Arbitration Clauses In Employment Contracts

Last updated on: May 24, 2022

Few people, least of all small business employers, enjoy going to court to resolve issues with others. In employment matters, small business employers often prefer to deal with matters in house, and avoid the expense and sometimes publicity of a trial. However, some matters cannot be handled in house, especially in situations where an employee believes that the company representatives are not fair. The employee may prefer to have a third party decision maker, which may lead to a lawsuit. Still, litigation is not the only alternative to resolving employee disputes with a third party. With some planning, a small business can avoid court and require any issues arising with an employee to be decided through arbitration.

Arbitration is a dispute resolution process by which the parties to a dispute submit their positions on the issue to one or more arbitrators for a binding decision. Arbitration is by agreement, and a small business owner may include an arbitration clause in an employee’s employment contract, which would limit the resolution of any claims against the business to binding arbitration. If there is a dispute as to the applicability of the arbitration clause in a particular situation, or if other questions arise as to arbitration, a court may decide the issue. However, generally speaking, arbitration clauses found in employment contracts are enforceable if entered into before the dispute arises between the parties and the agreement does not unfairly restrict the employee’s rights.

While arbitration may be cheaper than litigation, there are other considerations that an employer should keep in mind when deciding whether or not to require arbitration. For example, an arbitrator may make a decision that attempts to please both parties, as opposed to a court making a firm decision in one party’s favor. If the arbitrator makes a middle of the road decision, the employer may have to make concessions they may not otherwise have had to if the case was before a judge or jury. There are also limited appeal rights under arbitration as well as limited access to an injunctive remedy. In a case filed in court, the employer is able to ask the court to issue an injunction stopping the employee from engaging in certain conduct pending the outcome of the case. With arbitration, this may not be possible, and may be less enforceable if it is. This may be a major concern for an employer who is seeking to stop an employee from selling trade secrets or engaging in other conduct that has immediate negative consequences for the business.

Employers should also keep in mind that there are some claims that may not be able to be dealt with in arbitration. These include claims that an employee files before the Equal Employment Opportunity Commission.

Contact Us For Legal Assistance

If you are a small business owner seeking to structure your employment contracts and other employee related documents in a manner that is beneficial to your business, contact the experienced North Miami business attorney from Charlip Law Group, L.C. for a consultation.

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