desired. Virtually all aspects of the communication and distribution process that could have gone wrong did – moreover the process was too complicated and legalistic… Our goal was – and is – to ensure that everyone who works for CIGNA has a clear understanding and commitment to ensuring the successful implementation of the existing policies and programs we have designed to create a respectful and productive work environment in our company. We wanted to be sure that everyone read the Handbook rather than tossing it in the bottom drawer as some may done in the past.” In the email, CIGNA removed the link between signing the handbook and receipt and future compensation and benefits. CIGNA informed its employees that it was circulating a simpler acknowledgment form for them to sign.

During the course of his employment, Leodori became aware of what he believed was illegal or improper conduct on the part of several officers and employees of the company. He reported that conduct to the general counsel and others and claimed that INA suspended him and transferred him to CIGNA’s payroll as a result. Leodori was subsequently terminated when an investigation into his claims by a retired federal appellate judge hired by CIGNA revealed that his claims could not be substantiated. He filed this action and alleged that his termination was in violation of the New Jersey Conscientious Employee Protection Act (CEPA) , N.J.S.A. 34:19-1 to -8. The trial court dismissed the complaint, finding that there was a valid agreement to arbitrate. Leodori filed a second complaint containing virtually the same claims. Once again, the trial dismissed his complaint. In an unreported decision, the Appellate Division reversed the dismissal of the first complaint. The New Jersey Supreme Court granted CIGNA’s petition for certification.

The Decision

In its analysis, the Court relied upon two of its recent decisions. In Garfinkel v. Morristown Obstetrics & Gynecology Associates, 168 N.J. 124 (2001), the Court considered the enforceability of a waiver-of-rights provision in an employment agreement between a physician and his employer. There, the Court recognized that waiver-of-rights provisions are permissible. However, the Court stressed the need for a “discrete manifestation of the employee’s intent as reflected in the text of the agreement itself.” The provision at issue in Garfinkel simply stated that the parties agreed to resolve any claim or controversy that arose from the agreement by submitting it to arbitration. In the Court’s view, the language of the provision did not signal an intention to arbitrate disputes that were governed by the LAD or similar statutes. The Court observed: “[t]o pass muster, however, a waiver-of-rights provision should at least provide that the employee agrees to arbitrate all statutory claims arising out of the employment relationship or its termination. It should also reflect the employee’s general understanding of the type of claims included in the waiver, e.g., workplace discrimination.”

The Court also considered its decision in Martindale v. Sandvik, Inc., 173 N.J. 76 (2002). There, the Court upheld the validity of a waiver-of-rights provision in an application for employment, finding that general contract principles should apply. The Martindale Court noted, however, that, like a contract, an arbitration provision may be invalidated “upon such grounds as exist at law or in equity for the revocation of any contract.”

From these two cases, the Court in Leodori set forth two “overarching tenets.” First, contract principles will apply to arbitration agreements and states are not permitted to subject an arbitration agreement to more burdensome requirements. Second, an arbitration agreement will only be enforced where the employee has “agreed clearly and unambiguously to arbitrate the disputed claim.” This determination is made by considering the intention of the parties as reflected in the written agreement itself. With these tenets in mind, the Court considered the validity of the waiver-of-rights provision.

First, the Court determined that the waiver-of-rights provision in the handbook reflected an unambiguous intention to arbitrate a CEPA claim. The Court paid a great deal more attention to the second question, whether Leodori actually agreed to the provision. Initially, the Court found that a valid waiver results only from an “explicit, affirmative expression of agreement that unmistakably reflects the employee’s assent.” The Court rejected a defense argument, premised on the Court’s decision in Woolley v. Hoffmann-La Roche, Inc., 99 N.J. 284, modified, 101 N.J. 10 (1985), that Leodori’s receipt of the handbook and his continued employment constituted an implied but enforceable agreement to the arbitration policy. According to the Court, Woolley focused on an employer’s obligation to its employee, not the reverse. Moreover, the CIGNA handbook disclaimed the formation of a Woolley contract by including language that preserved the employee’s at-will status. Ultimately, the Court concluded that Woolley’s implied contract doctrine does not extent to a waiver-of-rights provision.

The Court’s analysis turned to the application of contract principles. Because Leodori never signed the Employee handbook Receipt and Agreement, the Court refused to enforce the arbitration provision in the absence of an explicit indication that Leodori intended to be bound by that provision. In the Court’s view, the CIGNA email that gave employees the option of signing either the acknowledgment form or a revised form was open to different interpretations. The Court concluded that the record was insufficient to establish that Leodori had, in fact, waived his statutory rights.

In sum, the Court held that “an arbitration provision cannot be enforced against an employee who does not sign or otherwise explicitly indicate his or her agreement to it.” The Court noted that CIGNA’s own forms called for an employee’s signature. Thus, it refused to allow CIGNA to request or require a signature and then to argue that the signature itself was meaningless. The Court was careful to distinguish between Leodori’s knowledge of the existence of the arbitration provision and his actual assent to it. The Court agreed that Leodori was aware of the provision because it was publicized on a number of different occasions. However, the Court refused to elevate that knowledge to an unmistakable agreement to the policy. Significantly, Leodori’s status as an attorney did not alter the Court’s analysis.

The Court downplayed the defense’s concern that its decision would make it impossible for employer’s to effectuate arbitration agreements. According to the Court, the blame was properly laid at the feet of the employer in this case, who had failed to secure Leodori’s signature on the pre-printed Agreement that was included with the handbook. Moreover, had the acknowledgment form that Leodori signed included a statement that the employee agreed to the more detailed arbitration provision contained in the handbook, the arbitration provision would have been enforced. The Court provided clear direction for the future: “[t]he acknowledgment form need not recite that [arbitration] policy verbatim so long as the form refers specifically to arbitration in a manner indicating an employee’s assent, and the policy is described more fully in an accompanying handbook or in another document known to the employee.” Here, the arbitration policy in the handbook was sufficiently clear and would have been upheld had the acknowledgment form Leodori signed contained a statement that he agreed to the arbitration provision.


This case provides a clear roadmap for employers to follow to insure that their arbitration provisions are enforced. The employer should include an acknowledgment form like the Employee Handbook Receipt and Agreement discussed here. Once the employee signs such a form, he will be hard-pressed to argue that the arbitration provision should not be enforced.