EMPLOYEE ARBITRATION AGREEMENTS

Due to the recent spike in employment-related lawsuits, many employers are now turning to arbitration agreements as an alternative to traditional litigation.  The motivation behind this shift is largely financial, as businesses look for ways to help minimize legal costs.  Along with controlling costs, using an arbitrator is often a faster, simpler, cheaper, and more confidential process than traditional litigation.

Lady smiling with an orange in one hand and an apple in the other hand

In arbitration, the arbitrator acts as a neutral party who reviews all of the facts of the case, similar to a judge in traditional litigation.  Based on his or her findings in the context of the relevant employment law, the arbitrator will then come to a decision.  This decision is considered final and binding unless the arbitration is expressly nonbinding, and therefore, an appeal process is not permitted.

Arbitration is not objectively superior to litigation, nor is litigation inherently preferable to arbitration: it depends upon the details of your specific legal situation.  At Bellatrix PC, our experienced business defense lawyers bring dual qualifications as aggressive litigators and certified arbitrators to each case we handle.  We can give you an inside perspective on the potential outcomes, advantages, and drawbacks of each conflict resolution method, and will carefully determine which course of action is most suitable for your matter.

To begin exploring your options in a confidential case evaluation, call Bellatrix PC today at (800) 889-8376.

Are There Different Types of Arbitration Agreements?

In short, yes.  There are two types of arbitration agreements: post-dispute and pre-dispute arbitration agreements.

post-dispute arbitration agreement is one that is entered into after the parties are already embroiled in a dispute. This type of agreement rarely leads to legal controversy, and courts have a history of enforcing them by ordering the parties to proceed to arbitration.

pre-dispute arbitration agreement is an agreement signed between two parties stating that if a dispute arises, it will be resolved through arbitration.  If properly drafted, a pre-dispute arbitration clause should cover all potential legal disputes — federal, state, statutory, and common law — and will prevent the matter from being litigated in court.  The neutral party arbitrator will hold the decision-making power.

Pre-dispute agreements are more controversial, especially in an employment context, as employees and their legal counsel often argue that it is unfair to force the employee to agree to arbitrate legal claims that have yet to arise.  Some reasons for this objection include:

  • The employee did not know what the severity of the dispute would be when the clause was agreed upon.
  • Arbitration ends up being more costly for the employee than formal litigation would be.
  • The common condition that employees must keep all proceedings and verdicts confidential.

Despite these controversies, arbitration agreements are now appearing in a variety of locations in employment paperwork.  They can be found in free-standing documents, or may be included within a variety of documents including employment agreements, employee handbooks and policy manuals, and employment application forms.

While some are straightforward boilerplate agreements, it is not uncommon for employers to customize arbitration agreements to cover specific types of employment disputes, such as disputes arising from breach of contractstock option incentive plans, or meal and rest periods.  Employers are also permitted to include their own rules for arbitration proceedings, though they can elect to adopt the rules of a neutral agency, such as the American Arbitration Association.

 

Contact Our Business Attorneys for Help Drafting Employment Contracts

In order to create a well-drafted agreement, employers should keep the following procedures in mind regardless of whether the agreement is pre-dispute or post-dispute in nature:

  • Ideally, you should create the agreement as a free-standing document.  Do not bury it in an employment agreement, employee handbook/manual, or employment application form.
  • Draft the agreement to make it appear contractual in nature.
  • Ensure that the agreement does not substantially rely on extraneous documents or policies incorporated by reference.
  • Ensure that the language of the agreement is clear and unambiguous, so that the employee is reasonably alerted to the arbitration provision.
  • Have the agreement reviewed by an employment law attorney to ensure compliance with all state and federal and statutory and common laws.

If you are considering having your employees sign a pre-dispute or post-dispute agreement, it is wise to consult an arbitration lawyer for assistance. Case law pertaining to employment arbitration agreements is constantly involving.  The business defense attorneys of Bellatrix PC have years of experience drafting arbitration agreements for companies of all sizes and structures, and can perform an in-depth review to ensure that your agreement is in compliance with all applicable laws.  Our legal team will sit down with you to outline what types of disputes the agreement should cover, which rules you must follow, and other pertinent matters.

Additionally, if a dispute should arise with a former employee, the attorneys of Bellatrix PC can work to enforce your company’s current arbitration agreement.  We will advise you of your rights and walk you through all of the necessary steps to improve the likelihood that your agreement will be upheld in court.  Legal preparation today can help to reduce the time and money necessary to handle future disputes.

To schedule a private legal consultation, call the law offices of Bellatrix PC at (800) 889-8376.

 

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